Campbell's is reaching for the oldest tool in the consumer staples playbook: price hikes. The company, known for its soups and snacks, is betting that customers will stomach higher prices even as they feel the pinch of inflation themselves. But Wall Street isn't so sure, and shares took a hit on Thursday.
The stock fell after Campbell's reported a mixed bag for its fiscal fourth quarter and issued guidance for fiscal 2027 that came in below what analysts had penciled in. The company also made a bold move to cut its dividend by more than a third, a decision that might raise eyebrows but is aimed at shoring up the balance sheet.
Campbell's Earnings Snapshot
Let's dig into the numbers. Adjusted earnings per share of 39 cents matched expectations, but sales of $2.137 billion missed the $2.146 billion consensus. Sales dropped 8% year over year, though that includes a 7-percentage-point drag from the extra week in the prior year. On an organic basis, sales declined 1%.
Restructuring charges ballooned to $52 million from $7 million a year earlier, a sign that the company is serious about reshaping its cost structure.
To offset persistent inflation and protect margins, Campbell's has raised prices across about 60% of its portfolio, with an average increase of 4% to 5%. The company is assuming a price elasticity of 1.5, meaning it expects a 1.5% drop in volume for every 1% price increase. Management acknowledges these hikes will hurt volumes and net sales, but they expect a net benefit to the bottom line, with stronger price realization kicking in from the second quarter.
The financial strain is evident: adjusted gross profit fell 14% to $611 million, and adjusted gross margin contracted 190 basis points to 28.6%, largely due to inflation, tariffs, and other supply-chain costs. Adjusted EBIT declined 25% to $242 million, driven by the lower gross profit.
Full-year operating cash flow slipped to $1 billion from $1.1 billion, and capital expenditures dropped to $361 million from $426 million. The company returned $496 million to shareholders, mostly through dividends.
Campbell's Cuts Dividend By 36%
In a move that might surprise income investors, Campbell's reduced its quarterly dividend to 25 cents per share from 39 cents. That brings the annualized dividend to $1 from $1.56, a 36% reduction. The company says the move will help accelerate debt reduction, a priority given the current interest rate environment.
The dividend is payable Nov. 2, 2026, to shareholders of record as of Oct. 1, 2026.
New Cost-Savings Plan Targets $500 Million
Campbell's also unveiled a new cost-savings program aiming for $500 million in savings by fiscal 2030. Some actions are already underway, including plant closures and recently completed workforce reductions. The company has identified about $350 million of incremental savings within that target, coming from headcount reductions, procurement initiatives, and supply-chain network optimization.
Procurement efforts will cover both direct and indirect spending. Campbell's expects headcount reductions and procurement initiatives to generate significant savings in the current and following fiscal years.
This new program builds on the previous $375 million PEAK program, under which Campbell's realized $225 million in savings through the latest fiscal year. The remaining $150 million will roll into the new program, so the total is a bit of a moving target.
Fiscal 2027 Outlook Falls Short
Looking ahead, Campbell's expects fiscal 2027 adjusted EPS of $1.65 to $1.80, which is below the $1.85 analyst estimate. That's a tough pill to swallow for investors hoping for a rebound.
The company expects organic net sales in Meals & Beverages to decline about 3% at the midpoint in the first quarter, with performance staying relatively consistent throughout the year. Its Snacks business is expected to hit a low point in the first quarter before improving modestly, helped by innovation, brand support, and stronger execution.
Inflation is projected to remain a 5% to 6% headwind, and logistics costs are expected to rise at a double-digit rate before improving toward year-end. Campbell's also expects negative price realization in the first quarter, but that measure should turn positive in the second quarter as the recent pricing actions take effect.
Campbell's First-Quarter Margins Face Pressure
The first quarter won't be pretty. Heavy investment in Meals innovation, slotting fees, activation, and holiday trade programs is expected to pressure margins. Campbell's expects gross margin to decline significantly in the first quarter before improving in the second quarter, turning positive in the second half. For the full year, the company expects a decline of about 50 to 100 basis points.
EPS is also expected to fall sharply in the first quarter before improving sequentially, with growth turning positive by the fourth quarter. It's a story of short-term pain for long-term gain, but investors are clearly skeptical.
CPB Price Action: Campbell's shares were down 9.23% at $21.58 at the time of publication on Thursday, according to market data.
