Campbell Soup Co. has booked drop in full-year profits as higher costs and increased spending on promotions hit earnings.

In the 12 months ended 29 July, earnings amounted to US$774m, a 0.2% decline on the prior-year period. Excluding items impacting comparability in both periods, adjusted net earnings declined 7% to $783m.

EBIT slid 5.5% to $1.21bn as a result of a decline in gross margin, which suffered amid “cost inflation, increased promotional spend and unfavourable mix”, Campbell said.

Sales dropped to $7.70bn from $7.72bn in the prior year. Campbell blamed the revenue decline on the increased promotional expenditure and a volume and mix impact of two percentage points.

However, in the last three months of the year, Campbell reported a 3% increase in sales on an organic basis. President and CEO Denise Morrison said Campbell saw “strong gains” in US soup and simple meals. Reported sales were flat.

Nevertheless, cost inflation and spending on marketing and promotions hit adjusted EBIT, which fell 10%. Net earnings climbed to $127m from $100 a year earlier.

For the current financial year, Campbell forecast sales growth of 10-12% and earnings of $2.51 to $2.57 per share, excluding special items.