Campbell's Q1 2026: Contradictions Emerge on Snacks Stabilization, Soup Pricing, Tariff Mitigation, La Regina Acquisition, and Goldfish Strategy

Date of Call: None provided

Financials Results

• Revenue: Net sales $2.7B, down 3% YoY (organic net sales down 1%)
• EPS: Adjusted EPS $0.77, down 13% YoY (gross tariff impact $0.14 to EPS; net tariff impact $0.04; noosa divestiture -$0.01; lower interest +$0.01; higher tax rate -$0.01)
• Gross Margin: Adjusted gross profit margin 29.9%, down 150 bps YoY; cost headwinds ~520 bps (including ~200 bps from gross tariffs)
• Operating Margin: Adjusted EBIT decreased 11% to $383M; Meals & Beverages operating margin down 190 bps; Snacks operating margin down 100 bps

Guidance:

• Reaffirming fiscal 2026 guidance ranges announced Sept 3, 2025 (excludes extra FY25 week: ~2% net sales, ~2% adjusted EBIT, $0.06 EPS)
• Expect gross tariffs ≈4% of cost of product sold (≈60% Section 232 steel/aluminum; remainder IEEPA); plan to mitigate ~60% via inventory management, supplier collaboration, alternative sourcing, productivity/cost savings, and surgical pricing
• Anticipate increased promotional activity and marketing investment in Q2 (marketing at upper end of 9%-10% of net sales); expect Q2 margin pressure similar or slightly worse than Q1, improvement in H2 as tariff lap occurs
• La Regina 49% transaction expected to close H2 FY26 and be EPS neutral for FY26; option to acquire remaining 51% later (~$600M valuation)
• Fiscal 2028 cost-savings target $375M; $160M achieved to date (≈$15M incremental in Q1)

Business Commentary:

• Sales and Market Performance:
• Campbell's organic net sales decreased by 1% in Q1 of fiscal 2026, with total in-market consumption down 2%.

• This decline was driven by a 2% drop in consumption, partly offset by retailers building inventory ahead of promotional activities, and a one-point impact from partnering contract brands.

• Brand Performance and Strategic Focus:

• The company's 16 leadership brands held share for the eighth consecutive quarter, with consumption down 1%, showing better performance than the total in-market consumption of 2%.

• The focus on consumer-led innovation and brand activation, as well as an enhanced emphasis on value, contributed to this stability.

  

• Cost Management and Financial Impact:

• Adjusted EBIT margin decreased by 11% due to cost pressures, with an 11% year-over-year decline in adjusted EBIT.

• Despite implementing cost-savings initiatives and pricing increases, the decline was due to disproportionate inflation and tariff-related pressures.

• Divestitures and Strategic Investments:

• Campbell's divested the noosa brand and entered into an agreement to acquire a 49% interest in La Regina, producer of Rao's tomato-based pasta sauces.
• These actions aim to secure high-quality supply and enhance the company's strategic partnership with the Romano family to support the growth of the Rao's brand.

Sentiment Analysis:

Overall Tone: Neutral

• Management reiterated FY26 guidance while disclosing material headwinds: organic net sales down 1%, adjusted EBIT down 11% to $383M, and adjusted gross margin down 150 bps to 29.9%. They flagged gross tariffs ≈4% of cost of goods sold and expect to mitigate ~60% through savings, sourcing and selective pricing, and articulated confidence in brand actions (Rao’s investment, cost savings, innovation).

Q&A:

• Question from Tom Palmer (J.P. Morgan): Could you provide added detail on the La Regina acquisition rationale, timing, and the option on the remaining 51% (how purchase price would be determined)?
  Response: Investment secures high-quality supply and strengthens partnership with the Romano family to support Rao’s growth; buying 49% for $286M via two payments ($146M now, $140M in one year), with a call option to acquire remaining 51% later (ultimate valuation near ~$600M with up to ~20% premium depending on performance) and a Romano-family put after four years; expected EPS neutral in FY26 and improves Rao’s margins and innovation capability.

• Question from Andrew Lazar (Barclays): What gives you conviction that the snack segment will stabilize in the back half of the fiscal year given muted sequential improvement in Q1?
  Response: Category dollar consumption was sequentially stable, easier comps entering H2 should aid stabilization; company expects Q2 proof points and is driving stabilization via innovation (cookies, Snack Factory), price-pack architecture, targeted promotions, and stronger omnichannel execution—Goldfish reignition is core.

• Question from David Palmer (Evercore ISI): How do mega trends (GLP‑1s, COVID-era pricing hangover) affect salty snacks and subcategories into 2026?
  Response: Snacking is evolving across premiumization, flavor exploration and health/wellness; brands are positioned to win but management is prioritizing consumer-focused innovation, targeted messaging and value to address cohort differences—some subsegments show strength while others need work.

• Question from Robert Moskow (TD Cowen): How do you reconcile necessary price increases to cover costs with the need to maintain affordability in eating soups where share has declined; how have competitors reacted?
  Response: Cooking soups remain strong while eating/RTS faced pressure from selective pricing and private label recovery; pricing elasticities matched expectations, and the company took surgical price increases but will take selective incremental actions into the soup season to remain competitive and protect long‑term brand value.

• Question from Michael Lavery (Piper Sandler): With 49% ownership of La Regina, how will margins and top-line momentum be reflected (consolidation) and what is the growth outlook for Rao’s?
  Response: Company expects mid‑ to high‑single-digit consumption growth for Rao’s; due to call option the P&L will be fully consolidated (100% recognized, then 51% minority interest); anticipate full gross margin benefit for brand, financing costs separately, EPS neutral in FY26 and accretive over time; deal increases flexibility to invest in brand growth.

• Question from Peter Grom (UBS): Todd, initial perspectives after stepping into the CFO role—where do you see the biggest opportunities for improvement?
  Response: Sees strong brands and people; priorities are streamlining analysis, focusing resources on the right initiatives, improving decision discipline, optimizing investments and bringing experience from larger and smaller food companies to drive growth, profitability and cash flow.

• Question from Jim Salera (Stephens): On Goldfish, has the brand lost households or seen buy‑rate declines, and what will incremental marketing focus on?
  Response: Household penetration is relatively stable; buy rate declined; plan to drive buy rate via clear brand messaging, expanded innovation (e.g., pretzel variant), price‑pack architecture to deliver value (multi‑pack proof during back‑to‑school), and improved omnichannel in‑market execution.

• Question from Chris Carey (Wells Fargo): How did Q1 gross margin compare to expectations and what is the phasing/trajectory for gross margins the rest of the year?
  Response: Q1 came in as expected given ~520 bps total cost pressure (≈200 bps from tariffs); supply chain offsets (~70%) helped; expect similar or slightly worse pressure in Q2, improvement in Q3 and clearer relief in Q4 as tariff lapping and cost initiatives take effect; long‑term goal is gross margin well above 30%.

Contradiction Point 1

Snacks Category Stabilization

It involves differing expectations for the stabilization of the snacks category, which impacts investor perceptions of the company's strategic direction and market positioning.

What supports the expectation of stabilization in the snacks segment by the second half of the fiscal year, and how does this align with key players focusing on affordability moving forward? - Andrew Lazar (Barclays)

2026Q1: We expect snacks categories to stabilize in the second half due to easier comps. - Mick Beekhuizen(CEO)

What key factors should be considered for fiscal '26 in the Snacks segment? - Andrew Lazar (Barclays)

2025Q3: We expect a recovery in fiscal '26. Marketing spending will likely lean more into the range of 9-10% to support brand investments. - Mick Beekhuizen(CEO)

Contradiction Point 2

Soup Pricing and Competitive Response

It highlights the company's approach to pricing and competitive response in the Soup segment, which impacts consumer perception and market positioning.

How will you improve affordability in the soup business amid price increases, and how are competitors responding? - Robert Moskow (TD Cowen)

2026Q1: Soup pricing actions were necessary due to tariff-related inflation, impacting RTS share. - Mick Beekhuizen(CEO)

Are there plans to increase promotional activities due to competitive pressures? - Ken Goldman (JPMorgan)

2025Q3: Promotional activity is stabilizing. We're focusing on allocating promotional dollars effectively during key periods. - Mick Beekhuizen(CEO)

Contradiction Point 3

Tariff Impact and Mitigation

It involves the company's approach to managing tariff-related pressures, which can influence operational strategies and financial performance.

How will you maintain affordability in the soup business during price hikes, and how are competitors responding? - Robert Moskow (TD Cowen)

2026Q1: Soup pricing actions were necessary due to tariff-related inflation, impacting RTS share. - Mick Beekhuizen(CEO)

What are the trade-offs of more aggressive pricing in the soup category to offset tariffs, and could you clarify the fiscal '26 tariff impact and mitigation strategies? - Robert Moskow (TD Cowen)

2025Q4: Lower-than-expected tariff impact in Q4 due to inventory management. Significant tariff pressure expected in fiscal '26. - Carrie Anderson(CFO)

Contradiction Point 4

La Regina Acquisition Impact on Rao's

It involves the strategic implications and financial impact of the La Regina acquisition on Rao's, which is crucial for investors understanding the company's growth strategy.

How will the La Regina acquisition impact Rao's top-line growth and margin contributions? - Michael Lavery (Piper Sandler)

2026Q1: The La Regina transaction is expected to consolidate 100% of P&L, improving Rao’s gross margin and bottom line. - Mick Beekhuizen(CEO)

What are the growth drivers for Meals & Beverages and Snacks? - Jim Salera (Stephens)

2025Q3: Meals & Beverages has a strong portfolio with premium and mainstream offerings that meet consumer needs. - Mick Beekhuizen(CEO)

Contradiction Point 5

Goldfish Brand Strategy

It involves the strategic direction and competitive positioning of the Goldfish brand, which impacts market performance and consumer engagement.

How has Goldfish's household penetration and consumption frequency changed? What are the key focus areas for incremental marketing? - Jim Salera (Stephens)

2026Q1: Goldfish's household penetration is relatively stable, but buy rates have faced pressure. - Todd Comfer(CFO)

What factors are driving the pressure in the Snacks segment? What steps are being taken to address controllable factors? - Andrew Lazar (Barclays)

2025Q3: Two-thirds of the decline in in-market consumption is attributed to the aggregate category deterioration, with one-third due to our in-market performance. - Mick Beekhuizen(CEO)