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    CAMPBELL'S (CPB)

    CPB Q3 2025: 6th Straight Meals Growth, Snacks Slump & $0.04 EPS Hit

    Reported on Jun 4, 2025 (Before Market Open)
    Pre-Earnings Price$34.85Open (Jun 2, 2025)
    Post-Earnings Price$34.85Open (Jun 2, 2025)
    Price Change
    $0.00(0.00%)
    • Consistent Meals & Beverages momentum: Management highlighted six consecutive quarters of positive in-market consumption and noted strong at-home cooking trends, supporting robust growth in this division.
    • Robust Rao's growth trajectory: Rao’s brand demonstrated around 10% to 11% in-market consumption growth recently, reinforcing confidence in its ability to drive overall fiscal growth.
    • Proactive innovation in Snacks: Despite challenges, the team is aggressively improving pricing, promotional activity, and launching innovative products (e.g., Pepperidge Farm cookies, Goldfish adjustments) to reposition the Snacks portfolio for recovery as consumer confidence improves.
    • Underperformance in the Snacks segment: Management highlighted that snacks experienced declining net sales and disappointing organic growth due to both category headwinds and in-market execution issues, suggesting continued vulnerability if consumer behaviors do not improve.
    • Tariff-related headwinds and uncertainty: Executives pointed to phasing-in tariffs generating an estimated $0.03–$0.05 EPS impact, with uncertainty around inventory and mitigation timing, which could pressure margins and future earnings.
    • Rising promotional and marketing costs amid cautious consumer sentiment: The Q&A indicated a potential need to increase promotional activity and marketing spend to support slow-recovering segments, which might further squeeze margins if consumer confidence remains weak.
    MetricYoY ChangeReason

    EBIT

    –35% (from $248M in Q3 2024 to $161M in Q3 2025)

    EBIT declined sharply due to margin pressures resulting from a significant rise in total costs & expenses (up 9%), which outweighed the revenue gains, despite strong performance in certain segments. This indicates that increased operational costs adversely affected earnings.

    Net Earnings

    –50% (from $133M in Q3 2024 to $66M in Q3 2025)

    Net Earnings halved as the lower operating income, driven by the EBIT decline and rising expenses, eroded bottom‐line profitability. The drop underscores how cost pressures can severely impact overall net results.

    Total Costs & Expenses

    +9% (from $2,121M in Q3 2024 to $2,314M in Q3 2025)

    Costs increased by about 9%, reflecting higher expenditures such as cost of products sold and marketing/selling expenses. This rise in costs put pressure on margins and contributed to the declines in both EBIT and Net Earnings.

    Meals & Beverages

    Essentially flat ($1,155M vs. $1,160M)

    Meals & Beverages revenue remained steady, indicating consistent demand; however, its stability was not enough to counterbalance the increased expense pressures in other areas.

    Snacks

    +9.2% (from $1,209M in Q3 2024 to $1,320M in Q3 2025)

    Snack sales grew by 9.2%, driven by robust brand performance and increased consumer interest. While this segment provided a boost in total revenue, it did not compensate for the higher cost base affecting overall profitability.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Adjusted Earnings

    FY 2025

    no prior guidance

    Expected at the low end of the guidance range due to slower-than-anticipated recovery in the Snacks business

    no prior guidance

    Tariff Impact

    FY 2025

    no prior guidance

    Estimated net incremental headwind of tariff-related costs to be up to $0.03 to $0.05 per share

    no prior guidance

    53 Weeks

    FY 2025

    no prior guidance

    Fiscal year includes 53 weeks. The benefit of the 53rd week is estimated to contribute approximately two points of growth to reported net sales and adjusted EBIT, plus about $0.05 of adjusted EPS

    no prior guidance

    Core Inflation

    FY 2025

    no prior guidance

    Expected to remain in the low single-digit range for the full fiscal year

    no prior guidance

    Cost Savings

    FY 2025

    Increased expectations for the full year from $90 million to $120 million

    Increased cost savings expectation for the full year from $120 million to $130 million

    raised

    Capital Expenditures

    FY 2025

    Approximately 4.7% of net sales

    Approximately 4.5% of net sales, revised down from prior guidance

    lowered

    MetricPeriodGuidanceActualPerformance
    Reported Net Sales YoY Growth
    Q3 2025
    6% to 8% increase
    4.5% increase (from 2,369To 2,475)
    Missed
    Adjusted EBIT YoY Growth
    Q3 2025
    3% to 5% increase
    -35.1% (from 248To 161)
    Missed
    Marketing & Selling Expense as % of Sales
    Q3 2025
    9% to 10% of net sales
    8.7% (216÷ 2,475)
    Beat
    TopicPrevious MentionsCurrent PeriodTrend

    Consistent Meals & Beverages Momentum

    Emphasized across Q4 2024, Q1 2025, and Q2 2025 for steady organic net sales growth, positive consumption and brand performance

    In Q3 2025, messaging remains positive with six consecutive quarters of positive consumption and organic net sales growth, although a normalization in shipment timing is expected

    Consistent performance with enduring growth in consumption and sales, while anticipating a slight normalization in shipment timing.

    Rao's Brand Growth and Integration

    Consistently discussed in Q4 2024, Q1 2025, and Q2 2025 with strong consumption growth (high teens and 15% in-market growth), integration benefits from Sovos Brands, and optimistic long-term guidance

    In Q3 2025, Rao's shows solid long‐term potential but faces near-term challenges such as underperforming promotions and pricing sensitivities, as well as active steps to mitigate tariff impacts

    Steady integration and robust long-term growth remain, although near-term pricing and promotional challenges have emerged, prompting strategic mitigation.

    Snacks Division Performance and Margin Challenges

    Addressed in Q4 2024, Q1 2025, and Q2 2025 with consistent reports of organic net sales decline, margin compressions due to cost inflation, competitive pressures, and supply chain costs, with various initiatives to improve distribution and execution

    In Q3 2025, the Snacks division continues to face headwinds with a 5% net sales decline and margin pressures, though there are early signs of operational improvements like DSD optimization, against a backdrop of heightened competitive scrutiny

    Persistent challenges in sales and margins remain evident; slight operational improvements are noted, but competitive and cost pressures continue to weigh on performance.

    Innovation, Pricing, and Promotional Strategies in Snacks

    A constant theme in Q4 2024, Q1 2025, and Q2 2025 with a focus on product innovation (e.g., Goldfish, Snack Factory), disciplined pricing strategies, and targeted promotions to drive category growth

    Q3 2025 continues to emphasize new product launches and re-engineered price pack architectures across categories such as pretzels, cookies, and chips to offset margin pressures and shifting consumer behavior

    A consistent drive to innovate and manage pricing remains central; however, the current period shows enhanced focus on tactical promotional adjustments to sustain growth amid evolving market dynamics.

    Tariff and Trade-Related Cost Pressures

    Not addressed in Q1 2025 or Q4 2024; first detailed discussions appear in Q2 2025 with broad tariff concerns, particularly around steel, aluminum, and Canadian exports

    Q3 2025 provides a deeper discussion of tariff impacts—with estimated per-share headwinds and detailed mitigation strategies including supplier partnerships and inventory management

    A relatively new and growing concern, tariffs have emerged as a key topic; proactive mitigation strategies are being employed, marking a shift from previous periods where this was not discussed.

    Shifts in Consumer Sentiment and Economic Outlook

    Q4 2024 depicted a cautious yet optimistic consumer outlook with fragile confidence, while Q1 2025 noted a dynamic environment with gradual recovery; Q2 2025 had minimal focus on sentiment

    In Q3 2025, consumer sentiment shows clear softening, with more deliberate spending and headwinds in discretionary categories such as snacks, reflecting broader economic concerns

    Evolving sentiment with increased consumer caution in Q3 indicates potential headwinds; while previous periods maintained cautious optimism, the current tone is more conservative regarding discretionary spending.

    Cost Savings and Productivity Initiatives

    Consistently discussed across Q4 2024, Q1 2025, and Q2 2025 with the introduction of a new $250M program, reported savings (from $60M up to $90M in fiscal 2025 expectations), and contributions from Sovos integration and network optimization

    Q3 2025 reports achieving about $110M in savings so far under the $250M program and raises full-year expectations to $130M; integration of Sovos continues to contribute further back-office efficiencies

    A robust and continuously improving focus on cost efficiency is noted; progressive achievements in cost savings and productivity are reinforcing the company’s long-term financial strength.

    Supply Chain and Input Cost Concerns

    Highlighted in Q4 2024, Q1 2025, and Q2 2025 with persistent inflationary pressures and supply chain cost challenges, partially offset by productivity initiatives and cost savings

    In Q3 2025, while supply chain concerns remain due to inflation and input cost pressures, the company emphasizes its long-standing supply chain excellence and ongoing mitigation strategies such as strategic inventory management and productivity gains

    Ongoing challenges in supply chain cost pressures persist, although enhanced mitigation strategies and productivity improvements are gradually tempering the impact; the outlook remains cautious but shows structured resilience.

    1. Snacks Pressure
      Q: Category vs. execution pressure on Snacks?
      A: Management explained that about two-thirds of the pressure on Snacks comes from weak overall category trends and one-third from in-market execution, emphasizing targeted innovation and improved pricing strategies to regain share.

    2. Snack Margin Outlook
      Q: Q4 Snack margin expectations?
      A: Carrie stated that, after a 300 basis-point sequential improvement, they expect Snack margins to average around 13% for the full year, reflecting rigorous cost control and mix optimization.

    3. Rao's Growth
      Q: Expected growth rate for Rao’s this year?
      A: Management remains bullish on Rao’s, anticipating high single-digit growth as recent in-market consumption reached about 10-11%, signaling early positive momentum.

    4. Snack Investment
      Q: Will additional promotions drive Snacks recovery?
      A: The team emphasized that instead of simply increasing promotional spending, they are focusing on better price pack architecture and strategic, ROI-driven promotions during key periods.

    5. At-Home Trend
      Q: Is the at-home cooking trend sustainable?
      A: Executives noted sustained success in Meals & Beverages with six consecutive quarters of positive in-market growth, though some benefits were driven by shipment timing that should normalize in Q4.

    6. Snacks Category Needs
      Q: What changes does the Snacks category need?
      A: They highlighted that restoring consumer confidence and balancing value with indulgence will be crucial for reversing the current downturn in the entire Snacks category.

    7. Better-For-You Focus
      Q: How significant is the better-for-you portfolio?
      A: Management described a balanced approach where innovation in better-for-you items is key—especially in areas like chips and Goldfish—but it is part of a surgical strategy rather than a full portfolio reset.

    8. Tariff Mitigation
      Q: Can production be shifted to mitigate tariffs?
      A: Carrie explained that instead of shifting production entirely, they are using strategic inventory management, enhanced supplier partnerships, and cost optimization to mitigate the $0.03 to $0.05 per share tariff impact.

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