Campbell’s: Strong Sales Elevate FY Guidance Post-Sovos Acquisition

The Campbell Soup Company posted solid third-quarter earnings this morning, beating analyst expectations as net sales increased 6% driven by the Sovos Brands acquisition and integration.

Organic net sales growth was flat at $2.2 billion compared to the prior year. On a two-year CAGR basis, net sales rose 5% and organic net sales grew 2% due to price realization. The company’s gross profit margin also notched a slight improvement, coming in at 30.9% compared to 30%; gross profit increased to $732 million from $668 million the year before.

Marketing and selling expenses represented 9% of net sales and increased 6% to $206 million due to the Sovos acquisition. EBIT decreased by $6 million to $248 million while adjusted EBIT increased 13% to $354 million due to higher gross profit from the acquisition. Reported EPS came in at $0.44 per share compared to $0.53 per share a year ago.

Campbell’s highlighted a total of $940 million in cost savings accomplished throughout the quarter, resulting from its multi-year initiative and the result of Snyder-Lance business synergies; additionally the Sovos Brands integration resulted in $3 million in cost synergies in the quarter.

Looking ahead, Campbell’s said it is on track to generate $1 billion in cost savings by the end of 2025; additionally, the company expects to generate upwards of $50 million in annual ongoing savings by 2026 as a result of the Sovos acquisition.

“We are making significant investments to continue the transformation of our manufacturing and distribution network to maintain our competitive advantage, while also selectively rationalizing less efficient or redundant areas to lower costs,” said Mark Clouse, president and CEO, during the company’s earnings call. “We are investing approximately $230 million through fiscal 2026 in various facilities to modernize our supply chain, including added capacity and capabilities.”

On a category basis, the company’s Meal and Beverages business net sales grew 15%, largely driven by the Sovos integration. According to Clouse, these results have allowed Campbell’s to surpass its main strategic goal of building “a billion-dollar sauce business”

“Campbell’s has strengthened its leading share position in the total Italian sauce category in terms of both dollars and units, gaining 3.1 points of unit share and 3.1 points of dollar share in the third quarter,” he said. “Even more encouraging is the household penetration momentum we are seeing for Prego and Rao’s, with both increasing compared to the prior year.”

Clouse also called Noosa a “positive surprise” from the acquisition and highlighted that the brand’s 8 oz. yogurt has now seen 14 quarters of “consecutive dollar consumption growth.” While he emphasized the strength of the brand, he also announced that Campbell’s has begun to explore alternatives for the business since yogurt is not a strategic category for the soup, snack, meal and beverage conglomerate.

As for its additional core competencies, Campbell’s soup business also saw sales grow 2%, due to increases in its broth business. Consumer habits amid continued inflation have helped drive this growth, Clouse said, explaining that its condensed cooking and broth segments have notched notable dollar share gains as consumers prioritize “stretchable meals.”

“Given the strength of our supply chain, we’ve been able to step up production to help meet that need, which has accelerated growth in this normally stable category,” said Clouse. “Although we expect industry capacity to return over time, it’s adding significant new households for Swanson that we see as a positive indicator for the future of our ready-to-serve business.”

On the snack side, organic net sales declined 1%, and Clouse said the segment is now facing short-term pressure due to lingering inflation and economic pressure on lower- and middle-income consumers. Despite the challenge, the company expects snacks to rebound in the near term. The company’s snack Power Brands, including Goldfish, Lance, Kettle Brand and Cape Cod, notched a 2% increase in net sales; Goldfish and Late July specifically saw significant gains, increasing net sales 5% and 26%, respectively.

The company also affirmed its full-year outlook and raised its expectations for annual net sales to fall between +3% to +4% compared to the previous forecast of between -0.5% to +1.5%. Full-year operating margin is expected to be approximately 15% is on track to reach a long-term goal of 17%, Clouse said.

“The third quarter was a solid quarter where we advanced in every aspect of the business,” Clouse said. “We saw stabilizing trends on growth and volumes, compelling earnings with margin improvement and a great start to the integration of Sovos brands as we continue to control the controllables in a dynamic environment.”