Good morning, and welcome to the Campbell Soup Company Third Quarter Fiscal 2025 Earnings Conference Call. Today's conference is being recorded. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to turn the call over to Rebecca Gardy, Chief Investor Relations Officer at Campbell Soup Company. Please go ahead.

Good morning, and welcome to Campbell Soup Company's third quarter fiscal 2025 earnings conference call. I'm Rebecca Gardy, Campbell Soup Company's Chief Investor Relations Officer. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Carrie Anderson, Chief Financial Officer. Today's remarks have been prerecorded. Once we conclude the prepared remarks, we will transition to a live webcast Q&A session. The presentation, a transcript of management's prepared remarks, and today's earnings press release have been posted to the Investor Relations section on our website, campbellscompany.com. Following the conclusion of the Q&A session, a replay of the webcast will be available at the same location, followed by a transcript of the call within 24 hours. Slide two outlines today's agenda. Mick will provide insights into our third quarter performance as well as our in-market performance by division. Please recall that effective first quarter fiscal 2025, we are using Serkana, MULO Plus for in-market data. Carrie will then discuss the financial results of the quarter in more detail and review our guidance for the full fiscal year 2025. On our call today, we will make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to Slide three of our presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our presentation. And now, it's my pleasure to turn it over to Chief Executive Officer, Mick Beekhuizen. Mick?

Thanks, Rebecca. Good morning, everyone. Our third quarter earnings performance exceeded expectations, driven by solid contributions from our meals and beverages business due to strong in-market performance and a benefit from favorable shipment timing, which we expect to normalize in the fourth quarter. The performance of our snacks business was mixed this quarter, reflecting continued category softness and an increasingly competitive environment. That said, we have an attractive snacking portfolio with a clear right to win, and we have been refining our plans to improve our in-market performance. In the current dynamic macro environment, consumers are making thoughtful spending decisions, which is materializing in our categories. Consumers continue to cook at home and focus their spending on products that help them stretch their food budgets, and they're increasingly intentional about their discretionary snack purchases. These behaviors supported growth in our meals and beverages categories and increased headwinds in our snacking categories. Collectively, our sixteen leadership brands' in-market performance was in line with overall category consumption, with meals and beverages consumption ahead of categories and snacks behind, driven by heightened competitive pressures. Given our performance year to date, we are reaffirming our full year fiscal 2025 guidance ranges. That said, we now expect adjusted earnings to be at the low end of the guidance range due to the slower than anticipated recovery in the snacks business. Consistent with what we said during our last earnings call, and given the fluid operating environment, this guidance excludes any impact from the imposition of import tariffs and potential retaliatory actions taken by other countries, as the trade environment remains uncertain. We have separately estimated the fiscal 2025 tariff impact, which Carrie will talk through in a few moments. We remain focused on near-term in-market execution and mitigating tariff impact while investing in our brands,…

Thanks, Mick, and good morning, everyone. As Mick said earlier, our third quarter performance exceeded our expectations. The overperformance in the quarter was primarily attributable to our meals and beverages division, which benefited from the timing of customer inventory orders. Reported net sales increased 4%, driven by the sales contribution from SOVOS brands. Organic net sales, excluding the impact of currency, the PopSugar and Nusa divestitures, and approximately half a quarter of SOVOS, increased 1% as over-delivery in meals and beverages more than offset continued pressures in our snacks business. As a reminder, SOBUS moved into organic growth mid-quarter as we lapped the anniversary date of the acquisition on March 12, 2024. Adjusted EBIT increased 2%, primarily due to the contribution from the acquisition offsetting lower base business performance. Adjusted EBIT margin was down 30 basis points with limited impact from tariffs. Adjusted EPS exceeded our expectations at $0.73, down 3% from the prior year. The impact of the acquisition was accretive to adjusted EPS in the quarter. Turning to Slide nineteen, as mentioned earlier, organic net sales for the third quarter were up 1% due to favorable volume and mix, partially offset by planned lower net price realization. The favorable volume and mix component was attributable to both SOVOS, as well as over-delivery within our base meals and beverages business, which I'll discuss more in a moment. Reported net sales in the quarter of 4% reflected a four-point net contribution from acquisitions and divestitures, which included six points from the Sogos acquisition and negative two points from the PopSciret and Nusa divestitures. On Slide twenty, third quarter adjusted gross profit margin declined 110 basis points, with margin in the base business down 100 basis points and a negative 10 basis point impact related to the acquisition. Base business margins…

Our first question comes from Andrew Lazar from Barclays. Barclays.

Great. Thanks so much. Mick, I wanted to dig in on snacks some more. That's the area where the company is seeing sort of the most pressure. How much of the pressure is overall category versus Campbell Soup Company's in-market execution? I guess what's the company specifically doing to control what it can while also not contributing to any sort of race to the bottom, so to speak, from a category pricing perspective? And I guess I'm trying to get a sense of how we think about the next few quarters in this segment in terms of volume and price.

Yeah. Yeah. Okay. Great. Morning, Andrew. Appreciate the question. And, obviously, a core focus for us. If you look at the quarter Q3 and you put it in perspective versus Q2, you see that actually sequentially the aggregate categories deteriorated, which is one driven by the deteriorating consumer confidence that we've obviously all seen. And then on top of it, the consumer continues to become increasingly intentional, and that is really that focus on value-added for you and indulgence. If you look at our in-market consumption, you saw that in Q2, we were down minus 1%. In Q3, we're down minus 3%. About two-thirds of that is driven by the worsening of the aggregate categories, and about one-third of that is driven by our in-market performance. If you look at the in-market performance during the quarter, there are a couple of areas that actually worked well, and I talked about it in my prepared remarks, which comes back to Pepperidge Farm Bakery and Cookies as well as pretzels, where you saw some innovation really driving our brands and supporting overall consumption. I expect us to continue to focus on innovation, which is important as the consumer, as I described earlier, is really intentional about the dollars that they're spending. And we are really focused with our innovation on meeting those consumer needs. Then on the flip side, if you look at Q3, on the one end, we got the chips categories, and within chips, we are actually our brands are within the right subsegments of the broader chips category. So I feel good from that perspective. That being said, there's some increased competition, and the team is working through making sure that we're successful in this environment with, on the one hand, focus on in-market execution with distribution expansion where…

Thanks for that. A brief follow-up. Just I know it's too early to guide for fiscal 2026. It's still an incredibly dynamic environment. But what are the key inputs for us to consider just as we think to next year? Particularly as it seems there's a need for some continued reinvestment in the snack space, you know, some other food companies have been increasingly talking about the need for greater in-market pressure to sort of nudge the consumer a bit. Thanks so much.

Yeah. Yeah. Okay. Obviously, we're not yet ready to give fiscal 2026 guidance, but when I look at where we're at with regard to the snacks business, as you might recall from last time around, we actually expect that a recovery of the snacking business throughout this year and actually ending the year relatively flat. And then going with that into fiscal 2026. Obviously, where the current trend is and looking into Q4, we still have ways to go on that. And as a result, I expect that recovery to take place now in fiscal 2026. I do think that's coming back to the different tactics that I previously described, probably combined with making sure that we continue to invest in our brands. And one of the things that you see right now is that we are spending from a marketing selling perspective at the lower end of our 9% to 10% range. I do expect that going into next year, we might need to lean into that a little bit more as we need to make sure that we support our brands in the marketplace. The other thing is, Andrew, maybe kind of from a broader incentive comp perspective, our incentive comp is not surprising in light of the overall results that you're seeing. I expect that that will be a little bit of a headwind going into next year.

Got it. Thanks very much.

Our next question comes from Ken Goldman from JPMorgan. Please go ahead. Your line is open.

Hi. Thanks. Good morning. In meals and beverages, you did highlight a few times the uptick in at-home cooking and eating trends, which of course is great to see. I'm just curious, I guess, to what extent you have optimism in this positive trend to continue. You know, how much of it do you think is driven by sort of just lower consumer confidence, or are there other factors you'd highlight? I'm really just trying to get a sense of the sustainability of that tailwind as you see it.

Yep. Yep. Okay. Yep. Thanks, Ken. If I look at the meals and beverages business, meals and beverages are obviously a bright spot within our portfolio, and you see that in the results. We now have six quarters of positive in-market consumption growth within meals and beverages. If you look at the results this time around, they were exacerbated a little bit by the timing of shipments. And we do expect those to reverse in Q4. It will likely be about three points headwinds in MMB for the fourth quarter. Now that being said, from an in-market consumption perspective, we feel pretty good about where we're at. And particularly, if you look at what the team's been able to do over the past, call it, six quarters. When you start looking at the overall portfolio, the portfolio is well-positioned with providing that value, quality, and convenience in an environment where the consumers continue to look more at cooking at home. And you also see the power of our portfolio, why it works, with us being, for instance, both having mainstream as well as premium offerings. A good example, obviously, we often talk about Prego and Rails, but if you look at products in broth, we also have Swanson and Pacific. And particularly during the time where there's disproportionate demand for broth and a little bit of supply pressure, you see actually both brands doing really well in this marketplace. Now it isn't only coming back to those. You also saw some of the condensed activation that we had in the marketplace this time around with mac and cheese, which is really driving to cooking with condensed as an everyday behavior versus just during the holidays. And I think the activation this past quarter was a great proof point of that. I'm obviously a continued big believer in the RAYOS brand. I'm sure we'll talk a little bit more about that. And then other areas within the portfolio that we don't talk as much about, for instance, V8. And if you look at V8 over the past nine quarters, the team has done a great job of actually stabilizing that business, and in certain areas, like, for instance, V8 energy, we've actually seen double-digit growth. So overall, I feel very good about meals and beverages and the meals and beverages portfolio in light of some of the trends that we're seeing with regard to the consumer and the continued focus on cooking at home, in combination with our portfolio and the breadth of our portfolio. Now that being said, I don't expect us per se to repeat the Q3 results as we are coming out of the soup season, obviously. But all set, I feel good about where we're at, and I still believe that there's a lot of opportunity going forward within the portfolio.

Thank you. Very quickly, understanding it's too soon for specifics. You mentioned a couple of factors influencing the bottom line next year. One of them was higher marketing below the gross margin line. In light of some of the competitive activities you mentioned today, whether it's RTS, premium pasta sauce, or snacks, is it also reasonable at this point to anticipate an uptick in your promotional activities as well? Not that these activities, so to speak, won't have an ROI that's beneficial. But just on a gross level, I want to get a better sense or idea of investments ahead. Thank you.

Yeah. Yep. Good question. And it's something that we're obviously very focused on. If anything, I actually, whereas if I looked at about twelve months ago, we were very much continuing to increase the overall promotional activity, and it was not just us. You saw it more broadly in the categories. And I'm starting to see that that is stabilizing, and it's much more about not so much about adding promotional activity, and it's much more to my earlier point, making sure that the promotional activity that's in the marketplace is in the marketplace when it really matters. Like, for instance, during key drive periods. On top of it, and what do I mean by key drive periods? For instance, during the Easter time period. Important for you know, to broad, and that is, you know, a good moment where the brands really matter. You want to make sure that you're out there with the proper price points. I do think the other piece, particularly when I think about snacking, and on a day-to-day basis, is making sure that we have the right starting price point in the marketplace. And that comes back to that price pack architecture, and when you heard me talk a little bit about Goldfish, for instance, smaller pack size, but also across broader salty some of these multipack initiatives, and that's actually really working. So again, I am not looking at much as increased promotional activity from a dollar's perspective. It's much more making sure that we allocate the promotional dollars properly. And on top of it, we continue to evolve around PPA.

Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.

Hey, Mick, Carrie. Good morning. Thanks for the question. I maybe want to ask a slight variation on the snacks question, and understanding we've kind of already addressed a bit of it. But I mean, your results in the quarter were more or less in line with how the category has been performing. And I think the broader question is probably just that, you know, the category continues to be such a drag, and you know, as we get into what should be a pretty peak demand season over the summer and even just over the next twelve months, I think it would be maybe more helpful to just understand what you think needs to happen from a category perspective in snacks to actually be able to see some improvement. So we have all this discussion about, you know, race to the bottom on pricing or lack thereof. Just, you know, you're using comments in your prepared remarks like, you know, are consumers deeming that it's worth it to actually indulge in snacking? So just like, maybe help us from a much higher level understand what needs to happen from a category perspective for that demand profile and consumers to actually deem the category to be worth it over the next twelve months.

Yeah. Oh, okay. Let me try to frame it up as follows. So first, Peter, when I look at the overall category dynamics and you look at it sequential quality deterioration that I described earlier, I think one of the key components of that is the deteriorating consumer confidence. And you see that disproportionately play out in categories like snacks because of the discretionary nature. So that is one thing that if there's one area that I could point to that, that's one area that I think would actually be helpful is improving overall consumer confidence. Then I think the other aspect of it is back to your specific question around some of the quote-unquote worth it. Worth it not being as much of the dollars, but much more about, like, the experience. And I think that comes really back to that continued focus on intentionality that we have seen within the snacking categories with a broader focus on, on the one hand, value, better for you, and then indulgence or flavors or experience, if you want to call it, and the last three all within that call it one bucket. And what do I think is important within that is making sure that we continue to meet the consumers' needs. And you see, for instance, with a good example of that is in the innovation of Pepperidge Farm cookies with the launch of the Milano white chocolate and the resulting lift that we have had, of course, on the one hand, around that particular innovation, but also then the broader Milano brand. So I just think it's coming back to making sure that we continue to evolve our brands and meet those consumer needs. And if anything, actually, the broader, you know, CPG industry has actually done a real good job over time to continue to meet those consumer needs. And that's what we continue to focus on and work through as well.

Okay. Thanks for that, Mick. No. That's helpful context. And, Carrie, if I can ask a clarification comment, the three to five cents of tariff-related impact that you outlined, that's not included in the guidance but presumably hits the Q4 numbers. Should we be viewing that as a full quarter impact? Presumably, you would have carried some inventory maybe into the quarter. So I just want to understand if that three to five cents is truly a three-month impact that if things don't change, we could kind of run rate forward or if there's some nuance around inventory. Thanks very much.

Thanks, Peter. I would say when I think about the three to five cents, tariffs are being phased in, right? So I would say three main areas of impact that's in that three to five cents. First, currently, we're seeing an impact from the Canada wave one retaliatory tariffs. Those went into effect at the beginning of March. And they remain in place. And they relate to our Canadian exports of a portion of our soup business that we ship to Canada. You have other tariffs that are starting to phase in in Q4, if your section 232 tariffs that impact tin plate and aluminum, where, obviously, we source for our soup and our beverage cans. And then you also have the phase-in of reciprocal trade actions, which does include the impact on our RAYOS portfolio, which is made in Italy, both finished goods as well as raw materials coming from Italy. So to your point, we are that's a net impact, net of mitigation. And as I mentioned in my prepared remarks, we're working to minimize that overall impact, including strategic inventory management as you referenced earlier. And then working closely with our suppliers here. I wouldn't be right now, taking that three to five cents and annualizing it. I wouldn't go there at this point. I think it's a bit too early to say what the fiscal 2026 impact may be, mainly because of the rapidly evolving trade landscape. I would say also, you know, as we mentioned, those tariff impacts are being phased in, and we've had more limited ability to minimize that gross impact. So the range provided doesn't reflect all of the levers that we are working towards, which some take more time to affect. So we just be cautious to annualize that Q4 impact at this time. And, obviously, working to minimize the overall impact as much as we can, that will inform us ultimately for our fiscal 2026 view.

Great. Thank you.

Our next question comes from Megan Clap from Morgan Stanley. Please go ahead. Your line is open.

Hey, good morning. Thanks so much for taking our question. I wanted to just ask on RAYOS, and apologies if I missed it, but I don't think I saw you reiterate the expectation for RAYO's growth to be slightly above 10% this year. So could you just maybe give us an update on how you're thinking about RAYO's growth for this year?

Yeah. Morning, Megan. So let me talk about RAYOS. So one and some of it is also in the prepared remarks. I continue to be very bullish around RAYOS, and I'm very excited to have RAYOS in the portfolio, which is playing also right into or supporting the overall meals and beverage divisional growth, particularly in light of some of the consumer trends we just talked about. Now if you look at the and maybe I'll step back for a second. It is or let me first answer your question. It's like, we expect still, you know, I probably with where I sit right now, expect high single digits for fiscal 2025. If I look at the year to date, in-market consumption is about 10%. Two percent this past quarter. That was obviously in line with the overall category, but below our expectations. And as I mentioned in the prepared remarks, we have a pretty good handle on the individual drivers. And the team is all over in-market execution. And as a result, I have a lot of confidence in the continued trajectory or growth trajectory of the brand. Now if you look at the L4, so the last four weeks, in-market consumption, you actually see some of that already come to provision. It's obviously always tricky to look just at, like, L4 periods, but you actually do see that sauce is up 9%, and the overall brand is up about 11%. So feel good where we are with RAYOS. And you might have a little bit of timing here and there, but the team is continuing to expand the brand, and we're glad to have RAYOS in our portfolio.

Okay. Great. That's helpful. Thanks. And, Carrie, maybe a follow-up for you just on the margin profile in the fourth quarter and the expectations there. Clearly, you're expecting EBIT and EPS now at the low end on a slower snacks recovery. Previously, you talked about snacks margins recovering sequentially in Q3 and Q4. That did occur nicely. Are there some incremental actions that you're taking that might mean that's not the case anymore?

Yeah. I think we were pleased with our Q3 sequential improvement, knowing that we had some discrete items that impacted us in Q2. Saw that rebound nicely in that 300 basis point sequential improvement into Q3. I would say as we look at first half versus second half, still expecting that sequential improvement from first half to second half. However, given the slower than anticipated recovery of our snacks business, that obviously took us to that lower end of our earnings guidance. We're now expecting snacks margins to be at 13% for the full year. And what we're still focused on is all of those snacks margin building blocks, including our broader network initiatives that we've been working on, including DSD warehouse and route optimization, as well as those mix improvements in our as we grow our leadership brands. So I think it's but it's also important that we remain competitive in the marketplace and to continue to support our brands for the long-term value. So we're really trying to make sure we balance both.

Okay. Great. Thank you.

Our last question comes from Jim Solera from Stephens. Please go ahead. Your line is open.

Hey, guys. Thanks for taking our question. I wanted to dig in, Mick, on this conversation around, you know, the splurge-worthy portion of your portfolio and really trying to categorize how much of meals and beverage and how much of snacks that you kind of put under that broader better-for-you umbrella? And is that, you know, on a go-forward basis, is that really going to be kind of the driver for growth? And do we need to see the innovation focused around there and maybe a revamp of some of the overall snack brands to target that consumer? Or is it really just get consumer confidence back, and that's kind of the first leg forward?

Ladies and gentlemen, this is the operator. We're experiencing technical difficulties. Please stay on the line one moment. The call will resume shortly. We've reconnected the host line.

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Yes. Loud and clear.

Okay. I'll leave you my question, and then we can reask it.

Sorry about that, Jim. We lost power for a second here.

Well, no problem. Basically, the core of the question was what percentage of your portfolio do you kind of view as being under this, you know, better-for-you, splurge-worthy umbrella? And if we think about, you know, what drives the recovery on a go-forward basis, is it really, you know, pivoting the portfolio to have a broader focus there? Having innovation focus there? Is it, you know, we need consumer confidence to rebound, and then the innovation and the better-for-you expand is kind of secondary to that?

Yeah. Yep. So when I look at where we're at right now and with if you look at the sequential performance that I described and also the sequential performance of the categories, I mentioned, the deterioration of consumer confidence definitely did have an impact, right, on the particularly with the discretionary nature of the categories. So an improvement in overall consumer confidence would support the categories as a whole. That being said, we obviously got to make sure that we stay focused on the pieces that we can control, and we should, and we are going to continue to evolve with the environment. Hence, you hear me also talk a little bit more about some of these PPA initiatives and the strategic promotional activity. Now that being said, I think for the long-term health of the brands and the broader, particularly snacking portfolio, I think that innovation around intelligence and experiences is important, and you've seen that with, for instance, the Milano example that I gave previously. I don't think it's as much of a complete reset of the portfolio. I don't want you to take that away. I think we have a lot of things that are actually working well, and if you look, for instance, at our pretzel's portfolio, I feel very good about, on the one hand, having Snyder of Hanover, which is much more focused on the pretzel traditionalist, and then the Snack Factory portfolio, which is really in and around that reimagining of pretzels, and they work really nicely together as you saw this past quarter as well. Then on chips, we're actually already in the better-for-you broader segment that is actually growing, whether it's just through Kettle or Cape or even late July. So feel good about that. And then on the cracker side, I think we have a unique proposition more broadly with Goldfish, and I'm very confident that the team with all the things that are working through it is going to change the trajectory over time. So that is probably hopefully giving you a little bit of a sense. It is much more surgical than it is a complete repositioning. And then finally, if I look at the meals and beverage portfolio, I actually think there have a very good collection of brands with premium mainstream, as we talked about in the past, as well as the way that they are positioned that I think they're meeting consumer needs really well, and we see that in the results this past quarter.

Great. And if I could just sneak in one quick one for Carrie. Carrie, you've mentioned, you know, some of the impact on Rails from the import tariffs. Are you guys able to shift more production to Alma, or do you guys have any sense of what the capacity is there, and, you know, if that has a meaningful impact on the unit economics if you can, you know, just have more stuff produced in Alma and just import, I would assume, the raw materials versus the finished product?

Yeah. I mean, I would say just generally, I think, answer it with all of the steps. We're going to look at all of the levers that we have to mitigate tariffs. So whether it's strategic inventory management, which we're obviously leaning on that hard this quarter here, working in close partnership with our suppliers. And that would include our partnership with La Regina, looking at all of what they can bring to help us look at the overall minimizing the overall impact. And then also looking at product cost optimization. So I think all of those levers will come into play as we manage that relationship and manage the overall impact for the RAYOS brand.

We are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.