Max Gumport

Max Gumport asked about a reasonable normalized segment profit margin for sweet baked snacks, given current impacts and a reduced long-term sales growth target. He also sought an update on Uncrustables trends, including total company versus retail growth, as the brand approaches its $1 billion revenue target.

Answer

CFO Tucker Marshall acknowledged sweet baked snacks profitability is below expectations but anticipates improvement in Q4, promising a revised profit margin target and trajectory in the next earnings call, focusing on bakery environment and cost management. CEO Mark Smucker expressed continued confidence in Uncrustables as a key growth driver, citing distribution gains in away-from-home and C-store channels, new household additions, brand expansion, and innovation, while maintaining market leadership despite category expansion.

Max Gumport asked about the sweet baked snacks' profit side, recognizing discrete impacts and a reduced long-term sales growth target, and sought color on a reasonable, normalized segment profit margin for the business.

Answer

CFO Tucker Marshall acknowledged profitability is below expectations, particularly in Q3, but expects improvement in Q4. He stated that the team is focused on improving profits through bakery environment management and cost control, and a revised profit margin target will be provided in the Q4 earnings call.

Max Gumport asked if the Uncrustables volume decline in the frozen handheld and spreads segment this quarter was primarily due to lapping strong prior-year performance and the impact of new entrants. He also sought confirmation on whether the $75 million in tariff expense was the total expected for FY2026 and entirely due to coffee tariffs.

Answer

Mark Smucker, CEO and Chair of the Board, confirmed that the Uncrustables volume decline was largely due to lapping strong merchandising and promotions from the prior year's Q2. He added that new competition has generally been supportive, increasing category variety, and that household penetration, marketing, and innovation will continue to drive growth. Tucker Marshall, Chief Financial Officer, confirmed that the $75 million in tariff expense is the total expected for FY2026 and is entirely due to coffee tariffs.

Max Gumport asked if the Uncrustables volume decline in the frozen handheld and spreads segment this quarter was primarily due to lapping strong Q2 results from a year ago, and if new entrants were impacting the business. He also sought confirmation on the $75 million tariff expense for FY26, specifically if it's the total amount and entirely coffee-related.

Answer

Mark Smucker, Chief Executive Officer and Chair of the Board, confirmed that the volume decline was largely due to lapping strong merchandising and promotions in Q2 of the previous year. He added that innovation and solid merchandising support in the back half would drive acceleration, and competition has generally been supportive. Tucker Marshall, Chief Financial Officer, confirmed that the $75 million in tariff expense is the total amount expected for fiscal 2026 and is entirely due to coffee tariffs.

Max Gumport of BNP Paribas sought to reconcile the updated coffee assumptions, asking why the segment's profit outlook remains stable despite worse-than-expected volume impacts. He also requested more color on the company's GLP-1 research, questioning why no impact is being seen if the drugs are known to reduce food consumption.

Answer

CFO Tucker Marshall clarified the coffee financials, explaining that a $0.20 EPS benefit from better-than-expected elasticity was offset by a new $0.25 EPS headwind from increased tariffs, effectively bringing the segment's profit back to its original plan. CEO Mark Smucker added that GLP-1 research shows no impact because categories like coffee and pet are unaffected, while indulgent snacks like Hostess are still consumed as small rewards, a trend supported by continued consumer snacking habits.

Max Gumport asked about the drivers of the free cash flow miss in fiscal 2025, the reasons for the guided increase in fiscal 2026 despite lower expected EPS, and how the company plans to fund its debt paydown and dividend commitments.

Answer

CFO Tucker Marshall attributed the FY25 miss to higher inventory balances from green coffee inflation. He explained the FY26 improvement is driven by a $75 million reduction in capital expenditures to $325 million, plus continued working capital management. He confirmed that debt paydown will be funded by a combination of free cash flow after dividends and excess cash from the balance sheet.

Max Gumport pressed for clarity on the decision not to cut the dividend, given the high payout ratio and leverage, and sought details on the 2026 outlook regarding SNAP budgets, Supreme Court case impacts, debt refinancing rates, and market share gain assumptions. He also asked about maintenance CapEx, the cadence of incentive compensation impact, Simple Mills' Q4 sales disruption, and its Q4 margin dip due to input costs and tariffs.

Answer

Anthony Scaglione, CFO, stated the dividend is a board discussion, part of a holistic review, and confirmed compliance with covenants and plans for debt refinancing at potentially higher rates. He noted the diverse portfolio addresses SNAP impacts. Ryals McMullian, Chairman and CEO, attributed market share gains to brand investments and innovation, and stated no material financial impact is expected from the Supreme Court case. He clarified maintenance CapEx is around $2M per bakery annually plus ERP, most incentive compensation adjustment occurred in the first three quarters of 2025, and Simple Mills' Q4 sales disruption was due to distributor inventory deloading and a coconut sugar issue. The Q4 margin dip was primarily due to almond flour costs and tariffs, expected to continue into 2026.

Max Gumport questioned the decision not to cut the dividend immediately, citing the high payout ratio, leverage concerns, covenant risk, and lack of CapEx plans for 2026. He also asked for clarity on factors embedded in the 2026 outlook, including reduced SNAP budgets, potential Supreme Court case impacts, debt refinancing at higher rates, and the assumption of large market share gains. In follow-ups, he inquired about maintenance CapEx levels, the cadence of the 8 cents EPS impact from incentive compensation in 2025, Simple Mills' Q4 2025 sales performance and outlook, and the reasons for Simple Mills' Q4 EBITDA margin dip and the 2026 input cost outlook.

Answer

Anthony Scaglione (CFO, Flowers Foods) reiterated that the dividend is part of a holistic review with the board, confirmed compliance with covenants, and expressed confidence in refinancing upcoming debt at slightly higher rates. He noted the diverse portfolio addresses SNAP budget reductions. Ryals McMullian (Chairman and CEO, Flowers Foods) attributed anticipated market share gains to incremental brand investments, innovation (including Simple Mills), and increased marketing, stating no material financial impact is expected from the Supreme Court ruling. He clarified maintenance CapEx is around $2 million per bakery plus ERP, most incentive compensation adjustment occurred in the first three quarters of 2025, Simple Mills' Q4 sales were affected by distributor inventory deloading and a coconut sugar issue but remains bullish for 2026, and Simple Mills' Q4 margin dip was due to almond flour, tariffs, and brand investments, expected to continue into 2026.

Max Gumport asked about Flowers Foods' capital allocation strategy, specifically the balance between reducing CapEx to normalize leverage and reconsidering dividend levels, questioning if current leverage and dividend restrain investment capacity. He also sought clarification on the Q3 margin pressure, noting declines despite lower ingredient costs, and how the company plans to navigate potential continued pressure.

Answer

CFO Steve Kinsey explained that capital allocation is continuously considered, with a focus on shareholder value. He clarified that CapEx reduction is partly for deleveraging but also due to project cadence shifts and reassessment for optimal returns, separate from dividend considerations. Kinsey stated that the board reviews dividends quarterly, considering leverage ratios and payout. Regarding margins, he attributed gross margin pressure to top-line issues and increased promotions, with Simple Mills' 100% co-man model being a significant factor that will lap next year. SD&A pressure was linked to the California labor pool conversion (lapping next year) and overall labor costs.

Max Gumport questioned the balance between reducing CapEx and reconsidering dividend levels, suggesting that the current leverage and dividend might be restraining investment. He also asked about the drivers behind the Q3 gross and EBITDA margin decline, despite lower ingredient costs, and how the company plans to navigate potential continued margin pressure.

Answer

CFO Steve Kinsey clarified that CapEx reduction was primarily due to project cadence shifts and reassessment for optimal returns, not directly tied to dividend considerations, which the board reviews quarterly. He attributed gross margin pressure to top-line challenges, promotional activity, and Simple Mills' 100% co-manufacturing model. SD&A pressure was linked to the California labor pool conversion and overall labor costs.

Max Gumport inquired about the drivers behind the continued decline of the oat milk category in U.S. retail, despite Oatly's outperformance, and what the 2026 outlook for the U.S. retail oat milk category entails. He also asked for clarification on when Oatly expects to achieve positive free cash flow, given the anticipated continued negativity in 2026.

Answer

Daniel Ordoñez, Global President and COO, attributed Oatly's U.S. performance to its reshaped portfolio (95% drinks), the successful coffee and food service playbook, growth in club channels, and expansion into Canada. He highlighted Oatly's market outperformance and renewed household penetration growth. Future plans include increased brand investment and deploying the European portfolio in U.S. traditional retail, acknowledging the market's complexity. Marie-José David, CFO, reiterated that the business plan is fully funded and expressed confidence in achieving structurally positive free cash flow through top-line growth, efficiency, working capital improvements, and CapEx discipline, stating it's a "matter of time" but not providing a specific timeline for 2026.

Max Gumport asked for more color on the continued declines in the U.S. retail oat milk category, despite Oatly's outperformance, and what assumptions for the oat milk category in U.S. retail are embedded in Oatly's 2026 outlook. He also inquired about the company's Free Cash Flow projections, specifically when it is expected to turn positive, given continued progress but an anticipated negative Free Cash Flow for 2026.

Answer

Daniel Ordoñez (Global President and COO) attributed Oatly's U.S. retail outperformance to its reshaped portfolio (95% drinks), strong coffee and food service playbook, and growth in club channels and Canada. He noted growing household penetration for Oatly, especially among Gen Z, and outlined plans for increased brand investment and deploying the European portfolio in U.S. retail. Marie-José David (CFO) acknowledged the Free Cash Flow progress and expected continued improvement in 2026, driven by EBITDA acceleration, CapEx management, and working capital improvements, but did not provide a specific timeline for becoming positive, stating the business plan is fully funded.

Max Gumport asked about the extent of Oatly's control in reigniting category growth, the impact of household penetration plateaus, and for an update on the company's long-term supply chain efficiency journey.

Answer

Global President and COO Daniel Ordonez stated that Oatly is adding 'category growth' to its list of controllables, planning to drive a 'second wave of momentum' through mechanical growth from distribution and a more precise marketing approach targeting taste perception barriers. CEO Jean-Christophe Flatin explained that the supply chain strategy involves focusing on five existing global sites after discontinuing new factory projects. This focus, combined with a permanent quest for efficiency, drove significant past margin gains and will be the primary contributor to 2025 EBITDA improvement.

Max Gumport asked for Hershey's perspective on the narrative that the company will be unable to grow its chocolate volumes for several years post-pricing cycle, and if there's any historical precedence to counter this view. He also inquired about Hershey's learnings from the European chocolate market, where price elasticities significantly increased in mid-2025 after initial encouraging trends, and how the US consumer and market differ from Europe.

Answer

CEO Kirk Tanner countered the volume growth narrative by highlighting the resilience and emotional connection of the confectionery category, and the strong momentum of the salty business in permissible, better-for-you, and portion control segments (e.g., SkinnyPop, Dot's Pretzels). He stated that the US chocolate category is highly unique with strong brand differentiation, variety, and mainstream affordability (75% of portfolio under $4), unlike Europe's high chocolate tablet bar market and premium skew. SVP and CFO Steve Voskuil added that Hershey's international portfolio, being premium and limited in scale, experiences higher elasticity.

Max Gumport asked for pushback against the narrative that Hershey will be unable to grow chocolate volumes for several years after the current pricing cycle, similar to other packaged food categories. He also inquired about learnings from Europe's chocolate market, where price elasticities ramped up meaningfully in mid-2025, and factors making the European consumer/market different from the U.S.

Answer

Kirk Tanner (President and CEO) countered by highlighting the resilience of the confection category and its emotional connection with consumers. For salty snacks, he emphasized positioning in permissible, better-for-you, and portion-control segments like SkinnyPop and Dot's Pretzels. He noted the U.S. category is highly unique with more brand differentiation, variety, and less private label compared to Europe's chocolate tablet bar market, stressing the relative affordability in the U.S. (75% of portfolio under $4). Steve Voskuil (SVP and CFO) added that Hershey's premium positioning and limited scale in international markets contribute to higher elasticity there.

Max Gumport followed up on elasticity response, focusing on the everyday business and the double-digit growth seen in the past quad week, asking for incremental color on its implications. He also questioned the competitive pricing environment, noting a narrative of competitors not following and suggesting different pricing cadences, with Hershey potentially catching up on pricing relative to four years ago.

Answer

Senior Vice President and CFO Steve Voskuil reiterated no concerns about elasticity, confirming double-digit growth in everyday CMG. President and CEO Kirk Tanner emphasized a consumer-first approach to pricing cadence, focusing on what's best for the category and consumer. Steve Voskuil added that pricing execution is now more precise and strategic, and Hershey is not concerned about overall price gaps, noting the category's resilience and rationality.

Max Gumport followed up on the elasticity response, asking for more color on the everyday business in the first few weeks, particularly given double-digit growth over the past quad week. He also inquired about the competitive pricing environment, noting that while competitors might have different pricing cadences, Hershey appears to be catching up on pricing relative to four years ago.

Answer

SVP and CFO Steve Voskuil reiterated no concerns about the everyday business, with CMG up double digits in the last four weeks. CEO Kirk Tanner emphasized a consumer-first approach to pricing cadence, focusing on what makes sense for the business and consumers. He and Steve Voskuil noted that the category remains resilient and rational, with no concerns about overall price gaps despite different phasing of competitive pricing.

Max Gumport of BNP Paribas inquired about the path to achieving $10+ adjusted EPS in 2026, considering the new pricing, tariffs, and current cocoa costs. He also asked about the potential need for incremental reinvestment to support the price increases.

Answer

SVP & CFO Steve Voskuil explained that while the new pricing is a material step towards margin recovery, it does not fully offset cocoa inflation to date. He noted that relief on tariffs or a reversion in cocoa prices could lead to better-than-algorithm earnings in 2026. He also confirmed that investments in brands, innovation, and customer events are factored into the pricing plan to support growth.

Max Gumport inquired about the path to achieving $10+ adjusted EPS in 2026, considering the new pricing actions and the added headwind of tariffs, and asked about the need for incremental reinvestment to support the price hikes.

Answer

SVP & CFO Steve Voskuil explained that while the new pricing is a significant step towards margin recovery, it does not fully offset cocoa inflation to date, and tariffs are a new headwind. He noted that if cocoa prices fall or tariff relief is granted, Hershey could achieve 'better than on algorithm' earnings in 2026. He also confirmed that brand investments and innovation funding are already factored into the pricing strategy.

Max Gumport inquired about the path to $10+ adjusted EPS in 2026, considering the new pricing and tariffs, and asked about the need for incremental reinvestment to support the significant price increases.

Answer

SVP & CFO Steve Voskuil explained that while the new pricing is a material step toward margin recovery, it does not fully offset cocoa inflation to date. He noted that tariffs are a new headwind not contemplated in the original $10+ EPS scenario. However, he expressed optimism that if tariffs are relieved or cocoa prices revert, Hershey could achieve better than on-algorithm earnings in 2026. He also confirmed that brand reinvestment is factored into the pricing strategy.

Max Gumport sought clarification on McCormick's tariff numbers, specifically reconciling the reported fall in gross annualized exposure from $140 million to $70 million with the expectation of $50 million in incremental tariffs for FY2026, and previous guidance for 2025. He asked for the final gross and net tariff numbers booked in FY2025 and if the net impact of tariffs is expected to be zero year-over-year in 2026. He also requested clarity on the Q1 EPS cadence, questioning why it's projected at the mid-to-high end of guidance despite soft operating profit due to the Mexico acquisition.

Answer

Marcos Gabriel, Executive Vice President and CFO, clarified that in 2025, the gross tariff impact was $70 million, mitigated to a net impact of $20 million. For 2026, the annualized gross exposure is $70 million, and with $20 million already absorbed in the base, the incremental year-on-year gross impact is $50 million, which McCormick plans to mostly offset. He confirmed that the net impact of tariffs going to zero year-over-year in 2026 is a fair assessment. Regarding Q1 EPS, he explained that while operating profit would be soft due to the McCormick de Mexico acquisition not being fully included, EPS would be at the mid-to-high end in Q1, then normalize throughout the year, indicating a different dynamic between OP and EPS in the first quarter.

Max Gumport asked for clarification on tariff figures, specifically reconciling the reduction in gross annualized tariff exposure from $140 million to $70 million with the expected $50 million incremental tariffs in FY26, and the previously booked $70 million gross and $20 million net tariffs in FY25. He also asked for confirmation that the net tariff impact year-over-year for 2026 would be zero. Finally, he sought to reconcile the Q1 EPS cadence, where it's expected at the mid to high end of guidance, despite Q1 operating profit being soft.

Answer

Marcos Gabriel, EVP and CFO, clarified that in 2025, the gross tariff impact was $70 million, mitigated to a net impact of $20 million. For 2026, the annualized gross exposure is $70 million, and with $20 million already absorbed in the base, the incremental gross year-on-year impact is $50 million, which the company plans to offset. He confirmed that the net tariff impact year-over-year for 2026 is expected to be zero. Regarding EPS cadence, he explained that Q1 operating profit will be soft due to the McCormick de Mexico acquisition not being fully included, but Q1 EPS will be at the mid to high end, normalizing throughout the year, indicating a different equation between OP and EPS in Q1.

Max Gumport asked to reconcile the strong Consumer Americas volume growth (approximately 3%) with U.S. scanner data showing deceleration for McCormick branded products, inquiring if other countries, non-track channels, or private label performance explain the gap. He also requested more detail on the working capital components driving higher cash needs, specifically inventories, and expectations for cash flow by year-end 2025.

Answer

Brendan Foley, Chairman, President, and CEO, suggested that the difference might be due to acceleration in e-commerce and club store channels (unmeasured channels), as well as the strong performance of their Canadian business. He highlighted e-commerce growth as a significant factor. Marcos Gabriel, Executive Vice President and CFO, expressed strong confidence in full-year cash flow. He explained that the lag in Q2 and Q3 was due to higher working capital use, specifically purchasing raw material inventories, and expects this to normalize in the back half, with Q4 being the biggest quarter for cash flow.

Max Gumport sought to understand the factors contributing to McCormick's robust Consumer Americas volume growth, despite a clear slowdown in U.S. scanner data for McCormick branded products. He asked if this gap could be attributed to other countries in the Americas, non-track channels, or private label performance. He also requested more details on the working capital components driving the decrease in cash flow from operations year-to-date and expectations for year-end 2025.

Answer

Chairman, President, and CEO Brendan Foley suggested that the discrepancy might be explained by acceleration in unmeasured channels like e-commerce and club stores, as well as strong performance from the Canadian business within Consumer Americas. Executive Vice President and CFO Marcos Gabriel attributed the year-to-date decrease in cash flow from operations to higher cash use for working capital, specifically through inventory purchases of raw materials in Q3. He expressed strong confidence in normalizing this trend and delivering very strong cash flow for the full year 2025, with Q4 being the largest quarter for cash generation.

Max Gumport asked for confirmation that the company's long-term financial targets remain intact despite the new tariff outlook and requested more detail on the observed uptick in innovation activity from large CPG customers.

Answer

Chairman, President & CEO Brendan Foley confirmed that the company remains confident in its long-term objectives. Regarding innovation, he described a 'net incremental' increase in activity from CPG customers, particularly in reformulation and matching driven by health and wellness trends. He noted that while McCormick's win rate is strong, the timing of when these benefits will materialize is variable.

Max Gumport asked to what extent the observed softness in the snacking category is driven by consumer financial pressures versus changing preferences toward healthier eating.

Answer

Chairman, President and CEO Brendan Foley attributed the trend to a combination of both factors. He noted that while there is some softness, growth pockets exist in value-added and better-for-you snacks. More broadly, he described the consumer as resilient but cautious, continuing value-seeking behaviors like cooking from scratch, which they perceive as both cheaper and healthier. This dynamic ultimately benefits McCormick's core categories.

Max Gumport highlighted the dichotomy between McCormick's strong U.S. consumer volumes and the soft volumes of its CPG customers in the Flavor Solutions segment. He also asked for more detail on the strategic inventory buys that impacted 2024 cash flow.

Answer

CEO Brendan Foley attributed their consumer outperformance to strong execution and competing in healthy, growing categories like spices and hot sauce. CFO Marcos Gabriel explained the inventory buys are 'business as usual' strategic decisions to secure supply and lock in favorable costs on commodities, noting it's a standard part of their procurement playbook.

Max Gumport sought confirmation that long-term financial targets still stand despite the tariff outlook and asked for more detail on the innovation uptick from large CPG customers.

Answer

CEO Brendan Foley confirmed they remain 'confident and comfortable' with their long-term objectives from the last Investor Day. Regarding CPGs, he described a 'net incremental' increase in reformulation and matching activity on top of normal innovation, driven by health and wellness trends. He noted their win rate on these projects is strong, though the timing of benefits varies.

Max Gumport inquired about scenarios that could push Lamb Weston to the lower half of its Adjusted EBITDA guidance for the current fiscal year, asking why the low end of the range wasn't raised. He also asked for commentary to address investor concerns about potential further EBITDA declines in fiscal 2027 if the lower half of the range is more likely for 2026.

Answer

President and CEO Michael Smith cited the non-linear nature of turnarounds, ongoing competitive and macroeconomic environments, and continued soft traffic as reasons for prudence. He highlighted the dynamic international markets, strong European crop leading to lower costs, soft demand, and impact of added regional capacity on European exports as challenges. CFO Bernadette Madarieta reiterated the expectation to finish near the midpoint, citing Price/Mix headwinds, Argentina ramp-up costs, and European underutilization. Michael Smith added that the "Focus to Win" plan is still early, but they are confident in their strategy, cost savings, and customer partnerships, and will provide future margin targets later. Bernadette Madarieta emphasized North America's strong position.

Max Gumport asked about potential scenarios that could push Lamb Weston to the lower half of its adjusted EBITDA guidance range and what prevented the company from raising the low end of the range today. He also inquired about the implications for fiscal 2027 EBITDA, specifically if current performance suggests further declines next year, and sought commentary to address investor concerns.

Answer

CEO Michael Smith cited the non-linear nature of turnarounds, an ongoing competitive environment, soft traffic, macroeconomic headwinds, and dynamic international markets (strong European crop, soft demand, added capacity impacting exports) as factors. CFO Bernadette Madarieta confirmed expectations to finish near the midpoint of the EBITDA range due to price mix headwinds, Argentina ramp-up costs, and European underutilization. Michael Smith emphasized being early in the 'Focus to Win' plan, belief in the strategy, and progress in costs and customer partnerships, with future cost savings being key to long-term margin improvement, while Bernadette Madarieta highlighted North America's strong position.

Max Gumport inquired about the contribution of customer win growth in North America, asking for a quantification in point terms and whether the benefit, first noted in fiscal 4Q 2025, is expected to persist in Q2 and Q3. He also sought clarification on the Q1 versus Q2 gross margin comments, specifically whether the view on absolute gross margin has changed due to inflation timing or if the better-than-expected Q1 gross margin is the primary factor.

Answer

CEO Mike Smith stated that the team is actively securing new customers, driven by a heightened customer-centric approach. He noted that some customer conversions occurred earlier than anticipated in Q1, contributing to the higher volume. CFO Bernadette Madarieta added that the international segment benefited from lapping a prior year voluntary product withdrawal. She clarified that while the full-year gross margin is expected to be close to original expectations, the primary change is that Q1 performed better than anticipated, leading to an expectation of a flat gross margin between Q1 and Q2.

Max Gumport asked for a quantification of the contribution of customer win growth in North America and whether this benefit is expected to persist in 2Q and 3Q. He also sought clarification on the gross margin outlook, specifically if the better-than-expected 1Q gross margin means the absolute gross margin view has changed, or if it's primarily a timing shift.

Answer

CEO Mike Smith noted that new customer conversions occurred earlier than expected in Q1, contributing to the larger volume step-up, primarily in North America. CFO Bernadette Madarieta added that for the full year, gross margin is expected to be close to original expectations, with the primary change being a better-than-expected Q1 leading to a flat gross margin between Q1 and Q2.

Max Gumport from BNP Paribas asked for more detail on the company's strategic plans for geographies where it lacks a competitive advantage, specifically mentioning Europe. He also questioned the rationale and timing for excluding non-cash stock-based compensation from adjusted EBITDA metrics, viewing it as a real expense.

Answer

President & CEO Mike Smith declined to share specific geographic plans for competitive reasons but assured updates would be provided as decisions are finalized. CFO Bernadette Madarieta defended the accounting change, stating that while cash incentive awards remain in EBITDA, removing the non-cash portion reduces volatility and aligns reporting with how management internally evaluates the business, a practice she noted is common in the industry.

Max Gumport asked to size the magnitude of absorption headwinds expected in Q3, given that 3Q operating margins are expected to be below 2Q levels due to AMP and absorption headwinds from reducing inventory. He also inquired about the longer-term gross margin outlook, noting it's currently around 24% versus high 20% pre-COVID, and if anything would prevent getting back to high 20% levels over the next several years.

Answer

CFO Dave Marberger stated that Q3 gross margin would be similar to Q2, possibly a little better, but the main drivers for lower operating margin are AMP (over 3% of sales) and higher SG&A as a percentage of net sales, without providing a specific magnitude for absorption headwinds. CEO Sean Connolly affirmed plans to 'claw our way north' on gross margins, expecting expansion. He cited building blocks including 5% productivity, eventual inflation relief, supply chain resiliency investments (like chicken plants), strategic pricing, and Project Catalyst, along with ongoing portfolio reshaping, as contributors to margin expansion post-FY26.

Max Gumport asked about the expected magnitude of absorption headwinds in Q3 related to reducing inventory, and for a longer-term perspective on whether Conagra expects to return to high 20% gross margin levels, given current levels around 24% and historical pre-COVID levels in the high 20s.

Answer

CFO Dave Marberger stated that Q3 gross margin is expected to be similar to Q2, with the main drivers for Q3 operating margin being AMP over 3% of sales and higher SG&A as a percentage of net sales. CEO Sean Connolly affirmed plans for margin expansion, particularly in frozen, driven by 5% productivity, eventual inflation relief, supply chain resiliency investments (including repatriating outsourced chicken production), strategic pricing, and Project Catalyst, all contributing to good margin expansion post-F26.

Max Gumport from BNP Paribas asked for the expected path to margin recovery from the guided 11-11.5% operating margin, and inquired about the potential need to rationalize the manufacturing footprint due to operating deleverage from volume declines.

Answer

President & CEO Sean Connolly described the current margin pressure as a mechanical part of the inflation cycle, now compounded by a strategic choice to invest for volume rather than take broad-based pricing. He expects margins to bounce back post-FY26. EVP & CFO David Marberger added that while they constantly review their network, a current absorption headwind is due to temporary production shifts for facility upgrades, which will become a tailwind in FY27 as production is brought back in-house.

Max Gumport questioned the ability for volumes to remain positive after price cuts and whether current investments in the business are sufficient, also asking for clarity on the Q2 profit overdelivery and its expected unwind in Q3.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, highlighted that 90% of price investments are performing as modeled, and the remarkability framework is strong. Jeff Harmening, Chairman and CEO, and Kofi Bruce, CFO, confirmed that Q2 favorability from supply chain, International performance, and NAR shipment timing is expected to reverse in Q3.

Max Gumport noted that in areas of reinvestment, price declines are outpacing volume gains, hurting dollar sales. He asked for confidence in this relationship improving and requested a quantification of the investment in the fresh pet food launch.

Answer

CEO Jeffrey Harmening confirmed that volume share outpacing dollar share was expected and modeled for the first half of the year. He anticipates this will reverse in the second half as the company laps pricing actions and benefits from sustained marketing and innovation. He declined to quantify the fresh pet investment but stressed it would be significant to support a national launch and drive trial.

Max Gumport of BNP Paribas pointed to refrigerated dough, where volumes are up but dollar sales are down, and asked what provides confidence this relationship will improve. He also asked for the investment amount behind the fresh pet food launch.

Answer

Chairman & CEO Jeffrey Harmening stated that the volume/dollar share dynamic was expected and modeled. He anticipates that as the company laps pricing investments in the second half of the year, the impact of strong marketing and innovation will cause dollar shares to begin growing. He declined to quantify the fresh pet investment but confirmed it would be significant to drive trial for the national launch.

Max Gumport sought an update on tariffs, specifically if any FY25 cashew-related expenses would not repeat in FY26 due to exemptions, and asked for quantification. He then questioned what factors might be dragging down profit growth despite several discrete tailwinds.

Answer

Interim CFO Paul Kuehneman stated Hormel is fairly insulated from tariffs, with a 2026 range of $25M-$35M mainly for steel/aluminum, and confirmed this is in line with FY25 totals, but did not quantify the exact cashew impact. Interim CEO Jeff Ettinger acknowledged the potential admin savings but pointed to Q1 starting in a hole and strategic retail pricing decisions (not always pricing to full cost to protect long-term brand future) as mitigating factors.

Max Gumport from BNP Paribas requested an update on tariffs, specifically asking if any expenses related to cashews incurred in fiscal 2025 would not repeat in fiscal 2026 due to recent exemptions, and if so, to quantify that impact. He also sought clarification on the factors potentially holding back the low end of Hormel Foods' fiscal 2026 profit growth guidance, given several discrete tailwinds like administrative savings, lapping prior-year incidents, T&M benefits, and turkey pricing.

Answer

Interim CFO and Controller Paul Kuehneman stated that Hormel Foods feels fairly insulated from tariffs, with an expected range of $25-$35 million for fiscal 2026, mainly related to supplies, steel, and aluminum, which is roughly in line with the full-year total from 2025. He noted that the exact quantification of cashew-related tariff impact from 2025 due to recent exemptions was not provided. Interim CEO Jeff Ettinger acknowledged the discrete tailwinds but pointed to the Q1 earnings pressure as a mitigating factor, implying a higher growth rate for the rest of the year. He also mentioned that in retail pricing decisions, the company sometimes chooses not to fully offset cost increases to protect the long-term future of brands, which can impact profitability.

Max Gumport asked if the high end of the company's guidance range is now less likely, given that the previously mentioned tailwind from an improved turkey market appears to be unrealized. He also sought clarification on the T&M financial targets, asking how the FY25 savings goal of $100M-$150M contributes to the multi-year $200M+ EBIT income target.

Answer

CFO Jacinth Smiley maintained that the high end of the guidance range is still achievable. While acknowledging the turkey market dynamic, she emphasized that other drivers like volume, mix, the Planters recovery, and T&M performance are still in play to reach the target. CEO James Snee described the T&M benefits as an escalating 'growth flywheel' that continues to build, noting that the FY25 plan also includes significant reinvestment, but did not provide a specific breakdown of the multi-year target.

Max Gumport, Director and Equity Research at BNP Paribas, asked for more details on the cautious consumer spending environment observed by Smithfield Foods and how these insights are shaping the company's outlook for the coming months. Gumport also inquired about the quantified impact of delayed SNAP payments embedded in Smithfield Foods' Q4 outlook and the methodology used to arrive at that figure.

Answer

Steve France, President of Packaged Meats, described consumer sentiment as cautious, with value-seeking behavior consistent across the industry. He noted higher-income consumers maintaining spending, while lower-income households are more selective, making more frequent, smaller shopping trips, opting for larger pack sizes, and cooking at home to reduce costs. Despite these trends, protein remains a priority, and pork products are performing well due to affordability and versatility, with Smithfield's diversified brand and private label portfolio capturing consumers across the pricing spectrum. France stated that while 7.5% of total industry dollars in relevant categories are tied to SNAP, the overall impact to Smithfield's business would be relatively minor, as families still need protein. He expressed concern for the broader consumer impact and mentioned working with retail partners on value promotions. He confirmed that the diversified portfolio and private label capabilities provide a competitive advantage, and the fluid SNAP situation was factored into the guidance, though not explicitly quantified.

Max Gumport with BNP Paribas asked for more details on the cautious consumer spending environment Smithfield is observing and how it informs their outlook for the coming months. He also requested quantification of the impact of delayed SNAP payments embedded in the Q4 outlook and further color on how this impact was determined.

Answer

Shane Smith, President and CEO, and Steve France, President of Packaged Meats, described a cautious consumer sentiment with value-seeking behavior, particularly among lower-income households, who are making more frequent, smaller shopping trips, opting for larger pack sizes, and cooking at home more. They noted that protein remains a priority, and pork products are performing well due to affordability and versatility. Steve France addressed SNAP, stating that while 7.5% of industry dollars are tied to SNAP, the overall impact to Smithfield's business would be relatively minor, as families still need protein. He confirmed that the diversified portfolio and pricing strategy, including private label, position them well to mitigate impacts, and the guidance reflects their current assessment of this fluid situation.

Max Gumport questioned the confidence in the current reinvestment plan, noting it appears less sizable than some peers' despite ongoing volume declines, and asked for the rationale.

Answer

EVP & Global CFO Andre Maciel emphasized a disciplined, test-and-scale approach to investments. He stated that the company feels the current plans are appropriate but will not hesitate to increase spending if positive results are seen. The focus is on healthy, long-term growth through product and marketing rather than just price.

Max Gumport of BNP Paribas asked for more details on the retailer destocking observed in North America, including its primary drivers and the expected recovery timeline.

Answer

Chairman & CEO Dirk Van de Put attributed the destocking to retailers managing cash flow amid a broader consumption slowdown and potentially reallocating inventory ahead of tariffs. He noted that Mondelez is offsetting this by focusing on other channels like value and e-commerce. He expressed confidence that the destocking is now complete and expects Q3 to be 'clean' from an inventory perspective.

Max Gumport of BNP Paribas asked for more details on the drivers behind retailer destocking in North America and the expected timeline for recovery.

Answer

CEO Dirk Van de Put attributed the destocking to retailers managing cash flow amid a slowdown in overall consumption and potentially reallocating inventory ahead of tariffs on other goods. He noted that while some destocking in Q2 was a surprise, the company expects inventory levels to be 'clean' starting in Q3. He also mentioned that Mondelez is offsetting the impact by increasing focus on other channels like value and e-commerce.

Max Gumport sought clarification on the Q1 sales cadence and asked what will drive the expected improvement in underlying business trends from Q2 through Q4.

Answer

CFO David McKinstray clarified the Q1 headwind is relative to full-year guidance and expects Q2-Q4 to be uniform. CEO Gary Pilnick cited several drivers for improvement: a stable category, a more seasoned sales team, a robust commercial plan with broader innovation, and a focus on growth areas like natural/organic.

Max Gumport questioned why the cereal category is not seeing better performance, given its strong value proposition in an economic environment where consumers are actively seeking value.

Answer

Chairman and CEO Gary Pilnick acknowledged the logic but framed the category's modest decline as stable performance in a challenging environment. He suggested that WK Kellogg Co.'s own PPA strategy, which can impact reported volume, also affects the overall category numbers due to the company's significant market share. He affirmed that value-seeking behavior should be a tailwind for cereal.

Max Gumport of BNP Paribas followed up on the competitive environment, asking why Kellanova's business does not seem to require more price investment or givebacks, especially when competitors and retailers are increasingly signaling a need for it.

Answer

Chairman, President and CEO Steven Cahillane responded by pointing directly to the company's performance and outlook. He stated that Kellanova had a terrific second quarter, raised its full-year guidance, and has great confidence in its plans, innovation, and brand-building returns. He concluded that the company does not feel it is missing anything or needs to alter its current pricing and promotional strategy, as evidenced by its strong results.