CPB Q3 Deep Dive: Brand Investment and Cost Pressures Shape Quarterly Results

Packaged food company Campbell's (NASDAQ:CPB) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 3.4% year on year to $2.68 billion. Its non-GAAP profit of $0.77 per share was 5% above analysts’ consensus estimates.

Is now the time to buy CPB? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Campbell's third quarter results saw revenue come in above Wall Street expectations, but the company faced a year-over-year sales decline as shifting consumer habits and cost pressures weighed on performance. Management pointed to ongoing softness in snack volumes and selective price increases as key drivers, with CEO Mick Beekhuyzen noting that "cost increases and top line headwinds" were not fully offset by recent productivity and pricing actions. While the company's core brands maintained stable market share, the impact of tariffs and inflation continued to present challenges for both the meals and beverages and snacks segments.

Looking ahead, Campbell's management remains focused on navigating external cost headwinds, with a strong emphasis on innovation, omnichannel brand activation, and maintaining value for consumers. The company reiterated its full-year earnings outlook, reflecting ongoing investments in marketing and productivity to support top-line growth. CFO Todd Kunfer highlighted that, although "inflation will remain for the vast majority of the year," operational improvements and cost-saving initiatives are expected to ease margin pressures in the second half, especially as the company laps tariff impacts and supply chain productivity gains are realized.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to cost headwinds, evolving consumer preferences, and ongoing brand investment, while progress in cost savings and innovation was highlighted as a foundation for future growth.

• Tariffs and cost inflation: The company faced significant margin headwinds from tariffs and higher input costs, particularly in steel, aluminum, and agricultural commodities. CFO Todd Kunfer explained that gross tariffs accounted for a 200 basis point negative impact on adjusted gross margin, with inflation affecting both meals and snacks segments.
• Snacks volume declines: Snack volumes decreased as consumers became more intentional with purchases, especially in pretzels and chips. CEO Beekhuyzen emphasized the need to "reignite Goldfish" and accelerate innovation in premium and health-focused snack offerings to address evolving trends.
• Brand portfolio stability: Despite overall consumption falling 2%, Campbell's core leadership brands collectively held market share for the eighth consecutive quarter. The company credited at-home cooking trends for supporting strong performance in condensed soups and Italian sauces, while mainstream ready-to-serve soups continued to face pressure from private label competition.
• Strategic acquisition: Campbell's announced an agreement to acquire a 49% stake in La Regina, a key producer of Rao’s pasta sauces, aiming to secure high-quality ingredient supply and support future innovation. The deal is expected to be EPS-neutral this year and to enhance the brand's margin profile longer term.
• Cost savings initiatives: The company delivered $15 million in new cost savings this quarter, bringing the total to $160 million towards its 2028 target. Management plans to use these savings to offset cost headwinds and reinvest in marketing and omnichannel brand activation.

Drivers of Future Performance

Campbell's outlook for the remainder of the year centers on mitigating cost pressures, driving innovation, and maintaining consumer value focus.

• Sustained inflation and tariffs: Management expects inflation and tariff impacts to persist for most of the year, with gross margins anticipated to remain under pressure until the second half. CFO Kunfer noted that operational improvements and productivity initiatives are key to regaining margin levels above 30% over time.
• Brand and innovation investment: The company is increasing marketing and promotional spending, particularly behind flagship brands like Goldfish and Pacific, to drive household penetration and support new product launches. CEO Beekhuyzen highlighted upcoming campaigns and innovations as central to reigniting growth in core categories.
• Consumer value and pricing actions: Pricing remains a delicate balance, especially in the soup portfolio, as management seeks to cover elevated costs without sacrificing market share. Selective pricing and value-oriented promotions are expected to be more prominent, particularly during peak seasonal periods.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will closely track (1) the impact of heightened marketing and innovation on Goldfish and other core brands, (2) the trajectory of gross margin recovery as cost-saving measures and productivity initiatives scale, and (3) the integration progress and strategic benefits from the La Regina acquisition. We will also monitor how Campbell’s manages competitive pricing dynamics, particularly within soup and snacks.

Campbell's currently trades at $28.69, down from $30.04 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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