Campbell’s (NASDAQ:CPB) reported lower third-quarter fiscal 2026 results as weaker volumes, inflation and supply chain costs weighed on sales and profitability, while management reaffirmed its full-year outlook and said it is continuing to invest behind key brands.
President and CEO Mick Beekhuizen said the quarter was “largely in line” with the company’s expectations but remained pressured on a year-over-year basis. Organic net sales declined 4%, adjusted EBIT fell 24%, and adjusted earnings per share were $0.50, down 32% from the prior year.
Sales Decline as Volumes Fall
CFO Todd Cunfer said reported and organic net sales both declined 4% in the quarter. The decline reflected a 5% volume headwind, primarily from lapping strong prior-year soup performance and continued challenges in much of the snacks division. Net price realization provided a 1% benefit.
Adjusted gross margin was 27.7%, down 240 basis points from a year earlier, though slightly improved from the second quarter. Cunfer said gross tariffs, cost inflation and other supply chain costs were the main headwinds, including a modest impact from higher logistics costs tied to the Middle East conflict. Cost savings, supply chain productivity improvements and net price realization partially offset those pressures.
Adjusted marketing and selling expenses increased 2% to $211 million, or 8.9% of net sales, as the company continued to support brand investment. Adjusted administrative expenses were $149 million, slightly below the prior year.
Adjusted EBIT was $274 million, down 24%, and adjusted EBIT margin declined 300 basis points to 11.6%. Cunfer said the adjusted EPS decline was driven by lower adjusted EBIT, while interest expense, the adjusted tax rate and shares outstanding were consistent with the prior year.
Meals & Beverages Shows Mixed Trends
In the Meals & Beverages division, organic net sales declined 4%, while U.S. retail consumption was flat. Beekhuizen said the segment continued to benefit from at-home cooking behavior, though U.S. soup consumption declined 4.4% in the quarter against a strong comparison from the prior year.
On a two-year basis, total soup consumption declined 1.3%, which Beekhuizen said was similar to the first and second quarters of the fiscal year. He highlighted products used as ingredients in scratch or semi-scratch cooking across the Campbell’s, Swanson and Pacific brands, saying that group represents about half of the company’s U.S. retail soup portfolio and grew approximately 1.5% in the third quarter and 3.4% fiscal year to date.
Broth remained a stronger area. The category grew 5.3% in the quarter, while Swanson and Pacific combined grew consumption 4.4%. Pacific delivered 17% consumption growth in premium broth, marking its sixth consecutive quarter of double-digit growth, while Swanson grew 2% and gained share in mainstream broth.
Ready-to-serve soup had a softer quarter, with weakness in mainstream brands including Chunky. Premium soup brands performed better, with Pacific and Rao’s posting year-over-year consumption growth of 7% and 8%, respectively.
Rao’s continued to be a major growth driver. Beekhuizen said the total Rao’s brand grew consumption 15%, with sauce up 13% during the quarter. Rao’s drove 75% of total sauce category dollar growth in the quarter, and the brand recently surpassed $1 billion in trailing 12-month net sales. Rao’s products outside pasta sauce grew consumption 22% in the quarter.
Cunfer said Meals & Beverages operating earnings declined 16% because of lower gross profit, reflecting tariffs, elevated input cost inflation, other supply chain costs and unfavorable volume performance. These were partially offset by productivity improvements, net price realization and cost savings.
Snacks Remain Under Pressure
The snacks division also posted a 4% decline in reported and organic net sales. Beekhuizen said the weakness was driven largely by consumption softness tied to short-term decisions to stabilize fresh bakery operations and weakness in salty snacks.
“I recognize that our performance remains well below expectations,” Beekhuizen said. “We know that we need to deliver stronger absolute top and bottom-line results to create shareholder value.”
Goldfish consumption declined 0.9% in the quarter, consistent with the second quarter, while dollar share was stable. Beekhuizen said the company is returning the brand strategy to its legacy as a snack for families with kids. Core Goldfish offerings, which make up more than 90% of the brand’s retail sales, were flat for the second consecutive quarter.
Pepperidge Farm Fresh Bakery consumption declined 7.5%, while the category was down modestly. Beekhuizen said the performance reflected actions taken to stabilize the network, and noted that fill rates and in-stock levels were back at or near normalized levels. The company is beginning to reintroduce promotions in a disciplined manner.
In cookies, consumption declined 2.6%, though the company essentially held share. In salty snacks, retail sales fell 6.2%. Chips consumption declined 4.5%, an improvement from the second quarter, while pretzels softened. Beekhuizen said the company sees the most opportunity for simplification in the salty snacks portfolio and plans to tighten assortment, sharpen price-pack architecture and improve trade efficiencies.
Snacks operating earnings declined 32%, reflecting lower gross profit from elevated cost inflation, other supply chain costs and volume deleverage, partially offset by productivity, net price realization and savings initiatives.
Cost Savings, Cash Flow and Balance Sheet
Cunfer said Campbell’s has realized approximately $200 million in savings against a multiyear target of $375 million. The company also made progress on $100 million in overhead reduction actions announced last quarter, which are intended to improve efficiency across the organization.
Year-to-date operating cash flow was $839 million, down modestly as lower cash earnings were partially offset by improved working capital. Capital expenditures were $297 million, flat year over year. Campbell’s returned $380 million to shareholders year to date, primarily through dividends.
At the end of the third quarter, the company had approximately $402 million in cash and cash equivalents and about $7 billion in debt. Its net debt to trailing 12-month adjusted EBITDA leverage ratio was four times, and it had approximately $1.5 billion available under its revolving credit facility.
Cunfer said the company’s investment-grade rating remains “very important,” adding that Campbell’s has eliminated all anti-dilutive share repurchases and has no plans to increase its dividend.
Guidance Reaffirmed
Campbell’s reaffirmed its fiscal 2026 outlook, calling for organic net sales to decline 1% to 2%, adjusted EBIT to decline 17% to 20%, and adjusted EPS of $2.15 to $2.25.
The outlook includes initial impacts from the Middle East conflict, specifically higher logistics costs, which the company expects to offset with a tariff refund benefit in the fourth quarter. Cunfer also noted that Campbell’s will lap an extra week from last year’s fourth quarter, creating an expected headwind of about 7% to net sales, 9% to adjusted EBIT and $0.06 to adjusted EPS.
The company also expects its acquisition of a 49% interest in La Regina to be neutral to adjusted EPS in fiscal 2026. Cunfer said Campbell’s expects a small benefit to net sales and operating costs from consolidating La Regina’s plants in Scafati, Italy, and Alma, Georgia.
Looking ahead to fiscal 2027, Cunfer said that if oil prices remain around $100 per barrel, early estimates suggest 2% to 3% incremental inflation above the company’s typical base inflation rate. He said Campbell’s is focused on mitigants including productivity savings, overhead reductions and, if necessary, net price realization.
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.
