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CAMPBELL'S Co (CPB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 results aligned with internal expectations: reported net sales $2.77B (+10% YoY), organic net sales -1%, adjusted EBIT $432M (+6% YoY), adjusted EPS $0.89 (-2% YoY); GAAP EPS $0.72 .
  • Campbell reaffirmed FY2025 guidance and increased the quarterly dividend 5% to $0.39 per share; CEO transition to Mick Beekhuizen effective Feb 1, 2025 creates a strategic leadership catalyst .
  • Segment mix: Meals & Beverages +22% reported net sales (acquisition-driven) with operating earnings +17%; Snacks -4% reported net sales and operating earnings -12%, pressured by cost inflation, supply chain costs, and lower price realization .
  • Management highlighted Q2 as an “important milestone” and guided Q2 adjusted EPS to the low-$0.70 range with organic net sales relatively flat; FY2025 cost savings raised to ~$90M (from $70M) and net interest expense guidance improved by ~$10M due to refinancing .
  • Street consensus (S&P Global) for Q1 estimates was unavailable; analysts noted gross margin and marketing were modestly below consensus expectations (qualitative) .

What Went Well and What Went Wrong

What Went Well

  • Leadership brands and Sovos (Rao’s) momentum supported top-line and share gains; adjusted EBIT +6% YoY and reaffirmed FY guidance. “We expect sequential top line and market share momentum in Q2” .
  • Rao’s consumption growth remained robust (~15%), with broadening household penetration and better-than-expected pro forma growth now “slightly above 10%” for FY2025; acquisition expected to be accretive to adjusted EPS in FY2025 .
  • Cost savings execution: ~$30M delivered in Q1 under the new $250M program; management raised FY2025 savings to ~$90M and improved net interest outlook via bond refinancing .

What Went Wrong

  • Organic net sales fell 1% amid a dynamic consumer backdrop; GAAP EPS declined to $0.72, and adjusted EPS -2% to $0.89, largely from higher interest expense .
  • Snacks faced category and competitive headwinds (new entrants in salty snacks, private label pressure in cookies/pretzels), driving -4% reported net sales and -12% segment operating earnings; adjusted gross margin declined 70 bps (60 bps from Sovos mix) .
  • Thanksgiving timing shifted retailer inventory and pressured Meals & Beverages organic net sales vs higher in-market consumption; management quantified a ~2-point delta between consumption and net sales .

Financial Results

Quarter-on-Quarter Trend (oldest → newest)

MetricQ3 FY2024Q4 FY2024Q1 FY2025
Net Sales ($USD Millions)$2,369 $2,293 $2,772
GAAP Diluted EPS ($)$0.44 $(0.01) $0.72
Adjusted EPS ($)$0.75 $0.63 $0.89
Adjusted EBIT ($USD Millions)$354 $329 $432
Gross Profit ($USD Millions)$732 reported; $740 adjusted $675 reported; $719 adjusted $867 reported; $871 adjusted
Gross Margin (%)30.9% reported; 31.2% adjusted 29.4% reported; 31.4% adjusted 31.3% reported; 31.4% adjusted

Year-over-Year (Q1 FY2025 vs Q1 FY2024)

MetricQ1 FY2024Q1 FY2025YoY Change
Net Sales ($USD Millions)$2,518 $2,772 +10%
Organic Net Sales (%)——-1%
GAAP EBIT ($USD Millions)$358 $367 +3%
Adjusted EBIT ($USD Millions)$407 $432 +6%
GAAP Diluted EPS ($)$0.78 $0.72 -8%
Adjusted Diluted EPS ($)$0.91 $0.89 -2%
Adjusted Gross Margin (%)32.1% 31.4% -70 bps

Segment Breakdown (Q1 FY2025 vs Q1 FY2024)

SegmentNet Sales ($USD Millions) Q1 FY2024Net Sales ($USD Millions) Q1 FY2025Reported YoYOperating Earnings ($USD Millions) Q1 FY2024Operating Earnings ($USD Millions) Q1 FY2025YoY
Meals & Beverages$1,404 $1,706 +22% $287 $337 +17%
Snacks$1,114 $1,066 -4% $161 $142 -12%
Total$2,518 $2,772 +10% $448 $479 +7%

KPIs

KPI (Q1 FY2025)Value
Cash Flow from Operations ($USD Millions)$225
Capital Expenditures ($USD Millions)$110
Marketing & Selling Expenses ($USD Millions; ~% of Sales)$250 (~9%)
Administrative Expenses ($USD Millions)$175
Net Interest Expense ($USD Millions)$83
Effective Tax Rate (%)23.2% (adjusted 23.5%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales Growth (%)FY2025+9% to +11% +9% to +11% (reaffirmed) Maintained
Organic Net Sales Growth (%)FY20250% to +2% 0% to +2% (reaffirmed) Maintained
Adjusted EBIT Growth (%)FY2025+9% to +11% +9% to +11% (reaffirmed) Maintained
Adjusted EPS ($)FY2025$3.12 to $3.22 $3.12 to $3.22 (reaffirmed) Maintained
Cost Savings (Enterprise)FY2025~$70M ~$90M (raised) Raised
Sovos Pro Forma GrowthFY2025High single digits Slightly above 10% Raised
Adjusted Net Interest Expense ($)FY2025~$350M–$355M ~$340M–$345M (improved) Lowered
Q2 Adjusted EPS ($)Q2 FY2025—Low $0.70 range New specificity
Dividend per Share ($)Next payment$0.37 (Sept) $0.39 (payable Jan 27, 2025) Raised

Earnings Call Themes & Trends

TopicQ3 FY2024 (prior)Q4 FY2024 (prior)Q1 FY2025 (current)Trend
Consumer recovery & volumesStabilizing volumes; mixed by category/income Sequential vol/mix improvement; cautious tone Organic -1%; expecting sequential improvement in Q2 Gradual improvement, pragmatism
Rao’s/Sovos momentumValidated growth drivers; integration on track High-teens consumption; long-term mid-single-digit growth ~15% consumption; FY25 pro forma >10%; EPS accretive FY25 Strengthening
Snacks competitive dynamicsPressure in lower/middle income; promotion cadence New entrants in salty; private label in cookies Continued pressure; plan: innovation, disciplined promo Stabilize with investment
Inventory timing (Thanksgiving)——~2-pt delta between consumption vs net sales due to timing Transitory
Cost savings/productivity$940M cumulative; offset inflation Margin expansion, synergy capture ~$30M in Q1; FY25 savings raised to ~$90M Accelerating
Interest expense/refinancingHigher due to acquisition Elevated; outlook ~$245M FY2024 Guidance improved by ~$10M via $1.15B bond deal Improving
Ready-to-serve soup & private labelBroth strength aided by competitor supply constraints Expect share normalization in broth in 2H FY25 Ready-to-serve stabilizing; broth share to normalize Normalizing

Management Commentary

  • “We expect sequential top line and market share momentum in Q2... and are maintaining our full-year guidance” — Mark Clouse, CEO .
  • “Sovos... specifically Rao’s, continues to perform better than anticipated... acquisition is now expected to be accretive to adjusted EPS in the second half and for the full fiscal year” — Carrie Anderson, CFO .
  • “First quarter adjusted gross profit margin declined 70 bps, primarily driven by a 60 bps impact from the acquisition” — Carrie Anderson .
  • “Goldfish held its #1 position with teens... Pepperidge Farm Bakery growing... Snack Factory expanding into pretzel aisle with Pop ’ums and Bites” — Mark Clouse .
  • CEO transition: “The Board... elected Mick Beekhuizen to succeed Mark Clouse as President and CEO... effective Feb. 1, 2025” .

Q&A Highlights

  • Gross margin and marketing slightly below consensus; mix effects from higher Sovos/Rao’s contributions and softer legacy business; interest expense better due to proactive refinancing .
  • Back-half drivers: Sovos organic inclusion in March, higher net benefit of cost savings/productivity, lower interest headwind, 53rd week (+$0.07 EPS), and broth cycling .
  • Promotional strategy: maintain discipline; fight in elevated segments via innovation/marketing rather than deep discounting; monitoring price gaps especially in cookies/pretzels .
  • Thanksgiving inventory timing: ~2-point delta between Meals & Beverages consumption vs net sales; more than half attributable to later holiday timing .
  • Snacks margin path: second-half improvement expected via mix (leadership brands), reduced partner/contract brands, DSD/plant optimization; longer-term 17% target intact .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 revenue/EPS was unavailable at time of retrieval; qualitative commentary from analysts indicated gross margin and marketing were modestly below expectations .
  • Management guided Q2 FY2025 adjusted EPS to the low-$0.70 range and organic net sales to be relatively flat YoY, implying higher near-term investment and holiday support .

Key Takeaways for Investors

  • Expect Q2 sequential improvement (flat organic net sales, low-$0.70 EPS) as holiday support and innovation step up; positioning into 2H benefits from cost savings, Sovos accretion, and 53rd week .
  • Rao’s remains the growth engine: FY2025 pro forma growth now >10% with broadening household adoption and premium value vs away-from-home occasions; strengthens M&B mix .
  • Snacks near-term pressure should moderate; focus on elevating brands, innovation, and appropriate promotion while reducing lower-margin partner/contract brands supports margin trajectory .
  • Balance sheet/interest: refinancing improved net interest outlook by ~$10M; leverage at ~3.7x with goal to return to ~3x by FY2027 .
  • Dividend raised to $0.39 and CEO succession to Beekhuizen signal confidence and continuity in strategy execution .
  • Watch broth share normalization and category recovery pacing; management is pragmatic on consumer fragility and will balance investment vs earnings to protect FY guidance .
  • Tactical: Q2 results are the key stock inflection checkpoint; sustained Sovos/Rao’s outperformance and snacks stabilization are the narrative drivers for estimate revisions and multiple support .