CPB Q3 2025: 6th Straight Meals Growth, Snacks Slump & $0.04 EPS Hit
- 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.
Metric | YoY Change | Reason |
---|---|---|
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. |
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
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 |
Metric | Period | Guidance | Actual | Performance |
---|---|---|---|---|
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 |
Topic | Previous Mentions | Current Period | Trend |
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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. |
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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. -
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. -
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. -
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. -
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. -
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. -
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. -
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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