Campbell’s Co, the maker of Prego pasta sauce, exceeded third-quarter sales and profit estimates on Monday, driven by strong demand for canned food and soups. As economic uncertainty looms, more consumers are opting to eat at home, fueling the company’s growth during these challenging times.
Impact of Economic Uncertainty on Consumer Behavior
With fears of a potential recession and higher prices due to tariffs, many consumers are turning to more affordable alternatives to dining out. Campbell’s CEO Mick Beekhuizen commented, “Consumers continue to cook at home and focus their spending on products that help them stretch their food budgets.” This shift toward home cooking has benefitted the company, as more people seek affordable meal options in response to rising costs.
Strong Sales, but Challenges Persist in Snacks Segment
For the quarter ending April 27, Campbell’s reported a 4% increase in net sales, reaching $2.48 billion, surpassing the analysts’ expected $2.43 billion. This growth was driven by the meals and beverages segment, which saw a 7% rise in volumes. However, the snacks division experienced a 5% decline, highlighting ongoing challenges in that area.
Fiscal Outlook and Impact of Tariffs
Despite the positive quarter, Campbell’s has maintained its fiscal 2025 sales growth forecast of 6% to 8%, excluding the impact of tariffs. However, the company projected that annual adjusted profit per share will be at the lower end of its previous forecast of $2.95 to $3.05, largely due to weak demand in the snacks business. The company anticipates a 3-5 cent per share impact from the tariffs already in place.
Strategies to Mitigate Tariff Effects
To mitigate the impact of tariffs, Campbell’s is exploring pricing actions and working closely with suppliers to secure better sourcing and lower product costs. This approach aims to reduce the financial strain caused by the levies, which have affected the company’s bottom line.
Stock Performance and Future Prospects
While Campbell’s shares have fallen by approximately 18% this year, they rose about 1% in early trading following the announcement. Analyst Max Gumport from BNP Paribas noted that while Campbell’s core growth drivers, including snacks and the Rao’s brand, are lagging, the company’s overall performance still exceeded expectations, with an adjusted per-share profit of 73 cents compared to the anticipated 66 cents.
