US consumers are cooking at home at “the highest levels” in five years, significantly boosting sales at The Campbell’s Company in its latest quarter.
During the three months ending 27 April, Campbell’s generated net sales of $2.5 billion, reflecting a 4% year-on-year increase. On an organic basis, sales grew 1%, primarily driven by a 2% favorable volume/mix.
Campbell’s reported a remarkable 7% jump in the volume/mix within its Meals & Beverages division, resulting in a 6% increase in organic sales, with net sales for the unit reaching $1.46 billion in the third quarter.
Contrastingly, the Snacks division experienced a 5% drop in volume/mix, leading to a corresponding 5% decline in organic sales.
The company noted an 8% increase in segment operating earnings from Meals & Beverages, totaling $248 million, while Snacks saw a 13% decline to $145 million.
Campbell’s president and CEO Mick Beekhuizen characterized the company’s third-quarter results as “solid” and “exceeded our expectations,” albeit acknowledging the role of “favorable shipment timing.”
He added, “Consumers are increasingly turning to our brands for value, quality, and convenience as they cook at home at levels not seen since early 2020. While we have enjoyed some strong innovation launches, we’re adjusting our approach across our full brand portfolio to ensure competitiveness.”
In a discussion with analysts, Beekhuizen expressed strong confidence in the persistence of the home-cooking trend. He stated, “I feel very good about the meals and beverages portfolio in light of various consumer trends and our extensive range.”
“However, I don’t forecast repeating Q3 results since we’re naturally coming out of soup season. That said, I remain optimistic about our overall position and future opportunities within the portfolio.”
Interestingly, the third-quarter results captured a substantial 35% drop in EBIT, totaling $161 million, including a $150 million charge related to the Snyder’s of Hanover trademark. Adjusted EBIT rose 2% to $362 million.
“Based on recent performance, we adjusted our long-term outlook and recognized a $150 million impairment charge on the trademark, which reduced its carrying value on our balance sheet to $470 million,” a Campbell’s spokesperson said.
Net earnings plummeted year-on-year from $133 million to $66 million. Furthermore, adjusted net earnings fell by 3% to $218 million.
Beekhuizen elaborated that Snyder’s of Hanover appeals to “the pretzel traditionalist,” and remarked, “We continue to optimize our assortment toward higher-performing items while investing in convenient portion-controlled packs, though this was insufficient to counteract competitive pressures.”
Looking at the broader snacks market, the Campbell’s chief indicated that contextual categories “deteriorated” from the second quarter amid declining consumer confidence.
“Additionally, consumers have become more intentional, focusing on value-added indulgences,” Beekhuizen stated, noting brands like Pepperidge Farm benefited from new offerings. “I plan to prioritize innovation, which is crucial as consumers remain deliberate about their spending.”
Nevertheless, Beekhuizen acknowledged Campbell’s revised expectation for a “recovery” in its snacks business now projected for the 2025/26 financial year, as opposed to earlier forecasts predicting an earlier turnaround.
“I anticipate this recovery will begin in fiscal 2026, benefiting from the strategies previously discussed and continued investment in our brands,” he noted.
“At present, we are operating at the lower end of our 9-10% marketing and selling expenditure range. Moving into next year, I foresee a need to enhance this investment to bolster our brands in the marketplace.”
