Campbell Soup Company Q4 FY2025 earnings call

• Fourth quarter earnings performance was slightly ahead of expectations. Meals and beverages in-market consumption outpaced the category, while snacks saw sequential improvement in net sales and in-market consumption. - 16 leadership brands' in-market performance was in line with overall category. Consumers are cautious, seeking value, flavor-forward, premium experiences, and health and wellness. - Framework for connecting with consumers focuses on four key areas: premiumization, flavor exploration, health and wellness, and cooking at home. Launch of new growth office to meet consumer needs. - Innovation contributed ~3% to net sales in fiscal 2025, with examples like Kettle Brand Avocado Oil chips and Pacific flavored bone broths. Removing FD&C colors from portfolio starting in fiscal 2026. - Meals and beverages organic net sales decreased 3% in Q4, soup portfolio largely in line with category, broth category had 7% consumption growth. Snacks in-market results improved sequentially but still had 2% consumption decline year-over-year, with some brands showing share improvement and innovation success like Milano White Chocolate.

Meals and Beverages: Fourth quarter organic net sales decreased 3%, excluding the impact of the additional week, Noosa divestiture. Excluding these impacts, net sales were flat year-over-year. Organic net sales decline was mainly due to declines in Rao's, pasta sauces, and U.S. soup. Volume and mix decreased 4% but was partially offset by favorable net price realization of 1%. Snacks: Fourth quarter organic net sales declined 2% due to lower volume and mix, but improved versus Q3 due to favorable net price realization. Dollar consumption in the quarter was in line with full-year totals, while organic net sales were slightly better.

• Fiscal 2026 organic net sales expected to be down 1% to up 1% at midpoint, reflecting Meals & Beverages momentum and snacks stabilization in second half. - Adjusted EBIT expected to decline 9% to 13% and adjusted EPS to be down 12% to 18%, inclusive of divestiture impact. - ~Two-thirds of EPS decline attributable to net tariff impact, one-third from base business trajectory. - Intend to mitigate ~60% of tariff impact through inventory management, supplier collaboration, alternative sourcing, productivity, and surgical pricing. - Increased cost savings target to $375 million by end of fiscal 2028 under PEEK program, focusing on network optimization, integration synergies, technology and organization effectiveness, and indirect spend management. - Full-year reported net sales expected to be down 2% to flat, inclusive of divestitures. Capital expenditures expected to be ~4% of net sales.

• Tariff impacts, including 60% of gross tariffs from Section 232 steel and aluminum tariffs affecting Meals & Beverages, and IPEA tariffs impacting Rao's imports. - Cost inflation and supply chain costs. - Consumer demand changes and evolving snacking behaviors which may impact sales if not addressed effectively.

Q: Peter Galbo asked about factors driving the outlook for fiscal 2026 and phasing.

A: Mick Beekhuizen discussed Meals & Beverages momentum from cooking trends and Rao's performance, snacks stabilization in second half with brand support and innovation, pricing as positive contributor, and EPS decline factors. Carrie Anderson talked about organic net sales phasing with better trends in second half and margin pressure throughout the year.

Q: Tom Palmer asked about snacks division outlook and margin impact.

A: Mick Beekhuizen discussed snacking behaviors evolving, portfolio's fit in trends, brand activation, innovation like Milano White Chocolate, and focus on core areas. Carrie Anderson said most tariff headwind is in Meals & Beverages.

Q: Robert Moskow asked about pricing to offset tariffs and tariff impact in Q4.

A: Mick Beekhuizen said pricing and surgical pricing are part of tariff mitigation. Carrie Anderson attributed Q4 tariff impact lower to inventory management.

Q: Michael Lavery asked about tariff mitigation sustainability and cost savings program.

A: Carrie Anderson and Mick Beekhuizen discussed inventory management, alternate sourcing for some raw materials, and PEEK program's cost savings target increase and sustainability.

Q: Jim Salera asked about brand household penetrations and Rao's marketing.

A: Mick Beekhuizen said household penetrations are flat to slightly increasing, focus on brand support, innovation, and marketing to drive buy rate and household penetration, with Rao's having awareness opportunity and growth focus.