Campbell Soup's 2024 Q1 Earnings Call: Contradictions Emerge on Tariff Impact, Snack Stabilization, and Goldfish Strategy

Date of Call: None provided

Financials Results

• Revenue: $2.5B organic net sales, down 1% YOY
• EPS: $0.91 adjusted EPS, down 11% YOY
• Gross Margin: 32.1% adjusted gross profit margin, down 10 basis points YOY
• Operating Margin: 16.2% adjusted EBIT margin, decreased YOY (adjusted EBIT down 9%)

Guidance:

• Full-year organic net sales expected to be 0% to 2%.
• Q2: likely modest sequential volume improvement from Q1 but volume & mix still negative vs prior year; expense timing favorability to be rephased into Q2.
• Full-year adjusted EPS guidance reaffirmed at $3.09 to $3.15, with modest earnings growth and margin progress weighted to H2.
• Core inflation expected to remain in the low single-digit range for FY24.
• Marketing/selling spend targeted at low end of 9%-10% of net sales; capex increased to ~5% of net sales.
• Emerald divestiture ~-0.5% net sales and ~$0.01 EPS impact; Sovos not included in FY24 outlook.

Business Commentary:

* Revenue and Volume Trends: - Campbell Soup Company reported organic net sales of $2.5 billion for the first quarter, down 1% from the previous year, with adjusted EBIT and EPS declining by 9% and 11%, respectively. - Dollar consumption decreased by 2% but grew 8% over 2 years. - - The decline was attributed to a challenging consumer landscape and a significant increase in the prior year, with a focus on ensuring product affordability and maintaining competitive price gaps.

• Soup Segment Performance:
• Meals & Beverages division experienced a low to mid-single-digit decline in organic net sales and dollar consumption.
• The Soup portfolio saw decreases in dollar consumption, particularly in condensed and ready-to-serve segments, while broth consumption increased by 4%.
• 

• The decline was driven by consumers seeking more affordable meal options, leading to improved share in more value-oriented segments like condensed cooking soups.

• Snacks Division Growth:

• The Snacks division delivered 1% growth in organic net sales, with power brands growing by 5%.
• The increase was supported by a 3% net price realization and a 19% rise in dollar consumption over 2 years.

• Growth was driven by the resilience of power brands like Goldfish and Lance, despite some pressure from private label and broader category dynamics.

• Share Gains and Holiday Season:

• Campbell achieved significant share gains in key Thanksgiving-related segments, improving dollar share by 1.1% to 1.2% in broth and soup categories.
• The company saw a shift in consumer shopping behavior, with increased later purchases and active promotion seeking, indicating a return to Campbell's brand leadership.
• These improvements were due to strategic investment in advertising and better retailer alignment, positioning Campbell's products as preferred choices during the holiday.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly stated confidence: "we remain confident and are affirming our full year guidance"; noted adjusted EBIT and EPS came in slightly ahead and highlighted improving share trends and holiday resilience; reiterated expectation of sequential improvement and H2 margin tailwinds from moderating inflation and productivity.

Q&A:

• Question from Andrew Lazar (Barclays): You mentioned an encouraging start to the holiday season — can you dig into the data (category dollars, how Q2 is unfolding, and outlook for the rest of the year)?
  Response: Thanksgiving was resilient; we gained share in key holiday categories (condensed +1.1 pts, broth +1.2 pts, stuffing +0.2 pts), retailers shifted away from private label back to Campbell, supporting a positive start to the season and backing a back-end loaded recovery thesis.

• Question from Andrew Lazar (Barclays): Gross margins came in above forecast — what are you seeing on promotional tactics and the lift from promotions versus historical norms?
  Response: Margins beat as private-label ad presence stepped down and our promotions were more effective without materially higher spend; productivity and cost levers supported margins and we will remain judicious balancing affordability and margin.

• Question from Kenneth Goldman (JPMorgan): Where are the biggest opportunities to manage discretionary spending and how do you define discretionary?
  Response: Opportunities span enterprise cost programs: manufacturing/COGS savings and SG&A/nonworking spend reductions as part of the $1B cost savings initiative.

• Question from Kenneth Goldman (JPMorgan): Do key customers seem satisfied with category volumes and will shipments/consumption align in coming months?
  Response: We engage closely with customers to balance volume and profitability; expect unit step-up in the holiday period and view category fundamentals as healthy while protecting long-term margins.

• Question from Robert Moskow (TD Cowen): Did 'grow' brands outperform 'optimize' Soup brands this quarter and how did tactics differ?
  Response: Mixed results: growth brands (condensed, Chunky, Pacific) performed well; optimized (broth) rebounded vs private label in the holiday; ready-to-serve was pressured as consumers shift to stretchable meals—tactics focused on targeted investments by bucket.

• Question from Jason English (Goldman Sachs): The margin bridge shows a large 'other' supply-chain inflation bucket — what's in it and what should we expect?
  Response: 'Other' reflects non-core supply-chain inflation, unfavorable mix dynamics and fixed-cost absorption from lower volumes; these pressures should moderate in H2 as mix, volumes and productivity normalize.

• Question from Jason English (Goldman Sachs): Snacks volume trends are decelerating — what's driving that and are snack growth advantages waning?
  Response: Snacking is bifurcating: power brands remain resilient (growth moderating) while partner/contract and noncore segments face private-label and commoditization pressure; we remain bullish on long-term power-brand growth.

• Question from James Salera (Stephens): What's driving the strength in Lance and Late July relative to the broader power brand portfolio?
  Response: Different drivers: Late July is a premium-added-value brand growing with higher-income consumers; Lance is value-oriented and gaining among price-sensitive households, so both perform well but for different consumer segments.

• Question from James Salera (Stephens): Are Goldfish innovations aimed at recruiting new households or increasing buy-rate among existing buyers?
  Response: Innovations aim to broaden Goldfish usage across the whole household (teens/adults as well as kids), increasing buy-rate and retention through new formats (e.g., Crisps) and limited-time offers.

Contradiction Point 1

Tariff Impact and Mitigation Strategies

It involves the company's approach to managing tariff-related costs and its expected impact on margins, which are crucial for financial forecasting and investor confidence.

What is causing the recent volume slowdown in Snack Foods, and what is its impact on future growth? - Jason English (Goldman Sachs)

2024Q1: The margin pressure is due to non-core inflation, mix dynamics, and volume-related fixed costs. The supply chain leverage and mix dynamics are expected to normalize, contributing to reduced margin pressures. - Mark Clouse(CEO), Carrie Anderson(CFO)

How should we quantify the impact of 150 bps of margin pressure in Meals & Beverages compared to Snacks? - Taylor Conrad (Analyst)

2025Q4: The majority of the tariff impact is on Meals & Beverages due to steel aluminum tariffs and Rao's tariffs. - Carrie Anderson(CFO)

Contradiction Point 2

Snack Category Stabilization and Performance

It highlights differing perspectives on the stability and growth trajectory of the snack category, which can impact strategic decision-making and investor expectations.

What is causing the recent slowdown in Snack Foods volume trends, and how does this impact future growth? - Jason English (Goldman Sachs)

2024Q1: A bifurcation in snacking is observed, with power brands like Goldfish and Lance performing well. Some segments face pressure from private label and competition. Vigilance is needed, but the growth trajectory remains strong over the last couple of years. - Mark Clouse(CEO)

Will the snack category stabilize, and is the stabilization driven by the category or company-specific factors? - Thomas Palmer (JPMorgan)

2025Q4: Snacking occasions are stable or slightly growing. Brand activation and innovation are focused on trends like premiumization and health and wellness, which are well aligned with brand portfolio. Household penetration is relatively stable, and brand support and innovation will drive recovery. - Mick Beekhuizen(CEO)

Contradiction Point 3

Gross Margin Expectations and Performance

It involves changes in financial forecasts and reported actuals regarding gross margins, which are critical indicators for investors.

Did promotional tactics contribute to gross margins exceeding forecasts? - Andrew Lazar (Barclays)

2024Q1: Gross margins were consistent with expectations due to promotional execution and judicious investment. There was a shift back from private label to Campbell's brands, enhancing return on investment. - Mark Clouse(CEO)

Can you discuss trends in the gross margin and the impact of inflation on the core business? - Carrie Anderson (CFO)

2025Q3: Gross margin rate for the quarter was 40.4%, an increase of 160 basis points compared to the year-ago period. This increase was driven by a favorable category and customer sales mix, early performance benefits from our integrated business units, positive timing impacts on inflation and supply chain costs. - Carrie Anderson(CFO)

Contradiction Point 4

Snack Foods Volume and Market Performance

It involves differing perspectives on the performance of the Snack Foods segment, impacting investor expectations and strategic decision-making.

What is causing the recent slowdown in Snack Foods volume trends, and how does this affect future growth? - Jason English (Goldman Sachs)

2024Q1: A bifurcation in snacking is observed, with power brands like Goldfish and Lance performing well. Some segments face pressure from private label and competition. Vigilance is needed, but the growth trajectory remains strong over the last couple of years. - Mark Clouse(CEO)

What portion of Snacks segment pressures stems from overall category trends versus Campbell's in-market execution? What measures are being implemented to control factors within the company's control while avoiding a race to the bottom in pricing and competitiveness? - Andrew Lazar (Barclays)

2025Q3: The pressure on the Snacks segment is roughly split, with two-thirds attributed to worsening aggregate categories and one-third to in-market performance. The team is focusing on innovation to meet consumer needs, especially in value, better-for-you products, and indulgence. - Mick Beekhuizen(CEO)

Contradiction Point 5

Goldfish Performance and Strategy

It highlights discrepancies in the company's approach and expectations for the Goldfish brand, which is a key player in the Snack Foods segment and a core driver of the company's growth strategy.

Are Goldfish's innovations targeting new households or increasing purchase rates among core consumers? - James Salera (Stephens)

2024Q1: Innovations like Goldfish Crisps are focused on broadening household usage, being the #1 snack among teens while appealing to the entire family, aiming to increase buy rates and maintain Goldfish in households as kids age. - Mark Clouse(CEO)

What assumptions underlie consumer recovery in the second half of the year, and how will Goldfish perform within category recovery? - Jim Salera (Stephens)

2025Q2: Q3 is expected to resemble Q2, with stabilization in Q4, assuming categories remain stable. Focus is on improving Goldfish performance with proper promotional support and messaging. Innovation plans are in place to drive growth. Value and price architecture are also emphasized. - Mick Beekhuizen(CEO)