Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Campbell's Co (CPB, Financial) reported a 9% growth in net sales, driven by the contribution from the Sovos acquisition.
- The company's meals and beverages division showed consistent performance with a 1% increase in dollar consumption.
- Rao's sauce delivered high single-digit net sales growth in the second quarter and low teens growth for the first half.
- The Campbell's Co (CPB) achieved approximately $65 million in cost savings under its $250 million cost savings program.
- The company maintained a strong cash flow generation with $737 million in operating cash flow year to date.
Negative Points
- The anticipated recovery of some snacks categories did not materialize, leading to a softer top line.
- Snacks margin fell short of expectations due to unfavorable mix and operational headwinds in the fresh bakery business.
- Organic net sales decreased by 2%, driven by weaker-than-anticipated snacking categories.
- Adjusted EPS declined 8% to $0.74 due to higher interest expense from increased debt levels.
- The company revised its full-year guidance downward due to slower-than-anticipated recovery in snacking categories.
Q & A Highlights
Q: Mick, as we think about the fiscal second half, what actions are specifically driving the lower profit outlook, and does the revised guidance give the company enough room to get snacks back on track? Also, has the net price headwind to organic sales changed with the new guidance?
A: Mick Beekhuizen, President & CEO: The revised guidance reflects a broader operating environment where snacking categories didn't improve as anticipated, particularly in cookies and crackers. We expect sequential improvement in snacks margin but not to the previously communicated levels. The guidance assumes stabilization in snacks by Q4. Carrie Anderson, CFO: We expect promotions to be less of a headwind in the second half, and the guidance supports necessary promotional investments.
Q: Could you walk us through your assumptions for consumer recovery in the back half of the year, particularly for snacks? How do you see innovation and promotional activity impacting share gains or losses?
A: Mick Beekhuizen, President & CEO: We expect Q3 to be similar to Q2, with stabilization in Q4. We're focused on our core brands like Goldfish, ensuring proper support and innovation. The team is working on promotional support and price-pack architecture to provide value to consumers.
Q: How confident are you in achieving the 17% snacks margin target by fiscal '27, given current challenges?
A: Mick Beekhuizen, President & CEO: Despite current pressures, the building blocks for margin improvement, such as network optimization and mix improvements, remain intact. We are confident in a positive trajectory towards the 17% target, though the timeline may extend slightly.
Q: Regarding Rao's, how comfortable are you with the rate of change in consumption, given the deceleration in data?
A: Mick Beekhuizen, President & CEO: The deceleration is partly due to a shift in club activity timing. We expect Rao's to achieve slightly above 10% growth for the full year, supported by strong brand equity and strategic initiatives.
Q: Have your expectations for broth changed in the back half, considering private label recovery?
A: Mick Beekhuizen, President & CEO: The broth category is performing well, with private label recovery slower than anticipated. We expect some headwinds but less than initially expected, and our supply chain is prepared to meet demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
