Soup Giant Campbell's Q2 Earnings: Sales Miss Despite Sovos Boost, Cuts Full-Year Outlook

Campbell's Soup Company (CPB) reported its second-quarter earnings for fiscal 2025, and the results were a mixed bag. While the company's net sales increased by 9% year-over-year to $2.7 billion, driven largely by the acquisition of Sovos Brands, organic sales decreased by 2%. This decline in organic sales, coupled with increased interest expenses, led to a decrease in adjusted EPS of 8% to $0.74 compared to the same period last year.

The company's adjusted EBIT increased by 2% to $372 million, primarily due to the contribution of the Sovos Brands acquisition. However, the decline in adjusted EPS was influenced mainly by increased net interest expenses, reflecting costs tied to recent acquisitions. The company's operating margin narrowed to 30.4% compared to 31.4% last year, largely due to ongoing cost inflation and supply chain disruptions impacting production expenses.

Campbell's CEO Mick Beekhuizen acknowledged the challenges faced by the company, stating, "Given the softness in some of our snacking categories, the anticipated sequential top-line improvement did not materialize during the quarter, and now we have a more muted second half expectation." The company lowered its full-year 2025 guidance, projecting net sales growth between 6% and 8% (down from the previous guidance of 9% to 11% growth) and adjusted EPS in the range of $2.95 to $3.05 (down from prior expectations of $3.12-$3.22).

The integration of Sovos Brands has expanded Campbell's product portfolio, particularly in the premium market segment. However, the company continues to face challenges in the snacking categories, with intense competition from cheaper private-label brands and softness in some snacking categories. To address these issues, Campbell's could consider investing in marketing and advertising campaigns to differentiate its brands, exploring opportunities to offer more affordable snack options, and continuing to innovate and introduce new products to maintain consumer interest and loyalty.

In conclusion, Campbell's Q2 earnings showed a mixed performance, with sales growth driven by the Sovos Brands acquisition but offset by a decline in organic sales and increased interest expenses. The company has lowered its full-year guidance, reflecting the current operating environment. To navigate the dynamic consumer landscape, Campbell's must address the challenges in the snacking categories and continue to execute on its strategic plan.