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Why El Nino could be Campbell's big enemy

Already seeing slowing soup sales, Campbell Soup could be facing another obstacle: El Nino, according to Sanford C. Bernstein analysts.

The firm's rationale is straightforward: As temperatures fall, people chow down on more soup. The converse is true also.

Campbell's tomato soup is displayed at Santa Venetia Market on May 20, 2013, in San Rafael, California.
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Campbell's tomato soup is displayed at Santa Venetia Market on May 20, 2013, in San Rafael, California.

So companies such as Campbell's that generate a higher portion of sales via soup are more negatively impacted when winter is warmer than usual, as it's expected to be this fall and winter due to El Nino.

"Conversely, a boost to sales was seen in both the 2013 and 2014 winter seasons when temperatures were colder than average across the continental U.S. However, this year El Niño threatens a warmer than average temperature in three out of four regions of the country," the analysts write.


Bernstein thinks El Nino's warm weather could dent Campbell's earnings per share in its current fiscal second quarter by 2 cents year over year and the impact could linger into the third quarter.

In its weather outlook, NOAA forecasts an enhanced probability of higher-than-normal temperatures in the Far West, the northern contiguous U.S. to the Northeast, and southward to the Middle Atlantic states.

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The warmer forecast is unwelcome news for Campbell's.

During its latest fiscal year, soup sales declined 3 percent versus the prior year, driven by a 3 percent decline in condensed soup sales and a 5 percent decline in ready-to-serve. Broth, however, was a bright spot, growing 3 percent.