- Adjusted EBIT Decline Adjusted EBIT dropped 11% YoY to $383 million, driven by lower adjusted gross profit (-150 bps margin decline).
- La Regina Acquisition Secured 49% stake in La Regina, projected to add mid-to-high single-digit growth and boost gross margin significantly.
- Cost Savings Progress Achieved $15M incremental savings in Q1, totaling $160M toward the $225M fiscal 2028 target.
- Tariff Impact Tariffs projected to affect 4% of cost of product sold, with supply chain offsetting 70% of $500+ bps inflation-driven cost pressures.
- Snacks Portfolio Growth Peppered Pond Cookies, Snack Factory, and Late July gained share, despite 1% sales decline due to volume drops.
Segment Performance
In Meals and Beverages, organic net sales decreased 2%, with unfavorable volume and mix offset by favorable net price realization. The soup portfolio slightly lagged the category on share, while broth consumption grew for the ninth straight quarter. In Snacks, organic net sales declined 1%, driven by volume declines, partially offset by positive net price realization. The company held or gained share in about half of its portfolio, with solid performance in Peppered Pond Cookies, Snack Factory, and Late July.
Strategic Moves
The company acquired a 49% interest in La Regina, a producer of Rao's tomato-based pasta sauces, solidifying its partnership with the Romano family to fuel Rao's momentum. This acquisition is expected to add to the company's margin and flexibility, with a call option to consolidate 100% of the P&L. Campbell's CEO highlighted the importance of elevating the focus on consumer needs across the organization, with a focus on premiumization, labor exploration, health and wellness, and cooking and comfort.
Margin Pressures and Cost Savings
Margins have been impacted by high inflation, with over 500 basis points of total cost pressures, including 200 basis points from tariffs. The supply chain team has offset 70% of these costs. Gross margins are expected to remain under pressure in Q2, but will improve in the second half of the year as tariff impacts lap and cost improvement opportunities materialize. The company made progress towards its fiscal 2028 cost savings target, delivering approximately $15 million in new savings, bringing total cost savings achieved to $160 million.
Valuation and Outlook
With a P/E Ratio of 22.14 and an EV/EBITDA of 10.71, the company's valuation appears reasonable. The Dividend Yield of 5.46% is also attractive. Analysts estimate next year's revenue growth at -3.4%. Campbell's reaffirmed its full-year fiscal 2026 guidance ranges, expecting a significant impact from tariffs, with gross tariffs projected to be approximately 4% of cost of product sold. The company continues to focus on brand activation and innovation, particularly in meals and beverages, and is prioritizing reinvestment back into the business to drive incremental growth.