Campbell’s (NASDAQ:CPB) executives used the company’s third-quarter fiscal 2026 earnings question-and-answer session to outline a more cautious operating backdrop heading into fiscal 2027, citing potential incremental inflation tied to higher oil prices, continued pressure in snacks and a focus on balance sheet priorities.
Chief Investor Relations Officer Joshua Levine opened the call by noting that Campbell’s had released its earnings materials earlier in the morning, including its press release, Form 10-Q, slide presentation and management’s prepared remarks. President and Chief Executive Officer Mick Beekhuizen and Chief Financial Officer Todd Cunfer then fielded analyst questions on the company’s outlook, cost pressures and portfolio priorities.
Management flags potential inflation step-up
“Obviously, with the price of oil where it is, and look, if oil stays around $100 a barrel, we’re looking at an additional 2%-3% inflation on top of the core 3%,” Cunfer said. He also cited higher diesel costs and a driver shortage as contributing to elevated logistics and freight costs.
Cunfer said the company is nearly fully hedged for fiscal 2026, which ends in July, limiting near-term exposure. However, he said inflation in the first half of fiscal 2027 is likely to be high given current commodity and input prices. The second half, he said, depends on whether geopolitical tensions ease and whether prices for oil, fertilizer and aluminum moderate.
Campbell’s is also facing a reset of incentive compensation, which Cunfer said represents about a $40 million impact next year, along with expected higher marketing investments. To offset those pressures, he said the company is trying to accelerate savings from a previously announced $100 million SG&A reduction plan and other productivity initiatives.
Snacks portfolio simplification remains a priority
Beekhuizen said Campbell’s is focused on simplifying its snacks business by narrowing attention to the core of its brands and reducing less productive items. He pointed to Goldfish as an example, saying the company has focused the brand on households with children and has seen the core part of the brand stabilize over the past two quarters.
“You hear us talk about focusing on the core of the portfolio and also the core of the brands,” Beekhuizen said. “A good example of that is when you hear us talk about Goldfish and focusing on households with kids.”
Beekhuizen said Campbell’s is also shifting its innovation approach toward “fewer, more meaningful” launches rather than a broad range of smaller initiatives. The company is reviewing advertising support across brands and evaluating a “tail of SKUs” that represents limited sales but adds operational complexity.
Cunfer said snacks margins improved sequentially in the third quarter, with EBITDA margin rising from a little over 7% in the prior quarter to about 10%. However, he said both quarters remained down roughly 400 basis points from the prior year, which he called “not acceptable.” The improvement was driven in part by lower trade spending, less marketing and the company canceling most promotions in fresh bakery to improve on-shelf availability.
Looking ahead, Cunfer said Campbell’s needs to return Goldfish to growth, simplify the portfolio to improve mix and efficiency, and continue reviewing fixed costs across the snacks network and overhead structure.
Fourth-quarter sales expected to be flat to slightly higher
Cunfer said Campbell’s expects fourth-quarter net sales to be “flattish to slightly up,” supported by timing dynamics in meals and beverages. He cited the impact of an ERP conversion from Sovos that negatively affected Rao’s in the third quarter and creates a $30 million comparison benefit in the fourth quarter.
He said the meals and beverages segment should have a “very solid” fourth quarter, helped by slightly positive consumption trends and innovation-related pipeline fill, particularly in soups and sauces. Snacks, by contrast, are expected to be similar to the third quarter or “a little bit worse.”
When asked about the company’s full-year outlook, Cunfer said the lower end of the company’s organic sales guidance range, a decline of 2%, was “probably a more realistic assumption at this point.” He said adjusted EPS had moving parts but was likely in the area of $2.20 or below.
Cunfer also said Campbell’s expects a fourth-quarter tariff refund benefit of about $0.03 to $0.04 per share, but said that benefit is expected to be offset by higher fuel costs, the driver shortage and impacts related to the Iran conflict. He said some refunds may be received directly, including in connection with Rao’s and La Regina, while a smaller portion may come through vendors and could extend into next year.
Capital allocation focused on leverage and investment grade rating
Cunfer said maintaining Campbell’s investment-grade credit rating is “an imperative” for management and the board. He said the company is trying to balance dividend considerations with reducing leverage, and said there is no intention to increase the dividend “anytime soon.”
He said Campbell’s is focused on stabilizing earnings, reducing working capital and prioritizing capital expenditures toward the highest-return projects. Cunfer also said the company may consider hybrid debt instruments, noting that some peers have used them. He said such debt typically carries a higher coupon, potentially 150 to 200 basis points higher, but may receive partial equity credit from rating agencies.
“Obviously, M&A right now is off the table,” Cunfer said, adding that Campbell’s is working to reduce leverage to the low-three-times range over the next couple of years.
Executives point to cooking, Rao’s and premium soup as growth areas
Beekhuizen said Campbell’s sees continued strength in at-home cooking, which supports parts of the meals and beverages portfolio, including cooking soups, Rao’s and Pacific. He said the company now has four brands above $1 billion in sales: Campbell’s, Rao’s, Goldfish and Pepperidge Farm.
Beekhuizen said more than half of Campbell’s condensed soup portfolio is used for cooking as an ingredient, and that portion has been growing. The company is leaning into that trend with condensed sauces aimed at consumers preparing scratch meals at home and seeking different flavors.
Ready-to-serve soup remains more mixed. Beekhuizen said premium ready-to-serve soup, including Rao’s and Pacific, is growing and represents about 20% of the ready-to-serve portfolio. The mainstream portion remains under pressure, and he said Campbell’s needs to improve relevance through portfolio work and new innovation focused on better-for-you attributes.
On revenue growth management, Cunfer said Campbell’s is reassessing trade spending, particularly temporary price reductions that lack feature and display support. He said feature and display promotions deliver much stronger returns, while some shelf-only promotions do not provide sufficient benefit. Beekhuizen added that price-pack architecture is also important, citing 6% growth in Goldfish multipacks over the past 13 weeks.
About Campbell’s (NASDAQ:CPB)
Campbell’s (NASDAQ: CPB) is a leading manufacturer of shelf-stable foods and beverages, best known for its iconic soups and broths. Headquartered in Camden, New Jersey, the company offers a diverse portfolio of products designed to meet consumer demand for convenient, affordable meals and snacks. Since its founding in 1869, Campbell’s has grown through a combination of organic innovation and strategic acquisitions to expand its presence in the food industry.
The company’s brand portfolio includes Campbell’s Condensed Soups, V8 juices, Prego pasta sauces, Swanson broths and stocks, Pace salsas and dips, and Pepperidge Farm baked snacks.
