Megan Clapp

Megan Clapp sought clarification on the net price-cost relationship for chocolate in 2026 and the timeline for profit recovery, as well as the organic sales outlook, particularly for emerging versus developed markets.

Answer

Luca Zaramella, COO and CFO, confirmed expectations for flat chocolate pricing in 2026, with a neutral to slightly positive net price-cost balance, and projected 2027 as the year for significant profit recovery due to lower cocoa resets. He stated that emerging markets are expected to continue high single-digit growth, potentially exceeding guidance, with less pricing contribution and more from volume/mix. He also noted that reported volume declines in EMEA and Latin America are largely due to PPA, with underlying volume momentum remaining strong.

Megan Clapp sought clarification on the net price-cost relationship for chocolate in 2026, given flat pricing, lower cocoa, and inventory/hedge impacts, asking if it's neutral or positive. She also questioned if 2027 is when the real profit recovery for chocolate begins. Additionally, she asked for a breakdown of the 0%-2% organic sales outlook, specifically if emerging markets are expected to grow high single digits and if developed markets would then decline low to mid-single digits, and how the U.S. and Europe fit into this.

Answer

COO and CFO Luca Zaramella confirmed that the plan for chocolate in 2026 is a neutral to slightly positive balance between cost and pricing, with 2027 expected to be the year for significant profit recovery. Regarding organic sales, he stated that emerging markets are expected to continue growing, potentially even better than high single digits, with less pricing contribution and more volume/mix contribution in 2026. He implied that developed markets would face challenges, but did not explicitly confirm a low to mid-single digit decline.

Megan Clapp asked if the implied Q4 organic sales step-up is primarily Europe-driven and for expectations regarding North America's performance in Q4, given recent softer scanner data. She also inquired about the new multi-year North America supply chain program, how it differs from prior productivity initiatives, and any early targets.

Answer

Luca Zaramella (CFO) confirmed an expected Q4 rebound in Europe, driven by Christmas activation and a volume step-up. Emerging markets are also expected to show good top-line performance, with chocolate elasticity at 0.3x in Q3. In the U.S., the market is projected to be in line with a -4% volume decline, with more pricing kicking in positively impacting top and bottom line. Regarding the supply chain program, he explained it leverages existing competitive advantages to address costs in U.S. bakeries through automation for capacity and cost structure, with meaningful impact from 2027. It also optimizes the DSD logistics system (fewer distribution centers, automation) for better costs, service, and inventory, all within cash flow goals.

Megan Clapp asked for clarification on the drivers behind the implied Q4 organic sales step-up, particularly regarding Europe and North America's expected performance given recent softer scanner data. She also inquired about the new multi-year North America supply chain program, its differentiation from prior initiatives, and any early targets.

Answer

CFO Luca Zaramella confirmed an expected Q4 rebound in Europe driven by Christmas activation and a volume step-up, alongside continued good top-line in emerging markets with stable chocolate elasticity. For the U.S., he projected market volume to remain around -4%, with positive impacts from fine-tuned pricing strategies. He described the new North America supply chain program as leveraging competitive advantages, focusing on cost reduction in U.S. bakeries through automation and addressing capacity constraints, and optimizing the DSD logistics system for better costs and service levels, with meaningful impacts expected from 2027.

Megan Clapp from Morgan Stanley requested more detail on the second-half outlook, particularly the comment about 'reduced flexibility' and the regional growth drivers. She also asked about the potential for more pricing actions given the cocoa market dynamics.

Answer

CFO Luca Zaramella clarified that 'less flexibility' refers to unpredictable events like Europe's heatwave and U.S. destocking, which reduced their guidance buffer. For the second half, he anticipates a prudent approach in Europe and continued weakness in North America. Regarding cocoa, he outlined two scenarios for 2026: if prices stay high, current pricing actions may suffice; if they fall, the company could reinvest to stimulate demand and volume.

Megan Clapp from Morgan Stanley sought clarification on a comment about 'reduced flexibility' in the second-half outlook and asked about the potential need for more pricing actions depending on future cocoa price scenarios.

Answer

CFO Luca Zaramella clarified that 'less flexibility' refers to unpredictable headwinds like the European heatwave's impact on chocolate and U.S. retailer destocking. He stated that if cocoa prices remain elevated, current pricing actions should be sufficient for 2026, but if prices fall, the company would focus on reinvesting to protect demand and stimulate volume, which would ultimately benefit the P&L.

Megan Clapp asked for clarification on Premier Protein's Q1 consumption, particularly why January trends were below expectations, linking it to club channel performance, promotional intensity, and expanded shelf sets.

Answer

Darcy Davenport, President and CEO, attributed the Q1 consumption being slightly below outlook to timing delays in a mass promotion setup and a modest impact from increased frequency of insurgent brand promotions. She noted consumption improved in January (6% all channels, 16% ex-club) and expects continued momentum, with expanded club shelf sets remaining in place.

Megan Clapp inquired about Premier Protein's consumption trends, specifically why December and January consumption was below expectations, citing potential factors like mass retailer partnership timing, club channel weakness, and promotional intensity. She also asked for an update on expanded shelf sets at the largest club customer.

Answer

President and CEO Darcy Horn Davenport explained that Premier shake consumption was down 2% in Q1, below the flat prediction, due to timing delays in the mass promotion setup and a modest impact from increased frequency of insurgent brand promotions, mainly in club and mass. She noted consumption is improving, with 6% growth in January (16% excluding club), and confirmed expectations for the expanded shelf set at the largest club customer to remain.

Megan Clapp of Morgan Stanley inquired about the single-serve opportunity and the strategy of moving into the mainstream beverage aisle to reach new customers amidst rising competition in the club channel.

Answer

CEO Darcy Horn Davenport explained that the current club channel competition is a unique, temporary situation. She emphasized that their guidance to retailers is to secure high-traffic locations with clear signage. She confirmed that expanding single-serve displays, both ambient and in coolers, is a key focus for the upcoming year, viewing a direct-store-delivery (DSD) model as a longer-term opportunity.

Megan Clapp (identified as Megan Christine Alexander in the transcript) asked for details on the potential impact of tariffs, including the percentage of input costs related to dairy protein and potential mitigation strategies.

Answer

CFO Paul Rode stated that dairy inputs represent about one-third to 40% of COGS, but only a portion sourced from New Zealand and the EU would be subject to tariffs. He estimated the unmitigated impact would be a low single-digit increase to total COGS. Mitigation strategies being explored include sourcing from different suppliers. No impact is expected in fiscal 2025.

Megan Clapp asked why Conagra maintained a wider-than-normal EPS guidance range despite being halfway through the year and expressed confidence in offsetting the Ardent shortfall, and sought clarification on whether two-year reported trends in refrigerated and frozen are expected to accelerate in Q3 versus the first half, given consumption momentum and timing shifts.

Answer

CEO Sean Connolly explained that narrowing the EPS guidance range typically occurs later in the year, not after Q2, so no specific read-through should be made. For refrigerated and frozen, he stated that a 'good second half' is expected in frozen, driven by northward-inflecting underlying trends, market shares near high watermarks, and stronger promotional programming in Q3 compared to both last quarter and a year ago (when promotions were limited by supply constraints).

Megan Clapp asked why the EPS range remains wide at Q2, despite confidence in offsetting Ardent's shortfall, inquiring about key swing factors or uncertainties. She also asked if the two-year reported trend in Refrigerated & Frozen (R&F) is expected to accelerate in Q3 versus the first half, considering consumption momentum, timing shifts, and shipment timing benefit, given that the street implies a deceleration.

Answer

CEO Sean Connolly stated that they wouldn't 'overthink' keeping the EPS range wide, as narrowing typically occurs later in the year (not Q1 or Q2), and they would update the range next quarter. For R&F, he indicated that a 'good second half in frozen' is expected, citing underlying trends inflecting northward, market shares returning to high watermarks, and stronger promotional programming in Q3 compared to Q2 and a year ago (when promotions were limited by supply constraints).

Meghan Clapp inquired about the higher cost of volume pressuring Q3 margins, how it's embedded in the full-year guidance, and any flexibility in other lines, as well as an update on category growth trends, particularly given noise from SNAP and government shutdown.

Answer

Jeff Harmening, Chairman and CEO, explained that full-year guidance remained unchanged due to sector volatility, with cost of volume and pace of recovery being key determinants. Jeff Siemon, VP of Investor Relations and Corporate Finance, noted category volumes improved to down 0.5% in Q2, and Dana McNabb, Group President of North America Retail and North America Pet, discussed cereal lagging due to high-protein alternatives, with plans for innovation and marketing to improve performance.

Megan Clapp asked about category performance relative to initial expectations, the need for improvement in cereal to meet guidance, and the observed impact of GLP-1 medications. She also followed up on the pet segment's phasing into Q2, considering factors like Tiki Cat lumpiness, Wilderness softness, and the fresh pet launch.

Answer

Jeff Harmening, Chairman and CEO, stated that the year has played out as expected, with top 10 NAR categories performing slightly better than anticipated, while flour and desserts were softer. He noted GLP-1s have had a small but growing impact, creating opportunities for protein and fiber-rich products. Kofi Bruce, CFO, acknowledged a slightly larger-than-expected Q4 shipment timing issue in Pet but maintained the annual outlook. He anticipated modest revenue contribution from fresh pet in Q2 and improvement in the back half, declining to give specific quarterly pet predictions due to inherent volatility.

Megan Clapp asked for clarification on how category performance has evolved year-to-date relative to initial expectations, whether cereal improvement is necessary for guidance, and details on the GLP-1 comment regarding tracked data. She also sought help framing the puts and takes for pet phasing into Q2, considering factors like Tiki Cat lumpiness, Wilderness softness, fresh pet launch, and shipment headwinds.

Answer

Jeff Harmening, Chairman and CEO of General Mills, stated that the year has played out as expected, with top 10 NAR categories performing slightly better than anticipated, while flour and desserts were softer. He noted GLP-1 usage is growing with reduced calories, but also presents opportunities for protein and fiber-rich products. Kofi Bruce, CFO, acknowledged the Q4 shipment timing issue in Pet was modestly larger but doesn't change the annual outlook. He indicated modest revenue contribution from fresh pet in Q2 and expected overall improvement in Pet in Q2 and the back half, declining to give specific quarterly predictions due to inherent volatility.

Megan Clapp sought clarification on whether massive share gains are needed to hit guidance, how category trends evolved versus expectations, and if cereal improvement is necessary. She also asked for expansion on GLP-1 comments regarding data, impact, and opportunities, and how to frame Pet phasing into Q2 given various puts and takes.

Answer

Chairman & CEO Jeffrey Harmening stated that the year played out as expected, with top 10 NAR categories performing slightly better than anticipated. He noted GLP-1s have had a small impact but present opportunities for protein and fiber-rich products. CFO Kofi Bruce acknowledged the Q1 shipment timing issue in Pet was modestly larger but doesn't change the annual outlook, declining to give quarterly predictions due to inherent volatility, but expecting modest revenue contribution from Freshpet in Q2.

Megan Clapp inquired about the pacing of coffee margins in Q3 and Q4, specifically if Q3's softer EPS outlook was due to tariffed coffee without pricing, and if mid-20% margins were still expected in Q4. She also asked how the rest of the U.S. retail portfolio (outside coffee) is expected to contribute to or return to Algo OSG by the Q4 exit rate.

Answer

Tucker Marshall, Chief Financial Officer, stated that coffee segment profit margin was 18.2% in Q2, anticipating slight improvement in Q3 (not surpassing 20%) and moving beyond 20% in Q4, though not reaching 25% due to digesting costs and absorbing $75 million in coffee tariffs. He noted that the company's comparable growth outlook is strong, driven by coffee, but also by momentum in away-from-home, resilience in pet, stabilization in sweet baked snacks, and growth in Uncrustables.

Megan Clapp asked about the pacing of coffee margins in Q3 and Q4, specifically if the softer Q3 EPS outlook was due to tariffed coffee without pricing, and if mid-20% margins were still expected in Q4. She also inquired about the Q4 exit rate for the U.S. retail portfolio (excluding coffee) and its contribution to the company's long-term growth algorithm.

Answer

Tucker Marshall, Chief Financial Officer, indicated that coffee segment profit margin would see a slight improvement in Q3 from 18.2% in Q2 but would not surpass 20%, moving beyond 20% in Q4 but likely not reaching 25% due to absorbing approximately $75 million in coffee tariffs predominantly in Q3. He noted that the company's comparable growth outlook of 5.5% (6% adjusted for co-manufacturing) is driven by coffee, but also by momentum in away-from-home, resilience in pet, stabilization in sweet baked snacks, and Uncrustables growth, affirming confidence in the strategy.

Megan Clapp of Morgan Stanley inquired about the increased free cash flow outlook, asking if it was a one-time benefit and how the company plans to use the additional cash. She also asked for help unpacking the Q2 mid-single-digit sales outlook, particularly which segments are expected to drive sequential improvement.

Answer

CFO Tucker Marshall clarified that the $100 million increase in free cash flow guidance is an ongoing annual benefit from the 'One Big Beautiful Bill Act,' not a one-time event. He stated the incremental cash will be used for debt paydown to achieve a three-times leverage target by the end of fiscal 2027. For Q2 sales, he pointed to continued momentum in coffee, Uncrustables, cat food, the Away From Home business, and stabilization in Sweet Baked Snacks.

Megan Clapp followed up on the fiscal 2026 outlook, asking why the base business seems to have minimal contribution, a change from prior commentary. She also questioned the flat comparable sales guidance for Q1, noting it seems conservative compared to recent syndicated data.

Answer

CFO Tucker Marshall reiterated that external factors like coffee elasticity ($0.80), tariffs ($0.25), and softness in Sweet Baked Snacks, plus an internal decision to increase marketing, impacted the outlook. For Q1, he noted that while coffee and Uncrustables will show top-line momentum, the overall flat result reflects softness in pet treats and lapping a divestiture in Sweet Baked Snacks.

Megan Clapp revisited the 2026 EPS commentary, specifically the potential for double-digit growth, and asked if anything had changed regarding factors like tariffs and cocoa costs since the previous quarter, given cocoa moderation and potential tariff relief. She also asked for clarification on the implied Q4 outlook, noting it might be below Street models, and whether the North America confectionery outlook had changed due to Halloween and everyday business dynamics.

Answer

President and CEO Kirk Tanner confirmed potential for EPS upside. Senior Vice President and CFO Steve Voskuil detailed factors for 2026, including consumer demand, innovation, and elasticity. He noted marginally better feelings about cocoa, with hedging in progress, and some optimism for tariff relief through trade deals, though $200 million incremental tariffs are still modeled. For Q4, he attributed the implied outlook primarily to international shipment timing, expecting U.S. CMG momentum to continue with additional investment for Halloween and holiday, and less cocoa hedge favorability than Q3.

Megan Clapp asked about the drivers behind the mid-single-digit growth in non-seasonal confectionery during the quarter and the growth outlook for the second half. She also sought confirmation that Hershey could deliver on-algorithm growth in 2026.

Answer

Chairman, President & CEO Michele Buck attributed the non-seasonal growth to strong innovation, the product's role in providing emotional comfort, and lapping softer comps. She also highlighted strong results from instant consumable initiatives. SVP & CFO Steve Voskuil confirmed that based on current information, Hershey sees a path to on-algorithm top-line and earnings growth for 2026.

Megan Clapp from Morgan Stanley asked for details on the drivers behind the non-seasonal chocolate growth in Q2 and the outlook for the second half. She also sought confirmation on delivering on-algorithm growth in 2026.

Answer

Chairman, President & CEO Michele Buck attributed the non-seasonal growth to strong innovation, the product's role in providing emotional comfort, and lapping softer comps. She noted Q2's growth rate may not sustain due to tougher comps ahead. SVP & CFO Steve Voskuil confirmed that based on current information, Hershey expects to deliver on-algorithm top-line and earnings growth in 2026.

Megan Clapp asked about the drivers behind the mid-single-digit growth in non-seasonal confectionery during the quarter, the outlook for the second half, and whether the company expects to deliver on-algorithm growth in 2026.

Answer

Chairman, President & CEO Michele Buck attributed the non-seasonal growth to strong innovation, the product's role in providing emotional comfort, and lapping softer comps, while cautioning that the growth rate may not sustain due to tougher comparisons ahead. SVP & CFO Steve Voskuil confirmed that based on current visibility, Hershey expects to deliver on-algorithm top-line and earnings growth for 2026.

Megan Clapp, Research Analyst at Morgan Stanley, asked for further detail on the packaged meats profit outlook, specifically the implied deceleration in year-over-year profit decline for Q4. She inquired if this reflects pricing lagging raw material costs and how this might correct in the first half of next year. Clapp also followed up on the momentum in packaged meats strategies, including mix improvements, efficiencies, and innovation. She asked Shane Smith to gauge the 'inning' of these strategies and how they are expected to trend through next year and beyond, particularly regarding their impact on margins and the benefits of vertical integration.

Answer

Steve France, President of Packaged Meats, attributed the outlook to the ability to adjust pricing with market movements, particularly for private label business (40% of retail mix), and branded products. He noted that timing varies by category and competitive landscape. The guidance reflects the best current view of the business, focusing on disciplined pricing, promotional strategy, mix optimization, innovation, and operational efficiency to drive Q4 performance. Shane Smith, President and CEO, described mix optimization as an ongoing evolution, citing the continuous effort to replace declining holiday ham volume with smaller, everyday-use items and growing into dry sausage capacity. He emphasized that the company's overall momentum stems from its unique, vertically integrated supply chain, which, with streamlined hog production, leads to record collective company profits despite individual segment fluctuations, ensuring consistent earnings and cash flow.

Megan Clapp with Morgan Stanley asked for further detail on the packaged meats profit outlook, specifically the implied deceleration in year-over-year profit decline for Q4, and whether this reflects pricing lagging raw material costs, and how it might correct in H1 2026. She also inquired about the 'inning' of Smithfield's packaged meats strategies, particularly mix optimization and efficiency, and their expected trend through next year and beyond.

Answer

Shane Smith, President and CEO, and Steve France, President of Packaged Meats, attributed the outlook to their ability to adjust pricing based on market movements and category specifics, leveraging both private label flexibility and branded strength, alongside disciplined promotional strategies and operational efficiencies. Shane Smith stated that mix optimization is an ongoing evolution, citing the continuous effort to replace holiday ham volume with smaller, everyday items and growth in dry sausage. He emphasized that the company's overall momentum stems from the vertically integrated model, which allows for record collective profits despite individual segment fluctuations, ensuring consistent earnings and cash flow.

Megan Clapp of Morgan Stanley asked if the Hog Production guidance leans toward the high end of the range and inquired about the drivers behind the expected acceleration in Packaged Meats volume in the second half of the year.

Answer

CFO Mark Hall confirmed that the Hog Production outlook "leans towards the higher end" of the updated range. Steven France, President of Packaged Meats, attributed the expected volume acceleration to new product innovations and strong momentum in the foodservice channel, which saw sales grow 9.5% in the quarter.

Megan Clapp of Morgan Stanley followed up on the hog production guidance, asking if the higher end of the range is more likely, and inquired about the drivers for the expected acceleration in packaged meats volume in the second half of the year.

Answer

CFO Mark Hall confirmed that leaning towards the higher end of the hog production guidance is a fair assessment based on the current futures curve. Steven France, President of Packaged Meats, attributed the expected H2 volume growth to new product innovations, strong momentum in the foodservice business which was up 9.5% in Q2, and leveraging their diverse brand portfolio.

Megan Clapp inquired about the growth of Atkins' top-performing SKUs (75% of sales from top two quartiles), whether the 20% decline is concentrated in lower-velocity SKUs, and if the bulk of rationalization will conclude by fiscal 2026.

Answer

President and CEO Geoff Tanner confirmed that the majority of Atkins' SKUs in the top two quartiles are healthy and growing. He stated that declines are primarily driven by underperforming 'tail SKUs,' specifically the 10-15% in the bottom quartile, which the company is actively rationalizing with retailers to achieve a more optimal and sustainable assortment.

Megan Clapp inquired about the performance of Atkins' top-quartile SKUs, which represent 75% of sales, asking if they are currently growing. She also sought clarification on whether the expected 20% decline for Atkins is concentrated in lower-velocity SKUs and if the rationalization of bottom-quartile SKUs will be largely complete by the end of fiscal year 2026.

Answer

President and CEO Geoff Tanner confirmed that the vast majority of Atkins' SKUs in the top two quartiles are healthy and growing. He clarified that the brand's declines have been primarily driven by underperforming tail SKUs, specifically the 10-15% in the bottom quartile. Tanner stated that the company is focused on rationalizing this tail and working with retailers to achieve a more optimal and sustainable assortment concentrated around the core.

Megan Clapp inquired about the drivers of the strong Q2 volume performance, the components of the raised full-year guidance, and the planned increase in promotional activity for the second half of the year.

Answer

CFO Thilo Wrede explained that volume accelerated as forecasted throughout the quarter and the recent price increase performed better than anticipated. He clarified that the guidance increase reflects continued volume acceleration and the pricing benefit. Promotions were always planned for the second half as supply improved, and there may be flexibility to increase them further depending on the impact of tariffs.

Megan Clapp asked for an update on the timing for stabilizing North America Retail sales and for details on the gross margin outlook, specifically the split between input cost inflation and tariffs.

Answer

CEO & Director Carlos Abrams-Rivera pointed to the 'brand growth system' as the driver for gradual improvement in North America. EVP & Global CFO Andre Maciel noted that while commodity inflation peaked, some P&L impact shifted to Q3. He quantified the tariff impact at ~100 bps for the year, with a potential annualized impact of ~180 bps carrying into 2026.

An analyst from Morgan Stanley asked for clarification on the wider operating income guidance, questioning whether the 'changing policy landscape' mentioned in prepared remarks relates more to top-line or cost impacts.

Answer

Executive Andre Maciel confirmed the wide guidance range is designed to accommodate various potential scenarios from the changing policy landscape, which could have positive or negative business implications. CEO Carlos Abrams-Rivera added that this provides flexibility to manage volatility while continuing to invest in the business to drive trial and fuel growth opportunities.

An analyst for Megan Clapp asked for clarification on the wider operating income guidance, questioning if the 'changing policy landscape' reference relates more to top-line or cost impacts.

Answer

CFO Andre Maciel explained that the wider guidance range is designed to accommodate a variety of potential scenarios from the evolving policy landscape, which could have either positive or negative business implications. CEO Carlos Abrams-Rivera added that this provides the necessary flexibility to continue investing in the business to drive trial and capitalize on opportunities identified by the brand growth system.

An analyst from Morgan Stanley, on behalf of Megan Clapp, sought clarity on why the "changing policy landscape" led to a wider operating income guide.

Answer

EVP & Global CFO Andre Maciel explained the wider range accounts for various potential scenarios with positive or negative business implications. CEO Carlos Abrams-Rivera added that it provides flexibility to navigate volatility while continuing to invest in brand growth and consumer trial.

Megan Clapp of Morgan Stanley requested quantification of the impacts from shipping shifts versus retailer ordering patterns on U.S. sales and asked for the dollar value of tariffs embedded in the guidance.

Answer

CFO Paul Ruh explained that the two U.S. sales factors are linked and difficult to separate, but most of the impact is a timing issue. CEO Ynon Kreiz added that clearing uncertainty is helping retailers adapt. Ruh clarified the total tariff exposure for the year is now estimated at less than $100 million before mitigation, with the impact concentrated in the second half.

Megan Clapp pressed for more clarity on the magnitude of the expected Q1 sales decline and asked about the expected first-half versus second-half sales split. She also inquired if the increased investment in digital was OpEx or CapEx.

Answer

CFO Anthony DiSilvestro did not quantify the Q1 decline but attributed it to a later Easter and inventory correction, confirming the historical 35% first-half, 65% second-half sales split should hold for 2025. He clarified that the investment in self-publishing digital games is an SG&A expense (OpEx), not CapEx, and that 2025 CapEx would be comparable to 2024 levels.

Megan Clapp of Morgan Stanley questioned if the reaffirmed midterm outlook was conservative given 2025's strong performance, and asked about the drivers behind Monopoly Go's Q2 acceleration and its updated revenue decay assumptions.

Answer

CFO & COO Gina Goetter stated that while 2025 is over-delivering, the company is not changing its midterm targets yet, citing potential lumpiness and future tariff impacts. CEO Chris Cocks attributed Monopoly Go's strength to savvy partnerships and lower-than-expected user acquisition costs. Goetter guided to a monthly revenue contribution of $12-14 million for the back half of the year.

Megan Clapp from Morgan Stanley asked about Vail's competitive positioning against other multi-mountain passes and its plans to drive pass growth. She also questioned the European strategy, including the use of partnerships versus the owner-operator model and the approach to M&A.

Answer

CEO & Chair Rob Katz stated that competition has helped shift consumer mindset towards buying passes and that Vail will innovate its marketing to compete effectively. On Europe, he clarified that the preference remains the owner-operator model, but partnerships are an option. He stressed that any M&A will remain disciplined and targeted to add value to the network.

Megan Clapp requested an update on the full-year growth expectation for the Rao's brand and asked about the margin profile expectations for the Snacks division in the fourth quarter and for the full year.

Answer

President, CEO & Director Mick Beekhuizen revised the full-year growth expectation for Rao's to 'high single digits' from the previous 'slightly above 10%,' citing a softer Q3 but noting recent consumption data shows a rebound. Executive VP & CFO Carrie Anderson stated that while Q3 Snacks margins improved sequentially, the slower-than-expected recovery led to a revised full-year margin expectation of 13% for the segment, which contributed to the full-company adjusted EPS guidance moving to the low end of the range.

Megan Clapp of Morgan Stanley inquired about the company's confidence in getting its market share performance back in line with the category this year and asked how the top-line guidance change breaks down between volume and price.

Answer

CFO David McKinstray explained that improvement will be sequential, driven by staged initiatives like distribution gains, strategic investments, and the Kashi relaunch. He also noted that after lapping a price increase in Q2, price realization is expected to flatten, with volumes and net sales moving in line in the second half of the year.

Megan Clapp followed up on market share, asking about the company's confidence in getting its performance back in line with the category this year. She also requested a breakdown of the revised top-line guidance between volume and price for the remainder of the year.

Answer

CFO Dave McKinstry stated that improvement will be sequential and not happen overnight, citing building blocks like distribution gains and the Kashi relaunch that will stage in throughout the year. He explained that after lapping a price increase in Q2, price realization is expected to flatten in the second half, with pounds and dollars moving more in line.

Asked about the company's confidence in its ability to align its performance with the category's performance this year and requested a breakdown of the revised top-line guidance between price and volume.

Answer

Executives stated that improvement will be sequential throughout the year, driven by staged initiatives like distribution gains and the Kashi relaunch. They expect low single-digit price realization in Q2, after which pricing will flatten out in the second half, with volume and sales moving in line.

Megan Clapp sought clarification on the messaging around returning to 200 annual unit openings, asking if the strategy is shifting to a more deliberate ramp. She also asked about the future trajectory of CapEx beyond 2025, given recent sizable increases.

Answer

CEO Colleen Keating clarified that the goal is a 'healthy, steady pace of growth' to avoid a single bumper crop year, while still aiming to reach 200 annual openings in the coming years. CFO Jay Stasz addressed CapEx, stating that while not guiding beyond 2025, the company will continue to use its balance sheet to recycle capital, such as by refranchising Spain, which could then fund expansion into another new market.

Megan Claff of Morgan Stanley requested a breakdown of the approximately $3 EPS headwind for 2025, asking which components were transitory, and inquired about the company's strategic response to a potential large tariff on imports from Mexico and China.

Answer

CFO Bob Mack detailed the EPS headwinds, noting the largest factors are the reset of profit-sharing compensation and negative mix, followed by lower volume and a ~$0.20 impact from lower financial services income. CEO Mike Speetzen addressed the tariff question by stating that such a broad tariff would have major economic implications and that Polaris would leverage its diversified manufacturing footprint to adapt over time if necessary.

Megan Clapp (identified as Megan Christine Alexander in the transcript) pressed for a deeper understanding of Topgolf's same-venue sales decline, noting the significant deterioration on a multi-year basis. She asked management to parse what is macro-driven versus execution-related and questioned if comps could remain negative into 2025.

Answer

President and CEO Chip Brewer attributed the significant decline and volatility primarily to the 3+ bay events business, which he believes is experiencing both a reversion from a post-COVID surge and a broader economic slowdown. He viewed the consumer side as more stable and declined to provide 2025 guidance, but reiterated the company is focused on returning to positive same-venue sales over the long term.