Campbell Soup’s Earnings Call: Mixed Signals Amid Challenges

Campbell Soup Company ((CPB)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Campbell Soup Company painted a mixed picture, highlighting both positive developments and significant challenges. While there were some encouraging signs in brand performance and cost savings, the company also faced hurdles such as declining organic sales, reduced EBIT and EPS, and the potential impact of tariffs.

Slightly Ahead of Expectations

Despite the challenging operating environment, Campbell Soup Company’s fourth-quarter earnings performance was slightly ahead of expectations. This was a positive note in an otherwise tough quarter, indicating the company’s resilience and ability to navigate difficult market conditions.

Strong In-Market Performance

The Meals and Beverages segment showed strong in-market performance, with consumption outpacing the category. This growth was largely driven by trends in at-home cooking, which have boosted demand for Campbell’s products.

Rao’s Brand Performance

Rao’s brand made a significant contribution to the company’s performance, returning to high single-digit consumption growth. This growth positively impacted the Italian sauce category, showcasing the brand’s strong market presence.

Milano White Chocolate Success

The introduction of Milano White Chocolate was a notable success, leading to a 27% increase in dollar consumption for the Milano brand. This innovation highlights Campbell’s ability to capture consumer interest and drive sales through new product offerings.

Progress in Cost Savings

Campbell Soup Company exceeded expectations in cost savings, delivering $145 million in fiscal 2025. The company has increased its cost savings target to $375 million by fiscal 2028, demonstrating a strong commitment to improving efficiency and profitability.

Decline in Organic Net Sales

Organic net sales saw a decline of 3% in Q4, primarily due to unfavorable volume and mix. This decline underscores the challenges Campbell faces in maintaining sales momentum in a competitive market.

Adjusted EBIT and EPS Decrease

Both adjusted EBIT and EPS decreased by 2% in the fourth quarter compared to the prior year. This decline reflects the broader challenges the company is facing in terms of profitability.

Impact of Tariffs

Tariffs are expected to have a significant impact on Campbell’s financials, contributing to a projected decline in adjusted EPS by 16% to 11% in fiscal 2026. The company is actively working to mitigate these effects through strategic measures.

Snacks Segment Pressure

The Snacks segment experienced a 2% decline in organic net sales, with particular challenges in the pretzels, chips, and crackers categories. This segment’s performance highlights the competitive pressures and changing consumer preferences in the snacks market.

Forward-Looking Guidance

Looking ahead, Campbell Soup Company has outlined its expectations for fiscal 2026. The company anticipates a 4% tariff impact on the cost of products sold but plans to mitigate about 60% of this through various strategies. Guidance for fiscal 2026 includes reported net sales expected to decrease by 2% to flat, with organic net sales ranging from a 1% decline to a 1% increase. Adjusted EBIT is projected to decline between 9% and 13%, while adjusted EPS is expected to be down 12% to 18%. Campbell is also increasing its cost savings target to $375 million by fiscal 2028 to counterbalance the tariff impact and support brand investment and innovation.

In conclusion, Campbell Soup Company’s earnings call revealed a complex landscape of opportunities and challenges. While there are positive signs in brand performance and cost savings, the company must navigate significant hurdles, including declining sales and the impact of tariffs. Investors and stakeholders will be closely watching how Campbell addresses these challenges in the coming fiscal year.