The Campbell's Company Common Stock 2026 Q4 Earnings Call

Good morning, and welcome to The Campbell’s Company’s fourth quarter fiscal 2026 earnings conference call. I’m Joshua Levine, Campbell’s Chief Investor Relations Officer. Joining me today are Mick Beekhuizen, President and Chief Executive Officer, and Todd Cunfer, Chief Financial Officer. In addition to our prerecorded remarks, we will host a live question-and-answer session via webcast today, September 3, 2026, at 9:00 A.M. Eastern. Today’s earnings press release, presentation, and an audio recording of our prepared remarks are available on the Investors section of our website. A replay of the Q&A session will be posted there following its conclusion, with a full transcript available within 24 hours. You will find today’s agenda on Slide 2. Mick will provide an update on our business performance. Todd will then discuss our financial results and our fiscal 2027 outlook.

During today’s discussion, management may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates and are subject to risks and uncertainties. Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause actual results to differ materially. Management may also use non-GAAP financial measures, which we believe provide useful information for investors. Non-GAAP financial measures are not intended to be considered in isolation from or as a substitute for the financial information presented in accordance with GAAP. Reconciliations to the most directly comparable GAAP measures are included in the appendix of our earnings presentation. Finally, please note that this is the first quarter following our acquisition of a 49% interest in La Regina, whose results are fully consolidated into Campbell’s financial statements.

The remaining 51% interest we do not own is reflected as earnings from noncontrolling interest. Campbell’s financial statements prepared in accordance with GAAP also include certain fair value adjustments associated with the acquisition, including for the deferred payment of the second tranche due on May 4, 2027, and for the option to acquire remaining interests at a future date. These fair value adjustments will be excluded from our adjusted earnings. It is now my pleasure to turn the call over to Mick.

Thanks, Josh. Good morning, everyone, and thank you for joining us. Our fourth quarter results reflected many of the same challenges we have faced in recent quarters, with profitability coming in as expected. Organic net sales declined 1% as weakness in snacks more than offset solid consumption and organic net sales growth in meals and beverages. Adjusted EBIT decreased 25%, and adjusted EPS was $0.39, down 37%, pressured by elevated inflation. The declines in adjusted EBIT and EPS include an estimated high single-digit impact from lapping the extra week in last year’s fourth quarter. Our fiscal 2027 outlook reflects an external environment that we expect will remain volatile, as well as another year of elevated inflation that will continue to pressure margins, particularly in the first half.

However, our outlook also reflects the benefits of productivity, cost savings initiatives, and pricing that we expect to build throughout the year and increasingly support margin recovery. Make no mistake, our results remain unacceptable. Instead of waiting for the environment to improve around us, we are addressing reality head-on. The initiatives we are laying out today are designed to improve performance and put us on a path back to a sustainable long-term value creation model. It starts with our team. Since I became CEO about 18 months ago, we have strengthened our leadership through a combination of external hires and internal promotions, bringing experience from both established peers and disruptors and an ambition to drive change. We have also streamlined our category-led operating model across both divisions to enhance our in-market presence and improve our agility with consumers and customers.

The goal is to enable clearer decision rights, sharpen our focus, enhance execution, and instill a culture of urgency and accountability. This operating model has contributed to improved performance in meals and beverages, and we are applying those learnings in snacks. Looking ahead, our top priority is to get close to the consumer in everything we do, from the products we offer to the innovation we launch and the nutritional benefits we deliver, and the way we manufacture and bring products to market. This is not new, but it’s a philosophy we must follow with greater speed and discipline. That means engaging more frequently with consumers, responding faster, and using data and insights to anticipate evolving preferences. As the consumer evolves, so must we. Campbell's scale and resources give us the opportunity to create a competitive advantage.

At the beginning of fiscal 2026, we established our growth office to create scalable commercial capabilities across insights and analytics, consumer experience, innovation, R&D, and revenue growth management. These capabilities have helped produce one of our strongest innovation pipelines in several years and supported the removal of artificial colors, making Campbell's one of the first among our center store peers to successfully complete a change. Our strengthened enterprise revenue growth management team is another example of investing in critical commercial capabilities. This team brings greater rigor to pricing, promotion, price-pack architecture, and how we deliver the right value to consumers. These capabilities are particularly important now. With cost pressures accelerating in fiscal 2027, we are selectively implementing commodity-driven pricing actions while importantly continuing to make targeted price investments in other areas. We are also changing our approach to marketing support.

Specifically, we will direct a majority of this year’s marketing budget toward our best opportunities, moving away from what has historically been a balanced approach across our portfolio. Let me be clear. We are not walking away from any business or brand. However, our marketing investments must work harder for us. In fiscal 2027, we have national advertising campaigns planned for Rao's, Goldfish, and Pepperidge Farm, as well as a robust omni-channel and influencer-led media plan to drive trial of innovation, notably across two new platforms under the Campbell's brand. We are also further accelerating our shift toward digital, responding to how consumers are discovering and engaging with brands. This includes expanded use of social, influencer, and e-commerce channels, as well as newer AI-enabled platforms, which together will represent approximately 85% of our working media budget.

To help fund these initiatives and enable a return to profitable growth, we are launching a $500 million enterprise-wide savings program, which Todd will describe in greater detail. With this program, we are focused on increasing speed and accountability and improving our margins and cash flow. Finally, we are taking action to strengthen our balance sheet and reduce leverage. We are resetting our dividend, which was a difficult but necessary decision. Together with our actions to improve cash generation, it will accelerate de-leveraging, preserve financial flexibility, and support sustainable long-term value creation. Let's now turn to our Meals and Beverages division. Our top-line performance was stronger this quarter, with organic net sales up 3%, driven by consumption growth of 0.8% and an approximately $30 million benefit from prior year timing shifts. Semi-scratch cooking consumption grew 5% in the quarter, led by Swanson, Pacific, and Rao's.

Declines in our eating soups eased relative to Q3 as prior year comparisons normalized. We are optimistic about our Meals and Beverages division. Semi-scratch cooking represents more than half of the division's retail sales and has delivered a four-year retail sales CAGR of over 5%. Empowering everyday cooking is an important growth pillar for us, positioning us well with today's consumer. Our products provide strong value, especially as most meals are eaten at home and families increasingly seek a wider variety of flavors and cuisines. For years, we have built credibility with consumers by investing in and ultimately winning during major celebratory occasions, such as the holiday season. Our next opportunity is to further amplify our relevance within everyday meals. This includes executing a strategy that meets consumers where they find inspiration and adapting our media and recipe plans to succeed across social, digital, and emerging AI-enabled platforms.

Examples include winning with Campbell's Condensed in mac and cheese and building routine meal bundles that bring together Rao's offerings across sauce, pasta, and frozen to make meals such as spaghetti and meatballs. We have more work ahead, but our direction is clear and momentum is building. In U.S. soup, consumption grew 0.9% in Q4. Broth was a standout, with the category growing 11.8%, its strongest volume-driven growth quarter in several years. Swanson grew 7%, in line with mainstream broth, while Pacific increased 28.4%. We continue to believe that increasing at-home cooking occasions and consumers' focus on flavor and wellness support sustained growth in this category. Within eating soups, declines eased relative to Q3 for Chunky and Campbell's Red and White Condensed. At the same time, premium brands Pacific and Rao's sustained strong double-digit growth, up 14% and 25.3% respectively.

We continue to see an opportunity for these faster-growing brands to bring new relevance to the broader category by meeting consumer demand for premium and better-for-you offerings. In fiscal 2027, we will complement our core with innovation that brings new benefits and occasions to the soup aisle. Launches include Pacific Ramen Broth, Campbell's Condensed Sauces, and a new line of better-for-you clean label Campbell's ready-to-serve soups made from bone broth and high-quality ingredients packed with functional benefits. Specifically, this new line will provide consumers with 20 grams of protein and an average of eight grams of fiber, creating a highly differentiated mainstream offering. Moving on, Rao's finished another fiscal year of strong performance, growing consumption 9.6% for the quarter and 11.3% for the year. Rao's sauce consumption increased 8.9% in Q4 and 9.4% for the year, largely driven by sustained distribution and velocity growth.

The brand benefited from a meaningful increase in marketing as well as a solid contribution from our category-leading innovation in new-to-market creamy red sauces. Household penetration reached 18.9% in fiscal 2026, up 170 basis points for the year and approximately 300 basis points in the two and a half years since the acquisition. Rao's performance outside of sauce, including soup, pasta, and frozen, grew 17.7% for the year, providing a strong complement to our core sauce business. Rao's remains one of our top priorities, with substantial runway for greater household penetration, awareness, and expansion, both within the broader Italian sauce category and adjacent areas of the store. Our confidence is grounded in strong execution and a differentiated proposition built on time, quality ingredients, and exceptional taste. Substantial marketing support reflects the size of the opportunity.

Following a strong double-digit increase in media spending last year, we will increase support once again in fiscal 2027, with a new advertising campaign highlighting both the time we take to slow simmer our sauces and the value of making time for shared meals with friends and loved ones. Now let's turn to snacks. Consumption and organic net sales declined 5.1% and 6% respectively, reflecting improved performance in core Goldfish and sequential progress in Pepperidge Farm Fresh Bakery, while salty snacks remained weak. Fiscal 2026 was clearly a challenging year for the snacks division. However, with strong new leadership, a streamlined operating model, and a clear focus on everyday great execution, we are taking the right steps to turn around performance. Turning to our brands, growing Goldfish is critical to the long-term top and bottom line health of the snacks division. The headline 1.1% consumption decline masked encouraging progress in the core.