Campbell's Co Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Kenneth Goldman - JPMorgan Chase & Co - Analyst : Mark, a hearty congratulations to you. It's incredibly exciting to hear about this. Doesn't happen every day where you see one of our CEOs going to the NFL. So it's unique, and I'm happy for you. I wanted to ask about the gross margin and marketing. They came in both a little bit below consensus expectations. You provided a helpful breakdown of the gross margin drivers as usual. But just versus your own expectations, I know the quarter broadly came in line with what you were looking for, you said. But as we think about the gross margin and marketing kind of those building blocks of the EBIT margin, how did they perform versus what you anticipated coming into the quarter?

Question: Kenneth Goldman - JPMorgan Chase & Co - Analyst : Okay. And before my follow-up, I've already been messaged by 2 people saying I was overly effusive in my praise. So I guess I'll throw in a fly eagle fly to offset that. But the (multiple speakers)

Question: Kenneth Goldman - JPMorgan Chase & Co - Analyst : I don't acknowledge that. So the bar for 2H remains, I guess, a bit higher, just to jump back to Campbell, than some investors might be comfortable with, I guess, is the right way to say it. Is there anything unusual in terms of timing benefits, tailwinds we should be considering as we model the back half of the year? Just things that may not be obvious to the observers of the company at first glance.

Question: Andrew Lazar - Barclays Bank - Analyst : Let me add my congratulations to you as well, Mark, and also congratulations to Mick. Maybe just following on with the prior question for a minute around the back half. Organic sales came in sort of down 1% in the quarter versus expectations for kind of a flattish result. And you now expect flat organic sales in fiscal 2Q, where the Street was looking for a sort of a modest year-over-year increase. And I guess we've seen many calendar year reporters in the food space recently discussed sort of their expectations for another below-algorithm year next calendar year, which would kind of correlate to Campbell's back half of your fiscal '25 when you expect results to continue to sort of improve. So I guess I'm just trying to get a sense of I know you went through some of the drivers just now around the back half. But I mean how much are you taking into account some of those factors, right, that many industry players are already kind of saying, hey, next year is kind of not a lot of cause, but like not going to be kind of where we want it to be. I'm trying to like square those 2 things, I guess.

Question: Andrew Lazar - Barclays Bank - Analyst : Got it. That's really helpful. And then just with the modest increase, it seems like in full year sort of marketing and promotional investment and such, most of that to fall in 2Q. Where would that sort of put you from a promotional perspective at the end of this year versus, let's say, where you were a couple of years ago, right, prepandemic and all of that. Would that still be relatively in line with where you were? Or does it take you beyond that? Just trying to get a sense of context there.

Question: Peter Galbo - BofA Securities - Analyst : Congrats to Mark and to Mick. And Mark, I guess, we'll look forward to Jan Daniel's being in the Campbell's Chunky commercials next year.

Question: Peter Galbo - BofA Securities - Analyst : Mark, maybe just one kind of nuance question that we're getting this morning just around the inventory timing shift related to Thanksgiving. A, just maybe you can unpack that a bit more, given your kind of an October quarter end with Thanksgiving later? And if you can just quantify at all kind of how much you think it moved?

Question: Peter Galbo - BofA Securities - Analyst : Got it. Okay. No, thanks for that. And if I just go back to the slide you had on Rao's and some of the sourcing occasions that you mentioned, I'm just curious kind of what data you're looking at internally or what you're seeing that suggests that that's actually the case that you are seeing Rao's specifically kind of source share from some of the Italian concepts in the restaurant channel?

Question: Robert Moskow - TD Cowen - Analyst : And Mark, congratulations to you. Best wishes. One question on Snacks. The margins were around 13.5% in the quarter. That's quite a bit lower than what I had expected. And I think what Campbell expected too. And I just wanted to know, with this environment for pricing being under pressure and cost -- you seem to have some supply chain inflation that's a little bit higher than what I would have thought. Can you still hit your margin target for this year? I think there was like a 50-basis point expectation for margin expansion. And maybe just longer term, I think we're all kind of concerned that the salty snacks category took prices too high during the pandemic and that there's a value correction -- value equation correction that needs to be established going forward. So how does that inform the 17% margin goal longer term?

Question: James Salera - Stephens Inc. - Analyst : Mark, just want to echo the congratulations. It's tough to find an industry that's more exciting than packaged food, but I think Pro Football categorized as one. I think I wanted to just maybe follow up on some of the comments on snacking. And correct me if I'm wrong here, but I believe that the level of volume sold on promo is still lower than pre-COVID. And given some of the industry category headwinds, rather, is the industry just taking kind of, let's say, a more tactical approach on promo and just being less broad-based than in the past? And maybe if I can back on the second part to that question. If the consumer does normalize throughout the year, do some of these price gap distinctions just become less important, and that's kind of what the industry is looking to. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CPB.OQ - Q1 2025 Campbell's Co Earnings Call

Question: James Salera - Stephens Inc. - Analyst : Great. And then if I could maybe sneak in a higher-level question. In your prepared remarks, you talked about really strong momentum with rails with among millennial households. And that doesn't quite fit with maybe some of the broader narrative on -- it's a very premium product and millennials tend to have a little bit less spending power than other groups. And so are there any learnings that you can take from Rao's to apply to other parts of the portfolio where maybe you could have a premium or better-for-you clean label value proposition that would drive consumer groups that would typically not spend on premium products to engage with different brands?