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Campbell Soup (CPB) is sharply lower after reporting its Q2 (Jan) results this morning, falling to new multi-decade lows. The packaged food company posted a rare EPS miss, its first since Q3 FY21, while revenue fell 4.5% yr/yr, or 3% organically, to $2.56 bln, also below expectations. Adding to the disappointment, the company lowered its FY26 organic revenue guidance to down 1-2% from -1% to +1% and cut EPS to $2.15-2.25 from $2.40-2.55, well below expectations.

• Q2 fell short of CPB's internal expectations, driven by weaker-than-expected Snacks performance and storm-related shipment delays in Meals & Beverages, despite relatively steady underlying consumer demand.
• Meals & Beverages organic sales declined 2% on a 2% drop in volume/mix. However, underlying in-market demand was more encouraging, with consumption increasing 2%, led by particular strength at Rao's.
• Snacks organic sales declined 6% on a 6% drop in volume/mix. Its recovery is taking longer than anticipated, with consumption down 3%, though Goldfish improved sequentially and Pepperidge Farm Cookies remained a relative bright spot.
• Declines in Chips and Pretzels, supply constraints in Fresh Bakery, and pressure from third-party partner and contract brands were significant drags on Snacks performance.
• Adj. gross margin declined 270 bps to 27.7%, driven by inflation and other supply chain costs, including a 230 bps tariff headwind, leading adj. EBIT to fall 24% yr/yr and adj. EPS to decline 31% to $0.51.
• CPB delivered $20 mln of cost savings in the quarter and is accelerating that effort with another $100 mln identified. However, guidance is pressured by the slower Snacks recovery and incremental trade investments. Also, Q3 organic sales, EBIT, and EPS are expected to be broadly consistent with Q2.

Briefing.com Analyst Insight

This was a disappointing Q2 for CPB. While sentiment was already muted heading into the report, the guidance cut and commentary around the slower-than-expected recovery in Snacks appear to be the main factors weighing on shares today. Meals & Beverages was also pressured by January weather, which created roughly a one-point headwind to sales. Still, Meals & Beverages was the main factor behind the sequential improvement in in-market consumption, as category leaders like Rao's and favorable at-home cooking trends continued to support resilience. However, Snacks was the larger disappointment and the main driver behind the guidance cut. Consumption declined, while execution issues at Fresh Bakery and elevated competitive intensity in salty continued to weigh on performance. CPB is accelerating cost savings and acting with urgency, but with the Snacks recovery taking longer than expected, added trade investment, and ongoing cost pressure on the bottom line, expectations have reset lower.