Campbell Soup's Q4 2025 Earnings Call Contradictions: Tariff Impact, Snacks Recovery Delays, and Rao's Growth Outlook Signal Shifting Priorities?

Date of Call: November 2, 2025

Financials Results

• Revenue: $2.7B, down 3% YOY; organic net sales decreased 1%
• EPS: $0.77 per adjusted share, down 13% YOY
• Gross Margin: 29.9%, down 150 basis points YOY
• Operating Margin: Meals and Beverages operating margin lower by 190 basis points YOY; Snacks operating margin decreased 100 basis points YOY

Guidance:

• Reiterated fiscal 2026 guidance ranges provided on September 3, 2025 (excludes additional week in prior year).
• Significant tariff impact expected; gross tariffs projected at ~4% of cost of products sold (~60% Section 232 steel/aluminum, remainder global tariffs).
• Expect to mitigate ~60% of tariff impact via inventory management, supplier collaboration, alternative sourcing, productivity/cost savings, and surgical pricing actions.

Business Commentary:

• Sales and Consumption Trends:
• The Campbell's Company reported organic net sales were down 1% for the first quarter of fiscal 2026, with a 2% decline in consumption.

• The decrease was mainly due to retailers building inventory and snacks ahead of promotional activities.

• Snacks Segment Performance:

• The Snacks segment experienced a 1% decline in organic net sales, driven by a 3% unfavorable volume/mix decline.

• Consumer pressure on snack purchases and the impact of contract brands were key factors affecting the segment.

• Meals and Beverages Division:

• The Meals and Beverages division saw a 2% decrease in organic net sales, with a 3% unfavorable volume/mix and a 1% favorable net price realization.

• The decline was partially offset by strong performance in condensed cooking soups and broths, driven by at-home cooking trends.

• Cost and Margin Challenges:

• The company's adjusted EBIT margin decreased by 150 basis points to 29.9%, impacted by 520 basis points of cost headwinds, including a 200 basis point negative impact from gross tariffs.

• Despite cost savings and productivity improvements, elevated inflation and tariff impacts pressured margins.

• Leadership Brands and Market Share:

• Campbell's leadership brands held or grew share for the eighth consecutive quarter, with a total leadership brand consumption decline of 1%.
• This was supported by consumer trends favoring at-home cooking and elevated experiences, particularly in the Meals and Beverages division.

Sentiment Analysis:

Overall Tone: Neutral

• Management described Q1 results as 'in line with our expectations' and 'dynamic operating environment.' While acknowledging challenges (e.g., 'Snacks business remained under pressure,' 'adjusted EBIT margin decreased'), they expressed confidence in the portfolio, consumer focus, and strategic priorities, stating 'our portfolio is well positioned' and 'we remain confident in our leadership brands.'

Q&A:

• Question from Thomas Palmer (JPMorgan): Follow up on the La Romano announcement for details on the reason for the acquisition, timing, and the option on the remaining 51%.
  Response: Mick Beekhuizen: The investment strengthens the partnership with La Regina (the proprietary producer of Rao's tomato-based sauces) to secure supply, support innovation, and enhance the growth story of the Rao's brand. Todd Cunfer added the deal is expected to be EPS-neutral in fiscal 2026, with a total potential valuation around $600 million if the call option is exercised.

• Question from Andrew Lazar (Barclays): Based on Q1 data, what gives you conviction in a Snacks segment stabilization in the second half, and how might affordability trends from a key player impact this?
  Response: Mick Beekhuizen: Conviction is based on the expectation that category pressure may stabilize as comps become easier in the second half, alongside focused execution on portfolio evolution (e.g., innovation in cookies and pretzels, reigniting Goldfish). The key is amplifying proof points in Q2 to inform the second half trajectory.

• Question from David Palmer (Evercore ISI): How are mega trends (like GLP-1 concerns, COVID overpricing) interacting with salty snacks subsegments, and how are you thinking about them going into 2026?
  Response: Mick Beekhuizen: The focus is on aligning innovation and messaging with core consumer trends: premiumization, flavor exploration, health & wellness, and cooking/comfort. The overarching need is to continue emphasizing value across the consumer spectrum.

• Question from Robert Moskow (TD Cowen): Regarding the soup business, do you need to improve affordability of eating soups, and how have competitors responded to your price increases?
  Response: Mick Beekhuizen: The company is conscious of the value equation. While price increases were necessary to cover disproportionate inflation (especially in RTS soups), they have led to short-term share pressure. To mitigate, selective incremental actions have been taken to ensure competitiveness, especially during the critical soup season.

• Question from Michael Lavery (Piper Sandler): Regarding the La Regina deal, will the margin benefit only occur after full consolidation, and what are the implications for top line momentum?
  Response: Todd Cunfer: The full gross margin benefit will be realized upon 100% consolidation (via a minority interest line for the 51% not owned), significantly improving Rao's margins. Mick Beekhuizen added that Rao's continues to deliver mid-to-high single-digit consumption growth, with 4% in Q1, supporting the top line trajectory.

• Question from Peter Grom (UBS): As the new CFO, what are your initial perspectives on the biggest opportunities for improvement (growth, profitability, cash flow)?
  Response: Todd Cunfer: The opportunity lies in streamlining analysis, focusing on the right priorities, and leveraging his experience from Hershey and other companies to bring perspective on efficiency, investment, and people.

• Question from James Salera (Stephens): Regarding Goldfish, has it lost households or seen a step-back in consumption frequency, and what is the focus of the incremental marketing?
  Response: Mick Beekhuizen: Goldfish household penetration is relatively stable; pressure has been on buy rate. The plan focuses on reinforcing brand messaging, innovation (e.g., Goldfish pretzel), price pack architecture for value (as seen in back-to-school multipacks), and strong omnichannel execution.

• Question from Christopher Carey (Wells Fargo): How did Q1 gross margin compare to expectations, and what is the outlook for margin improvement through the year?
  Response: Todd Cunfer: Gross margin came in as expected, pressured by over 500 bps of total costs (including ~200 bps from tariffs). Supply chain actions offset ~70% of these costs. Margins will remain pressured in Q2, with improvement expected in Q3 and Q4 as tariff impacts lap and cost initiatives mature, with a goal to get margins above 30% over time.

Contradiction Point 1

Tariff Impact and Financial Outlook

This involves a significant change in the characterization of a major financial headwind (tariffs) from being a specific, quantified, and evolving challenge requiring mitigation to being a normalized, managed component of cost inflation. This shift affects the perceived stability and predictability of the company's cost structure and margin outlook.

Was Q4 tariff impact lower than expected guidance of $0.03 to $0.05, or did third-quarter factors affect the $0.02 actual impact? - Robert Moskow (TD Cowen)

2025Q4: The lower tariff impact in Q4 was primarily due to effective inventory management and active supplier collaboration, which helped mitigate costs. This lever is expected to have a fuller impact in fiscal '26. - Carrie Anderson(CFO)

How did Q1 gross margin perform vs. expectations, and what is the phasing for the rest of the year? What are the long-term margin prospects? - Christopher Carey (Wells Fargo)

20251209-2026 Q1: Q1 gross margin was exactly as expected, pressured by over 500 bps of total cost inflation (including ~200 bps from tariffs...). Similar pressure is expected in Q2... - Todd Cunfer(CFO)

Contradiction Point 2

Snacks Segment Recovery Timeline and Confidence

This represents a notable shift in confidence and the stated path to recovery for a core business segment. The narrative moves from an explicit expectation of recovery in fiscal '26, driven by a detailed plan, to a more cautious outlook focused on stabilizing comparisons and reigniting a specific product, without reaffirming the earlier recovery timeline.

What portion of Snacks segment weakness stems from industry-wide trends versus Campbell's operational execution? How is the company managing its performance to avoid aggressive price competition? How should we model volume and pricing trends in this segment over the next several quarters? - Andrew Lazar (Barclays)

2025Q3: For fiscal '26, a recovery in Snacks is expected, which may require leaning into marketing investment... Challenges remain in crackers (Goldfish) and chips. The plan focuses on innovation, optimizing price pack architecture... - Mick Beekhuizen(CEO)

What gives you confidence in stabilizing the Snacks segment in H2, and how might a key competitor’s affordability strategy impact this? - Andrew Lazar (Barclays)

20251209-2026 Q1: Conviction is based on the expectation that category pressure will stabilize in the second half due to easier year-over-year comparisons... The focus is on reigniting Goldfish and improving execution to drive second-half momentum. - Mick Beekhuizen(CEO)

Contradiction Point 3

Snacks Segment Performance and Outlook

This is a direct contradiction regarding the health and growth trajectory of the company's core "power" brands. The shift from describing "flat underlying volume mix" and "strong double-digit growth over two years" to expressing concern about "recent pressure" and the need to "reignite Goldfish growth" indicates a material worsening in the underlying business narrative.

What factors are causing the slowdown in Snack Foods volume growth? Is the company moving into a period where snack food growth advantages are no longer present? - Jason English (Goldman Sachs)

2024Q1: Power brands (two-thirds of the business) continue strong growth despite market pressures, with flat underlying volume mix in Q1. ...Despite recent deceleration, power brands have shown strong double-digit growth over two years, and the outlook remains bullish... - Mark Clouse(CEO)

What drives confidence in stabilizing the Snacks segment in the second half of the fiscal year, considering recent trends? How might a key competitor's affordability strategy affect this? - Andrew Lazar (Barclays)

20251209-2026 Q1: The CEO expresses concern about stabilizing the Snacks segment, citing recent pressure and the need to reignite Goldfish growth, indicating a current challenge. - Mick Beekhuizen(CEO)

Contradiction Point 4

Rao's Brand Growth Expectations

This involves a clear inconsistency in communicated growth targets for a recently acquired, strategic brand. The shift from being "bullish" on high-single-digit growth for the *immediate* fiscal year to focusing on EPS neutrality and margin benefits for the *next* fiscal year suggests a recalibration or potential downgrade of near-term growth expectations.

Can you update growth expectations for Rao's this year? - Megan Clapp (Morgan Stanley)

2025Q3: The company is bullish on Rao's and expects high-single-digit growth for fiscal '25. Year-to-date in-market consumption was ~10%... The brand remains strong, with recent 4-week trends showing sauce up 9% and brand overall up ~11%. - Mick Beekhuizen(CEO)

Could you provide details on the La Romano (La Regina) acquisition, including the reason, timing, and the option to acquire the remaining 51%? - Thomas Palmer (JPMorgan)

20251209-2026 Q1: The deal is expected to be EPS-neutral in fiscal 2026. The timing is opportunistic, following the recent Rao's acquisition. - Mick Beekhuizen(CEO), Todd Cunfer(CFO)

Contradiction Point 5

Phasing and Expectations for Rao's/Meals & Beverages Performance

This contradiction pertains to the expected quarterly cadence and stability of a key segment's performance. The shift from explicitly warning of "choppy" phasing due to promotional shifts and lapping benefits to describing maintained "mid-to-high single-digit consumption growth" creates conflicting signals about the predictability and execution quality of this business unit.

Can you clarify which quarters should be considered as potential high or low points for Rao's performance this year? - James Salera (Stephens)

2025Q4: Rao's phasing will be choppy due to promotional shifts (some moving from Q1 to Q2 in FY26) and lapping the SAP implementation benefit that buoyed growth in Q3 FY25. - Carrie Anderson(CFO)

Will the margin benefit from the La Regina deal occur only after full consolidation? Will the deal impact top-line momentum? - Michael Lavery (Piper Sandler)

20251209-2026 Q1: Rao's has maintained mid-to-high single-digit consumption growth, and the company is confident in continuing that trajectory. - Mick Beekhuizen(CEO)