Campbell Soup Co. , the largest U.S. soup maker, posted a 25 percent drop in fiscal second-quarter earnings on Wednesday as lower soup shipments, higher marketing costs and softness in its Godiva chocolates business weighed on profits. 

A drop of 6 percent in U.S. shipments of wet soup, sold in cans, bottles and other containers, in the quarter ended Jan. 27 was caused by warm weather and the residual effect of consumer stockpiling in the fiscal first quarter following the Sept. 11 attacks on the United States, Campbell said. Excluding acquisitions, overall sales fell 2 percent. 

"The volumes were poor but that wasn't a big surprise, given the weather," said Banc of America Securities analyst William Leach. "Basically they're spending a lot of money and there's still no sales growth." 

Camden, New Jersey-based Campbell, the maker of Pace sauces, Pepperidge Farm cookies and Swanson broths, said quarterly net earnings fell to $203 million, or 49 cents a share, from $271 million, or 65 cents, in the same period a year earlier. Excluding restructuring costs in Australia, earnings were 50 cents a share. 

The results met the company's November forecast, and Campbell maintained its prior outlook for earnings of about $1.30 a share for the fiscal year, excluding the impact of restructuring its Australian operations. Last year the company earned $1.55 a share. 

While U.S. canned soups volume declined 6 percent, largely because of a 13 percent drop in condensed soup volumes, international canned soup volume rose 4 percent. 

The resulting net decline of 3 percent in worldwide wet soup volume contrasted with the company's earlier predictions for flat volumes. Campbell expects a "slight increase" in volumes in the second half of the year, executives told analysts in a conference call on Wednesday. 

MARKETING YET TO BOOST SALES 

Revenue rose 3 percent to $1.81 billion from $1.76 billion a year earlier, while base overall volume was flat, Campbell said. 

Campbell last July unveiled a costly restructuring plan calling for $365 million in additional spending, in part to overhaul and promote its iconic red-and-white label soups, whose well-known flavors include chicken noodle and cream of mushroom. Condensed soups have posted relatively flat sales for several years, analysts said. 

A big component calls for increased marketing, an initiative that analysts say has not yet paid off. Campbell, which is boosting marketing costs by about $200 million this year, has been going head-to-head with General Mills' Progresso line in an effort to reposition its condensed and ready-to-serve soups as more oriented toward adults. 

"It's got to be frustrating to spend an incremental $120 million on (first-half) marketing and not really move the needle on internal sales," said Prudential Securities analyst John McMillin, who has rated Campbell shares "hold" for more than five years. "The sales needle on their core (soup) business didn't move." 

Campbell boosted total marketing in the quarter by 17 percent, before the impact of foreign currency and a European acquisition. 

LAYING THE GROUNDWORK 

Consumer attitudes in the wake of the September attacks, coupled with overall weakness in the U.S. economy, have hurt Godiva, Campbell's premium chocolates business, the company said. 

Ready-to-serve soups such as the Chunky and Select brands showed improvement in the quarter, the company said. Several non-soup businesses, including Pepperidge Farm cookies, Arnotts biscuits and U.S. Prego and Pace sauces, posted positive sales so far in the year, Campbell said. 

"We are continuing to lay the groundwork across the entire portfolio to realize the full potential of our business," Chief Executive Douglas Conant said in a statement. 

Favorable short-term interest rates in part offset lower earnings, the company said. Campbell expects third-quarter results of 21 cents to 24 cents a share. 

Free cash flow in the first half was $430 million, compared with $682 million in the same period a year earlier. Debt rose to $3.8 billion from $3.2 billion. 

Campbell shares were off 60 cents, or 2.2 percent, at $26.79 in Wednesday afternoon trading on the New York Stock Exchange. The shares have outperformed the broad Standard & Poor's 500 Index by more than 5 percent in the past 12 months.