Campbell Soup(CPB) - 2025 Q1 - Quarterly Results

Q1 FY2025 Performance Overview Campbell's Q1 FY2025 saw 10% net sales growth driven by acquisition, 6% adjusted EBIT growth, and a 2% adjusted EPS decline, alongside a CEO transition Financial Highlights Campbell's reported a 10% increase in net sales for the first quarter of fiscal 2025, primarily driven by the Sovos Brands acquisition, while organic net sales declined by 1% Q1 FY2025 Key Financial Metrics | Metric | Q1 FY2025 (As Reported) | Q1 FY2024 (As Reported) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,772 million | $2,518 million | 10% | | Organic Net Sales | - | - | (1)% | | EBIT | $367 million | $358 million | 3% | | Adjusted EBIT | $432 million | $407 million | 6% | | Diluted EPS | $0.72 | $0.78 | (8)% | | Adjusted EPS | $0.89 | $0.91 | (2)% | CEO Commentary CEO Mark Clouse stated that the first-quarter results were largely in line with expectations, reflecting the company's agility in a dynamic consumer environment - The company is navigating a dynamic consumer environment and an uneven pace of category recovery[3] - Expects sequential improvement in top-line and market share during the critical second-quarter holiday season[3] - The Board's approval of a 5% dividend increase signals confidence in the company's earnings, cash flow, and long-term growth potential[3] CEO Transition Campbell's announced a leadership change, with the Board of Directors electing Mick Beekhuizen as the new President and CEO, effective February 1, 2025 - Mick Beekhuizen has been elected as the new President and CEO, succeeding Mark Clouse[20] - The transition will be effective February 1, 2025, with Mark Clouse retiring on January 31, 2025[20] Detailed Financial Analysis This section provides an in-depth review of Campbell's consolidated financial performance, including sales drivers, margin trends, cash flow, capital allocation, and progress on cost savings initiatives Consolidated Financial Performance The 10% reported net sales growth to $2.8 billion was driven by the Sovos Brands acquisition, while organic sales fell 1% due to lower net price realization - Net sales increased 10% to $2.8 billion, driven by the Sovos Brands acquisition[7] - Organic net sales decreased 1% due to a 1% decline in net price realization and flat volume/mix[7] - Adjusted gross profit margin decreased by 70 basis points to 31.4%, with the Sovos acquisition accounting for approximately 60 basis points of the decline[8] - Adjusted EBIT increased 6% to $432 million, primarily due to the contribution from the acquisition[12] - Adjusted EPS decreased 2% to $0.89, mainly reflecting higher net interest expense ($83 million vs. $48 million prior year) from increased debt[13][14] Cash Flow and Capital Allocation Cash flow from operations improved to $225 million from $174 million in the prior year, benefiting from changes in working capital and higher cash earnings Q1 FY2025 Cash Flow & Capital Allocation | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Cash Flow from Operations | $225 | $174 | | Capital Expenditures | $110 | $143 | | Cash Dividends Paid | $116 | - | | Common Stock Repurchased | $54 | - | Cost Savings Program The company is making progress on its new cost savings initiative, having achieved approximately $30 million in savings during the first quarter - Delivered approximately $30 million of savings in Q1 under the new $250 million cost savings program[16] Segment Performance This section analyzes the financial performance of Campbell's key operating segments, Meals & Beverages and Snacks, detailing sales drivers, organic growth, and operating earnings trends Meals & Beverages The Meals & Beverages segment saw a significant 22% increase in net sales to $1.7 billion, entirely driven by the Sovos Brands acquisition Meals & Beverages Q1 FY2025 Performance | Metric | Q1 FY2025 ($ million) | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $1,706 | 22% | | Organic Net Sales | - | 0% | | Operating Earnings | $337 | 17% | - Organic sales were flat, with gains in Prego, Canada, and foodservice offset by declines in U.S. soup, partly due to the later timing of Thanksgiving affecting retailer inventory levels[29][30] Snacks The Snacks segment experienced a 4% decline in net sales to $1.07 billion, driven by volume declines and lower net price realization across several brands Snacks Q1 FY2025 Performance | Metric | Q1 FY2025 ($ million) | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $1,066 | (4)% | | Organic Net Sales | - | (2)% | | Operating Earnings | $142 | (12)% | - Organic sales decline was driven by decreases in partner brands, Pepperidge Farm cookies, Goldfish crackers, and Late July snacks[31] - Operating earnings decreased primarily due to lower gross profit, which was impacted by cost inflation, other supply chain costs, and lower net price realization[32] Corporate Corporate expenses increased to $106 million from $88 million in the prior-year quarter, primarily due to a loss from the Pop Secret divestiture and higher cost savings initiative costs - The increase in corporate expense was mainly due to the loss from the sale of the Pop Secret business and higher costs for savings initiatives, partially offset by mark-to-market gains on commodity hedges[33] Shareholder Returns This section details Campbell's initiatives to return value to shareholders, including a dividend increase and the establishment of a new share repurchase program Dividend Increase Reflecting confidence in its financial strength, the Board of Directors approved a 5% increase in the quarterly dividend, raising it from $0.37 to $0.39 per share - The quarterly dividend was increased by 5% to $0.39 per share, or $1.56 on an annualized basis[19] Share Repurchase Program The company has established a new $250 million anti-dilutive share repurchase program to offset dilution from stock compensation - In September 2024, the Board approved a new anti-dilutive share repurchase program of up to $250 million[17] - As of quarter-end, approximately $206 million remained under the anti-dilutive program and $301 million remained under the September 2021 strategic repurchase program[18] Fiscal 2025 Outlook This section outlines Campbell's reaffirmed full-year fiscal 2025 guidance, including projections for net sales, organic net sales, adjusted EBIT, and adjusted EPS Full-Year Guidance Campbell's has reaffirmed its full-year fiscal 2025 guidance, projecting reported net sales growth of 9% to 11% and adjusted EPS growth of 1% to 4% - The company reaffirmed its full-year fiscal 2025 guidance, which balances expected progress with pragmatism regarding the consumer environment[21] Full-Year Fiscal 2025 Guidance | Metric | FY2025 Guidance | | :--- | :--- | | Net Sales | +9% to +11% | | Organic Net Sales | 0% to +2% | | Adjusted EBIT | +9% to +11% | | Adjusted EPS | +1% to +4% ($3.12 to $3.22) | - Guidance includes the expected performance of the noosa yoghurt business but excludes any impact from its pending sale[23] Financial Statements and Reconciliations This section presents Campbell's unaudited consolidated financial statements for Q1 FY2025 and provides detailed reconciliations of GAAP to non-GAAP financial measures Consolidated Financial Statements The report includes unaudited consolidated financial statements for the first quarter ended October 27, 2024, providing detailed financial data - Consolidated Statements of Earnings show Net Earnings of $218 million for the quarter, compared to $234 million in the prior year[44] - Consolidated Balance Sheets show Total Assets increased to $16.1 billion from $12.3 billion year-over-year, primarily due to increased intangible assets and long-term debt related to acquisitions[48] - Consolidated Statements of Cash Flows detail a net cash inflow from operating activities of $225 million for the quarter[15][50] Reconciliation of GAAP to Non-GAAP Measures This section provides a detailed reconciliation of reported GAAP financial results to the non-GAAP (adjusted) measures used throughout the earnings release - Organic Net Sales are reconciled by excluding the impacts of currency, acquisitions (Sovos Brands), and divestitures (Pop Secret)[54] - Adjusted Earnings are reconciled by excluding several items, including costs for savings initiatives, commodity mark-to-market gains/losses, acquisition costs, and charges associated with divestitures[56] Q1 FY2025 GAAP to Adjusted EPS Reconciliation | Item | Per Share Impact | | :--- | :--- | | As Reported (GAAP) EPS | $0.72 | | Costs associated with cost savings initiatives | $0.09 | | Commodity mark-to-market gains | $(0.01) | | Accelerated amortization | $0.02 | | Charges associated with divestiture | $0.06 | | Adjusted EPS | $0.89 |