Executive Summary
Campbell Soup Company reported QQ1 2025 results with a reported net sales increase of 10% to $2.772 billion, led by the Sovos acquisition, while organic net sales declined 1% due to dynamic consumer conditions and timing-related retailer inventory shifts tied to Thanksgiving this year. Management highlighted meaningful progress on the Sovos integration and continued momentum from Rao's, with Leadership Brands delivering growth in both dollar consumption and market share.
Adjusted EBIT rose 6% year over year, and adjusted EPS was $0.89, with the acquisition broadly neutral to adjusted EPS in the quarter. The margin mix was affected by the higher proportion of Rao's and Sovos (lower-margin profiles) versus legacy Campbell businesses, yielding a gross-margin compression of about 70 basis points. Nonetheless, the company reinforced its full-year guidance and signaled continued margin and cost-saving acceleration through a new $250 million cost-savings program, with pro forma Rao's growth now expected to exceed 10% for fiscal 2025. Free cash flow was solid at $115 million for the quarter, and Campbell reiterated its objective to restore debt leverage toward 3x by 2027 while continuing to return cash to shareholders via dividends and share repurchases. The upcoming Q2 holiday period remains a critical milestone for progress toward full-year commitments.
Overall, Campbell is navigating a progressively improving consumer environment, leveraging Sovos and Rao's to offset near-term organic softness, while investing behind leadership brands and efficiency programs to position the business for sustainable, long-term earnings growth.
Key Performance Indicators
QoQ: 7 366.67% | YoY:-6.84%
QoQ: 7 400.00% | YoY:-7.59%
Key Insights
Revenue (Q1 2025): $2.772B, up 10.0% YoY; organic net sales: -1% YoY (excluding acquisitions, divestitures, currency). In-market consumption with Sovos pro forma: +2% across the company; Meals & Beverages pro forma net sales +2% (Sovos contribution) and in-market consumption +5%. Gross profit: $867M; gross margin 31.28% (0.3128).
Operating income: $367M; operating margin 13.24%. EBITDAR: 0.1717; interest expense: $87M; depreciation & amortization: $109M; EBITDA: $476M.
Net income: $218M;...
Financial Highlights
Revenue (Q1 2025): $2.772B, up 10.0% YoY; organic net sales: -1% YoY (excluding acquisitions, divestitures, currency). In-market consumption with Sovos pro forma: +2% across the company; Meals & Beverages pro forma net sales +2% (Sovos contribution) and in-market consumption +5%. Gross profit: $867M; gross margin 31.28% (0.3128).
Operating income: $367M; operating margin 13.24%. EBITDAR: 0.1717; interest expense: $87M; depreciation & amortization: $109M; EBITDA: $476M.
Net income: $218M; net income margin 7.86%. Earnings per share (diluted): $0.72–$0.73 range (reported $0.73; diluted $0.72). Weighted-average shares: 298M (basic) / 301M (diluted).
Cash flow: Operating cash flow $225M; capital expenditures $110M; free cash flow $115M. Net debt to adjusted EBITDA: 3.7x; cash and cash equivalents: $808M; revolver availability approximately $1.85B.
Balance sheet snapshot: Total assets $16.11B; total liabilities $12.27B; total stockholders’ equity $3.84B. Total debt $7.92B; net debt $7.11B. Dividend increased 5% to be payable Jan 27, 2025. Noosa divestiture later planned for calendar year 2025; forecasted impact to EPS ~($0.01) in fiscal 2025.
Guidance: Full-year fiscal 2025 guidance reaffirmed. Q2 expected organic net sales flat vs. prior year with positive volume/mix and Adjusted EPS in the low $0.70s. Net price investment targeted to be <100 bps for the year; cost savings accelerated via the $250M program with FY25 savings raised to ~$90M. Sovos pro forma growth now expected slightly above 10% for FY25 and accretive to adjusted EPS in 2H and for the full year. 53rd week provides a $0.07 tailwind in Q4. Management targets debt leverage reduction back toward 3x by 2027.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.77B |
10.09% |
20.89% |
| Gross Profit |
867.00M |
10.03% |
28.44% |
| Operating Income |
367.00M |
2.51% |
376.62% |
| Net Income |
218.00M |
-6.84% |
7 366.67% |
| EPS |
0.73 |
-7.59% |
7 400.00% |
Key Financial Ratios
operatingProfitMargin
13.2%
operatingCashFlowPerShare
$0.76
freeCashFlowPerShare
$0.76
dividendPayoutRatio
53.2%
Management Commentary
Key management themes from the QQ1 2025 earnings call:
- Strategy and brand momentum: Mark Clouse highlighted that 'Leadership Brands showed growth in both dollar consumption and share' and that Rao's and Sovos are driving top-line momentum, with 'in-market consumption positive 2% pro forma' for the group. He also noted that Rao's growth exceeded initial expectations and was 'slightly above 10%' pro forma for FY25, reinforcing the argument for premiumization alongside mainstream growth.
- In-market dynamics and timing: The team attributed the organic sales decline of 1% largely to 'the later timing of the Thanksgiving holiday this year' and retailer inventory movements, with in-market consumption shifting favorably for the Sovos/Rao's mix. Carrie Anderson added that ex-Sovos, the base business margin was relatively stable, signaling that mix is the key near-term driver of gross margin movement.
- Margin and cost management: The executives discussed a 70 bp gross-margin decline largely due to Sovos and Rao's mix, offset by productivity gains and cost savings. They disclosed about $30M of savings under the $250M cost-savings program in Q1, including $9M from Sovos integration. The plan to accelerate savings to $90M in FY25 reflects a pragmatic stance to fund growth investments.
- Guidance and outlook: Both Mark and Carrie reaffirmed FY25 guidance, emphasizing sequential progress into Q2 and a more favorable back-half trajectory as Sovos moves to organic growth and leadership-brand mix strengthens. They cautioned that a prolonged consumer recovery could keep the lower end of the guidance range in play, but the plan includes a modest net price offset and productivity gains to support margin resilience.
- Capital allocation and leverage: The company emphasized disciplined capital allocation, a 5% dividend increase, and debt-refinancing activities (e.g., $1.15B bonds) contributing to a lower near-term interest burden. Management reiterated the goal to return to a 3x net debt/adjusted EBITDA target by 2027 while maintaining investment-grade ratings.
"We began fiscal 2025 with a first quarter generally in-line with our expectations, with net sales up 10% reflecting the momentum that Sovos added to our top-line performance. Organic net sales were down 1% reflecting a continued dynamic consumer environment and some impact due to movements in retailer inventory levels influenced by the later timing of the Thanksgiving holiday this year."
— Mark Clouse
"The growth of Sovos, and specifically the Rao’s brand, is exceeding our expectation, and adding important momentum to our Meals & Beverages division and the company. We reaffirmed our fiscal 2025 guidance which reflects our expectation of steady progress and incorporates an appropriate level of pragmatism."
— Mark Clouse
Forward Guidance
Campbell reaffirmed its full-year fiscal 2025 guidance. Key elements include:
- Organic net sales: flat to slightly down in Q2 with positive volume/mix, followed by modest improvement through the second half as Sovos accelerates to organic growth.
- Adjusted EPS: Q2 expected to be in the low $0.70s, reflecting increased marketing/selling investments to support holiday launches and ongoing innovation; full-year EPS is forecast to progress, aided by productivity gains and the normalization of net price impact, with the cumulative effect of Sovos integration and Rao's performance.
- Net price and cost savings: Less than 100 bps of net price investment for the year, with a strong pipeline of savings from the new three-year, $250M program; FY25 cost savings now expected around $90M (up from $70M previously).
- Interest expense and financing: Full-year adjusted net interest expense expected to be about $340–345M, aided by lower coupons on refinanced debt.
- Sovos and Rao's: Sovos pro forma growth now expected to be slightly above 10% for FY25 and accretive to adjusted EPS in 2H and for the full year; Rao's growth trajectory remains favorable with long-term mid-single-digit growth and a larger household penetration opportunity than Rao's current household reach implies.
- Second-half cadence: Expect modest organic growth acceleration as Sovos contributions move into the base business and as leadership-brand mix improves, partially offset by lower broth net sales versus a prior year.
- 53rd week: A $0.07 benefit expected in Q4 from the fiscal calendar.
- divestitures and liquidity: The noosa divestiture is expected to close in calendar year 2025; the guidance does not yet reflect any potential dilution from the transaction, with a plan to update guidance after closing. Investors should monitor holiday season performance, supply-chain costs, and the ongoing integration synergies as the primary factors influencing downside/upside to the forecast.