What’s Going On Here?Campbell served up stronger-than-expected quarterly earnings on Wednesday, but the soup-maker left a suspicious aftertaste in investors’ mouths. What Does This Mean?Ordinarily, investors might’ve been happy with an update like this one. Campbell’s profit, after all, beat investors’ forecasts last quarter, thanks in part to lower-than-expected marketing expenses. Its revenue did too: sales came in ahead of expectations partly because Campbell reduced its promotional offers, forcing customers to pay more.
On this occasion, though, analysts were worried that the “quality” of the update suggested weak earnings could be on the way. For one, Campbell had previously promised to increase, not cut back, its marketing spend relative to its sales. And for another, its decision not to invest in promotions was a dubious one, considering a resurgent coronavirus was making shoppers prioritize cost-effectiveness once again. And that could mean it’ll struggle both to hold onto customers and win over new ones… Why Should I Care?For markets: Look on the bright side.
Campbell’s shares fell 2% on Wednesday, even as US stocks overall rose to a record high. But that drop might’ve been worse if Campbell hadn’t announced a higher-than-expected dividend. Spare a thought, then, for wholesale grocery distributor United Natural Foods, whose shares fell 11% on Wednesday after it revealed lower-than-expected quarterly earnings – with no dividend-colored lining to speak of.
The bigger picture: Flavor of the month.
Investors are increasingly eyeing up smaller companies’ shares, as well as those of “cyclicals” like autos and construction that tend to do well in an economic recovery. And as we move into said recovery and away from recession, it’ll likely be consumer staples like Campbell – which are generally expected to thrive when the going’s rough – that are scrubbed off the “flavor of the month” chalkboard. | 
