Good morning and welcome to Campbell Soup Company's fourth 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. If you would like to ask a question, please press star one on your telephone keypad. I would now like to turn the call over to Rebecca Gardy, Chief Investor Relations Officer at Campbell Soup Company.

Good morning and welcome to the Campbell Soup Company fourth quarter fiscal 2025 earnings conference call. I'm Rebecca Gardy, Campbell'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 pre-recorded. Once we conclude the prepared remarks, we will transition to a live webcast Q&A. The presentation, a transcript of management's prepared remarks, and today's earnings press release have been posted to the Investor Relations section of our website, thecampbellscompany.com. Following the conclusion of the Q&A, a replay of the webcast will be available at the same location, followed by a transcript of the entire call, including the Q&A, within 24 hours. Slide two outlines today's agenda. Mick will provide insights into our fourth quarter performance, as well as our in-market performance by division. Carrie will then discuss the financial results of the quarter in more detail and review our guidance for the full fiscal year 2026. Please note that all references to in-market performance refer to a 13-week period for the fourth quarter and a 52-week period for the full year for comparative purposes. I would also point out that beginning in fiscal 2026, we will change how we report share of chips for our Cape Cod, Kettle Brand, and Late July brands. Cape Cod and Kettle Brand will be compared against the total potato chip category, replacing the current comparison to the kettle cooked potato chip category. Late July will be compared against the total tortilla chip category, replacing the current comparison to the natural and organic tortilla chip category. We believe these changes will better reflect the in-market performance for our brands and will highlight their favorable positioning within the chips category. In addition, beginning in fiscal 2026, the snacking and meals and beverages retail business in Latin America is managed under our meals and beverages segment. 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. Now it is my pleasure to turn it over to our Chief Executive Officer, Mick Beekhuizen. Mick?

Thanks, Rebecca. Good morning, everyone, and thank you for joining our fourth quarter fiscal 2025 earnings call. Our fourth quarter earnings performance was slightly ahead of our expectations as we continued to successfully navigate the dynamic operating environment. Meals and beverages in-market consumption continued to outpace the category. Our snacks business saw sequential improvement in net sales and in-market consumption, along with better sequential share performance across several key brands. Collectively, the in-market performance of our 16 leadership brands was in line with overall category performance. As we have seen over the last few quarters, consumers remain cautious and intentional with their spending. They continue to seek value in a variety of ways, such as cooking at home, a behavior that fuels growth in our meals and beverages business. Consumers are also increasingly seeking flavor-forward offerings, premium experiences, and health and wellness benefits. These trends are the backdrop for exciting innovations and incremental brand support across both divisions. Finally, as outlined in our press release, we issued fiscal 2026 guidance reflecting the anticipated tariff impact, while continuing our commitment to prioritize innovation and increase marketing investments to support our amazing portfolio of brands and deliver increased cost savings. Carrie will provide more details on our guidance in a moment. Now let's turn to the key highlights from our fourth quarter and full year results. In-market consumption during the quarter declined 1%, while organic net sales declined 3%, with the bulk of the difference being driven by the favorable shipment timing in the third quarter, reversing in Q4. As a reminder, the organic net sales result excludes a seven-point positive impact from the additional week in the quarter and a three-point negative impact related to our portfolio optimization strategy, specifically the Pop Secret and Noosa divestitures. Overall results for the quarter…

Thanks, Mick. Turning to our Q4 results, as Mick said earlier, our fourth quarter performance was slightly ahead of our expectations. As a reminder, our Q4 and full-year results include the contribution of an additional week in fiscal 2025. Q4 reported net sales increased 1% with the contribution from the additional week. Organic net sales, excluding the impact of the additional week, currency, and the Pop Secret and Noosa divestitures, decreased 3%, which was driven by the expected reversal of favorable third quarter shipment timing in meals and beverages, and continued pressure on snacking categories. As a reminder, the Sovos Brands acquisition was fully included in organic growth in the fourth quarter following the anniversary date of the acquisition in Q3. Adjusted EBIT decreased 2%, including the benefit of the additional week, with adjusted EBIT margin down 50 basis points, including a 30 basis point impact from tariffs. Adjusted EPS of $0.62 was lower by 2%, with the additional week contributing $0.06, partially offset by an approximate $0.02 headwind from tariffs and an approximate $0.02 impact from divestitures in the quarter. Turning to slide 19, for the full year, net sales increased 6%, primarily driven by the contribution of the Sovos Brands acquisition. Organic net sales decreased 1% compared to the prior year, driven by modestly lower volume and mix and net price investment. Full-year adjusted EBIT increased 2%, driven by the contribution of the acquisition and the additional week in fiscal 2025, partially offset by lower adjusted EBIT in the remainder of the business. Adjusted EPS decreased 4%, driven by increased interest expense. The modest Q4 headwind from tariffs and the full-year impact of divestitures offset the benefit of the additional week in our full-year adjusted EPS results. The Sovos Brands acquisition performed well in fiscal 2025, with Rao's…

Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw any questions, please press star one again. Thank you. Our first question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.

Hey, good morning, guys. Thanks for taking the question. Mick, I was hoping you could just maybe dive a little bit deeper into some of the puts and takes on the outlook for fiscal 2026, particularly just factors that may drive you kind of towards the upper or lower ends of the ranges that you've given, and any other additional detail on phasing maybe from Carrie as we think about, you know, first quarter and then first half or second half. Thanks very much.

Yeah, great. Morning, Peter. Let me quickly dive into guidance and then Carrie, I'll pass it over to you if you can talk a little bit more about the phasing piece. As I described during the prepared remarks, kind of stepping back for a minute, first of all, of course, you know, we're very focused on the overall consumer environment and how the consumer continues to evolve. We believe that increased brand support and also innovation is going to be critical. At the same time, as we allude to the dynamic operating environment, that really comes back to a necessity for us to step up productivity and cost savings across the organization. If you look specifically at our guidance and our guidance ranges, maybe first on the top line, a range from -1% to +1% organically, really focusing on the midpoint. As I alluded to, continued Meals & Beverages momentum that's really coming back to we have wind in our back with regard to the overall cooking trends. Our product and our portfolio are very well positioned to continue to benefit from the trend. At the same time, you also saw the Rao's performance in Q4, and we continue to lean into that brand. I'm a very big believer of the continued growth within Rao's. On the snacks side, we made sequentially some in-market progress. That being said, we are still down year over year in Q4. If you go into the fiscal year and look at our overall guidance, we are assuming that we're starting to stabilize in the second half. You basically are assuming that recovery of the snacking business throughout the year. That's partially predicated on this incremental brand support as well as the innovation. From an overall pricing perspective, we are assuming pricing to be a…

Thanks, Mick. As you think about the organic net sales phasing, I would ask you to consider looking at what we're lapping in fiscal 2025 as you think about the quarters. As I look at first half and second half, generally, I would say favorable trends when you look at it from a half perspective, first half year over year and second half year over year. For Q1 specifically, I would say sequential better trends than Q4. Year over year growth trends are sequentially better than Q4. There's still some pressure in Q1, fiscal 2026, especially considering, again, the phasing of snacks recovery and some M&B lumpiness. That M&B lumpiness is really attributable to promotion timing, some shifts from Q1 into Q2, and then some weather benefits that we're lapping from Q1 of fiscal 2025. Hopefully that helps you from an organic net sales perspective. From the margin perspective, as you think about your quarterly phasing, Mick talked about that 150 basis point margin pressure at the midpoint. I would say we're going to see similar margin pressure throughout the year, including Q1. I would say that should help you as you think through your quarterly phasing, Peter.

Great. Thanks very much, guys. Very helpful. I'll pass it on.

Our next question comes from Tom Palmer from JPMorgan. Please go ahead. The line is open.

Good morning, and thanks for the question. I wanted to just ask on the snacks side, the outlook discusses the expected stabilization in the second half of the year. I wondered if you might talk a bit about what you're seeing today across categories and how you think about the path to stabilization this year and maybe to what extent you kind of look at it as being more of a category driver versus more company-specific initiatives. In your answer to Peter, you did note a couple of company-specific areas like innovation and marketing to help. Thank you.

Okay, great. Let me quickly give you a little bit of context then. First, let me step back with regard to overall snacking, and then I'll come back to some of the dynamics within our portfolio. When I look at overall snacking, first of all, snacking occasions are here and they're here to stay. If anything, they're stable to slightly growing. As we described in our earnings and in our deck, you saw that we're very focused on the fact that snacking behaviors are evolving. As a result, we laid out the framework with a focus on premiumization, flavor exploration, as well as health and wellness in order to make sure that we continue to connect and evolve with the consumer. That's on the one end with regard to brand activation because we actually believe our portfolio plays really well within these different trends and across this overall framework. On top of it, it informs us how and where to innovate. For instance, the Milano White Chocolate success is a great example of that. That's really coming back to flavor exploration. You see that when you really get the innovation right, it really works. You see that in the Milano numbers with 27% growth. Why do I feel so confident around our overall portfolio of brands? It's actually because if you look across our brands, you see that household penetration is actually relatively stable. If anything, maybe in certain instances over the past 12 months, slightly increasing. The relevance of our brands is really there. We need to make sure that we continue to focus, to the earlier point, on activation as well as innovation so we continue to connect with the consumer. How do we think, how do I think we're going to win in the overall marketplace? It's really focused on core key areas, which is coming back to, on the one hand, that increased brand support that we talked about earlier, the product innovation. We need to continue to evolve our price packs. We talked a little bit about that last time around, for instance, with Goldfish, making sure that multi-packs work and that we have the right pack sizes of multi-packs, particularly during the back-to-school time period. It's one of the things that our teams are very focused on executing. That's really important. Finally, we still have a lot of runway with regard to both distribution as well as in-market execution, and the team is all over it because that's obviously critical. That comes back to kind of the bigger picture of snacking and how our portfolio fits within that. Generally, I'm a very strong believer of us being able to start to get our snacking portfolio back to sustainable, profitable growth. You're seeing already some of the sequential progress, but we still have some work to do going into fiscal 2026. Hence, we are talking about stabilization throughout the year because I expect that really to manifest itself in the second half.

Okay, thanks for the detail there. Carrie, you noted the 150 basis points of operating margin pressure at the midpoint of the outlook. Just when thinking between the two segments, just any help on kind of where we might see that impact greater. I mean, I would assume meals and beverages, given some of the tariff commentary, but maybe you could help quantify. Thank you.

Yeah, that is the correct assumption. When you think about the tariffs, about 60% of those gross tariffs are coming from Section 232 steel and aluminum tariffs, and that's going to really hit M&B. You've also got the IPEA tariffs that will also impact Rao's imports as well. The majority of that headwind is going to be sitting in meals and beverages.

Okay, thank you.

Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open.

Hi, thank you. Two questions. One is, Mick, you know, some of your peers who are facing tariffs on steel and aluminum are taking a more aggressive stance on pricing to offset it. I wanted to know how you thought about the pros and cons of raising prices more emphatically to offset these costs. Is the category just not, is the soup category in particular just not ready for it? Secondly, let's go for the first. I'll come back.

Yeah, that's good. If you look, Carrie described all the different initiatives that we're focused on in order to make sure that we help offset the tariffs, including the inventory management, but also working with our suppliers as well as, as you heard us talk about, increased productivity and cost savings initiatives. Pricing and surgical pricing initiatives are part of that overall equation. To your point, Rob, around meals and beverages, the soup business is impacted by tariffs because of what Carrie described with the Section 232 steel and aluminum tariffs. When I look at overall pricing, pricing is also manifesting itself within that soup portfolio. We're just being really surgical about where do we believe we have some opportunity to increase pricing and where not.

Okay, my follow-up was, I think the guidance for fourth quarter was for tariffs to be $0.03 to $0.05 of impact, and it ended up being $0.02. Were the costs lower than you expected, or am I not counting something that happened in maybe third quarter?

Yeah, I would attribute it more to one of our levers. As we think about all the different levers we're pulling, it is primarily one of inventory management, right? Working with our suppliers and also active inventory management there, you'll see that fuller impact, obviously, when we talk about our fiscal 2026. That's really what helped us in the fourth quarter, that coming in lower.

Okay, thank you.

Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Thank you. Good morning. I just want to follow up on some of the tariff mitigation, and I guess you just touched on the inventory management. How sustainable is that, or is it more just delaying some of the cost that comes later? When you talk about alternate sourcing, can you help us unpack that a little bit? I know tin plate is, I think, scarcely or maybe not really made in America. Rao's is, of course, coming from Italy. Is that where you would imagine maybe potentially shifting that approach, or, you know, help us understand just some of the mitigation approach in a little more detail.

Yeah, I'll start there and have Mick talk about some of the other levers. I think in terms of inventory management and supplier collaboration, to me, those go very much hand in hand as we have discussions with our partners. I think it will still be a lever that we'll be able to see some of that benefit in the combination of both of those together as we look at fiscal 2026 and work to find offsets in conjunction in indefinite partnership with our supplier partners. Mick, you want to talk a little bit about the alternate sourcing?

Yeah, let me talk about it in three pieces. When I look at alternative sourcing, you're right. For steel aluminum, there's not an alternative source. How does it impact our business? It's really coming back to food-grade tin plate that we need for our cans. As Rob mentioned earlier, that's particularly within our soup business. There's not enough capacity or supply available in the U.S. If it was available, we would buy it locally. We're not able to do that. As a result, we have no choice but to import that key raw material for our product. Obviously, coming back to tariffs, there's a 50% tariff on that. As a result, that is something that we're mitigating with other alternatives or trying to partially mitigate with other alternatives than an alternative source because that is not available. That is, call it, the steel aluminum bucket. The second bucket is Rao's. Rao's is made, or the vast majority of the product is made in Italy, and we import it. It is partially the magic of the sauce, actually, or the magic of the product that the sauce is made in Italy and that we import it. As you've heard us say in the past, we're not changing the sauce. It's absolutely critical for us to make sure that we maintain that elevated product quality. There we have some flexibility with some production in Georgia, and we're working with the co-manufacturer on that with our partner in Italy. However, there's only so much we can do around that. The third bucket is what I'll call rest of world IPEA tariffs that Carrie mentioned earlier. There we have some flexibility because that's really coming back to, in certain instances, we're not because you have certain raw materials that come from one particular country or from one particular region, and you have only so much choice. However, within that rest of world bucket, there are alternatives, and we are pursuing those actively. It's really important that we maintain top quality product for our consumers. Sometimes that's taking a little bit longer, particularly if you want to switch suppliers because we want to make sure that we maintain the quality of our product and maintain that consumer proposition. That's a little bit of the process that we're going through.

That's helpful. Just to follow up on the increased productivity savings target that you've announced, you've got a plan that was already in place. You're pushing that harder. How comfortable are you that you're not putting sort of capabilities at risk or cutting too much? Can you just help us understand maybe how you came to the figure that you felt like it wasn't maybe too aggressive or do you feel like it is? Can you just help us understand how to think about that?

Yeah, I would start and say, you know, as we think about fiscal 2025, the savings of our PEEK cost savings program came in much higher than what we initially expected, and a lot of that coming from the acceleration of Sovos integration. There will still be integration savings from Sovos as we move into fiscal 2026. If you recall, we just moved Sovos into the Campbell Soup Company's ERP system at the end of Q3, beginning of Q4. There are still back office opportunities and savings on integration as we move into fiscal 2026 that we'll see. There is also some network optimization with Sovos that will continue to refine that with our Meals and Beverages network. I think there's still more opportunity there for Sovos. The other areas are the same levers that we're pulling. Whether it's org effectiveness, whether it's IT digital roadmap and driving more productivity through realization of our IT roadmap, whether it's our network optimization, which covers certainly broader than just our manufacturing plants, it also covers warehouses or logistics. All of those areas, plus our indirect procurement team, is doing a fantastic job there in identifying opportunities. I think that I don't think, and I'll have Mick maybe comment, I don't think that there is anything that we're short-changing. I think these are all areas of where I think we can continue to unlock efficiency and effectiveness through the things that we're doing as part of PEEK.

Yeah, I'd add maybe to it the step-up of productivity from historically we've done, call it about like 3% this year. We're targeting around 5%. Definitely a lot of work across the organization, and I really applaud the team for stepping up the efforts across the board. It is an elevated target compared to what we've done in the past. However, the team is also identifying a lot of opportunities across the company and also collaborating across a lot of different functions in order to make sure that, one, we obviously deliver, but two, to your question, that we also don't undermine any capabilities, or if anything, we actually make ourselves better and stronger so we can continue to deliver and focus on delivering that growth that we're focused on.

Okay, thanks. I'll pass it on.

Our last question today will come from Jim Salera from Stephens. Please go ahead. Your line is open.

Hey, Mick. Hey, Carrie. Thanks for taking our question. I wanted to just start with just something that you had said in a previous response to, I believe, Tom's question, that your brands' household penetrations are kind of flat to slightly increasing in certain areas. That would obviously imply that the volume pressure is more from either a frequency or a mix. Can you just talk through what gives you confidence that you can start to see an uplift either, again, on mix or volume if the consumer environment doesn't really improve in 2026? Are there any brands like Rao's comes to mind, obviously, where there's still kind of an awareness opportunity and you expect to get some lift from that on marketing to drive further household penetration? Maybe the portfolio as a whole and then thoughts on scaling Rao's to awareness with the increased marketing.

Yeah. Okay. Great. You're right. If you look back to my earlier comment, household penetration flat to slightly increasing means that the buy rate is down a little bit. That comes back to what we're focused on as our brands continue to maintain relevance. You see that back to the household penetration reference. They are still showing up in the households. We need to make sure that we continue to keep or increase that overall buy rate. By the way, we also still have opportunity to continue that household penetration across the board, right? It's really those two levers. That is why we come back to what I described earlier, that brand support is so important in order to make sure that we maintain or increase that overall awareness. On top of it, innovation. Innovation can really further support increased buy rate because you're providing more variety. That also comes back with, for instance, the price-pack architecture that I mentioned earlier, making sure that we have the right packs available at that proper decision point, like, for instance, back to scope, making sure that we have those Goldfish multi-packs available across the store. I look at it really as like it is really good that household penetration is flat to stable with potential upside there. At the same time, we got to continue to make sure that we focus on that stabilization or growth in overall buy rate with these different initiatives. That also comes back to that overall consumer framework that the team is using, which I wholeheartedly believe in. Now, coming back to, you know, to build on your second part of your question, there are certain brands where there's obviously significant upside potential from an overall household penetration perspective. We talked in the past about Rao's. Rao's is a great example of that. Also, going into this fiscal year, the team is very focused, as I mentioned earlier, on continued growth in Rao's. It's probably going to be a little choppy, you know, quarterly because of some timing of promotional activity. Overall, continued focus on growth. You saw the 8% consumption growth on sauces in Q4. I expect us, we've said this in the past, mid to high single-digit growth for the Rao's brand. That's what the team is focused on. Continued increase of household penetration is a key component of that.

Great. Maybe just one real quick follow-up. Can you just give us any thoughts around, you mentioned choppiness with Rao's, any particular quarter we should think about as being, you know, kind of high point or low point as we just think about the cadence through the year?

Yeah, again, if you think about what we're lapping from fiscal 2025, I think that will be a reference point. In Q1, you go back, we had a pretty nice pro forma growth. We didn't have Sovos in the base 2024, but we had it in the 2025 on a pro forma basis. Very nice growth in Q1. We're going to see some promotional shifts from Q1 into Q2 for Rao's. I think it's important to remember what we're lapping in the second half. We had the SAP implementation that buoyed the Rao's net sales growth in Q3, and we saw some timing of that come back and reverse out in Q4. As you think about that phasing, just remember what we're lapping in fiscal 2025, Jim.

Great. Thanks, Carrie. I'll hop back in the Q.

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