Campbell Soup Company ((CPB)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Campbell Soup Company painted a mixed picture for investors. While the company maintained stable market share in its leadership brands and made strategic acquisitions, it faced challenges with declining net sales, EBIT, and gross margin pressures due to rising costs and tariffs.
Stable Market Share in Leadership Brands
The company’s leadership brands, which account for about 90% of enterprise net sales, managed to maintain a stable market share despite facing challenges. Consumption was down by just 1%, indicating resilience in the face of market pressures.
Growth in Broth and Italian Sauces
Campbell’s broth segment continued its growth trajectory, with Swanson achieving six consecutive quarters of increased millennial buy rates. Rao’s Italian sauces also saw growth in both dollar and volume share, solidifying its position as the number one brand in its category.
Strategic Acquisition in Italian Sauces
In a strategic move, Campbell’s announced the acquisition of a 49% interest in La Regina, a key partner in producing Rao’s tomato-based pasta sauces. This acquisition is expected to be EPS neutral by fiscal 2026 and aims to improve margins for the Rao’s brand.
Decline in Organic Net Sales and Adjusted EBIT
The company reported a 1% decline in organic net sales and an 11% year-over-year decline in adjusted EBIT. These declines were attributed to increased costs and top-line headwinds, presenting a challenge for the company.
Pressure on Snacks Business
Campbell’s snacks segment faced significant pressure, with net sales declines in Snyder’s of Hanover pretzels, Fresh Bakery, Goldfish Crackers, and Cape Cod potato chips. However, these were partially offset by gains in Pepperidge Farm cookies.
Gross Margin Contraction
The company’s adjusted gross profit margin fell by 150 basis points to 29.9%. This contraction was driven by cost headwinds and gross tariffs, which negatively impacted the margin by 200 basis points.
Forward-Looking Guidance
During the earnings call, Campbell’s reaffirmed its fiscal 2026 guidance. The company anticipates continued pressure from tariffs, which are projected to impact approximately 4% of the cost of products sold. However, Campbell’s plans to mitigate 60% of this impact through various strategies. The strategic acquisition of a 49% interest in La Regina is expected to support growth in the Rao’s brand and be EPS neutral for fiscal 2026.
In summary, Campbell Soup Company’s earnings call highlighted a mixed performance, with stable market share in key brands and strategic acquisitions being positive notes. However, challenges such as declining net sales, EBIT, and gross margin pressures due to rising costs and tariffs remain significant hurdles for the company moving forward.