Campbell’s Company executives warn they may need to make some “tough decisions” soon to offset soft sales, tariff-driven inflation, conflict-related cost pressures and tighter margins that are weighing on earnings.
The soup and snack maker reported Monday that organic net sales fell 4% to $2.4 billion in the company’s third quarter ending May 3 compared to the same period last year. This dragged down earnings per share 32% year-over-year to 50 cents. Both reflect a 5% volume headwind due primarily to lapping strong soup performance a year ago but also continued challenges across the company’s snacks division.
Even though the declines beat investor predictions and were in line with the company’s expectations, CEO Mick Beekhuizen said the company must deliver stronger absolute top and bottom-line results – especially in the company’s snacks division, net sales of which fell 4% in the quarter.
“I recognize that our performance remains well below expectations” in snacks, Beekhuizen said. “We know that we need to deliver stronger absolute top and bottom-line results to create shareholder value.”
To do that, the company is considering some tough decisions and may include rationalizing our product portfolio, reallocating and prioritizing investment for certain brands, and consolidating nodes within our network,” he explained.
It also may raise prices “as a last resort” to offset rising inflation due to the US-Iran war and other global conflicts snarling supply chains and driving up the cost of oil, fertilizer and other key components, CFO Todd Cunfer said.
Salty snack segment will be testing ground for simplification strategy
Campbell’s is taking a hybrid approach to simplify its portfolio, including trimming underperforming SKUs to free resources that can be reallocated to “the core of the portfolio.”
Beekhuizen said he sees the most opportunity for the company’s “simplification efforts” within its salty snack portfolio, which has struggled with lower consumption.
“To reignite growth, our salty brands need to strengthen their core with bigger and bolder ideas that are sustainably supported by higher levels of marketing. We need the right pack-sizes and the right price points to win, with consumer-led innovation differentiated from competition,” he said.
“To achieve this, we will tighten our assortment, sharpen price-pack architecture and improve trade efficiencies, all while prioritizing where we can win. These initiatives are in our control, and we have already started actioning against them. This process will take some time, but we are committed to turning around this business,” he added.
Goldfish offers a case study
For support, he pointed to early efforts withing the company’s iconic Goldfish snack brand.
“We are seeing encouraging early signals from our decision to return the brand’s strategy to its legacy as a leader in snacking for families with kids. For the quarter, total Goldfish consumption declined 0.9%, consistent with Q2. Dollar share was stable, a notable improvement as compared to recent trends. In our core product offerings, which are focused towards households with kids, consumption was flat for the second quarter in a row,” which “represents sustained improvement from earlier in the year,” he explained.
Looking forward, he added, “we have strong plans with stepped up merchandising including feature and display support and stronger omnichannel execution that improves how Goldfish shows up for families both in-store and online.”
One example of innovation that is “tailored to households with kids” is the brand’s collaboration with Pokemon, he said.
Likewise, the company will launch an ad campaign “highlighting the brand’s playful legacy as ‘the snack that smiles back,’” he added.
What products could Campbell’s cut?
To help fund investment in brands’ ‘core,’ Campbell’s could cut underperforming SKUs.
Potentially on the chopping block are “a tail of SKUs in certain brands” that do not account for “a lot of sales,” but the reduction of which “could actually allow for further simplification and as a result improve the overall operations and improve our overall network,” Beekhuizen said.
SKUs that are removed from the “core” of brands also could fall away.
In addition to cutting weak SKUs, the company plans to tighten its CapEX budget and look for “opportunities to lower our future capital needs and remove fixed costs from our P&L,” Cunfer said.
“And obviously, M&A right now is off the table,” he added.
Price hikes could be on the horizon
While Cunfer stressed the company would prefer to improve top and bottom lines through cost management strategies, it may also raise prices as a “last resort” to address inflation increases that could be double what Campbell expected at the start of the fiscal year.
“Before the Middle East conflict, we were looking at base inflation of around 3%. Obviously, with the price of oil where it is, and look, if oil stays around $100 a barrel, we are looking at an additional 2% to 3% inflation on top of the core 3%,” Cunfer said.
Compounding these costs is a driver shortage “that is causing higher inflation from a logistics and freight perspective as well,” he added.
“As we continue to see those inflationary pressures we’re going to stay focused on generating elevated levels of productivity, incremental cost savings initiatives and then also focus on that positive net price realization,” but if that is not enough, the company will consider surgical price increase in different parts of the portfolio to maintain margins, Beekhuizen said.
Improvements in fresh bakery offer silver lining
“Consumption softness” in Campbell’s snack business is due in part to “purposeful, short-term decisions intended to stabilize our fresh bakery operations,” which are paying off, according to Beekhuizen.
“We made measurable progress this quarter improving on-shelf availability and customer fill rates from the low levels we experienced earlier this year” under the Pepperidge Farm business, he said.
“With operational metrics in a stronger place, we are beginning to reintroduce promotions in a disciplined way,” which should bolster the business, he said.
Likewise, the company is strategically launching new Pepperidge Farm products, including an apple pie flavored limited-edition cookie for America’s 250th birthday.
Looking forward
Through a combination of these and other efforts, executives expect Campbell’s performance to slowly and steadily improve – giving them confidence to reaffirm the company’s fiscal outlook for 2026.
“We expect organic net sales declines of 1% to 2%, adjusted EBIT declines for 17% to 20% and adjusted EPS of $2.15 to $2.25,” said Cunfer.
“This outlook reflects performance fiscal year-to-date, and embeds our intention to maintain the investments necessary to improve performance and execution. Furthermore, this outlook now includes the initial impacts from the Middle East conflict, specifically higher logistics costs, which we expect will be offset by recognizing a tariff refund benefit in Q4,” he added.
