Campbell Soup's Q4 2025: Contradictions Emerge on Snacks Stabilization, Margins, and Tariff Pricing Strategies

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 03, 2025

Financials Results

• Revenue: Net sales up 1% YOY; organic net sales down 3% YOY (53rd week +7 pts; divestitures -3 pts)
• EPS: $0.62 adjusted EPS, down 2% YOY; 53rd week +$0.06; tariffs -$0.02; divestitures -$0.02
• Gross Margin: 30.5% adjusted gross margin, down 90 bps YOY (≈30 bps impact from tariffs)
• Operating Margin: Adjusted EBIT margin down 50 bps YOY (level not disclosed)

Guidance:

• FY26 reported net sales expected -2% to flat; organic -1% to +1% (ex 53rd week; includes divestitures).
• Adjusted EBIT -9% to -13%; adjusted EPS -12% to -18% (includes ~$0.04 dilution from divestitures).
• ~Two-thirds of EPS decline from net tariff impact; tariffs ≈4% of COGS; ~60% mitigation via inventory mgmt, supplier collaboration, sourcing, productivity, selective pricing.
• Marketing/selling to 9%–10% of net sales; Meals & Beverages momentum; Snacks expected to stabilize in 2H; modest positive pricing.
• Core inflation low single digits; productivity ≈5% of COGS; ~$70M cost savings in FY26; Peak target raised to $375M by FY28.
• Net interest $320–$325M; tax rate 24%; capex ≈4% of net sales.

Business Commentary:

* Financial Performance and Cost Management: - Campbell's Soup reported a 1% increase in net sales for Q4 fiscal '25, with adjusted EBIT and adjusted EPS down by 2%. - The growth was slightly ahead of expectations, driven by favorable settlement timing in Q3 reversing in Q4, and adjusting for the benefits of the additional week in the quarter.

• Meals & Beverages Division Trends:
• Meals & Beverages reported flat net sales in Q4, excluding impacts from additional weeks and divestitures, with organic net sales down 3%.

• The declines were due to favorable customer shipment timing in Q3 reversing, and reduced consumption in ready-to-serve soups.

• Snacks Division Dynamics:

• The Snacks division saw a 2% increase in net sales, with organic net sales down 2%, driven by lower net sales of third-party partner and contract brands.

• Improvement in net price realization in Q4 compared to Q3 was noted, contributing to a better sequential performance.

• Consumer Trends and Strategic Response:

• Meals & Beverages leadership brands gained 0.2 share points, with 5 of 8 brands growing or holding share, while Snacks leadership brands saw mixed performance, with two brands holding share.
• Consumer trends towards at-home cooking and premium experiences have been key growth drivers, with investments in innovation and marketing expected to continue supporting brand growth.

Sentiment Analysis:

• Management said Q4 was "slightly ahead of our expectations" with net sales up 1% but adjusted EBIT/EPS down 2% YOY. FY26 outlook calls for adjusted EPS down 12%–18% due to tariffs (~4% of COGS), partially mitigated. Snacks expected to stabilize only in 2H, while Meals & Beverages shows momentum. Cost-savings target raised to $375M by FY28.

Q&A:

• Question from Peter Galbo (Bank of America): What drives the FY26 outlook toward the high/low ends, and how should we think about Q1, 1H vs 2H phasing?
  Response: M&B momentum and modest pricing help; Snacks expected to stabilize in 2H; increased marketing and productivity offset tariffs; Q1 trends sequentially better than Q4 with M&B promo shifts into Q2 and similar margin pressure each quarter.

• Question from Thomas Palmer (JPMorgan): What gives confidence in Snacks stabilization in 2H—category dynamics or company actions?
  Response: Snacking occasions persist; focus on premiumization, flavor, wellness; step-up in marketing, innovation, price-pack (e.g., multipacks), and execution/distribution to drive sequential improvement and 2H stabilization.

• Question from Taylor Conrad (Firm not stated): Where will the 150 bps operating margin pressure hit more—M&B or Snacks?
  Response: Mostly Meals & Beverages due to Section 232 steel/aluminum and AIFA-related impacts (including Rao’s imports).

• Question from Robert Moskow (TD Cowen): Why not use more aggressive pricing to offset steel/aluminum tariffs, especially in soup?
  Response: Pricing is a lever but applied surgically; combined with supplier collaboration, productivity, and other mitigations to balance category health and cost pressures.

• Question from Robert Moskow (TD Cowen): Q4 tariff impact was $0.02 vs guided $0.03–$0.05—why lower?
  Response: Active inventory management and supplier actions reduced Q4 impact; fuller tariff effects expected in FY26.

• Question from Michael Lavery (Piper Sandler): How sustainable are inventory and sourcing mitigations, and can Rao’s sourcing shift?
  Response: Inventory mgmt and supplier collaboration continue; no U.S. thin-plate alternative for cans; Rao’s largely remains Italy-made for quality, with limited U.S. co-man capacity; pursuing other sourcing where feasible without compromising quality.

• Question from Michael Lavery (Piper Sandler): Does the higher cost-savings target risk capabilities?
  Response: Confidence is high: further Sovos integration, network optimization, IT/digital, and indirect procurement provide runway; productivity target raised to ~5% of COGS without undermining capabilities.

• Question from James Salera (Stephens): With household penetration stable/slightly up, how will you lift buy rate/mix, and what about Rao’s awareness?
  Response: Increase brand support, innovation, and pack architecture (e.g., Goldfish multipacks) to boost buy rate; Rao’s targeted for mid- to high-single-digit growth via awareness and penetration gains.

• Question from James Salera (Stephens): Rao’s quarterly cadence given noted choppiness?
  Response: Expect promo shifts from Q1 into Q2; lap Q3 ERP timing benefits and Q4 reversals from FY25.