Campbell’s Reports Weak Q2 2026 Results, Cuts Full-Year Guidance

Key Highlights

• Net Sales: Decreased 5% to \$2.6 billion; organic sales down 3%.
• EBIT: Dropped 17% to \$273 million (GAAP); adjusted EBIT fell 24% to \$282 million.
• EPS: Down to \$0.48 (GAAP); adjusted EPS plunged 31% to \$0.51.
• Cash Flow: Operating cash flow year-to-date was \$740 million; \$263 million returned to shareholders via dividends and share buybacks.
• Storm Disruption: January storms caused shipment delays, impacting net sales by approximately 1%, adjusted EBIT by ~\$14 million, and adjusted EPS by ~\$0.04/share.
• Guidance: Full-year fiscal 2026 guidance was lowered, reflecting continued weakness, especially in the Snacks segment.

Detailed Financial Performance

Campbell’s second quarter of fiscal 2026, ended February 1, 2026, saw broad-based declines. Net sales dropped to \$2.564 billion from \$2.685 billion, with organic sales down 3%. EBIT fell to \$273 million (down 17%), and adjusted EBIT was \$282 million, down a steep 24% year-over-year. Diluted EPS was \$0.48 (down 17%), with adjusted EPS at \$0.51, a sharp 31% decline.

Segment Breakdown

• Meals & Beverages: Net sales declined 4% to \$1.65 billion. Excluding the noosa divestiture, organic sales were down 2%, mainly due to declines in core U.S. soup, Prego sauces, foodservice, and V8 beverages. Rao’s brand was a bright spot, surpassing \$1 billion in trailing 12-month sales. Segment EBIT fell 15%, mainly due to lower gross profit and divestiture effects, partially offset by lower marketing/selling expenses.
• Snacks: Net sales fell 6% to \$914 million, primarily driven by declines in chips and pretzels, fresh bakery supply constraints, and weak contract manufacturing. Segment EBIT dropped a staggering 39%, driven by lower gross profit and higher costs.

Margins and Expenses

• Gross Profit: Fell to \$717 million (from \$819 million); margin shrank to 28.0% from 30.5%.
• Adjusted Gross Profit: Down to \$710 million; adjusted margin dropped 270 basis points to 27.7% due to inflation, supply chain costs, tariffs, and unfavorable mix, partly offset by cost savings and productivity improvements.
• Marketing & Selling Expenses: Decreased 2% (to \$252 million); adjusted expenses down 3% (to \$248 million), mainly from lower selling expenses and cost savings.
• Administrative Expenses: Down 3% to \$160 million; adjusted down to \$152 million, aided by cost savings but offset by higher benefit-related costs and inflation.

Cash Flow and Shareholder Return

• Operating Cash Flow: \$740 million YTD (vs. \$737 million prior year).
• Capital Expenditures: \$227 million YTD (vs. \$211 million prior year).
• Shareholder Return: \$237 million paid in dividends; \$26 million in share repurchases YTD. \$172 million remains under the Sept 2024 buyback program and \$301 million under the Sept 2021 program.

Cost Savings Initiatives

Campbell’s delivered \$20 million in savings this quarter, reaching \$180 million towards its \$375 million target by fiscal 2028. These savings are intended to offset tariff and other headwinds.

Price Sensitive Developments & Shareholder Risks

• Guidance Cut: Full-year FY26 guidance was lowered due to continued Snacks weakness, incremental trade investments, and a more cautious outlook. The company now expects:
  • Organic net sales: -2% to 0% (previously -1% to +1%)
  • Adjusted EBIT: -20% to -17% (previously -13% to -9%)
  • Adjusted EPS: \$2.15 to \$2.25 (formerly \$2.35 to \$2.55; FY25 was \$2.91)
• Storm Disruption: Shipment delays and supply chain costs caused by January storms impacted performance, a risk factor that may persist.
• Cost Pressures: Inflation, tariffs, and supply chain challenges continue to pressure margins, especially in Snacks.
• Divestitures: Recent sales of noosa yoghurt and Pop Secret impact YoY comparisons and ongoing segment performance.
• Acquisitions/Strategy: Announced intent to purchase 49% of La Regina di San Marzano and La Regina Atlantica, subject to customary conditions, with \$2 million in acquisition-related costs already booked.
• Impairments: Major impairment charges in FY25 (total \$176 million pre-tax on trademarks, including Snyder’s of Hanover, Late July, and Allied brands) may raise concerns about the value of acquired brands and future write-downs.
• Litigation: Ongoing legal costs tied to the divested Plum baby food business and other litigation matters continue to be a drag on results.
• Supply Chain and Tariffs: Continued risk from tariffs, inflation in labor/materials, and supply chain disruptions.
• Change in Latin America Segment Reporting: Latin American retail business now managed under Meals & Beverages rather than Snacks as of FY26, with retrospective adjustments to segment reporting.

CEO Commentary

“Our core Meals & Beverages portfolio delivered in-market consumption growth in the second quarter, highlighted by the Rao’s brand surpassing \$1 billion in trailing twelve-month net sales. Overall results, however, fell short of our expectations due to weaker-than-expected performance in Snacks and storm-related shipment disruptions. To stabilize Snacks, we are taking decisive action, focusing on sharpening our value proposition, new product innovation, and in-market execution. We are also accelerating cost saving initiatives to mitigate cost headwinds and support continued investment in our brands. Given our first half results and the current operating environment, we are lowering our full-year outlook to reflect a more cautious view for the balance of the year. At the same time, our brand portfolio fundamentals remain sound, and we continue to be confident in our ability to create sustainable profitable growth over the long-term.” – Mick Beekhuizen, CEO

Outlook and Risks

Campbell’s now faces a more challenging environment than previously anticipated, with ongoing cost inflation, supply chain risks, and competitive pressures in both Meals & Beverages and Snacks. The guidance cut, storm disruptions, and margin compression are all likely to weigh on investor sentiment and could impact share price performance. Furthermore, impairment charges on acquired brands and ongoing litigation add to the risk profile.

Conclusion

Campbell’s Q2 2026 results were significantly below expectations, with broad-based declines in sales, earnings, and margins. The lowered full-year guidance, ongoing cost pressures, and underperformance in the Snacks segment are substantial concerns for investors and are likely to impact the stock’s valuation in the near term. While cost savings programs are ongoing and the brand portfolio remains strong, the near-term outlook is cautious, and execution risks remain elevated.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Investors should perform their own due diligence and consult with a financial advisor before making any investment decisions. The author and publisher are not responsible for any actions taken based on this information.

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