Campbell's Reports Second Quarter Fiscal 2025 Results

• Net Sales increased 9% to $2.7 billion and decreased 2% on an organic basis.
• Earnings Before Interest and Taxes (EBIT) were $327 million. Adjusted EBIT increased 2% to $372 million including the impact of the Sovos Brands, Inc. (Sovos Brands) acquisition.
• Earnings Per Share (EPS) were $0.58. Adjusted EPS decreased 8% to $0.74.
• Fiscal year-to-date cash flow from operations was $737 million; returned $283 million to shareholders through dividends and share repurchases.
• Updates full-year fiscal 2025 guidance.

The Campbell's Company (NASDAQ:CPB) today reported results for its second quarter fiscal 2025 ended January 26, 2025. Unless otherwise stated, all comparisons are to the same period of fiscal 2024.

CEO Comments

Mick Beekhuizen, Campbell's President and CEO, said "Second quarter earnings were in line with our expectations despite the dynamic operating environment. Given the softness in some of our snacking categories, the anticipated sequential top-line improvement did not materialize during the quarter, and we now have a more muted second half expectation. As a result, we are updating our full-year guidance. We remain confident in our ability to successfully navigate the current consumer landscape with our portfolio of advantaged leadership brands, talented team and track record of execution. We have a strong foundation to deliver long-term sustainable, profitable growth and shareholder returns."

Items Impacting Comparability

The table below presents a summary of items impacting comparability in each period. A detailed reconciliation of the reported (GAAP) financial information to the adjusted information is included at the end of this news release.

Second Quarter Results

Net sales in the quarter increased 9% to $2.7 billion driven by the benefit from the Sovos Brands acquisition (also referred to as the acquisition). Organic net sales decreased 2% to $2.4 billion driven by net price realization with flat volume/mix.

Gross profit increased to $819 million from $776 million. Gross profit margin was 30.5% compared to 31.6% and adjusted gross profit increased to $815 million from $772 million. Adjusted gross profit margin decreased 100 basis points to 30.4% mainly driven by cost inflation and other supply chain costs, unfavorable net price realization and the impact of the acquisition, partially offset by supply chain productivity improvements and the benefits from cost savings initiatives.

Marketing and selling expenses, which represented approximately 10% of net sales, increased 18% to $256 million. Adjusted marketing and selling expenses increased 18% to $255 million, primarily driven by the impact of the acquisition and higher advertising and consumer promotion expense in the base business.

Administrative expenses decreased 13% to $165 million. Adjusted administrative expenses decreased 2% to $156 million driven by the benefit from cost savings initiatives, partially offset by the impact of the acquisition.

Other expenses were $41 million compared to $26 million. Adjusted other expenses were $8 million compared to $9 million.

EBIT increased to $327 million from $317 million. Adjusted EBIT increased 2% to $372 million primarily due to the contribution of the acquisition, partially offset by lower adjusted EBIT in the base business. The base business performance was primarily driven by lower adjusted gross profit and higher adjusted marketing and selling expenses partially offset by lower adjusted administrative expenses.

Net interest expense was $80 million compared to $46 million, primarily due to an increase in interest expense related to higher levels of debt. The effective tax rate was 30.0% compared to 25.1% and the adjusted effective tax rate was 24.0% compared to 24.5%.

EPS decreased to $0.58 per share compared to $0.68 per share. Adjusted EPS decreased 8% to $0.74 per share primarily reflecting higher net interest expense, partially offset by the increase in adjusted EBIT. The acquisition was slightly accretive to adjusted earnings per share.

Cash Flow and Shareholder Return

Cash flow from operations for the six months ended January 26, 2025 was $737 million compared to $684 million primarily due to higher cash earnings and changes in working capital. Capital expenditures year-to-date were $211 million compared to $263 million. In line with Campbell's commitment to return value to its shareholders, the company has paid $227 million of cash dividends and repurchased common stock of approximately $56 million year-to-date. As of the end of the second quarter, the company had approximately $205 million remaining under its anti-dilutive share repurchase program in addition to approximately $301 million remaining under its September 2021 strategic share repurchase program.

Cost Savings Program

Through the second quarter, Campbell's has delivered approximately $65 million of savings under the $250 million cost savings program announced in September 2024.

Updated Full-Year Fiscal 2025 Guidance:

Based on year-to-date performance and the ongoing dynamic consumer environment, Campbell's is updating its full-year fiscal 2025 guidance. In addition, the company's updated guidance reflects the sale of the noosa yoghurt business, which was divested on February 24, 2025, and is estimated to have an impact of approximately 1 percentage point on net sales and an estimated $0.01 dilutive impact to adjusted EPS.

The company is updating its full-year fiscal 2025 financial outlook as follows:

• Net sales growth of approximately 6% to 8%.
• Organic net sales expected to be in the range of down 2% to flat.
  • Organic net sales exclude acquisitions, divestitures, currency and the 53rd week. As a reminder, Sovos Brands was acquired on March 12, 2024, and therefore moves into organic net sales during the third quarter of fiscal 2025.
• Adjusted EBIT growth of 3% to 5%.
  • Reflecting strong first half progress on cost savings initiatives, expected full-year 2025 cost savings are increased to $120 million.
• Adjusted EPS of $2.95 to $3.05, or approximately down 4% to down 1% versus prior year adjusted EPS of $3.08.
  • Net interest expense expected to be $325 to $330 million reflecting the benefit of the after-tax proceeds from the noosa divestiture used to reduce debt.

The company's guidance does not reflect any impact from potential import tariffs by the U.S. government and potential retaliatory actions taken by other countries, given the tariff and trade environments are uncertain and rapidly evolving.

Consistent with prior guidance, the benefit of the 53rd week is included in the company's fiscal 2025 guidance (with the exception of organic net sales which exclude the 53rd week) and is estimated to be worth approximately 2 points of growth to reported net sales and adjusted EBIT, along with approximately $0.07 of adjusted EPS.

Other additional guidance assumptions can be found in the accompanying investor presentation available at https://investor.thecampbellscompany.com/events-presentations.

Segment Operating Review

An analysis of net sales and operating earnings by reportable segment follows:

Meals & Beverages

Net sales in the quarter increased 21% driven by the benefit of the acquisition. Excluding the acquisition, organic net sales decreased 1% driven by declines in SpaghettiOs and U.S. soup, partially offset by gains in foodservice. Lower net price realization of 2% was partially offset by favorable volume/mix of 1%. Sales of U.S. soup decreased primarily due to decreases in ready-to-serve soups and condensed soups, partially offset by an increase in broth.

Operating earnings in the quarter increased 18%. The increase was primarily due to the benefit of the acquisition, partially offset by higher marketing and selling expenses.

Snacks

Net sales in the quarter decreased 6%. Excluding the impact of the Pop Secret divestiture, organic net sales decreased 3% driven by declines in third-party partner and contract brands, Goldfish crackers and Snyder's of Hanover pretzels. Sales were impacted by volume/mix declines of 2% and lower net price realization of 1%.

Operating earnings in the quarter decreased 29% primarily due to lower gross profit and higher marketing and selling expenses. Gross profit margin decreased primarily due to the impact of cost inflation and other supply chain costs, lower net price realization and unfavorable volume/mix, partially offset by supply chain productivity improvements and the benefits from cost savings initiatives.

Corporate

Corporate expense was $73 million in the quarter compared to $89 million. The decrease was primarily due to lower costs associated with cost savings and optimization initiatives, costs associated with the acquisition in the prior year, lower administrative expenses and higher unrealized mark-to-market gains on outstanding undesignated commodity hedges, partially offset by non-cash impairment charges.

Conference Call and Webcast

Campbell's will host a conference call to discuss these results on Wednesday, March 5, 2025, at 8:00 a.m. Eastern Time. Participants calling from the U.S. & Canada may dial in using the toll-free phone number (800) 715-9871. Participants calling from outside the U.S. & Canada may dial in using phone number +1 (646) 307-1963. The conference access code is 3292637. In addition to dial-in, access to a live listen-only audio webcast and accompanying slide presentation, as well as a replay of the webcast, will be available at https://investor.thecampbellscompany.com/events-presentations.

Reportable Segments

The Campbell's Company earnings results are reported as follows:

Meals & Beverages, which consists of our soup, simple meals and beverages products in retail and foodservice in the U.S. and Canada. The segment includes the following products: Campbell's condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; SpaghettiOs pasta; Campbell's gravies, beans and dinner sauces; Swanson canned poultry; V8 juices and beverages; Campbell's tomato juice; and as of March 12, 2024, Rao's pasta sauces, dry pasta, frozen entrées, frozen pizza and soups; Michael Angelo's frozen entrées and pasta sauces; and noosa yogurts. The noosa yoghurt business was sold on February 24, 2025. The segment also includes snacking products in foodservice and Canada; and

Snacks, which consists of Pepperidge Farm cookies, crackers, fresh bakery and frozen products, including Goldfish crackers, Snyder's of Hanover pretzels, Lance sandwich crackers, Cape Cod potato chips, Kettle Brand potato chips, Late July snacks, Snack Factory pretzel crisps, and other snacking products in retail in the U.S. The segment also includes the snacking and meals and beverages retail business in Latin America. The segment also included the results of our Pop Secret popcorn business, which was sold on August 26, 2024.

We refer to the following products as our "leadership brands": Campbell's condensed and ready-to-serve soups; Chunky soups; Swanson broth, stocks and canned poultry; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; V8 juices and beverages; Rao's pasta sauces, dry pasta, frozen entrées, frozen pizza and soups; Pepperidge Farm cookies, crackers and fresh bakery; Goldfish crackers; Snyder's of Hanover pretzels; Lance sandwich crackers; Cape Cod potato chips; Kettle Brand potato chips; Late July snacks; and Snack Factory pretzel crisps.

About The Campbell's Company

For 155 years, The Campbell's Company (NASDAQ:CPB) has been connecting people through food they love. Headquartered in Camden, N.J. since 1869, generations of consumers have trusted us to provide delicious and affordable food and beverages. Today, the company is a North American focused brand powerhouse, generating fiscal 2024 net sales of $9.6 billion across two divisions: Meals & Beverages and Snacks. Our portfolio of 16 leadership brands includes: Campbell's, Cape Cod, Chunky, Goldfish, Kettle Brand, Lance, Late July, Pace, Pacific Foods, Pepperidge Farm, Prego, Rao's, Snack Factory pretzel crisps, Snyder's of Hanover, Swanson and V8. For more information, visit www.thecampbellscompany.com.

Forward-Looking Statements

This release contains "forward-looking statements" that reflect the company's current expectations about the impact of its future plans and performance on the company's business or financial results. These forward-looking statements, including any statements made regarding sales, EBIT and EPS guidance, rely on a number of assumptions and estimates that could be inaccurate, and which are subject to risks and uncertainties. The factors that could cause the company's actual results to vary materially from those anticipated or expressed in any forward-looking statement include: the risks associated with imposed and threatened tariffs by the U.S. and reciprocal tariffs by its trading partners; the risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation, including those related to tariffs; disruptions in or inefficiencies to the company's supply chain and/or operations, including reliance on key contract manufacturer and supplier relationships; declines or volatility in financial markets, deteriorating economic conditions and other external factors, including the impact and application of new or changes to existing governmental laws, regulations, and policies; the company's ability to execute on and realize the expected benefits from its strategy, including growing sales in snacks and growing/maintaining its market share position in soup; the impact of strong competitive responses to the company's efforts to leverage brand power with product innovation, promotional programs and new advertising; the risks associated with trade and consumer acceptance of product improvements, shelving initiatives, new products and pricing and promotional strategies; changes in consumer demand for the company's products and favorable perception of the company's brands; the risk that the cost savings and any other synergies from the Sovos Brands, Inc. ("Sovos Brands") transaction may not be fully realized or may take longer or cost more to be realized than expected, including that the Sovos Brands transaction may not be accretive within the expected timeframe or the extent anticipated; the ability to realize projected cost savings and benefits from cost savings initiatives and the integration of recent acquisitions; the risks related to the effectiveness of the company's hedging activities and the company's ability to respond to volatility in commodity prices; the company's ability to manage changes to its organizational structure and/or business processes, including selling, distribution, manufacturing and information management systems or processes; changing inventory management practices by certain of the company's key customers; a changing customer landscape, with value and e-commerce retailers expanding their market presence, while certain of the company's key customers maintain significance to the company's business; product quality and safety issues, including recalls and product liabilities; the possible disruption to the independent contractor distribution models used by certain of the company's businesses, including as a result of litigation or regulatory actions affecting their independent contractor classification; the uncertainties of litigation and regulatory actions against the company; a disruption, failure or security breach of the company's or the company's vendors' information technology systems, including ransomware attacks; impairment to goodwill or other intangible assets; the company's ability to protect its intellectual property rights; increased liabilities and costs related to the company's defined benefit pension plans; the company's ability to attract and retain key talent; goals and initiatives related to, and the impacts of, climate change, including from weather-related events; the costs, disruption and diversion of management's attention associated with activist investors; the company's indebtedness and ability to pay such indebtedness; unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, geopolitical conflicts, extreme weather conditions, natural disasters, pandemics or other outbreaks of disease or other calamities; and other factors described in the company's most recent Form 10-K and subsequent Securities and Exchange Commission filings. This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company's outlook. The company disclaims any obligation or intent to update forward-looking statements in order to reflect new information, events or circumstances after the date of this release.

Reconciliation of GAAP to Non-GAAP Financial Measures

Second Quarter Ended January 26, 2025

The Campbell's Company (the "company") uses certain non-GAAP financial measures as defined by the Securities and Exchange Commission in certain communications. These non-GAAP financial measures are measures of performance not defined by accounting principles generally accepted in the United States and should be considered in addition to, not in lieu of, GAAP reported measures. Management believes that also presenting certain non-GAAP financial measures provides additional information to facilitate comparison of the company's historical operating results and trends in its underlying operating results, and provides transparency on how the company evaluates its business. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the company's performance. Management considers quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of the company's performance and trends in its underlying operating results. The adjustments on earnings may include but are not limited to items such as: unusual or non-recurring gains or charges; costs associated with cost savings and optimization initiatives; actuarial gains or losses on pension and postretirement plans; unrealized mark-to-market gains or losses on outstanding undesignated commodity hedges; gains or losses on the extinguishment of debt; gains or losses on divestitures; costs associated with acquisitions; impairment charges or accelerated amortization; certain litigation expenses or recoveries; and costs or recoveries related to a cybersecurity incident. Depending upon facts or circumstances, management may change these adjustments. When these adjustments change, the company will provide updated definitions of its non-GAAP financial measures. When items no longer impact the company's current or future presentation of non-GAAP operating results, the company will remove these items from its non-GAAP definitions.

Organic Net Sales

Organic net sales are net sales excluding the impact of currency, acquisitions, divestitures and the 53rd week in fiscal 2025. Management believes that excluding these items, which are not part of the ongoing business, improves the comparability of year-to-year results. A reconciliation of net sales as reported to organic net sales follows.

Items Impacting Earnings

Adjusted Net earnings are net earnings excluding the impact of costs associated with cost savings and optimization initiatives, unrealized mark-to-market gains or losses on outstanding undesignated commodity hedges, accelerated amortization, impairment charges, gains or losses on divestitures, certain litigation expenses or recoveries, costs or recoveries related to a cybersecurity incident, actuarial gains or losses on pension and postretirement plans and costs associated with acquisitions. Management believes that financial information excluding certain items that are not considered to reflect the ongoing operating results, such as those listed below, improves the comparability of year-to-year results. Consequently, management believes that investors may be able to better understand its results excluding these items.

The following items impacted earnings:

The following tables reconcile financial information, presented in accordance with GAAP, to financial information excluding certain items: