Campbell Soup Stock

Perfect. Welcome back everybody. Thanks so much for joining us. And welcome back for our fireside chat with The Campbell's company. With us today are President and CEO, Mick Beekhuizen; and CFO, Todd Cunfer, welcome to you both.

Thank you.

Thanks for being here.

Thank you for having us.

Maybe, Mick, we start with you. Perhaps it makes sense to start by maybe taking a step back a little bit. Over the past several years, Campbell's navigated a meaningful amount of volatility. The company has also experienced some persistent volume pressure, particularly within Snacks, significant margin compression and rising balance sheet constraints. That ultimately culminated in a series of difficult decisions announced last week, including a dividend reduction, a substantially larger cost savings program, plant closures, additional pricing and a more concentrated approach to investment.

I guess from your perspective, what happened over the past several years that sort of brought the company to this point? And what are the most important lessons that inform the strategy you're sort of putting in place currently?

Yes. So maybe kind of stepping back, first of all, with where we're at right now. And when you look at how do we get here? So the consumer really evolved over the past years. And you see that play out across our portfolio. If I look, for instance, on the Snack side, you see we are operating in categories that are maybe growing currently about 1 percentage point or so. They were growing close to 4, 5 percentage points in the past.

Consumer has not only increased their focus on the value side, but it has also become very intentional with their purchases. And that's what you really see play out on the snacking side. So then maybe on the Meals & Beverage side, there's a little bit like a contrary trend going on where, again, back to the focus on value intentionality. And with that, at-home cooking is a continuous trend, and you heard us talk about it on the earnings call as well. And that's a trend where actually the Meals & Beverage portfolio is benefiting from.

We obviously, on the one hand, have that with brands that are within the broad category, but at the same time, also Rao's continues to benefit from that. So we refer to that more broadly as semi-scratch cooking and semi-scratch cooking is a trend that is working. What does that mean for me? And how does that really influence our, call it, like broader strategic choices.

First of all, we need to make sure that we're very close to the consumer. Really think about or really look at what does the consumer want, what does the consumer need and making sure that we pull that through in each of our brands. And when we are activating or when we're supporting our brands that we obviously connect that consumer need, but at the same time, also when we're doing that with innovation. And I'm sure we'll talk more about that aspect.

And that goes back to Snacks. A good example of that is Goldfish. The core household with families is what we need to focus on. That's an area where Goldfish needs to win. And that is also where Goldfish has a right to win. So that means with brand activation, like the snack that smiles back as well as with some of the innovation that we're currently working on with better-for-you a gluten-free Goldfish plays right within that space.

Then at the same time, on the Meals & Beverage side, what else can we do with semi-scratch cooking as the consumer continues to focus on that. What does that mean for us from an innovation perspective or even how can we further accentuate other parts of our portfolio, not only during the holiday period, but also during everyday cooking.

I'd say so lessons learned, it is really back to focus on the consumer. There's no silver bullet. We need to make sure that we are focused on everyday great execution, and we need to support our brands with marketing as well as innovation in the area where the consumer really wants to be.

You described current results as unacceptable and emphasize that Campbell is no longer waiting for the environment to improve around it. I guess as investors assess the sort of the reset, what's fundamentally different about the way Campbell will operate going forward versus simply doing more of the same things maybe with greater urgency? And where do you think the organization had been either too slow or insufficiently focused or maybe lacking the capabilities needed to respond to this rapidly changing consumer environment?

Yes. First of all, it all starts with the team. It starts with the people and making sure that we have great people in all the different areas. I've made very conscious choices in and around my leadership team. We have a couple of great leaders that are waking up every day on the commercial side to drive the businesses, but they are also building teams underneath them, again, that are doing the same.

What does that mean is we -- when I was President of Meals & Beverage, I put in place a category model. So when I was the President, I made sure that I had individual leaders, general managers that were leading each of the different businesses within the Meals & Beverages portfolio. They wake up every day with a cross-functional team. They have to drive that category and at the same time, also have full P&L responsibility.

We implemented that same structure this past year in Snacks. So now we have one consistent operating model across the organization. At the same time, we built our growth office in order to make sure that we take advantage of scaled commercial capabilities across the organization. These are not capabilities that are new to CPG. However, they are opportunities for us as a Campbell's organization. So it is, for instance, revenue growth management. You heard us talk a little bit about that on the earnings call as well. It's a capability that has been around for CPG. However, this is an opportunity for us at Campbell's in order to make sure that we utilize and -- or build and utilize that capability across the organization. So we are building those type of capabilities within the growth office. So it's people, structure, call it, like accountability.

Then the other piece that I mentioned earlier is a relentless focus on the consumer and making sure that the consumer is front and center. Again, nothing new. I know CPG, the C stands for consumer check. That is nothing new for the industry. However, we need to make sure that we live into that as an organization. And then we shouldn't get too enamored by the innovation, but we should make sure that it truly fulfills a consumer need. And that's why we are enthusiastic about it.

So the way that we are thinking about it is much more about, identify these consumer insights and then rapidly turn them into relevant food and brands. And that then also comes back to our brands and our brand support. We have a portfolio of 16 leadership brands, as we've talked about in the past. That is a relatively big portfolio. There are -- not every opportunity across the portfolio is equally weighted.

So as a result, we're making very conscious choices about where do we have a real right to win, how are we going to be able to grow and as a result, allocate resources accordingly. A good example of that, for instance, with Goldfish, we need to grow, we need to win. And as a result, that's a brand that we're putting the appropriate amount of resource behind.

The fiscal '27 outlook understandably reflects a difficult transition year. Organic sales expected to decline between 2% and 4%, EBIT down 7% to 12% and EPS down about 17% to 24%. I guess what milestones would give you confidence that the business has moved from restructuring and stabilization back towards sustainable value creation?

Yes, sure. Take that one please.

Yes. So look, I think the biggest factor for me is our ability to stabilize and grow gross margin. So the way it's going to sequence out for the year, Q1 is going to be very difficult. We have no pricing. In fact, we actually have some pricing investments. We're going to have some deleverage in our P&L from Snacks declines. So Q1 is going to be tough.

Q2 gross margin, we're going to -- as the pricing kicks in and some of the cost savings initiatives start to build, Q2 gross margin will still be down, but it will get a lot better.

In the second half, we anticipate gross margins will actually expand. That is the key to me to a healthy business that we can start to invest and to grow behind. And if we can end the year with gross margin expansion, that sets us up really well for FY '28, where we can invest in our businesses and start to grow the top line. So to me, the biggest to your question, gross margin stabilization and then expansion is probably the best thing to watch throughout the year.

Got it. Snacks organic sales declined about 6% in the fiscal fourth quarter with consumption down about 5%, while segment operating earnings declined about 34%. If we fast forward 12 months, what needs to be different for you to conclude that the turnaround is working? Should investors primarily focus on improving consumption, stabilization of market share, better execution or recovery in the segment's margin structure?

I look at it more as, yes, so Q1 is continuing to be a challenge from an overall revenue perspective on Snacks, and we've talked about that. However, going forward, sequential progress, particularly sequential progress within consumption and over time, stronger performance from a market share perspective. However, within Snacks, that all doesn't come at the same time.

When you look at our overall portfolio. I mentioned Goldfish earlier. I'm encouraged by what we're seeing right now within Goldfish and the work that we're doing, particularly in and around the core. So as a result, I feel more confident around the progress in and around Goldfish. We're making good progress in and around Pepperidge Farm that is within the fresh bakery side as well as on the cookie side. However, that's going to be probably a little bit more choppy.

And then on the salty side, we have a little bit more work to do. So I do expect, although we're working on all these different pieces, I do expect sooner progress on Goldfish versus some of the other pieces.

Company is implementing an average pricing of roughly 4% to 5% across approximately 60% of the portfolio at a time when some competitors may choose not to follow and the consumer remains pressured. How did you determine where the brands have sufficient pricing power? And what makes you comfortable that protecting profitability through price is preferable to defending near-term volume and share in those parts of the portfolio?

Sure. So again, on average, a fairly modest price increase around 2.5% to 3% across the entire portfolio. So not 3 or 4 years ago when people were taking double-digit price increases across the board. But the pricing action though modest, was kind of the last lever we have. We really felt with all the inflation, which is very significant, the #1 priority was to have as many cost efficiencies and savings programs, whether it's up in the plant or it's down in SG&A to offset that inflation.

Unfortunately, that was not enough given the extreme amount of inflation that we are seeing right now. So we had to take some pricing actions. It was very thoughtful. There was a very detailed analysis of what categories, what brands we thought we had the most ability to take some pricing on whether key components were how much private label is there, where are the price gaps, how -- where is our competitive stance within that category. So again, a very detailed analysis of where we thought we had the best ability to take price.

We are also, I think, cautiously prudent on the elasticity assumption. Usually, -- in my former life, 1:1 was kind of a typical elasticity and even during the pandemic was even less than that. So we assumed a 1.5 elasticity, some were higher, some were lower. But I think that put us in a pretty safe spot from a planning stance that we could go execute that and potentially have a little bit of upside to that. So again, not an easy decision to take price. But just given the structure of the P&L and my earlier comments around the importance of gross margins, it was necessary to price.

And thinking about the elasticity assumption, how much of the higher elasticity do you think reflects pressure on the consumer versus Campbell's current sort of competitive position? And how should investors think about the potential for elasticity to vary between, call it, Meals & Beverages versus snacks or between stronger brands and those that sort of require more work?

Yes. So as I said earlier, 1.5 is the average, but the way we modeled it, some were higher and some were lower. We pretty much assumed -- we obviously have no clue what our competitors are going to do. So again, to be conservative, we pretty much assumed that people would not immediately follow our pricing actions, and we'd be kind of out there a little bit alone. Again, the price increases are not significant, but any price increase has an impact on where you are in the marketplace. So again, we -- with the higher elasticity, we assumed we're kind of out there on our own.

Look, we do think the consumer is not as in a healthy place as they were 4 or 5 years ago, where there was a lot more cash coming out of the pandemic. People had a little more savings in their bank account. So the consumer is pressured. So some of it is clearly that. Some of it is, again, our assumption that not everyone is going to take those same actions as we do. And hopefully, we'll do better than the way we've modeled it.

Your '27 guidance assumes underlying consumption remains broadly consistent with recent trends, approximately, call it, 5% to 6% raw material and packaging inflation, double-digit logistics inflation and volume elasticity as we talked about. How would you characterize the degree of flexibility or cushion embedded in the outlook? And sort of which assumptions do you believe are most likely to determine whether results land towards the higher or sort of lower end of the range?

Yes. Look, I think we are very comfortable with the guidance that we gave. There's 2 huge variables at play. One is second half inflation and where is the oil, how does the Iran conflict settle or not settle. So there's a little bit of a variability in the second half, plus or minus around inflation. We've built in what we think is a cushion, but given this environment, you never know.

And the second one is the rate of recovery on Snacks. We have not built in much of a recovery on snacks. So if that goes better than we have planned, there is upside to the $165 million to $180 million, that would get you at the higher end of the range that we've mentioned. If the recovery is not as quick or stalls, that's the other key variable. So again, inflation snacks recovery, those are the 2 big variables out there.

Got it. And then in terms of phasing, as we talked a little bit about it before, a lot of moving pieces this coming fiscal year with negative price realization, elevated commercial investment and significant inflation weighing on the first quarter, followed by pricing being in the second quarter, productivity and cost savings becoming more meaningful in the second half.

Maybe you can level set investors on sort of the expected quarterly progression as we think about organic sales, gross margin and EPS and sort of what needs to materialize to deliver the anticipated improvement as the year progresses?

Sure. Yes. So as we laid out last week, Q1 is going to be tough. Snack volumes are going to be sharply down. We don't have any pricing kicking in yet, so that will not kick into Q2. And in fact, as you mentioned, we're actually making some pricing investments primarily on the meals area of our business, and that is really driven around execution around the key holiday period.

We feel great about those investments, but they come at a cost. We think they're going to drive a lot of volume. We think you're going to see some nice consumption increases on the meals business as we get into Q2 when that consumption actually hits around the holiday period, but that does come at a cost. And so as we get into -- Q1 is going to be a tough quarter. Q2 will get progressively better as the pricing kicks in, as some of the cost savings initiatives start to build, they will build sequentially bigger and bigger each quarter as we go through.

And as I said earlier, in the second half, we are expecting gross margin expansion after a tough first half. And in fact, in Q4, as that continues to build, we actually think we'll be EPS positive in Q4. If we can do that, we -- I think we're going to have a successful end to the year, and it again, sets us up really nicely for the following year.

The new $500 million cost saving program runs through fiscal '30, approximately $150 million rolling over from the previous program and about $350 million representing incremental identified savings. Maybe you can break down the incremental opportunity for us across sort of headcount and overhead, direct and indirect procurement, manufacturing and network optimization and some other areas. And I guess, which are the elements that carry the greatest execution risk?

Yes. So as you said, our old peak program, which went through fiscal year '28, still had $150 million left on it. That was very identified $150 million that we're going to go get. We rolled that over into a bigger, longer program through fiscal '30 for a total of $500 million. So as you said, an incremental $350 million.

The biggest incremental pieces to where we were before is, as you know, we've announced a number of headcount reductions, both in early retirement program and some involuntary cuts. Those are in place. Those are done. So those are locked and loaded. We've just launched a very substantial procurement savings project, both direct and indirect, literally every line item on the P&L will be tackled.

We have a couple of consulting partners who have done this with other major companies and have done this extremely well. So we have very clear visibility to what that looks like. So we feel very good about that.

And then in the outer years, that's tougher to quantify at this point, but we're very confident we'll get there is there's going to be some more plant network optimization that has to be done. So there's a lot of work underway there, more to come. It's going to take a little bit longer to get there, but I feel good about those. And look, there's always going to be new things that will build within that $500 million over the next couple of years.

Maybe picking up on that last point. I mean, closer in, I think the challenge is that additional pricing and assortment simplification could place some further pressure on volumes in a business that already faces meaningful fixed cost deleverage. How do you avoid a scenario in which sort of pricing improves unit economics the resulting volume pressure limits or delays the anticipated margin recovery?

So it's got to be everything, right? So we have to start to stabilize the business. We've got to start to stabilize the volumes. Even if the volumes are still down, which we do anticipate in the near term will be the case. We do have a lot of cost savings initiatives, both up in the supply chain side of the business, plus significant cost savings down in the SG&A buckets as well that we are confident that we'll be able to offset those margins.

Goldfish is both the largest and one of the most profitable brands in Snacks. And the core business focused on households with kids is, I think, as you mentioned, begun to stabilize and return to growth. What gives you the confidence that the recent improvement is sustainable rather than simply reflective of easier comparisons or sort of temporary activations?

And I guess what roles will national media, omnichannel execution, multipacks and sort of better-for-you innovation that you talked about play in returning the overall brand to, we'll call it, more consistent growth?

Yes. So again, as I mentioned earlier, I'm very, very much encouraged by the progress that we're making in Goldfish. Since we focused on that core consumer, which is really the families or the households with kids is where we're seeing that we're gaining traction. And it's not just because to your earlier point around earlier comparisons, really because of the actions that we're taking.

And on the one hand, I see it with regard to the work that we are doing right now around the national advertising campaign around The Snack That Smiles back, which is really back to, hey, that's the core consumer focus on that, the back-to-school activation that we're right in the middle of right now. But then also some of the innovation that we are launching, which is focused on better-for-you Goldfish, but really within that core consumer, so gluten-free Goldfish is a core component of that.

And then as you mentioned, I mean, there is -- I refer to that often as, call it, like in-market execution. It's around making sure that on the e-com side, we're really executing that we are making sure that we're winning in that space. At the same time, when we look at our pack type, or our packaging and making sure that we are very clearly articulating some of the benefits of Goldfish because it's a baked snack with real cheese. And some of these things, again, back to focus on the core consumer and focus on what does the consumer really care about, what -- how does that translate into what we need to do as an organization around the brand like Goldfish.

Maybe talk a little bit about the right to win in salty. Salty snacks remains the most challenged area with 4Q -- fiscal 4Q retail sales down about almost 8% and chips down over 9%. As you assess brands, let's call it, such as Snyder's of Hanover, Cape Cod, Kettle and Snack Factory, where does Campbell have a clear right to win? Where might the appropriate strategy be to narrow the assortment, accept a smaller revenue base or allocate less investment?

Yes. So as I mentioned, like with Goldfish, we're a little bit further in. On salty, we have much more work to do. It doesn't mean that we're not doing the work. It doesn't mean that we aren't working through the pieces, and we're making also very conscious choices around where do we have a right to win, but also what is the core consumer? And what is that core part of the portfolio where we should be winning with each of these brands.

I look at our salty portfolio as 2 pieces. On the one hand, you have pretzels. On the other side, you have chips. Within pretzels, a good example of focusing on what are these areas where we have a right to win, it is coming back to Snyder's of Hanover unflavored pretzels. And you saw this past quarter that we actually made good progress when we had the America250 activation, and you saw some positive momentum in and around the unflavored pretzel. We need to do more of that.

At the same time, with regard to Snack Factory, a couple of years ago, we made the choice to not only be in the deli aisle where the brand was born and where the brand has a very clear right to win. We were also in the salty aisle, and we had started to innovate with Snack Factory in the salty aisle. That makes for a very complicated brand positioning.

So as a result, back to the core, where do we believe we have a real right to win, not in the salty aisle, but in the deli aisle, focus on that. So -- and as a result, that's what the team is going after right now. At the same time, on chips, we have more work to do in food transparency, the chips piece where we have great brands like Late July, Cape Cod and Kettle, that space is very competitive right now. And as a result, we're working on, hey, where is a true point of differentiation because we really need to make sure that we lean into that with the brands.

Got it. More than half of the Meals & Beverage retail sales are exposed to cooking-oriented occasions. And that portfolio has grown at roughly a 5% CAGR over the past 4 years. I guess what gives you confidence that the semi-scratch cooking is sort of a durable behavioral shift rather than simply a response to, call it, near-term economic pressure? And how can Campbell expand its relevance from holiday-heavy occasions into everyday meals without requiring disproportionate investment?

I feel very good about that aspect. And it's because of the portfolio that we have and what we focused on in the past. And I'll talk a little bit more about that is if you start with what have we focused on in the past, we have often focused on the holiday occasions or special occasions where we believe with part of the Campbell's portfolio, we could win. We are finding, again, back to consumer insights that semi-scratch cooking has been a growing trend.

Semi-scratch cooking, by the way, means I am making a meal on the 30 minutes with 5 ingredients or less. So it's a, call it, like simple making food at home. That's -- our portfolio very clearly has benefited from that overall trend, and we have an opportunity to not only participate in that during the holiday period with some of our products, but also outside of the holiday period. So that is one of the -- and we refer to that as empowering everyday cooking.

So I feel like there is a big opportunity there, and we're working on that, not only with our existing portfolio, but also with some of the innovation like the launch of condensed sauces that we just launched under the Campbell's name. Then at the same time, back to kind of our broader portfolio, if I look at Rao's, Rao's also plays right within that consumer occasion. And Rao's has obviously grown -- has had very healthy growth rates. And I'm relatively confident that with all the work that we're doing, that we're going to be able to continue to grow that brand way beyond where it's currently at.

Yes. Yes. On Rao's, I mean, continues to deliver strong growth, household penetration, 19%, right? Sauce consumption was up high single digits last year. How do you frame the remaining runway in core pasta sauce versus the adjacencies such as soup, pasta and frozen? And how do you ensure the expansion creates incremental usage occasions without maybe stretching the brand beyond what makes its sort of premium proposition distinctive?

So again, sauce is BOSS. We always say that within the Rao's brand. The brand, as you're pointing out, has grown significantly, currently 90% household penetration, which is about 300 basis points higher than when we bought the brand a couple of years ago. That being said, that is still significantly below where a brand like Prego is.

If you look at also the unaided awareness metrics, you see that a lot of people don't know the Rao's brand yet. People haven't tried the Rao's brand yet. So continued focus on brand building, which we've started now probably about like 18 months ago or so, and we invested in the brand last year, we are going to continue to invest in the brand this coming year or during this fiscal year. It's important to continue to get the brand out there, and that should allow us to continue to build that overall household penetration within sauce.

That being said, even within sauce, we've launched some great innovation. Of course, there are some star SKUs like Marinara is working really well. I personally like Arrabbiata. If you haven't tried it yet, please try it. And then at the same time, innovation like the creamy sauces is working really well. That was innovation that we launched this past year. That's working really well. So we're going to continue to build out, call it, like the Rao's sauce franchise.

At the same time, as you're pointing out, some of these ancillary categories and the products that we've launched within that have worked. A good example is, for instance, Rao's soup, souping glass has actually worked really well for us. It grew double digit this past year. I believe there's continued opportunity there.

If you look at nearing categories like dry pasta, that works well together with the sauce. And particularly when you are selling products on an online modality like on e-com, actually bundling the sauce with the dry pasta is a great opportunity. And then we have obviously continued to grow in frozen.

Frozen really consists of 2 pieces right now. It's on the one in pizza, where actually we just now reduced the price to slightly below $10. So it's $9.99, which is actually a price point that we believe is very important for the consumer back to a consumer that's very focused on value. And as a result, I'm encouraged by that move that the team has been working on.

And then at the same time, frozen meals is something that we continue to work through. So long story short, there's a lot of opportunity around Rao's. It's a great addition to the Meals & Beverage portfolio, and it plays right within that semi-scratch cooking.

Campbell ended last fiscal year at approximately 4.3x net leverage, continues to be maintaining an investment-grade rating is imperative. Can you walk through the expected contributions from retained dividend cash, working capital improvements, earnings recovery and debt repayment to reach approximately 3x? And what's a realistic time frame if the top line recovery takes a bit longer than planned?

Yes. So look, whether it is a debt holder or an equity holder being over 4x leverage is just not where we can be. So we need to get it down to 3x as quickly as possible. It's probably going to take realistically without any big action, 3 to 4 years to get there. So the dividend cut was a big step forward to show how serious we are about reducing debt.

Working capital is going to become a huge focus of mine over the last next couple of years. We're going to take out a minimum of $100 million this year and more to come. And then CapEx, where we typically spent over $400 million a year in CapEx. We only spent $370 million this past year, and we set a budget of only $300 million for fiscal year '27. That will probably be a similar budget for the next couple of years.

So we're doing a lot of initiatives to increase free cash flow and obviously stabilizing earnings is really, really important to get that leverage down. Separately, from a financing perspective, we are looking -- we're looking at potential of doing a hybrid debt facility. That comes at a higher coupon, but it also gives us about a 50% equity credit that will be very helpful to getting our leverage down as well. So this is a very important imperative for the Board, for us, and we need to get that leverage down to 3 over the next couple of years.

In our remaining sort of minute or a little less before we head to the breakout, maybe Campbell has a number of recognizable brands, right, attractive underlying opportunities. But investors have heard versions, I guess, of the stabilization and recovery message before. What gives you confidence that the combination of the sharper portfolio choices, the stronger commercial capabilities, more aggressive cost action and a less constrained balance sheet will produce a different outcome this time? And what should investors hold management accountable for over the next, call it, 12 to 24 months?

Very much what gives me confidence is facing the real, real as an organization, truly focus on the transformation, truly focus on speed, putting the consumer front and center and holding each other throughout the organization accountable towards delivering results. And at the same time, back to the speed piece really because we are collaborating across the organization with speed.

And again, all in service towards delivering on our commitments, delivering results. I also feel like when I look at where we're at, on the one hand, within Meals & Beverage, we need to make sure that we maintain the momentum that we have, particularly within the semi-scratch cooking that we talked about. And at the same time, we've got to continue to make progress on the turnaround of Snacks. It's very early stages. I'm encouraged by Goldfish, but we have much more work to do, and that's what we're going to continue to talk about and bring people along on that journey.

Okay. All right. So please join us in the breakout and join me in thanking Mick and Todd for being here today.

Thank you.

Yes, of course.

Hello, and welcome to the Campbell's Company Q4 Fiscal 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Joshua Levine, Chief Investor Relations Officer. Mr. Levine, you may begin.

Good morning, and welcome to the Campbell's Companies Fourth Quarter Fiscal 2026 earnings question-and-answer session. Earlier this morning, the company published its earnings press release and slide presentation as well as both a written and audio recording of management's prepared remarks. All of these materials can be found on the Investors section of our website. Shortly after the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call.

Joining me today are Mick Beekhuizen, President and Chief Executive Officer; and Todd Cunfer, our Chief Financial Officer. During today's discussion, management may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates and are subject to risks and uncertainties.

Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause actual results to differ materially. Management may also use non-GAAP financial measures, which we believe provide useful information for investors. Non-GAAP financial measures are not intended to be considered in isolation from or as a substitute for the financial information presented in accordance with GAAP.

Reconciliations to the most directly comparable GAAP measures are included in the appendix of our earnings presentation. Finally, please note that this is the first quarter following our acquisition of a 49% interest in La Regina whose results are fully consolidated into Campbell's financial statements. The remaining 51% interest we do not own is reflected as earnings from noncontrolling interest.

Campbell's financial statements prepared in accordance with GAAP also include certain fair value adjustments associated with the acquisition, including for the deferred payment of the second tranche due on May 4, 2027 and the option to acquire remaining interest at a future date. These fair value adjustments will be excluded from our adjusted earnings.

We will now open the call for questions. Operator?

[Operator Instructions] Your first question comes from Tom Palmer with JPMorgan.

There was some helpful commentary in the prepared remarks about expectations for the first quarter. I think some of your sales initiatives and cost savings plans ramp as the year progresses. Could you perhaps discuss expectations for organic sales growth and EPS growth as we move through the fiscal year. For instance, does the outlook sort of embed any sort of growth to close out the year at this point?

Yes, absolutely. So let me first start off with net sales and then Todd, I'll hand it over to you for EBIT. So on net sales, if we focus on the midpoint of the range of the organic net sales range down about 3%. For MMB, we expect MMB to be down slightly, and that is fairly consistent throughout the year. Then with regard to snacks, we are expecting that Q1 to be the low point and then we are assuming a modest improvement throughout the year. And it's really driven by innovation, flowing in as well as the brand support that's flowing in throughout the year and some improved execution throughout.

From a cost perspective, let's kind of go through some of the buckets in the timing. So from an inflation standpoint. Right now, we believe the inflation hit is going to be fairly consistent throughout the year about plus 5% to 6%. As we talked about, logistics is going to be around double digits. That will get a little bit better at the end of the year as we lap some of the inflation that we already have embedded in Q4 of this year.

Negative price realization we will have in Q1, as I mentioned in the prepared remarks, we are spending significantly on -- from a -- particularly from a meals perspective on innovation, some slotting fees and activation in Q1, which we're very excited about that innovation. And then we have some terrific holiday programming that will have some trade associated with it as well in Q1, but that's -- we think that's going to be fantastic. But that will put pressure on margins in the first quarter. So we'll have negative price realization in Q1. And then as the pricing action that we took at the end of the fiscal year starts to come onboard in Q2 and throughout the rest of the year, we'll have some very positive price realization, again, beginning in Q2. From a productivity and enterprise cost savings perspective, we've got some great programming there and lots of good things are going to happen from a supply chain perspective, but they will build sequentially as the year goes on. They will be more second half weighted, but we feel very confident that we're going to be able to bring those cost savings through fruition.

So from a gross margin perspective, it will be down significantly in Q1. Again, there's no pricing effect, there's negative pricing in Q1 with all the inflation that's already embedded in our plan. And then that gross margin will get much better in Q2. And then we anticipate will actually be positive in the second half. Gross margin for the total year, probably down 50 to 100 basis points but will get sequentially better as the year goes on. And from an EPS perspective, obviously, a fairly sharp decline in Q1 will get sequentially better, and we think we will be positive EPS by the fourth quarter.

I did want to follow up on the planned price increases that you've noted had been communicated to retailers already. How did these discussions go? And what are your expectations around any distribution changes surrounding these adjustments?

Let me put this way, ongoing dialogue and the conversation is appropriately constructive with the retailer with where we're at.

Yes. And let me just give you a little bit of color on there. So we took fairly modest price increase on about 60% of our portfolio. So on average, 4% to 5% price increase. We think we've taken a prudent approach to what the elasticities are 1.5x. So that will have -- the way that math works, it will have a negative impact on net sales because of the volume impact but obviously a nice impact on the bottom line.

So again, as Mick pointed out, we've had very productive conversations with retailers I think we're very confident beginning in Q2, we'll start to see some nice price realization come through the P&L.

Your next question comes from Andrew Lazar with Barclays.

I was hoping you could dive into the planned $500 million in cost saves with a bit more detail on sort of what was already in play and where specifically the incremental actions are coming from and some of the timing around it?

So $500 million program over the next 4 years, beginning this year, so fiscal year '27 to fiscal year '30. If you remember, we had a peak program of $375 million. We were able to -- that was going through actually fiscal year '28. So through this fiscal year that we just ended, we got $225 million of that $375 million. So $150 million of that peak savings that those plans are already in place, that will roll over into the new $500 million program. So it's $350 million of incremental savings that we have identified through fiscal year '30. Some of it is the head count reductions that we just announced this last quarter. That's a piece of it. The big new item that we're really excited about. There's -- we have a major, major procurement savings initiative for both direct and indirect spending, literally every line on the P&L will have a large action around to try to reduce costs. And then there'll be some additional supply chain network optimization quite frankly, will take a little bit longer for it to come to fruition. But we will get between the head count reductions and the procurement savings we think in the next -- this year and the next year, we'll get significant savings.

Okay. And then you mentioned a bit of some pricing actions, both incremental pricing and some price investments. Can you talk a little bit about just where some of the targeted pricing actions are and where some of the price investments are likely to come through.

So the pricing investments in Q1 are largely in the meals business. Again, we have some really exciting new innovation on the soup and sauces side that is just hitting the market right now. So there's, unfortunately, the typical slotting fees that we have to pay to get that innovation in plus just the programming -- off-shelf programming that we're getting in Q1. The second piece that's hitting the pricing -- negative pricing piece in Q1 is some holiday programming for -- again, for the meals business. We're going to get some terrific off-shelf display. We think it's going to really drive a lot of consumption in volume.

So that is the consumption, that's the Q1 price investment that we're making. And then from a pricing for the rest of the year, it's fairly broad-based both around snacks and meals. Again, 60% of the portfolio we are touching -- we're trying -- we did a lot of great RGM work around where we thought we had the ability to take pricing with as little elasticity impact and profit impact as we possibly could make. So we feel good about where we are. But again, it was around 60% of the portfolio on both pieces.

And then maybe to add a little bit to that back, Todd, to your point around RGM and also trade. With the buildup of the RGM capability, we have on the 1 end here lets talk, Andrew, about the list pricing component. But on the other hand, Todd also highlighted the trade component. And within that, we have been very diligent about like what are the dollars that we're spending and are these dollars working hard for the consumer.

So it's really coming back to making sure that we have the right price points at the right point in time. And particularly on the snack side, we've done a lot of work over the past 6 months going through that. And although from a net perspective, it doesn't have per se, it doesn't lead to a reduction in trade, but it's more about a reallocation of trade, which are personally things doing exactly the right thing in order to make sure that we provide appropriate value in the marketplace.

Your next question comes from Peter Galbo with Bank of America.

Maybe just to switch gears a little bit back to the quarter itself, pretty strong performance in cooking soups. I think you added new metric to one of the slides, something like up 6% or 7% in terms of consumption. And obviously, that's being driven by both. But maybe you can talk a little bit just more about the initiatives for fiscal '27 as you think about the focus on cooking soups versus RTS and how we all might think about that over the next 12 months?

Yes, yes. So you're absolutely right. If you look at our overall soup portfolio, you're seeing that the cooking side of the portfolio is working really well, and we still got some work to do on the eating side, although we're all over that. And you'll see already some of the actions coming to fruition from -- and maybe to shortly touch on that within eating within the eating soups, it is some of the innovation that we've recently launched with Campbell's Nourish or the protein soups that are out there, I believe they are exactly connecting with what a lot of consumers are looking for at a great value.

And that's a good example of the great work that our teams are doing to really get closer to the consumer and translating that into relevant innovation and doing that fast. That being said, we've got more work to do on the eating soups, Premium is working. You saw that probably in my prepared remarks, it is a rail-specific continuing to grow double digits. We're going to obviously continue to lean into that. But I'll call it the mainstream RTS portfolio in addition to the innovation that I just described, we've got more work to do and particularly in around a brand like Chunky and the team is working through that.

So more to come in and around that part of the portfolio. Now back to the piece that is working really well and it's been working well for a while, which is really cooking and it's about half of our soup portfolio. It's on the one hand, [indiscernible] as you're describing. But on the other hand, it's also condensed cooking and condensed cooking has worked really well for a while.

Now we are going to continue to lean into that, not only within the soup side. And you saw one of the slides that we included in there. If you really look at the Meals and Beverage portfolio, and you look at the retail piece of that portfolio, a little over 50% of our Meals and Beverages retail sales is exposed to cooking. And that has grown pretty consistently over the past 4 years, call it at a CAGR of about 5%. When we are talking about that, we're really focused on semi scratch which represents about 50% of all at-home cooking occasions. And that's where that consistent growth is coming from. It's a behavior that the consumer is focused on, the consumer is seeking convenience and affordability by cooking smarter. And this is an area where we have a right to win and something that we're leaning into with our portfolio. That is on the one hand soup as you just highlighted with [indiscernible] condensed cooking but then also brands like rails, which is obviously a shining star of the Meals and Beverage portfolio and of the broader Campbell's portfolio.

So what are we doing about it in order to make sure that we continue to expand the opportunity here. It is making sure that our marketing efforts are not only focused on the holiday period, but really starting to dabble more into everyday cooking. And that's back to that semi scratch piece that I just described. And by the way, semi scratch means shorter prep less than 30 minutes and less than 5 ingredients. Think about it, 5 ingredients or less. Think about it that way.

Innovation is obviously the other space. So brand support, innovation, with the innovation, a good example is condensed sauces. And then, of course, we're going to continue to focus on supporting rails and continuing to grow the brand. So that gives you, hopefully, a little bit of additional context around our focus on empowering everyday cooking.

Great. Very helpful. And Todd, maybe if I could switch to your commentary just around refinancing and capital allocation. Obviously, the dividend reset today last quarter, we had spoken about potential hybrid issuance that may come potentially at some point here. Again, today, you're talking about refinancing. So I just want to understand in the context of the interest expense guidance being higher your commentary today how we might think about kind of the capital structure going forward.

Yes. Sure. So interest expense, we're projecting will be approximately $25 million higher year-over-year. It's really 2 components to that. Part of it is the La Regina acquisition. They have their own debt, their own interest expense, which now we are starting to pick up, plus we made the first cash payment of $140 million or so. Obviously, we finance that with debt. And so there's an interest expense that will wrap around for a full year of FY '27. The other piece is the anticipation, we have a $500 million bond maturing in March. We are looking at options for refinancing that.

As I talked about on the last call, we are strongly considering a hybrid, there's potential we would do that. That would come along with a higher coupon, obviously, but we would get 50% equity credit. So more to come on that, but a hybrid is one of the considerations we have for our refinancing.

Your next question comes from Peter Grom of UBS.

I just wanted to start on snacks. First, just as we think about the organic sales outlook, what kind of embedded from a snack standpoint. You mentioned in response to Tom's question, that 1Q is the low point. So just any guardrails to think about in terms of where we start versus where you would expect to exit. What assumptions underpin the outlook? And I guess just bigger picture, you talked about taking the right steps to turn around performance. So if we were to fast forward 12 months from now, what does that look like?

Yes. Okay. Let me give first big picture around the Snacks turnaround and then Todd, I'll hand it over to you to give a little bit more context to run some of the numbers underlying the guidance. So with regard to the snacks turnaround, first of all, I'd say, it all starts with the team. And we have -- I'm very excited about the leadership team that we have in place within snacks. We've made various changes and put that team together over the past 6 to 9 months.

The team is focused and they are great operators and have a lot of confidence in what they're focused on in order to make sure that we can deliver. Now to question, what are they focused on? It's really back to 3 priorities. First of all, focusing on return to the core fundamentals. What does that mean? That is a good example of that is focus on the core consumer. And you've seen that work within Goldfish. Within Goldfish, we are focused on households with kids. And as you've seen in our Q4 results, we're seeing some encouraging trends within Goldfish. That's a good example of that focus on the core fundamentals. The other piece that within that I'd add is brand support, making sure that we support our brands, that we support our brands in the marketplace back to the campaign, the national campaign for Goldfish, the snack that smiles back as well as a national campaign for Pepperidge Farm that we're rolling out this year. And then on top of it, focused innovation. And just like what I talked about when I talked about Meals and Beverages, it is making sure that we are focused on bigger, better innovation. And a good example of that staying with Goldfish is Goldfish better for you. And that's one of the innovations that's coming out. We've obviously announced it with Goldfish gluten-free, and we are very excited about that innovation coming in later this quarter, early Q2. So that's one, return to the core fundamentals. And second priority is really creating fuel to support our brands, which is coming back to 2 pieces. First of all, the costs I talked about that earlier as well as making sure that we really utilize the RGM or revenue growth management capabilities that we're building out throughout the organization. And we gave some examples of that earlier. And then third of all, it's coming to everyday great execution. What I mean by that, it is critical to make sure that the product is available on the shelf and the consumer wants to buy it. And there's a lot of focus on that throughout the organization. It obviously comes back to making sure that we produce the right product. So there's a very clear alignment between demand manufacturing, but then obviously, also making sure that we have appropriate DSD execution in order to get the product in the store and on the shelf. And that is obviously on our everyday products, but it's also with regard to, for instance, promotional activity. And a good example of the progress that we're making there is fresh bakery if you look at the sequential improvement that we've had in Q4 versus Q3.

Now still more work to do on it. And as a result, we're highlighting that as a third focus area. So overall, I feel very good about the team. I feel very good about the actions that we're taking, and we are making progress. Goldfish is a good example, but there's obviously much more work to do. And that's what we're working through this fiscal year. So with that, Todd, I'll add over to you.

Yes. Let me give you a little more color. So look, to be very direct, Q1 is going to be a very challenging quarter for Snacks. You're seeing the consumption trends -- they're not where they need to be right now. And then we have a couple -- we have 2 points of headwind from a shipment perspective. One point is we shipped ahead of consumption last quarter for some holiday programming that we have to lap and then we have some trade investment that we have this year and we didn't have last year. So it's high single digits down for Snacks in the first quarter. Obviously, that ends up being a not very pretty P&L. So you have the sales decline, you have a pretty large fixed cost deleverage. We have a lot of inflation and logistics costs in the first quarter.

So again, just be very direct, Q1 for Snacks is going to be very, very challenging. It will start to build back as we get in the back quarters the topline will start to strengthen, it will still be down, but the volume declines will soften. The pricing will start to take hold in Q2 and for the remaining part of the year. And then there's a lot of cost savings that will start to kick in in the -- primarily in the second half of the year. The keys as kind of Mick has been pointing out, look, innovation is going to be very key to a recovery for the year. We have some terrific innovation on Goldfish and later in the year on Snyder's, which we're really excited about. And then from a brand activation standpoint, we'll have some significant media campaigns on both Goldfish and Pepperidge, which we think are terrific.

So look, we have to get the margin structure back. Mick mentioned RGM and the pricing, that's a huge part of it. Look, the 2 most profitable brands that we have in the portfolio, the Snacks portfolio are Goldfish and Snyder's. If we get those 2 starting to stabilize and eventually grow, there is a massive impact on the profitability of this business. I talked about the procurement savings, which will have a positive impact starting in the second half on both the Snacks and the meals portfolios. And then, look, we have to get the plants. We're putting some capital in there. We've got to get the plants working more efficiently, and we feel good that, that will take place over time.

Quite frankly, the network optimization is going to take a little bit longer. Yes, we closed 2 chip plants here recently. So that's a positive impact on fixed cost absorption, but there's a lot more work to do there, and it's going to take time.

That's really helpful. And then, Todd, just maybe a follow-up but zooming out, right? It's a pretty dynamic external environment. You're implementing a lot of change across the organization. So how would you characterize the level of flexibility or cushion you've embedded in the guidance?

So I would say, look, the between the high end and the low end of the guide, the $1.65 to $1.80 and also, quite frankly, on the topline, there's really 2 big variables. What is inflation in the second half. We see a context -- we're about 80% covered in the first half of our fiscal year. We're about 50% covered in the second half.

So again, we've assumed the inflation is fairly consistent in that plus 5% to 6% range across the quarters. But if it gets better or worse, that obviously is going to have an impact on where we kind of fall within that EPS range. And the other one is the timing and the speed of the Snack recovery. If that volume starts to come back a little bit better, obviously, that's going to have a very, very positive impact on our top and bottom line. If it takes a little bit longer for it to recover, obviously, that gets you to the lower end. But those are the 2 big variables.

Your next question comes from David Palmer of Evercore ISI.

Just a quick follow-up. After the first quarter, you talked about improvement partially based on pricing. Do you see consumption possibly getting to flat or better or maybe some growth by the end of the year in the Snacks segment?

We are not anticipating, David, we will get to positive around consumption. That being said, we are expecting that we're going to make continued modest progress throughout the year.

Great. And one of the things you talked about in the prepared remarks is talking about sort of getting closer to the consumer and it looks like you're doing some things that are particularly with Goldfish that make a lot of sense playing into your core, making sure the pricing is right, protein, whole grain, gluten-free offerings. I'm wondering, and it seems like that part of Snacks is more of a near end than maybe more of a confident area that you feel like this is going to turn. Could you maybe share what some of the other insights are and other areas that you also see some improvement coming within snack beyond Goldfish and I'll pass it on.

Yes. Yes. So you're right. And you see it in the numbers with regard to Goldfish. I mentioned earlier the Q4 numbers are very encouraging. And I believe the team is doing the right thing. Obviously, as you're pointing out, still work to do, but we're on the right path, and we have the right actions in place we are replicating that across the broader snacks portfolio. And that's a little bit back to where I mentioned earlier, folks on those core fundamentals is really critical across the portfolio.

A good example, for instance, on pretzels is where you've seen the focus on the unflavored part of the portfolio has actually been bearing fruit. And you saw in this past quarter that was partially driven by the America 250 implementation or activation in the marketplace that were actually saw encouraging trends within the unflavored pretzels. Now we still have work to do around the flavored part of that portfolio. but really focusing on what is the consumer looking for, what does the consumer want and making sure that we're very clear about where do we have a right to win.

Another good example of that is, for instance, within Snack Factory. In Snack Factory, we were operating both in the deli aisle as well as in the salty aisle of the grocery store. And we are very focused on where is our core right to win is the [indiscernible]. So really bringing it back to that. Another good example of that is cookies. Cookies has been a little bit more volatile throughout the different quarters. But if you step back and you look at the full year, you are actually seeing that overall cookies for the year were flat, and it's really driven by an innovation playbook that the team has focused on and is executing on. And as a result, we've had great innovation with Milano white chocolate. We've had some great innovation with [indiscernible] and we're going to continue to work through that. Also because if you think about a cookie portfolio, it's still a relatively small business. So again, it's a good example of how we are going to be able to continue to win in each of these different areas. The one area that I'd say is probably going to take us a little bit more time back to your point around kind of the buy [indiscernible] is with regard to chips. I think chips, the team is doing some really good work in order to make sure that we're improving our competitive position. They're taking proactive actions.

However, these actions are going to take a little bit of time to implement them in the marketplace. So when I step back, we are making great progress on Goldfish. We're all over Pepperidge Farm and turning that around, whether it's on the execution side on bakery or whether it's some of the exciting innovation in bakery as well as in cookies and then on the salt side, it's going to take a little bit longer, particularly with regard to the chips trajectory that I just described. Hopefully, that gives you some additional context.

[Operator Instructions] Your next question comes from Steve Powers of Deutsche Bank.

I guess finally have 1 question. Let me think about it this way. You talked about a lot of investments in consumer capabilities, revenue growth management, better forecasting, kind of stepping away from the immediate '27 needs. There's a lot of investments in forward-looking capabilities that you're trying to build? And I guess if you had those 3 years ago, -- what decisions do you think you might have made differently? Or what might -- how might the outcomes that we're looking at today to be different if you have the capabilities you're now trying to build looking dockwards?

One, I think we would have been in a better place. And I personally believe we would have also been faster. So for me, the overall environment and the consumer has been evolving pretty quickly. And it is important for us as an organization that we quickly adjust accordingly. It's really -- one of the pieces we talk a lot about internally is rapidly turning these consumer insights into relevant food and brands. The better we are at that the better we are at that and the individual brand level, the more relevant we are going to be in the marketplace and the better we are going to be to perform because we're going to make sure that we fulfill those consumer needs.

And I think the team is doing a fantastic job at leaning into it and as you see with some of the examples, whether it was the [indiscernible] example and Campbell's that I talked about earlier, the team very quickly developed or whether it's condensed sauces within Campbell's that some other great highly relevant innovation or whether it is Goldfish better for you with the gluten-free launch. So I feel those are great examples of already us already being able to deliver based on the capabilities that we're building. Because I also don't want to give you the sense that all of this is on the come, right?

If you look at the growth office, we started the growth office a year ago. We implemented that in order to make sure that we step up commercial capabilities at scale across the organization. We implemented that, and we are starting to see the fruit of that labor coming through. RGM is a capability within the growth office that we've been investing in now for the past 6 to 9 months, and we are already utilizing those capabilities in some of the things that we talked about earlier in the call. So long story short, I think we're on the right path. I think we are increasing the focus on the consumer throughout the organization, which I think is really important as the consumer is evolving. But at the same time, we are also becoming better and better operators across the company.

Yes. I would just give just a little bit more on RGM and trade. Look, I think -- look, we are -- the bad news is we have been behind the curve in both our capabilities, our tools -- the good news is there's a lot of low-hanging fruit that we can extract over the next couple of years. So as we've mentioned before, we've just put a brand-new team in. They are going to be terrific -- they've already done some great work on not only list price increases, but starting to rework the trade budgets and spend them in a much more efficient way.

So I am really excited and confident over the next couple of years, we're going to see some great returns from there. And Mick mentioned speed. Look, we got this team together and when we said we got to do some pricing actions within 6 weeks, we did the analysis and communicated to retailers, historically, we could have never done that within that short of a period of time. And so again, there's -- we're still in early innings on this, but I'm super, super excited about the capabilities that we are building and it's going to create a lot of value for us.

Your next question comes from Chris Carey of Wells Fargo Securities.

One clarification, and then I want to tempt a bigger question, but just the improvement in the margin rate relative to fiscal Q1 as you get into fiscal Q2 and the rest of the year, will that be driven primarily by Snacks given the low starting point for Q1 and then margins get better from the Q1 starting point? Or will that happen in both divisions? So that's kind of a clarification of the phasing question, I suppose, at the beginning of the call.

The broader yes, sorry, go ahead. Go ahead with that.

Let me tackle that one first. The snacks margin recovery really won't happen until the second half. So as it starts to improve in Q2, it will be mostly on the meal side, but then both will kick in and benefit in the second half of the year.

Okay. Okay. The broader question may lack a bit of [indiscernible] the word. But I'm struck by there's this dynamic and your -- some of your peers are doing the same thing that there's been so much focus on improving volumes and improving competitiveness and now in your outlook, perhaps reasonably so, you've acknowledged that you just can't do it anymore and that you're going to turn to positive pricing now and it's actually going to drive even worsening volumes. And obviously, the macro backdrop has shifted a lot.

So I don't regard that decision. But in a way, what are you trying to accomplish now in the medium term? If I look at the commentary is maybe you're planning smaller snacking portfolio focused more on dollars and perhaps acknowledging that over -- being overly focused on volume was perhaps not the right strategy given the margin degradation of the business? Just -- can you give us a sense of what the strategic shift now is that you're acknowledging that you have to start protecting the bottom line and you're going to be accepting that volumes will be yet worse again going into this year? Any implications for what you're trying to accomplish over the next several years. Sorry to a good question, but I'm just struck by the strategy shift that you and your peers are underway. I'd be curious to your thoughts.

Yes. Yes. And maybe I'll kick it off with a bigger picture and then Todd I'll hand it over to you around kind of the pricing and around kind of the dynamics within the P&L. I would say the key thing that, as I mentioned earlier, we're really focused on is making sure that we set ourselves as an organization up for success in the medium term because where we've been those numbers are obviously not where we should be, and that's unacceptable.

So for us, we believe that getting back to growth, it's actually really important to focus, as I mentioned earlier, on the consumer, act with speed and also execute really well. So those are the 3 things that we are focused on across the organization. That being said, with our brands, we need to make sure that our brands are relevant. How do we do that? It is back to making sure that we support them in the marketplace. And every brand plays a role, right, within our broader portfolio.

With our big brands, we need to make sure that we support them and we grow them with rather campaigns like for instant Goldfish, where we are supporting Goldfish with a national campaign, but also brands like rails, where we still, from an overall, call it, like awareness perspective, the awareness is still relatively low compared to take another brand in our portfolio, Prego. So -- and we have a big opportunity there to continue to grow rails, whether it's within the Swanson or outside of the Swanson and you see the brand and the products that we have to resonate with the consumer, we just need to continue to make sure that we support the brand.

So hence, you'll see that national campaign come through this coming year combined with a continued focus on innovation, and I talked already about that before, but you see us really pick our spots throughout our portfolio on how are we going to continue to make sure that we deliver what the consumer is looking for or what we believe is the consumer need. So that's really the dialogue in the organization. That's what we're focused on. And we believe that, that, over time, will support growth for the broader organization. And you'll see me highlight whether it's on the Meals and Beverage side, certain areas or certain areas within snacks that we obviously believe we're going to have a little bit disproportionate growth.

So anyway, that's really kind of the approach that we're taking. Pricing, I see much more as, call it, like a short-term action with regard to the broader P&L. Also in service to what I just described, in order to be able to make sure that we continue to have healthy margins and that we can support our brands that we can continue to invest in our brands whether it's through marketing or continued innovation launches. So that's a little bit kind of how I described the medium-term versus, call it, like some of the short-term actions that we're taking in fiscal '27.

I don't know, Todd, would you have any additional thoughts.

A couple of more thoughts. And obviously, it's a really important question you asked. Look, pricing is not black and white pricing, there's no strategy where there's one size fits all. So we talked about what we're doing in the first quarter, specifically on the meals part of the business, where we are actually investing in price, i.e., promotional activity and the result is we're getting great off-shelf display during a really important holiday period. And again, using the RGM framework, that math that activity says you're going to get terrific returns by actually lowering the price for an important period of time. But that doesn't work all that doesn't work in every aspect on every time on every brand and lowering TPRs and price on the shelf is often not effective. And we've seen -- look, we've seen from ourselves and our peers who have lowered price over the last year or 2, that the results have been kind of underwhelming. And so there are periods of time where if the math works, we will invest in price because we get terrific volume and activity around it. But given the inflationary environment that we're seeing right now, we need to protect those margins. We need to take some -- unfortunately, some pricing activities to make the math work on our P&L. So again, there's not one size fits all, and we're going to look at it from case to case.

And I think, Todd, maybe the final point, like as we've talked about is offsetting that inflationary pressure, price is only one of the measures that we're taking. I mean, Todd talked a lot about the cost savings and the productivity initiatives. I think across the organization, the team is doing a phenomenal job in order to make sure that we turn over every dollar that we spend in order to help offset some of those raw material price increases.

Your last question will come from Robert Moskow with TD Cowen.

I wanted to know, Todd and Mick. Can you talk a little bit about how the Board's view on the dividend has evolved over the last 3 months? I mean I think at that time, 3 months ago, it sounded like there was a commitment to it. But did something change in the last 3 months to make them reevaluate. And then lastly, I wanted to dig in a little bit on the elasticity assumption more as to what Chris was asking, it's like the new normal now in food is to have elasticity that goes beyond negative 1.0, your volume is going to be down mid-single digit. And I want to know if big picture, is that a function of how you think consumers are going to react to the pricing -- or are you also acknowledging that maybe snacks in particular, you're going to have some less shelf space, a narrower product line, some conscious volume contraction before you can grow.

Let me first start off with the dividend and then Todd can talk about the price elasticity. But the -- so as I as it's also in my prepared remarks, I mean reducing dividend is obviously a difficult decision, but it's unfortunately a necessary decision that we needed to take. And I'd say from my vantage point, very constructive dialogue with the Board. And the dialogue obviously is continue to center around, hey, we need to make sure that we do the right thing in order to create long-term value for the shareholders.

Yes. Let's talk about the price elasticity for a second here. Look, I agree with you, typically, in my former life, I've seen more kind of one-to-one elasticity, you're starting to see higher elasticities, could it be some of the pressure on the consumer. I'm sure look, we've tried to be prudent in how we've built the elasticity assumptions. We've largely assumed that there's no that were -- people -- other competitors don't follow us in a lot of our categories, there's not necessarily a direct comparison.

So it's a little bit tricky in some of our brands and categories, but we've largely assumed that not everybody across that category follows. So look, if other people eventually take some price elasticities could be a little bit better than we modeled, but we want to make sure that the pricing actions that we took and the assumptions that we built in the P&L gives us a little bit of flex, and we feel good about that assumption.

Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect.

Good morning, and welcome to The Campbell's Company's Fourth Quarter Fiscal 2026 Earnings Conference Call. I'm Joshua Levine, Campbell's Chief Investor Relations Officer. Joining me today are Mick Beekhuizen, President and Chief Executive Officer; and Todd Cunfer, Chief Financial Officer.

In addition to our prerecorded remarks, we will host a live question-and-answer session via webcast today, September 3, 2026, at 9:00 a.m. Eastern. Today's earnings press release, presentation and an audio recording of our prepared remarks are available on the Investors section of our website.

A replay of the Q&A session will be posted there following its conclusion with a full transcript available within 24 hours. You will find today's agenda on Slide 2. Mick will provide an update on our business performance.

Todd will then discuss our financial results and our fiscal 2027 outlook. During today's discussion, management may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates and are subject to risks and uncertainties.

Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause actual results to differ materially. Management may also use non-GAAP financial measures, which we believe provide useful information for investors.

Non-GAAP financial measures are not intended to be considered in isolation from or as a substitute for the financial information presented in accordance with GAAP. Reconciliations to the most directly comparable GAAP measures are included in the appendix of our earnings presentation.

Finally, please note that this is the first quarter following our acquisition of a 49% interest in La Regina, whose results are fully consolidated into Campbell's financial statements. The remaining 51% interest we do not own is reflected as earnings from noncontrolling interest. Campbell's financial statements prepared in accordance with GAAP also include certain fair value adjustments associated with the acquisition, including for the deferred payment of the second tranche due on May 4, 2027, and for the option to acquire remaining interest at a future date.

These fair value adjustments will be excluded from our adjusted earnings. It is now my pleasure to turn the call over to Mick.

Thanks, Josh. Good morning, everyone, and thank you for joining us. Our fourth quarter results reflected many of the same challenges we have faced in recent quarters, with profitability coming in as expected. Organic net sales declined 1% as weakness in Snacks more than offset solid consumption and organic net sales growth in Meals & Beverages.

Adjusted EBIT decreased 25% and adjusted EPS was $0.39, down 37%, pressured by elevated inflation. The declines in adjusted EBIT and EPS include an estimated high single-digit impact from lapping the extra week in last year's fourth quarter. Our fiscal 2027 outlook reflects an external environment that we expect will remain volatile as well as another year of elevated inflation that will continue to pressure margins, particularly in the first half.

However, our outlook also reflects the benefits of productivity, cost savings initiatives and pricing that we expect to build throughout the year and increasingly support margin recovery. Make no mistake, our results remain unacceptable. But instead of waiting for the environment to improve around us, we are addressing reality head on.

The initiatives we are laying out today are designed to improve performance and put us on a path back to a sustainable long-term value creation model. It starts with our team. Since I became CEO about 18 months ago, we have strengthened our leadership through a combination of external hires and internal promotions, bringing experience from both established peers and disruptors and an ambition to drive change. We have also streamlined our category-led operating model across both divisions to enhance our in-market presence and improve our agility with consumers and customers.

The goal is to enable clearer decision rights, sharpen our focus, enhance execution and instill a culture of urgency and accountability. This operating model has contributed to improved performance in Meals & Beverages, and we are applying those learnings in Snacks.

Looking ahead, our top priority is to get close to the consumer in everything we do, from the products we offer to the innovation we launch and the nutritional benefits we deliver and the way we manufacture and bring products to market. This is not new, but it's a philosophy we must follow with greater speed and discipline.

That means engaging more frequently with consumers, responding faster and using data and insights to anticipate evolving preferences. As the consumer evolves, so must we. Campbell's scale and resources give us the opportunity to create a competitive advantage. At the beginning of fiscal 2026, we established our growth office to create scalable commercial capabilities across insights and analytics, consumer experience, innovation, R&D and revenue growth management.

These capabilities have helped produce one of our strongest innovation pipelines in several years and supported the removal of artificial colors, making Campbell's one of the first among our center store peers to successfully complete the change.

Our strengthened enterprise revenue growth management team is another example of investing in critical commercial capabilities. This team brings greater rigor to pricing, promotion, price pack architecture and how we deliver the right value to consumers. These capabilities are particularly important now.

With cost pressures accelerating in fiscal 2027, we are selectively implementing commodity-driven pricing actions while, importantly, continuing to make targeted price investments in other areas. We're also changing our approach to marketing support. Specifically, we will direct a majority of this year's marketing budget towards our best opportunities, moving away from what has historically been a balanced approach across our portfolio.

Let me be clear, we are not walking away from any business or brand. However, our marketing investments must work harder for us. In fiscal 2027, we have national advertising campaigns planned for Rao's, Goldfish and Pepperidge Farm as well as a robust omnichannel and influencer-led media plan to drive trial of innovation, notably across 2 new platforms under the Campbell's brand.

We are also further accelerating our shift toward digital, responding to how consumers are discovering and engaging with brands. This includes expanded use of social, influencer and e-commerce channels as well as newer AI-enabled platforms, which together will represent approximately 85% of our working media budget.

To help fund these initiatives and enable a return to profitable growth, we are launching a $500 million enterprise-wide savings program, which Todd will describe in greater detail. With this program, we are focused on increasing speed and accountability and improving our margins and cash flow.

Finally, we are taking action to strengthen our balance sheet and reduce leverage. We are resetting our dividend, which was a difficult but necessary decision. Together with our actions to improve cash generation, it will accelerate deleveraging, preserve financial flexibility and support sustainable long-term value creation.

Let's now turn to our Meals & Beverages division. Our top line performance was stronger this quarter with organic net sales up 3%, driven by consumption growth of 0.8% and an approximately $30 million benefit from prior year timing shifts. Semi-scratch cooking consumption grew 5% in the quarter, led by Swanson, Pacific and Rao's.

Declines in our eating soups eased relative to Q3 as prior year comparisons normalized. We are optimistic about our Meals & Beverages division. Semi-scratch cooking represents more than half of the division's retail sales and has delivered a 4-year retail sales CAGR of over 5%. Empowering everyday cooking is an important growth pillar for us, positioning us well with today's consumer.

Our products provide strong value, especially as most meals are eaten at home and families increasingly seek a wider variety of flavors and cuisines. For years, we have built credibility with consumers by investing in and ultimately winning during major celebratory occasions such as the holiday season.

Our next opportunity is to further amplify our relevance within everyday meals. This includes executing a strategy that meets consumers where they find inspiration and adapting our media and recipe plans to succeed across social, digital and emerging AI-enabled platforms.

Examples include winning with Campbell's condensed in Mac & Cheese and building routine meal bundles that bring together Rao's offerings across sauce, pasta and frozen to make meals such as spaghetti and meatballs. We have more work ahead, but our direction is clear and momentum is building. In U.S. soup, consumption grew 0.9% in Q4. Broth was a standout, with the category growing 11.8%, its strongest volume-driven growth quarter in several years.

Swanson grew 7%, in line with mainstream broth, while Pacific increased 28.4%. We continue to believe that increasing at-home cooking occasions and consumers' focus on flavor and wellness support sustained growth in this category. Within eating soups, declines eased relative to Q3 for Chunky and Campbell's Red and White condensed.

At the same time, premium brands Pacific and Rao's sustained strong double-digit growth, up 14% and 25.3%, respectively. We continue to see an opportunity for these faster-growing brands to bring new relevance to the broader category by meeting consumer demand for premium and better-for-you offerings.

In fiscal 2027, we will complement our core with innovation that brings new benefits and occasions to the soup aisle. Launches include Pacific Ramen Broth, Campbell's condensed sauces and a new line of better-for-you clean label Campbell's ready-to-serve soups made from bone broth and high-quality ingredients packed with functional benefits.

Specifically, this new line will provide consumers with 20 grams of protein and an average of 8 grams of fiber, creating a highly differentiated mainstream offering. Moving on, Rao's finished another fiscal year with strong performance, growing consumption 9.6% for the quarter and 11.3% for the year.

Rao's sauce consumption increased 8.9% in Q4 and 9.4% for the year, largely driven by sustained distribution and velocity growth. The brand benefited from a meaningful increase in marketing as well as a solid contribution from our category-leading innovation in new-to-market creamy red sauces.

Household penetration reached 18.9% in fiscal 2026, up 170 basis points for the year and approximately 300 basis points in the 2.5 years since the acquisition. Rao's performance outside of sauce, including soup, pasta and frozen, grew 17.7% for the year, providing a strong complement to our core sauce business.

Rao's remains one of our top priorities, with substantial runway for greater household penetration, awareness and expansion, both within the broader Italian sauce category and adjacent areas of the store. Our confidence is grounded in strong execution and a differentiated proposition built on time, quality ingredients and exceptional taste.

Substantial marketing support reflects the size of the opportunity. Following a strong double-digit increase in media spending last year, we will increase support once again in fiscal 2027, with a new advertising campaign highlighting both the time we take to slow simmer sauces and the value of making time for shared meals with friends and loved ones.

Now let's turn to Snacks. Consumption and organic net sales declined 5.1% and 6%, respectively, reflecting improved performance in core Goldfish and sequential progress in Fresh Bakery, while Salty Snacks remained weak. Fiscal 2026 was clearly a challenging year for the Snacks division.

However, with strong new leadership, a streamlined operating model and a clear focus on everyday great execution, we are taking the right steps to turn around performance. Turning to our brands. Growing Goldfish is critical to the long-term top and bottom line health of the Snacks division.

The headline 1.1% consumption decline masked encouraging progress in the core. As you may recall, during fiscal 2026, we refocused the brand on its legacy as a leader in snacking for families with kids. Core consumption returned to growth, supported by double-digit e-commerce growth and our collaboration with Pokémon, reinforcing our confidence in the strategy.

As we begin fiscal 2027, our investment plans and in-market activity reflect the brand's central proposition as a wholesome fun snack for families with kids. Back-to-school activity will include expanded omnichannel investments supporting key family-oriented offerings such as multipacks, alongside a new marketing campaign with playful advertising that reinforces the brand's family-friendly legacy and the "snack that smiles back" positioning.

Our packaging is also being refreshed with new call-outs that highlight the brand's well-established positive attributes, including no artificial colors or preservatives, 100% real cheese and that Goldfish are always baked, never fried. This fall, we will launch protein, whole grain and, for the first time, gluten-free options.

We are listening to our consumers and the team has responded with speed and agility. Turning to Pepperidge Farm Fresh Bakery. We remain focused on improved everyday execution, service and the measured return of promotions. Consumption declined 4.4% in Q4, an improvement from Q3 as expected, benefiting from a continued focus on execution within our network and in stores.

As we enter fiscal 2027, strong in-store execution and on-shelf availability remain important near-term opportunities, with innovation set to launch in the back half. Total consumption for Pepperidge Farm cookies declined 4.7% in Q4, with mixed trends across the portfolio.

Sales for Milano were down versus prior year, but grew at a low double-digit rate on a 2-year basis, largely reflecting strong year-ago performance for White Chocolate Milano and the halo effect on the core. Our distinctive portfolio was strong once again, led by Chessmen and the contribution from our limited edition Maggie's Apple Pie.

Looking ahead, we will build on recent success with on-trend innovation and a national media campaign highlighting the rich flavor and indulgence of our Pepperidge Farm cookie. With an expanding portfolio of delicious and on-trend offerings and brand awareness levels far below leading peers, we see a meaningful opportunity over time to build household penetration and drive growth.

Finally, Salty Snacks retail sales declined 7.8%, capping a difficult year. Pretzels declined 5.4%, helped by Snyder's of Hanover, which lapped prior year distribution losses, while driving growth in the unflavored portfolio as a result of strong America 250 execution. Chips were under pressure, down 9.4%, largely driven by Cape Cod and Kettle Brand as the category continues to be highly competitive.

Across our Salty Snacks portfolio, we are taking action to improve our competitive position. There's a lot of hard work ahead to turn around our Snacks performance, but our priorities are clear. First, we are strengthening our focus and returning to core fundamentals, meeting consumers where they are.

Second, we are reducing our costs, tightening our assortment and using our revenue growth management capabilities to improve price pack architecture and trade efficiencies. Third, we are focusing on core items and everyday great execution to improve service, on-shelf availability and productivity. This turnaround will take time and performance may not improve in a straight line, but we are committed to this important simplification work as the first step on our path back to growth. To wrap up, we expect the operating environment to remain challenging with continued pressure on consumers and elevated costs affecting our margins. We are not waiting for these conditions to improve.

We are increasing our focus on the consumer, concentrating investment behind our best opportunities, strengthening execution, reducing costs and taking action to strengthen our balance sheet. These choices are difficult but necessary. They will not improve performance overnight. But they are designed to restore growth, rebuild margins, reduce leverage and position Campbell's for sustainable long-term value creation. Let me now turn it over to Todd.

Thank you, Mick, and good morning, everyone. I will review our fourth quarter fiscal 2026 results, detail the actions we are taking to improve our performance and strengthen our financial profile and then finish with our fiscal 2027 outlook. Fourth quarter organic net sales declined 1% as strength in Meals & Beverages was more than offset by softness in Snacks. Volume/mix declined 1%, while net price realization was slightly positive. Adjusted gross margin declined 190 basis points to 28.6%. Cost inflation of nearly 6% and other supply chain costs were partially offset by productivity.

Adjusted EBIT declined 25%, primarily due to pressure on gross margin. Adjusted EPS of $0.39 reflected the adjusted EBIT decline and below-the-line items, including a higher diluted share count. Our diluted share count now reflects the option to use equity for the second La Regina payment due next May.

Meals & Beverages organic net sales increased 3%, driven by 0.8% U.S. retail consumption growth and an approximately $30 million timing benefit related to last year's Sovos SAP implementation. Segment operating earnings declined 12%, primarily due to inflation. Snacks organic net sales declined 6%, reflecting weaker U.S. retail consumption trends and lower contract and partner sales. Segment operating earnings declined 34%, primarily due to inflation and volume deleverage.

Fiscal 2026 operating cash flow was $1 billion, a decline of nearly $100 million due to lower cash earnings. Capital expenditures totaled $361 million, while we returned $496 million to shareholders primarily through dividends. At year-end, the company had approximately $394 million in cash and cash equivalents and approximately $7.1 billion in debt, bringing our net leverage ratio to 4.3x.

Restoring top line growth, rebuilding margins and reducing leverage to approximately 3x will require a series of decisive actions, many of which are already underway and will accelerate in fiscal 2027. First, we are launching a new enterprise-wide savings program, targeting $500 million of cost reductions by fiscal 2030.

This is separate from our annual productivity initiatives, which will continue to target an average of approximately 3% of cost of products sold. This new program will include the remaining initiatives from our prior program, the overhead savings initiative announced during the third quarter of fiscal 2026 and plans designed to improve how the company manages and deploys its direct and indirect spending. Several actions are already underway, including the closure of 2 Snacks plants in Hyannis and Jeffersonville and recently completed workforce reductions.

Specifically, through a voluntary early retirement program and involuntary reductions, we reduced our salaried workforce by approximately 13%. Together, these actions are designed to improve speed and accountability while supporting our margins and cash flow.

Second, we will pursue targeted net price realization, supported by expanded revenue growth management capabilities and inflation-driven actions already communicated to our retail partners. While volumes may be pressured in the near term, these were necessary decisions to protect our margins and preserve our ability to invest in our brands.

Third, we must improve cash conversion and accelerate deleveraging. We will reduce net working capital while prioritizing high-return capital projects. Finally, as announced this morning, we are resetting the quarterly dividend to $0.25 per share or $1 per share on an annualized basis, a reduction of 36%. This action is expected to reduce annual cash outflows by approximately $170 million, which we intend to direct towards debt reduction.

Our priorities are clear: return Campbell's to a sustainable long-term value creation model, reduce financial risk and maintain our investment-grade credit rating. Let's now turn to guidance. Our fiscal 2027 outlook reflects multiple cross currents impacting our industry and our business and includes a balanced view of both near-term risks and the margin benefits we expect to build throughout the year.

As laid out in our press release, we expect net sales to decline 2% to 4%, including a modest contribution from La Regina, adjusted EBIT to decline 7% to 12% and adjusted EPS of $1.65 to $1.80, representing declines of 17% to 24%. Organic net sales are expected to decline 2% to 4%.

This outlook assumes underlying consumption trends remain broadly consistent with recent levels. Quarterly results will likely vary, notably reflecting elevated investment spending in Q1 and the impact of pricing and related elasticity beginning in Q2. For the full year, we expect net pricing to be a low single-digit benefit.

Our adjusted EBIT outlook includes several key assumptions: combined raw material and packaging inflation of 5% to 6%, double-digit logistics inflation driven by higher diesel costs and reduced driver availability, productivity above 4% with realized benefits building across the year; total operating expenses down slightly on a dollar basis, including an approximately $50 million impact from resetting expense levels associated with the company's incentive compensation plans.

Marketing and selling expenses to increase as a percentage of net sales, we will concentrate support behind our strategic growth priorities, including marketing campaigns for Campbell's, Rao's, Goldfish and Pepperidge Farm and more than $100 million of cost reductions under our new enterprise-wide program. Below adjusted EBIT, we expect an approximate 10-point headwind to adjusted EPS growth from the following items: interest expense of $345 million to $350 million, reflecting the La Regina acquisition and higher costs associated with an upcoming refinancing.

Full year earnings attributable to noncontrolling interest of $15 million to $20 million, a diluted share count of approximately 308 million, reflecting the La Regina acquisition and the previously announced elimination of anti-dilutive share repurchases from our near-term capital allocation priorities.

La Regina is expected to be broadly neutral to adjusted EPS. Note that this guidance includes the company's current understanding of government policy and tariffs and does not assume any impact from new tariffs or changes to existing tariff rates. Please see Slide 28 in our earnings presentation for a comprehensive review of these and other assumptions supporting our full fiscal 2027 outlook.

In terms of phasing, we expect Q1 declines for organic net sales and profits to be below the lower end of our full year range, with sales declines driven primarily by weakness in our Snacks division and a significant investment to support innovation and holiday programming in Meals & Beverages.

Expected margin pressures also reflect elevated cost inflation, productivity and cost savings initiatives that will build as the year progresses. As a result, we expect Q1 adjusted EBIT margins of approximately 10%. After Q1, we expect the year-over-year trajectory to improve, benefiting from the building contribution of productivity, cost savings and net price initiatives. That concludes our prepared remarks.

Our live Q&A webcast will begin at 9:00 a.m. Thank you for your continued interest in The Campbell's.

Good morning, and welcome to The Campbell's Company Third Quarter 2026 Earnings Question-and-Answer Session. Today's conference is being recorded. [Operator Instructions]

I would now like to turn the call over to Joshua Levine, Chief Investor Relations Officer at Campbell's.

Good morning, and thank you for joining The Campbell's Company's Third Quarter Fiscal 2026 Earnings Question-and-Answer session. Earlier this morning, in conjunction with today's earnings announcement, the company published its press release, Form 10-Q and slide presentation as well as both a written and audio recording of management's prepared remarks. All of these materials can be found on the Investors section of our website. Shortly after the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call.

Joining me today are Mick Beekhuizen, President and Chief Executive Officer; and Todd Cunfer, our Chief Financial Officer.

During today's discussion, management may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates and are subject to risks and uncertainties. Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause our actual results to differ materially.

We also use non-GAAP financial measures that we believe provide useful information for investors. Reconciliations to the most directly comparable GAAP measures are included in the appendix of our earnings presentation. Non-GAAP financial measures are not intended to be considered in isolation from or as a substitute for the financial information presented in accordance with GAAP.

We will now open the call for questions. Operator?

[Operator Instructions] Our first question comes from Andrew Lazar from Barclays.

In today's prepared remarks, you discussed some "tough decisions" that will need to be made in Snacks as well as the potential for an incremental 2% to 3% unmitigated inflation above normal levels, again, potentially. I know we're not getting into specific '27 guidance at this point, but maybe you can help us with maybe the magnitude of some of these key puts and takes for next year, including the size of potential mitigating actions. I'd assume much of your ongoing productivity is going to be used to offset sort of baseline or underlying inflation?

Yes, sure. Andrew, so base inflation -- before the Middle East conflict, we were looking at base inflation of around 3%. Obviously, with the price of oil where it is. And look, if oil stays around $100 a barrel, we're looking at an additional 2% to 3% inflation on top of the core 3%.

Also, as you probably know, there's a driver shortage out there that not only are we having higher diesel costs, but that is causing higher inflation from a logistics and freight perspective as well. We obviously have the reset of our incentive comp, as we've talked about before, that's now about a $40 million impact to next year. We'd love to be able to obviously continue to invest in our brands. So we're anticipating some higher marketing investments.

So with all that as context, elevated productivity is essential for us going into next year. As we had the previously announced $100 million SG&A takeout over the next couple of years. We announced an early retirement package, which was well received. So we'll have some significant savings from that. And so we're going to have to get as much of that $100 million into next year as we possibly can. It won't all get into next year, but we'll fast forward as much as we can to offset some of those cost pressures.

And obviously, net price realization as needed as required. We're going to look really hard at our trade ROIs. And if we need to take some pricing, that's kind of a last resort, but obviously, we'll need to do that. So definitely some cost pressures going into next year. We're taking this very seriously. We have some elevated productivity and RGM will be a very, very key component going into next year.

Okay. And then just a follow-up. You talked about previously tightening your belt around cash flow and sort of capital allocation options. I guess given all the potential costs and reinvestment coming in fiscal '27, I guess, as you think about what changes in capital allocation may be needed and sort of your current thoughts on where the dividend is at?

Yes. So look, the dividend is extremely important to our shareholders. As we talked about before, no -- or no intention of increasing that dividend anytime soon, obviously. This -- the dividend rate is a Board decision that we have on a very regular basis. And we're obviously trying to balance that dividend rate with our ability to reduce leverage as quickly as we possibly can, maintaining that investment-grade rating is an imperative to the management team. It's an imperative to the Board. And so we are getting very aggressive on how we can get back down to the low 3s over the next couple of years.

Obviously, first and foremost, is we've got to stabilize earnings and ultimately grow the profitability of this business. So that's -- we're working very hard on that. we will aggressively reduce working capital over the next couple of years. From a CapEx perspective, we are only -- we're focusing on the highest priority projects. And then as some of our peers have done, we will consider hybrid debt instruments to try to make the rating a little bit stronger than it normally would be. And obviously, M&A right now is off the table.

So these are constant conversations we are having internally. We obviously -- this is very important to the management team and shareholders. And so we're working as hard as we can to get that down in the low 3s as soon as possible.

Our next question comes from Tom Palmer from JPMorgan.

In the prepared remarks, I did want to follow up a little bit on Andrew's comment in terms of Snacks and the commentary about rationalizing the portfolio and consolidating nodes in the network. I wondered if you might expand on this. Are there brands that you have in mind when we're talking about rationalizing? And then when I hear nodes in the network, should we be thinking manufacturing or distribution as kind of that area of focus? And I guess, anything on the timing of when we start hearing more definitive action taken?

Sure. Tom, let me give you a little bit of context. So I'm really looking at this in the context of simplification. And you hear us talk about focusing on the core of the portfolio and also the core of the brand. It's a good example of that is when you hear us talk about Goldfish and focusing on households with kids. That is proven to be a fruitful strategy. You've seen that over the past 2 quarters, that core part of the Goldfish brand has stabilized and we are going to continue to put incremental fuel behind that. That's the Goldfish example. We have other examples throughout the portfolio. So it is really at the brand level focus on the core.

And then additionally, from an innovation perspective, making sure that we support fewer, more meaningful innovation. Instead of having a broad proliferation of small innovations actually go bigger certain piece of innovation and make sure that we support them so that they truly become meaningful for the brand.

Another area in the context of brands and the role of the brands within the broader Snacks portfolio are choices that we're making around brand support and specifically certain brands require more advertising support and are ready for that versus others. So we're being very consciously about that allocation. That doesn't mean that we're going to focus on growth across the broader Snacks brand portfolio, however, making very conscious choices across the portfolio.

And finally, from a cost perspective, we need to make sure that we have a fuel to support our brands. Todd gave a couple of examples of different initiatives that we have across the broader organization. But when I look, for instance, within the Snacks portfolio that the -- there are certain cost savings initiatives that we have implemented in the past. We're going to continue to focus on the broader improvement of margins that is both on the SG&A side as well as on the supply chain side. And we have made some changes in the past, particularly with continued volume pressures, there's more opportunity there.

And then finally, when I look more broadly at the brand portfolio coming back to the top line and the focus on the core, there are -- there is a tail of SKUs in certain brands. It's not a lot of sales. However, we believe that the reduction of that tail could actually allow for further simplification and as a result, improve the overall operations and improve our overall network. So hopefully, that gives you a little bit of context of what we're working to.

It did, Mick. I had just a quick follow-up. In the fourth quarter, it seems like there's a mention of a tariff refund. I didn't see it quantified anywhere, including in the Q -- maybe any framing of that? And will that be isolated to the fourth quarter? Or is there any tail there?

Yes. So the impact we're projecting for Q4 from a tariff refund is about $0.03 to $0.04 a share. That is solely offset by the higher fuel cost, the driver shortage the impacts of the Iran conflict that we're already seeing so far. So those -- that $0.03 to $0.04, a good guy and a bad guy kind of offset each other. The tariff -- the tariff refunds, there's 2 pieces. There's the direct piece that we are able to get back directly. Think about that as the Rao's La Regina part of our business. Then there's a piece -- there's a second piece, which is a bit smaller, which is our vendors who are getting those refunds for us. That will probably take a little bit more time until they get the money and then we can get that money back. There's a chance we could get some of that in Q4. Some of that might roll into next year.

Our next question comes from Peter Grom from UBS.

Great. So I was hoping just to get some perspective on just kind of the organic sales outlook for the fourth quarter, which implies a pretty material improvement versus what we've seen year-to-date. So can you maybe just unpack the 4Q outlook in terms of some of the timing dynamics that are -- that will help that you mentioned versus maybe what you were expecting in terms of underlying consumption?

Yes. So obviously, some noise around the ERP conversion from Sovos affecting Rao's, particularly Q3 versus Q4. So that negatively impacted Q3, that $30 million [ lap ] comes into Q4. So M&B will have some strong growth from a net sales perspective in the quarter. The consumption is running right now slightly positive. So that is a good story. We're anticipating it will probably kind of continue to hover in that range as we close out the year. There's also a fair amount of pipeline fill from innovation. M&B has got some pretty exciting innovation, primarily on soups and sauces, which will help Q4 as well. So M&B, from a net sales perspective, we are anticipating having a very solid Q4. Snacks will probably be fairly similar to what you saw in Q3 might be a little bit worse than that. So all in all, net sales should be flattish to slightly up for the quarter.

That's really helpful. And Todd, a lot of moving pieces as it relates to [ earnings ] as well, which you alluded to in Tom's question, but the outlook still embeds a relatively wide range. So can you maybe frame what would put you closer to the higher end relative to the lower end? And just given the higher share count, input costs, et cetera, is the lower end more realistic at this point?

Yes. I would say from a net sales perspective, I think the lower end, that minus 2% is more -- probably more realistic assumption at this point. From a gross margin perspective, organically, we should probably have similar results to what we had in Q3. We were down 240 basis points. So somewhere in that range, though. With the La Regina acquisition now -- a partial acquisition, now being in our financials as we go into Q4, if you remember. So that [indiscernible] margin will come into our P&L. We'll get about 70 to 80 basis points of a benefit from there for the first time.

Marketing and selling, we anticipate, will be up slightly. We thought it would actually be up more in Q3. Some of the marketing shifted out of Q3 into Q4. We originally thought Q4 would be down and it will be slightly up. Interest, taxes, no big impact in there, but the share count because of the way GAAP requires us now to include approximately 7 million shares from that acquisition, we'll kind of artificially raise our share count from 299 to 306 million. So I would say net sales definitely at the lower end of that minus 1% to minus 2%. And I would say the EPS still some moving parts there but that probably is more $2.20 to below.

Our next question comes from Peter Galbo from Bank of America.

Todd, I just -- in your response to Andrew's question around kind of the puts and takes for '27, I just wanted to clarify that would include the step up share count from La Regina? I just wanted to make sure that, that mechanically, that's flowing through next year as well.

Yes. Yes. So for the full year, we'll have 3 -- approximately 306 million shares, yes.

Okay. Okay. And then, Todd, my other question is just around the -- in your comments, the possibility of issuing hybrid debt, understanding and maybe I'm a little out of my depth here, but understanding it will help more on the leverage side, but you also mentioned kind of trying to stabilize. I would think that a hybrid issuance would come with a higher coupon rate. Just how do you think about reconciling those 2 things of kind of stabilizing the earnings on one hand versus kind of the EBITDA piece, I know that they're considered differently by different constituents, but just maybe you can help frame that for us.

Yes. So I mean the hybrid debt, as you said, tends to be 150, 200 basis points higher. So yes, that will be a drag on EPS, obviously, would not affect EBITDA. So different people look at differently. So there's a little bit of a negative impact from an earnings perspective. Depending on what type of hybrid debt you do what you execute, you tend to get about 50% equity credit. So that's a positive from a rating agency perspective. So that's obviously the consideration there.

So look, everything is in balance. We're trying to balance what's best for shareholders, what's best from a credit perspective. So we're trying to thread that needle right now. But look, hybrid can be a very, very useful tool. And as I've said earlier in the call, some of our peers have done it very successfully. So it's something we'll consider.

Our next question comes from Chris Carey from Wells Fargo Securities.

I just wanted to start on the price increases or the concept that you might be willing to use price increases in the -- as a sort of tool in the toolkit to confront this higher inflation backdrop. Can you just expand on how you would think about this given the competitive dynamic right now? And perhaps how you would see that price realization versus RGM and specific areas in the portfolio where you would think you would have the highest cost justification for incremental pricing?

Yes. Maybe I'll start off and Todd. So first of all, I mean, Todd mentioned this earlier as well, as we continue to see those inflationary pressures, we're going to stay focused on generating elevated levels of productivity, incremental cost savings initiatives and then also focus on that positive net price realization. Todd also mentioned that we're building up the revenue growth management capability that's been something that we've been very focused on over the past 6 months. We're making good progress on that. And as a result, I believe that there is opportunity there. Now as we also mentioned earlier, as our last resort, I would go towards, hey, is there any need for potential list price increases.

But Todd, anything else that you'd like to add there?

Yes. Look, look, the cost pressures are -- remain kind of where they're sitting right now, we could actually be looking at 5% to 6% inflation. So the different components of RGM will have to be will have to be utilized. There is a big opportunity in just the trade investment ROI. There's a number of our investments that, quite frankly, just are not returning terrific benefits for our company, and we are adjusting those as we speak. If that's not enough, if we need to do some surgical pricing in different parts of the portfolio, to maintain our margins, we'll clearly take a look at that. But more to come. Obviously, the environment externally here globally is very volatile. It changes day to day, we're going to take the appropriate actions as necessary.

Okay. Perfect. Regarding the margins in snacking, during the quarter, there was an improvement relative to last quarter, which is encouraging. Obviously, you remain below where you had wanted the business to be over time. Give us a sense of how that fiscal Q3 margin came in relative to your own expectations? Was there any timing dynamic with lower marketing? Or are you starting to get your hands wrapped around the margin structure and perhaps we expect some stabilization at a minimum from here?

Yes. Look, the good news is we went from EBITDA margin last quarter, a little over 7% to about 10% this quarter. So we said we'd have sequential improvement from Q2 to Q3. We did. It was largely in line with our expectations. That's the good news. The bad news is both quarters were still down around 400 basis points year-over-year, which is obviously not acceptable. The higher margin in Q3 was really driven both sequentially and year-over-year by lower trade spend. So again, some of those RGM capabilities are starting to kick in, which is great. And then we had a little bit less marketing. We had more marketing spending year-over-year in Q2 than we did in Q3. So that really helped the margin structure a lot.

And we talked about the bakery performance, the good news is it is getting to be stabilized. We are improving on-shelf availability. And to get that improvement in on-shelf availability, we basically canceled all promotions in Q3. So that hurt volume in the top line, probably helped margins a little bit because we pulled out the vast majority of the trade. So kind of a mixed story here. Again, we feel good that we got it up to 10%, but it's not nearly where it needs to be. We'll probably see a similar type of profile in Q4. But as we talked about, look, we have significant things we have to go do. The key to improving those margins over the next couple of years is, number one, got to grow Goldfish. We've stabilized the business, but it's still kind of down 1%, 2%. We've got to get that to growth. That's the biggest and most profitable piece of the Snacks portfolio.

Mick has mentioned, simplifying the portfolio, which we're in the process of doing, which will improve mix. It reduces the amount of waste that we have out there and quite frankly, makes the plants more efficient. And then we're just going to have to continue to look at the fixed cost structure of the Snacks business, both from a network and from an overhead perspective. And those projects are well underway.

Our next question comes from David Palmer from Evercore ISI.

Obviously, heading into fiscal '27, you're going to be dealing with the inflation you talked about. And the choices you're making around Snacks and those things will be cause for noise and varying degrees of sales or profit pressure. But I'm wondering if you're just thinking about your core businesses and the goal of returning those to at least some modest growth, profitable growth, where do you think are the near and medium-term potential wins, most improved areas that we'll see from an organic sales perspective? And then I have a quick follow-up.

Sure. Even if you look at this quarter, I'll highlight a couple of areas, and I appreciate you asking the question because there are very clear proof points in this quarter that we can continue to support. Within the Meals & Beverages portfolio, the at-home cooking consumer trend is resilient, and we expect that trend to continue. And that is a big part of our Meals & Beverages portfolio plays right into that consumer trend. We've seen consistent growth throughout this fiscal year and I expect us to continue to support our portfolio within that particular area. That is both within cooking soups as well as Rao's and another great brand within that is Pacific as well. So that's very clearly an area within Meals & Beverages that's working and expect us to continue to support it and we'll have some great innovation going into the next fiscal year.

Then from a snacking perspective, you heard us talk about Goldfish. Goldfish is an important part of the Snacks portfolio. We're stabilizing the core and we need to make sure that we bring the brand back to growth. We're doing everything across their brand in order to support that growth, and it's also important from an overall profitability perspective.

And then within Pepperidge Farm, which is obviously another core part of the Snacks portfolio, we're making great progress from an operational perspective, and Todd just described that, which is really important. And those are -- again, if you hear me talk about it, you also hear me talk about our big brands with -- we now have 4 billion-dollar-plus brands with Campbell's, Rao's, Goldfish and Pepperidge Farm. And we need to make sure that we're set up for success and are growing in those different areas.

I guess I had one quick follow-up, and it's just about just that soup and sauces business, you're doing condensed -- Campbell's condensed sauces. Why is that a big idea? And why is that the right extension of condensed? And I wonder -- I don't want to say how hopeless it is for ready-to-serve and condensed eating soups, if you will, that part. Is there anything you can do to stabilize that part of the portfolio? And I'll pass it on.

Yes. Good. So let me address those in 2 parts. First of all, our condensed soup portfolio, about 50% of that portfolio, actually a little bit over 50% these days, is used for cooking as an ingredient. So think of cream of mushroom. The other half is the eating part of the portfolio. The cooking part of the portfolio has consistently been growing. And we're seeing consumers go to the soup aisle, buy our condensed cooking product in order to make scratch meals at home. That's a consumer trend that's working, that's been around for a little while, and that's what we're leaning into with the condensed sauces that we're launching.

So it's really coming back from a consumer insight that on the one hand, they're already using our condensed cooking products for that purpose. And then on top of it, what we're seeing, and we've talked about this in the past, is that the consumer is exploring different flavors, and that's exactly what these different products lean into. So it's really the combination of -- on the one hand, that continued cooking resilience, people go to the condensed cooking aisle and are buying as a result some of our products, and we're combining that with incremental flavors. And I'm very excited about that innovation that is going to come out in the next fiscal year.

Then with regard to ready-to-serve soup, ready-to-serve soup is an area where we've got some work to do. So on the one hand, we have part of the portfolio is working. So the premium part of that ready-to-serve portfolio is working. That's about 20% of the RTS portfolio. That's Rao's and Pacific. They are growing. However, that mainstream part of the portfolio is under pressure.

So what do we, as a result, are going to do? We've got to make sure that we support the premium brand growth because that's working. And then additionally, we need to increase the relevance of our mainstream portfolio. So on the one hand, we are looking at within the existing portfolio at the tail and that's where we see a disproportionate headwind, so we need to address that.

And we -- on top of it, we need to make sure that we increase the relevance of some of that part of the soup aisle, which is the ready-to-serve soup aisle and that comes back with some exciting innovation that we're launching next year. It's really focused on better-for-you and some of the positives of the product. So more to come on this.

Our next question comes from Megan Clapp from Morgan Stanley.

I wanted to come back to some of the comments on the 2% to 3% additional inflation that you cited as we look out to fiscal '27 if oil stays around $100, and I appreciate you giving that number. I guess -- maybe just to dig into it a little bit more. Can you just maybe help us understand how the inflation cadence might flow through the year, presumably given where you were hedged, I would think it might be a little bit more back half loaded as hedges roll off. But maybe you can just give us some context on where we're hedged today for fiscal '27 and maybe bucketing kind of the biggest pockets of pressure just as we think about tracking given oil is very volatile.

Yes. So I mean, obviously, we're almost fully hedged for our fiscal year '26 which ends in July. So it should be very little noise around that area. We have -- we do have some hedges in the first half of the year. Given the elevated cost environment, we probably have a little bit less than we would normally do because we're anticipating things will calm down a little bit, and prices, which are extremely elevated right now, will mitigate. But obviously, there is a risk in that.

Look, just given where prices are right now, the one thing that is looking more and more clear every day is that the first half inflation will be pretty high. Those prices are kind of set even if the war ended, conflict ended today, it would take a while for oil prices to come down. It would take a while for fertilizers to start moving in, for aluminum to start moving out of the region in a way that would bring prices down off their highs. So we'll have elevated inflation for sure in the first half of the year.

The question mark is what does the second half look like, do things calm down and we get more closer to the 3% versus the 5% to 6%. If the war continues for several more months, we could be looking at a full year of elevated inflation. So that -- those are some of the kind of moving parts right now.

And as we said, we're looking aggressively at cost savings. The RGM team is looking aggressively of optimizing our trade spend and then pricing is necessary.

Okay. That's helpful. And then maybe just a follow-up on Snacks, Mick. Just trying to put the pieces together. There's been a lot of helpful commentary. Goldfish core seems to have stabilized. Bakery, although we haven't talked about it much, I think, in the prepared remarks, some of those self-inflicted headwinds seem to be abating. And so the real question, Mick, just feels like Salty, and I know we've talked about it a lot. But the question is, could things get worse before they get better on the Salty side, just in terms of you're talking about SKU rationalization and simplification as we go through that? Is there any way to kind of help us understand the trajectory of Salty and maybe what a realistic timeline in your mind is for that business to stabilize?

Yes, yes. You're right, is on the positives, Goldfish working making sure that we maintain momentum. On the fresh bakery side, as Todd mentioned, feeling better from an operational perspective, which allows us to start reintroducing some of the promotional activity, which would allow us to start to better on that front as well. And from a Salty perspective, and you also saw this in my prepared remarks, really focus on its simplification, with like strengthening the core. It comes also back to some bigger bolder innovation, and we need to improve overall in-market execution. That's going to take a little bit longer. So I'd see that in the near term, we're going to continue to feel some pressure on Salty and then as some of these plans take shape, that should start to improve the trajectory. But you're right, that's going to take a little bit of time.

Our next question comes from Robert Moskow from TD Cowen.

Todd and Mick, you both talked about improving your RGM and finding those opportunities to eliminate trade programs that weren't working. Is there any further detail you can give or anything thematic there? Are there any types of promotions that are proving out to be more effective than others? And maybe in terms of -- you could break it out in terms of like, hey, we need longer duration deals or we need deeper deals? Is there anything to this?

Yes. So I'll start off. Look, the most and this is fairly obvious, but something we just need to get a lot better at. Look, when we run a TPR, just on the shelf, you don't get a great return. And we've got to limit those as much as we possibly can. When we get feature and display, the ROIs are really, really impressive. And so we need to work from both the marketing and the sales organization to make sure we're getting as much feature in display as we possibly can, and that's where we focus our investment. And TPRs, if we can't get a feature and display, we're probably going to walk away from some of those TPRs because the returns -- we feel good but the reality is the returns aren't there. So I would say that's the biggest thing that we're working on.

Yes, there are a couple of other pieces that I'd add is from making sure that we have the right price point when it really matters. And there are certain drive periods that are obviously critical and making sure that we support those. And to Todd's point, whether it's feature display, whether it's also broader brand support so that the whole package works.

Then the other piece that I'd add, and this is maybe a little bit of a nugget around Goldfish, if you look at it from a price pack perspective, you see that multipacks are growing. So in the last 13 weeks, actually, multipacks is growing 6%. So it's areas like that, that even within the brand that making sure that we have the right price points that we have the right price pack in the marketplace is absolutely critical.

Our last question today comes from Max Gumport from BNP Paribas.

First off, with regard to the tariff refunds, it seems like you're [indiscernible] to hold them, commentary from [indiscernible] would suggest there's potential that they will [indiscernible] give back tariff refunds to the consumer. So do you see any risk that the retailer puts pressure on you to give them back some of these funds as well?

I guess there's always a risk there. We have no intention at this point to give any of that money back. Look, the -- we -- if you look at our gross margins, we obviously have not -- we have not been able to offset those tariffs and just the normal inflation. We took some minimal pricing this past year. So right now, our intention is not to refund any of those tariffs.

Yes. And the only thing that I'd add to it is there's obviously always a lot of puts and takes. And per my earlier comments, we are very focused to make sure that we provide value to the consumer. That's something that we think about every day. We talk about every day, and there are obviously a lot of different considerations that are taken into account when we work through that, those decisions.

Great. And I just wanted to clarify that the 2 to 3 points of incremental inflation that you've called out for FY '27, that's a holistic number beyond just oil and commodities related to oil? Correct? It's your best guess at this point in time based on every input that you are procuring?

Yes. So again, prior to the conflict as we were looking at our initial planning for FY '27, we were looking at inflation close to 3%. The incremental piece from oil and the things around the Strait being shut down will add another 2 to 3 points, which gets you to the 5 to 6 points. So it's just not oil directly but it's everything that -- oil obviously gets into products, whether it's packaging, whether it's logistics. And then we're seeing some aluminum which comes out of that region is very, very elevated. At this point, fertilizer, which could have an impact on the farming community this year could have an impact as well. So everything that conflict is impacting goes into that incremental 2% to 3%.

And we are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to The Campbell's Company Second Quarter 2026 Question and Answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I will now turn the call over to Rebecca Gardy, Chief Investor Relations Officer. Ms. Gardy, you may begin.

Good morning, and thank you for joining The Campbell's Company Second Quarter 2026 Earnings Question-and-Answer Session. Earlier this morning, we released our earnings press release, earnings slide presentation and management's prerecorded remarks, including both the transcript and the audio of the remarks. All of the Q2 earnings materials are available on our website. At the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call.

During today's call, we may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to Slide 3 of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements.

Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Joining me today are Mick Beekhuizen, Chief Executive Officer; and Todd Cunfer, our Chief Financial Officer. We will now open the call for questions. Operator?

[Operator Instructions] Our first question today comes from Andrew Lazar from Barclays.

Maybe focusing on Snacks to start with, from a top line standpoint, what are you seeing in the key areas here of Goldfish, Fresh and Salty and sort of what's the plan for progress in the back half? And I guess for Salty specifically, you called out heightened competitive intensity and around which there's been plenty of discussion lately in the category. .

I'm trying to get a sense of what the solution is. Is it lower everyday prices, higher promotional spend, sort of bonus packs, et cetera? And kind of what sort of magnitude are we talking about?

And then just on the margin side, the 7% Snacks segment margin was a bit of a shock. And given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters? I know it's a lot, but I was hoping we can dig into that a little bit.

Great. Yes. Thank you for the questions. We'll take them one by one. So Snacks topline, Salty, I'll comment on, and then Todd, if you can take the margin. and I'll give kind of the broader lead in around the margin.

But if you look at -- so the Snacks top line, 3 key focus areas: first of all, Goldfish, second Fresh Bakery and then Salty. Let's go through kind of each of these different pieces. So with regard to Goldfish, we need to make sure that we maintain the Goldfish momentum. We had momentum, as you saw in our prepared remarks, going throughout the first half. We need to see that sequential progress throughout the second half of the fiscal year, and that's really with regard to in-market consumption.

And when you go to Fresh Bakery execution, we ran into execution challenges as we described. When I look at the remainder of the year, I expect that in Q3, we'll likely see some continued headwinds and that's partially self-inflicted as we reduced some in-market promotional activity in order to make sure that on-shelf availability and service levels are improving.

And then by the fourth quarter, we are working towards back to more normalized levels. And then when it get to Salty, we need to improve our overall competitiveness within that part of our Snacks portfolio. And it's really predicated upon 3 key focus areas.

First of all, making sure that we improve our competitiveness from a pricing perspective. Second of all, we need to make sure we're focused on the daily blocking and tackling or the in-market execution, which is absolutely critical. And then third, we need to evolve our portfolio with innovation, which is primarily focused on the one end premium, better for you as well as flavor exploration.

All that being said, within Salty, I expect that we're going to make some progress throughout the second half, but it will take some time. And with regard to your specific question around Salty pricing and that's really -- my comments really comes back to the chips side of the business. So Salty, as you might recall, we have -- consists for us of 2 key pieces.

First of all, Pretzels and then in the second half is Chips. That's really where we're seeing more of that competitive pricing dynamic playing out and you've heard that also from some of the other players in the space. What are we doing there? It is really focused on the promotional activity. It's going to be very surgical, and we're going to make sure that we are going to be competitive in the areas that matter during the time, it also really matters.

So again, just making sure that we're competitive in key moments. There is always a continued opportunity around some of the price pack architecture. However, that's going to take a little bit longer.

From a margin perspective, obviously, very poor performance, down 390 basis points in the quarter. As we mentioned in the script, about 1/4 of that was the bakery performance that Mick just mentioned. and 3/4 of it, quite frankly, is just when you -- when net sales were down 6%, there is a very large deleverage both in our plant network and also as we continue to invest in marketing and SG&A, when you're down 6%, that math and margin is challenging.

For the second half we will do a bit better on Snacks margin. In Q3, we are still in the process of stabilizing bakery. We are still going to have a fair amount of spending, particularly in marketing in Q3. So we will see some margin improvement in Q3, but nothing dramatic. I think we'll see a lot better performance in Q4 because we feel very strongly we will have the bakery performance stabilized much more greatly at that point. We will have lower marketing year-over-year and then we have a lot of activity on Goldfish in the quarter, which -- that is by far our highest-margin product line in the Snacks portfolio, so that should help margin as well.

Our next question comes from Tom Palmer from JPMorgan.

Maybe to start off, I wanted to maybe get a little more detail on the Fresh Bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they did emerge before the winter storms. It seems like they're related to execution challenges. I'm just trying to understand where you're seeing this? Is this like a production issue? Is it a challenge with route to market in terms of servicing customers and then just how you're addressing it. in terms of resolving it here over the next couple of quarters?

Yes. Okay. Let me address it. So with regard to Fresh Bakery, I mentioned this in my prepared remarks as well, it's really focused on both the manufacturing as well as distribution disruptions and it was exacerbated by the January winter storm. But you're right, we already started to see that throughout the quarter. .

And it's really coming back to making sure that we have product available on the shelf. So that comes back to service as well as the in-market execution piece. We deployed a cross-functional team, and we're already seeing measurable improvements across the board.

At the same time, I'm also very conscious that we need to make sure that we are making sustainable improvements. So as a result, we're investing in the business so that the changes that we're making are sticking so that we can service this business better going forward.

As I mentioned, we already started to see progress over the past, call it, 4 weeks. We've got to continue to work through that. in the third quarter, and then we're working towards normalization in the fourth quarter.

Okay. And then on capital allocation priorities, you noted the plans to focus more on debt reduction versus share repo. There's the dividend, which equates to a little over 2/3 of EPS guidance this year. And then you have the La Regina acquisition soon to close. So it seems like there also might be some investments needed to maybe support the business. Maybe just kind of an update on how you see this all balancing out.

Yes, I'll take that one. So look, cash flow obviously, has become extremely imperative for us, just given the debt leverage we are currently at and the takedown in the earnings. We will continue to invest in our business. We will reallocate some of our marketing money, as we've mentioned, into promotional activity to get sharper price points, but the net effect of that will be that, that is part of the reason why it's impacting our earnings.

But look, we're going to have to get really tight on CapEx. As you know, we took it down $50 million for the year. Working capital is going to have to be really tight. We're going to have no more share buybacks, even anti-dilutive share buybacks. We will not do -- look, dividend, extremely important to us, but we will not be increasing that dividend anytime soon. And so we're -- and look, we mentioned a $100 million cost reduction in overhead that's going to take over the next couple of years. And so that is in place to help cash flow as well.

The La Regina acquisition, in the near term, is not going to be significant from a cash flow perspective. We will make one payment of roughly $140 million, $150 million here before the close of the year. If you remember that second payment, we have the option of issuing equity. That second payment comes a year from now.

So if we need to issue equity instead of cash. We have that ability. And then the second half of buying up to 51% is probably a few years off. But rest assured, capital, cash flow preservation is heightened for us right now and getting that leverage down closer to 3% than the 4% is imperative for us.

Our next question comes from Peter Galbo from Bank of America.

I actually wanted to go back just on the Salty Snacks points, Mick, that you were making. I think if I heard you correctly, the focus is really to be more, I guess, on promotional within Chips versus maybe moving the every day. And obviously, your largest competitor is making it more of an everyday shift.

So just why is promotional the right route or right tactic from that perspective within Chips when you have, I guess, the 800-pound gorilla that's doing a more permanent shift or at least seems like a more permanent shift on the price side.

Yes. Okay. so let me give you a little bit more context around it. And listen, as I mentioned, it's going to be -- we're going to take a surgical approach that there's important. And the other aspect of it is we're going to make sure that we continue to be competitive with our brands.

If we look at the brands that we have with Cape and Kettle that are both in the -- like more in the Kettle Brand subcategory. We believe that with the brand positioning itself, we have a right to win with these brands. That is important, obviously, to kind of recognize and accordingly, we need to make sure that we continue to lean into that brands' right to win.

Now then back to your point around value, values are absolutely critical, obviously. And we've been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going -- as I mentioned, we're going to continue to look at key channels. And if I look at what the competition is doing, making sure that we stay competitive within those channels.

When I look at what we are seeing right now, most of the time, it can be resolved with our overall promotional strategy, there could be instances where we have to reset some of the pricing more permanently. And if so, then we'll do that. So I don't want you to take away that we are just going to solve this with pure promotional activity. I think it's going to be that surgical approach that I kind of said in my lead in.

Okay. Thanks for the additional context there. And Todd, just I think you gave some color around just the EPS cadence for the back half, but just wanted to clarify that. I believe it's Q3 look similar to Q2 and then you'd kind of see a normal step down in Q4, just to kind of hit the $0.90 you need to deliver in the back half at the midpoint. Do I have that math kind of right?

You have it correct. .

Our next question comes from Megan Clapp from Morgan Stanley.

Maybe we could just pick up there on the 3Q to 4Q cadence, and Todd, maybe a follow-up on some of the margin commentary you gave Andrew in the first question. So if 3Q kind of operating EBIT growth performance looks similar to 2Q, obviously an improvement expected in the fourth quarter. I think as you think about the margin profile, too, it would imply an improvement in margins as we get into the fourth quarter.

I think typically, 4Q is a lower margin quarter for you. So can you just from -- whether you do it by segment or just a consolidated basis kind of unpack the expectations as we go sequentially from 3Q to 4Q that would imply that step-up in margins sequentially.

Yes, absolutely. So a couple of factors give us more confidence that Q4 profile will be better than Q2 and Q3. One, if you remember, that Sovos ERP conversion that brought volume into Q3 last year out of Q4, we'll lap that. So we'll get a benefit -- organically, we'll get a benefit from that volume coming back into Q4 this year.

We do anticipate Snacks stabilization. We're not going to be all the way to bright, but we do believe the Snacks margin will improve sequentially as we get into Q4. Tariffs, we will start to lap some of the tariffs in Q4 of last year. So that year-over-year hurt will not be as great in Q4 as it has been in the first 3 quarters of the year. and we will have lower advertising spend in Q4. It will be up in Q3. It will be down year-over-year in Q4, and that will help, obviously, the margins.

Okay. Great. And maybe just 1 follow-up on what you just said on the stabilization in Snacks. Can you -- just from an org sales perspective 3Q to 4Q, can you just help us understand what you're expecting now for Snacks for the year? Should -- I know the compare does ease in both segments in the fourth quarter on the top line perspective, but should we still be thinking about Snacks as kind of declining in the fourth quarter?

Yes. It's going to take a while. Look, we have a lot of good activity going on, but Snacks will probably be down about 4% in the second half. So -- and that's going to be fairly balanced between Q3 and Q4, probably a little bit better in Q4 than Q3. But we are not anticipating a big sequential increase benefit from -- in the net sales line.

We do think we'll get -- will stabilize margins. They will get better. They will not be all the way to bright, but we do think the margin profile will get better as we end the year.

Next question comes from Michael Lavery from Piper Sandler.

Just wanted to understand a little bit better. You said that some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped-up promo spending, but it seems like the idea is to walk in to, I guess, why not both? Is it just maybe handcuffed by where you are on the leverage? Or is there a way to get -- do you have the right marketing spending level? And how do you think about balancing the need for that versus the pricing?

Yes. To be clear, our anticipation is marketing spend year-over-year will be up. So as we started the year, we were hoping it was going to be up a bit more than now we're forecasting, but it will be up year-over-year. Look, I'd love to be spending more marketing money versus trade if the kind of the market would allow right now, but we just think it's prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it's on broth, whether it's on chips.

And we're not talking about dramatic changes in our trade philosophy or spend. We will spend more. Some of that will get funded by marketing. There will be an incremental hit to the P&L, as we've mentioned. But the anticipation is marketing will still be up, but we are going to lean in a little bit more heavily into price.

And I think, to add -- maybe to add to that, kind of when you go through the year is we're taking a very balanced approach, right? I just want to make sure that we reiterate that because core brands, we're going to continue to make sure that we build them. And there is, for instance, one brand that we are continuing to support and we will continue to support on the Meals & Beverages side.

And you see the positive effect from that in the results. Another brand on the Snacks side that we've got to make sure we continue to support with marketing is Goldfish. So we're being very selective how we are allocating our dollars or our support between trade and marketing.

Okay. That's helpful. And just a follow-up on the pricing approach. Obviously, you touched on the promo increases. But then you've also just talked about sharpening value architecture and some of the price pack architecture. And then you just -- in the previous question, you touched on at least considering some list price adjustments.

Can you maybe give a sense of phasing and kind of where you are in that process? And what I've heard it correctly that any list price adjustments aren't decided, but just under consideration. And then on the price pack architecture, maybe some of -- how much is underway versus under consideration?

So let me unpack it. So first of all, some of the price pack architecture is going to take -- if it requires changing some of our package formats, that's obviously going to take a little bit longer. But it might also mean -- and I'll give you an example around, for instance, Goldfish, it might also mean for us to make sure that we lean in to an area that we see is actually working, is providing value to the consumers, such as multipacks within Goldfish.

That's been working, and we need to make sure that we continue to lean into that space because it -- we have a moment here with that particular pack. And that's also coming back to when I mentioned price pack architecture. Then there might be some of the larger pack sizes that we have within Goldfish, where we're leaning a little bit more into promotional activity in order to make sure that we hit a good price point that's providing that value for the consumer.

Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now, again, being very surgical. And then I can see, for instance, on Chips to the earlier point, if we're finding ourselves that certain list price gaps are just too large, we might selectively adjust. But the latter I expect to be smaller than the trade component.

And Michael, this work is underway. We'll do some things in the shorter term, but some of the activity that we're doing is going to take a little bit of time. As we look at some of the price slopes, particularly in our Snacks business, some of them were just out of whack. We just have price per ounce in some sizes that are below where they should be and conversely some that are above. So we just -- we need to get those aligned. It's going to take a little bit of time. But if we can execute that really well, there's some margin to be had.

Our next question comes from Max Gumport from BNP Paribas.

Another 1 on Snacks for me. It's really just on this recovery, it's been ongoing for some time now. We've not seen the volume grow in a couple of years. At what point do you stop talking about a recovery to the -- what you view as a normalized level of growth and maybe reset your expectation for what normalized growth is? And asked differently, what's giving you the confidence that this is still a segment where there is reasonable chance of growing sales organically at the levels you've discussed at past Investor Days?

Yes. 1 So when I look at -- so let me unpack that. So with regard to Goldfish, based on what we are -- based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business. And we're seeing that sequential improvement. We're obviously not all the way back to bright yet, but feel pretty confident around that.

Also because of the differentiated positioning of the brand. And I mean, in the end, it also has good, better for your credentials, and we need to make sure that we amplify those. So it's a brand that I think fits well with what consumers are generally looking for. And yes, we need to make sure that we tell that story and we provide the value in the marketplace and net-net, we can, as a result, grow that business.

So that's one. I feel pretty good about the Goldfish side of things. Then if I look at bakery as a whole, people continue to focus on moments of indulgence, and that comes back with cookies and we've been able to grow our cookies business out for 4 quarters in a row with the Milano innovation, and we've got some incremental innovation that recently came out with Chessmen.

So we feel pretty good about our overall cookies business. Now the cookies category hasn't been growing. So we need to make sure that we continue to differentiate our cookies business and that as a result, fuels the growth. Then with regard to Fresh Bakery, as I described earlier, we need to make sure that we get the execution right. And at that point in time, I believe we should be able to get that back to, call it, at least a flattish set of top line. So that's with regard to bakery.

Then when I get to Salty, if I look at the 2 pieces of our business, we are playing in subcategories that are growing with our Salty brands. That's first of all, within Pretzels, the Pretzels subcategory has been growing, and we have 2 great brands with Snack Factory as well as Snyder's of Hanover. Snack Factory has been growing. We've made some sequential progress on Snyder's of Hanover. We got more work to do on it in order to get that back to growth.

But again, because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business. Then on the Salty side -- sorry, on the Chips side, that's obviously, as we've just been talking, a more competitive space as we're all experiencing. And although the subcategories that we are in with -- on the Kettle chip site, Cape as well as Kettle chips, those 2 brands are well positioned within that subcategory of Kettle chips, which is the growing part of chips. However, the competition has increased over the past, call it, 12 to 24 months. And as a result, we've got more pressure and we're losing share there.

And that's why we need to do the work that I described earlier in order to make sure that we get a fair share of that growing subcategory. And then finally, you got Late July and Late July with its positioning is exactly what consumers are looking for. It is growing. It's a little wonky between different quarters because of some promotional activity. But overall, I feel very good about that brand. So if I kind of -- hopefully, that gives you a little bit of context about really unpack our overall Snacks portfolio around like why do we believe we should be able to grow it.

It's because the brands that we have and the subcategories that we're in, they are well positioned with what the evolving consumer is looking for and the consumer is looking for that premium better for you and flavor exploration experience and our brands can provide that.

Great. And then on Goldfish. So back in '23, you announced you were investing about $160 million in the Richmond manufacturing facility to expand Goldfish capacity. Since then, at least based on what we're seeing in tracked channel data, volumes have been in decline. So can you talk about any capacity utilization impacts you've seen as a result of that expansion and just your view on your ability to fill that capacity going forward? .

Yes. I mean, so look, this is -- what you just described, unfortunately is part of the reason why we had a 7% margin in Q2. There has been -- one of the issues, not everything, but one of the issues is deleverage in the P&L. To your point, we have invested in particularly Goldfish, but in other areas coming out of the pandemic where we thought the volume would continue to grow.

It obviously has not. And when you have higher fixed cost and your business is in decline a bit, that's really bad for margins, and that's what you're seeing. So our job as a management team is to make sure we can get that volume back and the P&L really starts to improve if we can do that. And that -- look, it's as simple as that. We've got to get Goldfish volume going in the right direction or we will continue to have these margin hurts.

Our next question comes from Robert Moskow from TD Cowen.

Just a couple of more add-ons. I wanted to ask about distribution for your Snack business. Your competitors talked about double-digit gains. And I wanted to know if you've seen distribution losses as a result of that.

And then secondly, Todd, the oil is jumping all over the place. It's going to have an impact on diesel. And I wanted to know if you could talk about how that may impact the cost structure of the DSD network. These are independent routes. So it's a little complicated. I wonder to know if you could help us.

Yes, Great. Thank you. Todd, why don't you take the second one, and then I'll come back on the first one.

No, absolutely. So obviously, incredibly fluid situation. Oil is bouncing all over the place right now, and I don't think anyone knows how this is really going to play out in the next few weeks and more importantly, months and years. The good news is, right now, we are about 85% hedged on all commodities, including things like diesel for freight and resins -- another plastics and aluminum that could obviously get impacted by what's going on in the Middle East right now.

So there could be some impact to this year, it's not going to be significant. If this continues, for several months, if oil remains where it is as we start the fiscal year, obviously, things are different. This will start to have an impact on our business and everyone's business if oil remains elevated, not just on freight, but on other products that leverage oil in their products as well. So more to come on that.

Hopefully, this will get resolved. We have -- as I mentioned in the prepared remarks, we have nothing -- no incremental costs embedded in our forecast from it. There is a little bit of risk there, but nothing substantial. So look, if we're sitting here 3 or 4 months and it's still elevated, we're going to have to address it either through pricing or really sharpen our pencils on getting more cost out of the system.

And when I look at overall distribution, Rob, I see in -- with the strength of our brands, you continue to see one distribution opportunities, and we're also gaining some of that distribution. It is more profound in areas like Goldfish, where we have a right to win. It's a well-positioned brand, and we continue to work with our retail partners in growing that brand in some of the more competitive areas such as Chips, I see a mix of some gains and losses and probably as a result a little bit more net neutral around the distribution side. .

When I think about what are we doing about areas like that, if we have great innovation, we find that our retail partners are excited about making sure that we gain that incremental distribution, and you see that, for instance, in cookies. Cookies done really well with the Milano as well as the Chessman innovation. And as a result, we've seen continued distribution gains in those areas.

Rob, you mentioned the independent DSD impact there, just so we're clear. they are -- look, they're independent operators. They are responsible for their fuel costs and other operating costs. So there's no direct impact to us. But obviously, if they don't have a competitive route where they can make money, ultimately, at some point in time, it impacts our ability to grow these businesses as well. So we'll have to be cognizant of that, but they are responsible for their fuel costs.

Our next question comes from David Palmer from Evercore ISI.

I'm wondering if there's a bigger long-term comment to be made about the Snacks business. Sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year. the implied valuation of it is compressed. There's something perhaps liberating about that in terms of how you're thinking about it.

You have Mohit. He's joining from a company that spun out DSD and sold cookies. And in other words, they rethought that business more completely. And I'm just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so you can put the resources you want to get the good stuff within it.

I know there's limited detail that you could share, but maybe you can make a comment on that, and I have a quick follow-up.

Yes. So -- and I know we've spoken about this in the past. I mean we are obviously operating the portfolio that we currently have. We are big believers in the brands that we have. We'll obviously always continue to make sure if there's alternatives that provide -- create better shareholder value that we take those into consideration now.

I'd say that when I look at our current Snacks portfolio, another way of looking at some of what we're just talking about, and particularly with regard to the margin is my perspective is like there's a lot of opportunity here. And you see that hopefully also throughout our commentary really that action orientation and making sure that we go after these different areas.

Now obviously, making sure, as Todd also mentioned, that we are stabilizing our top line is absolutely critical, growing areas like Goldfish, which will help from an overall mix perspective, and of course, making sure we get that Fresh Bakery execution right are all going to help margins, but we're not going to stop with those initiatives, continued focus on that elevated productivity level is really important, that's both within the plants as well as within our logistics network.

And then finally, Todd already mentioned the cost savings, whether they are with regard to our network or whether they are within our SG&A we're going to continue to work on those different areas, although some of them might obviously take a little bit longer. So listen, we are always going to be continue to look at all the different alternatives, but we are focused on the portfolio that we have and make sure that we work that as hard as we possibly can.

Just a quick one on the other side of the business. I think a lot of your comments on your prepared remarks are really true about the cooking behaviors of the younger generation and you're leaning in on that with this new condensed sauces business. I wonder about how incremental do you think that can be?

And on the other side, how much we should be worried about ongoing market share slippage on the broth side. It's been -- that broth business has flattened out lately. I'm just wondering how you're thinking about perhaps reviving growth there or at least forestalling whatever progress is being made by private label getting back on shelf.

Yes. So -- and thank you for asking the question. Of course, we didn't talk as much about the Meals & Beverages side of the business, but with the in-market growth that we generated during the second quarter and the strong performance of rails. So obviously something that we're very excited about.

The other thing that is really working within the M&B portfolio, as you're describing is the overall focus on cooking occasions and our portfolio is catering very well to that. Also our products within the soup and on the one hand, within our condensed -- so on the one hand, broth, I'll get back to broth in a minute. And then the other piece is our condensed portfolio has actually been doing relatively well because of the part of the business, of the condensed portfolio that's focused on cooking and is being used as an ingredient.

And it's a little over half of that condensed portfolio in the second quarter. That's been the growing part of the portfolio. On the flip side, the eating side has been declining. So net-net, condensed has been relatively flat during the quarter. That being said, we are seeing that differentiated proposition that we can provide with our condensed cooking soups, which are being used as an ingredient like cream of mushroom, cream of chicken, and we are now expanding that into Campbell's condensed sauces.

And we believe we have a right to win with that. So what does that do? It basically allows us to start transforming more and more of the soup out into an ingredient that we're providing, and it provides convenience and comfort at a very attractive value proposition. So I'm very excited about the Campbell's condensed sauces. We're going to introduce that in June, as you saw I think it will be incremental to what we're currently providing. And I think we're going to learn a lot with that introduction.

And it's a great complement to our condensed cooking soups as well as broth. And with regard to broth, broth has obviously been a growing category, 2 great brands we have within that category. It's Specific as well as Swanson, both of them continued to grow during this past quarter, albeit, as you're pointing out, a little bit of share pressure, which we anticipated because of at private label recovery. I -- we're going to continue to make sure that we, on the one hand, stay competitive within the space, but also we're continuing to focus on how can we grow that business as it is a very attractive value proposition that fits right within that cooking behavior.

Pacific has been growing double digits. The pressure has probably been a little bit more on Swanson. And Todd also mentioned earlier that we're watching very closely the price gaps to some of the private label participants and making sure that as a result we stay competitive during key dry periods like the holiday period.

Our last question comes from Jim Salera from Stephens.

Mick, I wanted to build on David's question there and maybe just ask if you could give us some details around how we should think about Meals & Beverages in the back half of the year, particularly what we should expect on pricing, given some of the competitive dynamics you just highlighted?

I mean is there still opportunity for modest net price realization in the back half of the year and embedded in your updated guidance, do you have incremental at-home consumption given some of the pressures on the consumer typically that benefits that portion of the business? Any detail on that would be helpful.

Yes. I'll take the pricing first. We will have still positive net price realization in the second half. It won't -- it won't be as great as it's been just because of some of the investments we've made in broth. We're actually making a little bit in rails as well, but we still will have positive price.

I think from a consumption perspective, you're probably going to see a little bit of pressure in the second half. You saw that in Q2, we did really well from an in-market consumption perspective. driven by the holiday period. Our products typically do very well during that period. And that was also very evident again during this holiday period.

And then on top of it, as you saw, we had very healthy growth with regard to grew in market consumption, 14.5% during the second quarter. As I mentioned in the past, we expect for the full year high single digits, and that's still what I'm expecting. So a little bit of that disproportionate growth during the second quarter. But overall, I expect continued growth with the brand. However, that leads to a little bit lower overall consumption growth in Meals & Beverages in the second half of this fiscal year.

So I think you're hovering probably to 0 to slightly to minus 1 to 0 is my hunch. That's probably what you're going to see in and around the second half.

And we are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to the Campbell's Company Second Quarter Fiscal 2026 Earnings Conference Call. I'm Rebecca Gardy, Campbell's Chief Investor Relations Officer. Joining me today are Mick Beekhuizen, Chief Executive Officer; and our Chief Financial Officer, Todd Cunfer.

In addition to today's prerecorded remarks, we will host an analyst question-and-answer session via webcast at 9:00 a.m. Eastern Time today, March 11, 2026. The presentation, a transcript and audio recording of management's prepared remarks and today's earnings press release are available on our website in the Investors section. A replay of the webcast will be posted there following the Q&A with a full transcript available within 24 hours. You will find today's agenda on Slide 2.

Mick will provide insights into our second quarter performance as well as our in-market performance by division. Todd will then discuss the financial results of the quarter in more detail and review our updated guidance for fiscal year 2026.

During today's discussion, management may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates and are subject to risks and uncertainties. Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause actual results to differ materially. We also reference non-GAAP measures that we believe provide useful information for investors. Reconciliations to the most directly comparable GAAP measures are included in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

And now it is my pleasure to introduce our Chief Executive Officer, Mick Beekhuizen. Mick?

Thanks, Rebecca. Good morning, everyone, and thank you for joining us.

Let me start with a clear and candid update on Q2 as the performance was below our expectations. Underlying consumer demand remained relatively steady, but our reported results were pressured by 2 key factors: weaker-than-expected performance in Snacks and storm-related shipment delays in Meals & Beverages that shifted some volume from Q2 into Q3.

In Meals & Beverages, in-market demand grew driven by our leadership brands, including Rails, and that strength continues to anchor our portfolio. In Snacks, the recovery is taking longer than anticipated. We made sequential progress on Goldfish, but fresh bakery execution disruptions and elevated competitive intensity in salty weighed on volume and margins. We are taking focused actions to restore fresh bakery service to sharpen our value, launch incremental innovation and improve in-market execution in salty while continuing to build on Goldfish momentum.

At the same time, we're accelerating enterprise cost savings to support margins and reinvestment, including $100 million of additional near-term overhead reduction initiatives that will increase efficiency and effectiveness across the organization.

Todd will provide more details in a few moments. Largely driven by the near-term outlook for our snacks business and select incremental trade investments, we've updated our fiscal 2026 guidance. We remain focused on executing our strategy and are increasing our intensity, especially on snacks execution and cost savings.

Turning to key drivers of our Q2 results. In-market consumption improved sequentially from down 1% in Q1 to flat in Q2, driven by Meals & Beverages. Organic net sales declined 3% in Q2, reflecting lower-than-anticipated in-market consumption within Snacks in combination with shipment delays late in the quarter, which largely impacted Meals & Beverages.

Adjusted EBIT declined 24% in Q2, driven by lower sales, operational disruptions, especially in fresh bakery and tariff-related cost pressure. Cost savings and productivity actions helped to partially offset these headwinds. Adjusted EPS was $0.51 for the quarter, consistent with the pressure on adjusted EBIT. Taken together, these results underscore the ongoing pressures we are navigating while reinforcing our focus on execution and disciplined actions to stabilize Snack's performance, maintaining momentum in Meals & Beverages and position the overall business for sustainable growth. Even in a challenging environment, we continue to see meaningful share resilience in Meals & Beverages across our portfolio. This was especially evident during the holiday period and in categories benefiting from at-home cooking trends.

Across our leadership brands, Q2 dollar consumption was relatively flat and dollar share declined 0.2 points. In Meals & Beverages, consumption increased 2% and overall share was flat year-over-year. In this environment, holding or growing share is meaningful, and it underscores the strength of our brands and our relevance with consumers. Campbell's rails and pacific either grew or held share versus last year. These brands benefit from sustained at-home cooking behavior, consumer trust and compelling value propositions that resonate given increased pressure on consumers' wallets. This performance reinforces the important role that Meals and Beverages continues to play in our portfolio.

In Snacks consumption declined 3% and overall share declined 0.3 points. That said, we are seeing important pockets of strength with Goldfish, Pepperidge Farm and Snack Factory holding or growing share. These wins show that our snacks brands resonate with consumers and can still outperform even with a tough category backdrop.

Our brand portfolio is well positioned to deliver sustainable growth as our brands have a strong right to win across the 4 consumer needs state pillars of cooking and comfort, premiumization, flavor exploration and health and wellness. We will fully capitalize on this right to win by accelerating innovation, evolving our products to further strengthen the consumer value proposition and increasing focus on executional excellence at retail, notably in omnichannel.

Turning to Slide 8. Meals & Beverages consumption remained strong in Q2, with dollar consumption up 2% versus last year, partially driven by strong holiday demand. However, organic net sales declined 2%, reflecting storm-related shipment delays in January, which created roughly a 1 point headwind to reported net sales.

Let me spend a few moments on the Meals & Beverages portfolio, starting with soup. Overall soup consumption was essentially flat in the quarter, but importantly, cooking occasions continue to provide a meaningful tailwind to in-market demand. Within a competitive category environment, we are competing effectively in at-home cooking occasions with strong brand positioning and disciplined price value architecture.

In broad category consumption grew for the 10th consecutive quarter, driven by younger consumers. While competition has intensified due to private label supply recovery and increased promo spending by branded competitors, Pacific delivered strong double-digit dollar consumption and volume growth and [indiscernible] continue to grow dollar consumption. In [indiscernible] we grew share for the ninth consecutive quarter, led by cooking portfolio.

During the holiday period, Campbell's delivered its highest dollar sales in the past 3 years. While the ready-to-serve category remains slightly negative despite sequential improvements we delivered shared gains driven by pacific and rails. Pricing actions performed in line with our expectations and we continue to actively monitor [ elicyainpance ] and competitive dynamics. We remain confident in our soup portfolio as we move through the balance of the year with advantaged brands and clear line of sight to build on the share positions as conditions normalize. Building Campbell's strong momentum and right to win in the consumer cooking -- we're excited about the launch of Campbell's condensed sauces. Consumers want to make great meals their families will love. But after a busy day, they need solutions that are simple, reliable and affordable, 90% of consumers recognize that Campbell's condensed soups are a convenient ingredient to enable semi-scretched home cooking.

Building upon this existing consumer behavior, we're launching Campbell's condensed sauces. These products will be merchandised in the soup aisle and will break through with sauce in big, bold font and on the front label. Campbell's condensed sauces will further build credentials for the soup aisle as a cooking solutions destination. The condensed sauces platform will ship this June with robust trade and consumer support beginning during back-to-school to build momentum ahead of peak holiday season.

Turning to Slide 11. When we added the Rao's brand to the Campbell's portfolio, we were very clear about our conviction of its continued growth trajectory. Rao's has a clear right to win as consumers are increasingly seeking quality authenticity and an elevated restaurant quality experience at home. That conviction was validated.

As of the second quarter, the total Rao's brand surpassed $1 billion in net sales on a trailing 12-month basis, growing 14.5% in consumption during the quarter. This is a significant milestone that reflects the strength of the brand, its premium positioning and the disciplined execution of our teams. Rao's is now our fourth billion brand, joining Campbell's, Goldfish and Pepperidge Farm. Rao's continues to be one of best cold storage of food. What makes performance specially compelling is its breadth and quality and although there is continued opportunity to expand the brand sauce remains fast. Rao's Italian pasta sauce is the #1 brand in absolute dollar growth, the #1 in market share growth and now holds a top share position across all 8 U.S. SCANA defined regions.

Additionally, Prego is maintaining its #2 position in each of these regions. Rao's pasta sauce continues to gain share through strong household penetration growth, industry-leading shelf productivity and innovation that is resonating with consumers and customers. Creamy Marinara is a clear example of leading innovation in the category on both dollars and velocity, reinforcing Rao's ability to elevate the category while expanding usage occasions.

In Q2, Rao's sauce delivered 11.5% consumption growth outpacing the Italian sauce category and helping to drive solid dollar share growth. Rao's sales growth is driven by fundamentals, expanding its household base, delivering strong velocities and building scale with one of the most productive assortments on shelf. This is not a pricing or promotion story. It's a sauce brand that consumers are actively and repeatedly choosing, surpassing $1 billion is not a destination. It's an important milestone in what we believe is a long-term growth story, with strong fundamentals, ongoing innovation and disciplined investment support, the Rao's brand exemplifies our commitment to establishing sustainable growth within Meals and Beverages.

Now let's turn to our Snacks business on Slide 12. As I've described, the category continues to reflect evolving consumer preferences. Consumers are still snacking with how and why the snack is changing, with greater intentionality around purchases and increased focus on health and wellness, premium and flavor forward experiences and clear value.

That said, Snacks performance in the quarter was weaker than we expected, driven by lower-than-anticipated in-market consumption and sequential progress in Goldfish was offset by the execution challenges in fresh bakery and increased competitive intensity within our salty portfolio. Looking at the financial results. Organic net sales declined by 6%, driven by volume declines with net price realization neutral for the quarter.

As expected, partnering contract brands were about a 1 point headwind to net sales. As mentioned during the previous quarter, shipment timing between Q1 and Q2 negatively impacted net sales for the second quarter. Importantly, while the quarter was pressured, we're making progress in key areas and remain confident in the strength of our Snacks brand portfolio and our right to win. We participate in categories where consumers continue to see connection, comfort and elevated experiences.

Our focus now is on maintaining the momentum within Goldfish, improving our execution within fresh bakery and increasing our competitive position within our salty portfolio. We are taking clear actions to address these issues and position Snacks for improved performance.

On Slide 13, I want to spend a moment to Goldfish, which is a core pillar in stabilizing our Snacks business. Goldfish is the #1 brand in crackers with households, with kids and has a broad appeal. Importantly, households with kids represent one of the most resilient snacking cohorts. And that's where Goldfish continues to have cohorts. And that's where Goldfish continues to have a clear right to win, a fun snack without artificial colors, flavors or preservatives and baked with 100% real cheese.

Given the importance of the brands to our overall Snacks business, we took a hard look at what was getting in the way of Goldfish performing consistently. And that led us to simplify, sharpen and refocus how we manage the business. We've sharpened the value architecture, anchored in larger sizes, including multipacks, reduced complexity versus prior years and focused innovation on scalable platforms. including seasoned pretzels and targeted limited time offerings.

As a result, we saw sequential improvement in consumption in Q2 with stronger performance where value architecture and retail execution are aligned. As we look ahead, we're staying tightly focused on Goldfish most valuable consumer, families with kids. This is where the brand's equity is strongest, and we're disciplined in-market execution and focused innovation can drive improved momentum over time.

Turning to Beverage Farm Cookies continue to do well during the quarter, driven by holiday performance and successful innovation across our 2 largest platforms, Milano and Chessmen, which attract consumers into premium worthy moments. Milano remained a key contributor to category growth, supported by white chocolate innovation and limited time offerings, while Chessmen returned to growth for the first time in 4 quarters.

As a result, cookies delivered another quarter of share gains, reinforcing the durability of premium indulgences. However, our Pepperidge Farm fresh bakery business was negatively impacted by execution challenges. Throughout the quarter, execution deteriorated, driven by manufacturing and distribution disruptions, which were exacerbated by the January winter storm. We quickly deployed a cross-functional team fully focused on improving the execution, and we're already seeing measurable improvements. As part of our efforts, we're investing to make sure that the improvements are sustainable as we turn the trajectory of the fresh bakery business.

I expect us to continue to make progress throughout the third quarter and be fully recovered during our fiscal fourth quarter. The overall brand is in a good position, which is giving us confidence that as execution improves, Pepperidge Farm Bakery will return to sustainable growth.

Turning to salty snacks. The sequential progress with in Pretzels was offset by competitive headwinds in chips. Specifically in Pretzels, we saw sequential improvement during the quarter led by sides of Hanover, holiday-specific limited time product offerings and improved execution drove momentum. We're reinforcing that progress by reigniting the core, including a refreshed visual identity to strengthen shelf presence and shopability and bringing better-for-you innovations such as our Snyder's of Hanover sticks platform, which offers a bundle of protein and fiber benefits.

In chips, we're placing a greater focus on value to remain competitive while continuing to invest behind platforms that resonate with today's consumers. Kettle brands in late July innovation, particularly avocado oil, is aligned with premium and better-for-you trends and is improving velocity in the category.

Overall, our salty portfolio is well positioned and will continue to evolve with consumer preferences, particularly within premium and better-for-you offerings. New product launches across our salty portfolio continue to be a key focus to evolve our brands. At the same time, to improve our competitive positioning, we need to sharpen our value and focus on in-market execution. As a wrap up, it's evident the consumer remains highly intentional with a clear focus on cooking and comfort, premiumization, flavour exploration and better for you. It's also evident that our brand portfolio is highly differentiated and well positioned to meet these consumer need states.

I'm pleased with the performance of the Meals and Beverage portfolio this quarter with rails leading the way and demonstrating our ability to grow in market consumption. In Snacks, progress has been slower than we anticipated. And while we are encouraged by the sequential improvement in Goldfish, maintaining momentum into the second half of the fiscal year is critical. We're actively addressing execution challenges within bakery strengthening competitive positioning within salty and delivering additional cost reductions across the company to support margins and continued brand investment.

We're making progress while navigating a dynamic operating environment, but we have more work to do and are taking decisive action to return to sustainable, profitable growth.

With that, let me turn it over to Todd.

Thank you, Mick, and good morning, everyone. I will walk through our Q2 fiscal '26 results and full year outlook. As you'll see, our results reflect a challenging operating environment, including competitive intensity, inflation and tariff impacts. We continue to take disciplined actions to manage costs, invest in our brands and position the business for improved performance.

Starting with the headline results, Q2 came in below our expectations, reflecting continued top and bottom line pressure in a dynamic operating environment. Net sales declined year-over-year, adjusted EBIT declined significantly and adjusted EPS reflected lower operating performance.

Turning to Slide 19. The organic net sales decline of 3% reflects volume and mix as the primary headwinds, indicating a more value-conscious consumer and elevated competitive intensity. Net price realization was roughly neutral, divestitures, including noosa reduced reported net sales by approximately 1 point as expected. In Meals and Beverages, underlying U.S. retail consumption grew driven by [indiscernible] and Rao's. However, reported net sales tracked behind consumption driven primarily by 1 point from the January storm impact on customer shipments as well as headwinds across foodservice, Canada and Latin America.

In Snacks, organic net sales declined more materially driven by unfavorable volume and mix across leadership brands; the shift in volume between Q1 and Q2 and continued pressure in contract and partner channels. Net pricing was modestly favorable but insufficient to offset volume pressure.

On Slide 20, second quarter adjusted gross profit margin decreased 270 basis points to 27.7%. Inflation and other supply chain costs were the primary drivers, including approximately 230 basis points of gross tariff impact. These pressures were partially mitigated by cost savings and supply chain productivity improvements and favorable net price realization, which together offset a meaningful portion of the inflationary headwinds.

Net price realization was slightly favorable, though less so than in the prior quarter due to additional promotional activity, particularly in our M&D business. In the second quarter [indiscernible] Campbell's made progress towards its fiscal 2028 cost savings target of $375 million by delivering approximately $20 million in new savings, bringing total cost savings achieved to $180 million. The company continues to expect these cost savings to be one of several levers to help offset tariff headwinds. We will be aggressive on cost savings initiatives and have identified additional near-term cost savings, including $100 million of overhead reductions over the next couple of years 2/3 of which are outside our current peak enterprise cost savings program.

Turning to Slide 21. Adjusted marketing and selling expenses stayed flat at 10% as a percentage of net sales reflecting the importance of continued investment behind our brands amid a softer top line. Administrative expenses also remained flat as a percentage of sales, demonstrating ongoing discipline in overhead cost management.

As shown on Slide 22, second quarter adjusted EBIT decreased 24%, primarily driven by the lower adjusted gross profit I just discussed, including a $14 million impact of customer shipment delays related to the January storm. Marketing and selling investments, along with other operating items were largely neutral on a margin basis. Overall, adjusted EBIT margin declined from 13.9% to 11%.

On Slide 23, adjusted EPS declined to $0.51, down 31% versus prior year. The decrease was almost entirely attributable to lower adjusted EBIT, including an approximate $0.04 from the January storm-related impacts. Interest expense, taxes and share count were essentially neutral in the quarter.

Turning to segment performance on Slide 24. Meals and Beverage results were impacted, as I mentioned, by an estimated $20 million due to customer shipment delays caused by January's winter storm as well as competitive pressures and tariff impacts. Organic net sales decreased modestly with volume and mix pressure, partially offset by pricing.

Operating margin declined to 15.3%, reflecting the same inflationary and volume-related challenges we discussed earlier. Organically, sales were down 2%, driven by volume and mix declines of 2%, partially offset by favorable net price realization of almost 1%. Largest declines in the quarter were seen in U.S. soup and Prego pasta sauces, which were partially offset by the continued strong quarterly performance of Rao's, which Nick spoke to earlier.

Second quarter operating earnings decreased 15%, primarily reflecting gross profit impacts from inflation, including tariffs. Cost savings and supply chain productivity improvements were partial offsets to the inflationary pressures.

On Slide 25, Snack results underperformed relative to our expectations this quarter, reflecting volume deleverage and higher costs. Net sales, both reported and organic declined 6%, primarily due to volume and mix pressure, while net price realization was flat. Declines in chips and Pretzels supply constraints in fresh bakery and impacts from third-party partner and contract brands were significant drags to Snacks performance in the quarter.

Snacks operating margin declined 390 basis points with 25% of this decline driven by poor bakery network performance and the rest as a result of the volume deleverage in both our plans and investment in marketing and SG&A. We forecast net sales performance for Snacks to improve modestly in the second half versus Q2, with sequential improvement in operating margin as well. We expect stabilization as we make progress to improve bakery performance and capture productivity gains.

Additionally, we are taking a comprehensive look at how to significantly improve the snacks margin profile, including simplifying SKU mix, price pack architecture and optimizing our manufacturing network. As shown on Slide 26, despite near-term earnings pressure, we continued our strong stable cash generation year-over-year. We returned $263 million to shareholders year-to-date through dividends and share repurchases. Capital expenditures of approximately $227 million were focused on growth and productivity. For fiscal 2026, we expect total CapEx of approximately 3.7% of net sales.

Our net debt to adjusted EBITDA leverage ratio at the end of the second quarter was 3.8x, reflecting lower earnings. Reducing debt remains a key focus going forward with specific emphasis on minimizing working capital and CapEx needs. In addition, we have suspended all share repurchases, including those for antidilution purposes. At the end of the second quarter, the company had approximately $561 million in cash and cash equivalents and approximately $1.8 billion available under our revolving credit facility.

Based on the slower-than-anticipated recovery in Snacks and incremental trade investments, we are updating our full year guidance ranges from those provided on December 9, 2025, to reflect a more cautious view of the balance of the year. Additionally, the newly imposed 10% global tariff under Section 122 will result in a modest increase to our second half tariff headwind.

Lastly, our updated guidance does not reflect any potential impact regarding the Iran conflict. We now expect organic net sales to be in the range of down 2% to down 1% and adjusted EBIT to be in the range of down 20% to down 17% and adjusted EPS in the range of $2.15 to $2.25 and representing a range of down 26% to down 23% versus prior year. Regarding Q3, we expect the organic net sales, EBIT and EPS growth profile to be relatively consistent with Q2.

As a reminder, we benefited last year in Q3 from shipping ahead of the Sovo's ERP conversion. This more than offsets the shift of volume from the storm this year out of Q2 into Q3.

As shown on Slide 27, all other assumptions remain unchanged. In closing, while our second quarter results were below our expectations and we revised our full year outlook we are acting with urgency and conviction leveraging the strength of our brands and capabilities to improve performance and drive long-term value.

That concludes our prepared remarks for today's call. We encourage everyone to listen to our live question-and-answer webcast, which will begin at 9:00 a.m. Eastern today, March 11, and which is accessible on the company's Investor Relations website. Thank you for your continued interest in the Campbells company.

Good morning, and welcome to The Campbell's Company First Quarter Fiscal 2026 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions]

I would now like to turn the call over to Rebecca Gardy, Chief Investor Relations Officer at Campbell's. Please go ahead.

Good morning, and welcome to The Campbell's Company First Quarter Fiscal 2026 Earnings Conference Call. I'm Rebecca Gardy, Campbell's Chief Investor Relations Officer. Joining me today are Mick Beekhuizen, Chief Executive Officer; and our new Financial Officer, Todd Cunfer.

Today's remarks have been prerecorded. After the prepared remarks, we will transition to a live webcast Q&A. The presentation, a transcript of management's prepared remarks and today's earnings press release are available on our website at thecampbellscompany.com in the Investors section. A replay of the webcast will be posted at the same location following the Q&A with a full call transcript including the Q&A session available within 24 hours.

Slide 2 outlines today's agenda. Mick will provide insights into our first quarter performance as well as our in-market performance by division. Todd will then discuss the financial results of the quarter in more detail and review our guidance for the full fiscal year 2026. Please note that all references to the first quarter in-market performance refer to the 13-week period ending November 2, 2025 compared to the 13-week period ending November 3, 2024.

In addition, beginning in fiscal '26, we are reporting share of our Cape Cod and Kettle brands chips against the total potato chip category, replacing the prior comparison to the kettle-cooked potato chip category. Late July will be compared against the total tortilla chip category rather than the natural inorganic tortilla chip segment. We believe these updates more accurately reflect our brands' in-market performance and underscore their strong positioning within the broader chips category.

And finally, beginning in fiscal 2026, the Snacking and Meals and Beverages retail business in Latin America is managed under our Meals and Beverages segment. Through the fourth quarter of fiscal 2025, the company's Latin America retail business was managed under the Snacks segment. Prior period results have been adjusted to reflect this change.

On our call today, we will make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to Slide 3 of our presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements.

Because we use non-GAAP measures, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our presentation.

And now it is my pleasure to turn it over to our Chief Executive Officer, Mick Beekhuizen. Mick?

Thanks, Rebecca. Good morning, everyone, and thank you for joining our first quarter fiscal 2026 earnings call. Before we review our results, I want to take a moment to welcome Todd Cunfer, our new CFO. With more than 2 decades of food industry experience, Todd brings the expertise and perspective we need. Throughout his career, he has demonstrated a proven ability to drive change and deliver superior financial results. I'm confident he will be a strong business partner and a tremendous asset to our company. Welcome, Todd.

Now let's review our first quarter results, which were in line with our expectations as we continued to navigate a dynamic operating environment. Organic net sales were down 1%, driven by a 2% decline in consumption, with the difference mainly due to retailers building inventory and snacks ahead of upcoming promotional activities. We have an attractive brand portfolio that meets the key attributes consumers are seeking, whether supporting at-home cooking, providing flavor forward options, premium experiences or health and wellness benefits.

While our total in-market consumption was down 2%, our 16 leadership brands consumption was down 1% and, collectively, they held share for the eighth consecutive quarter. Within Meals and Beverages, our leadership brands benefited from consumers' ongoing cooking at home behaviors and the growing demand for elevated new experiences. However, our Snacks business remained under pressure as consumers continue to be increasingly intentional with their purchases.

Since the start of the fiscal year, we have made significant progress on our cost savings initiatives, improved overall productivity and implemented selective in-market pricing increases. However, these actions were not sufficient to offset cost increases and top line headwinds, resulting in a decrease in our adjusted EBIT margin and an 11% year-over-year adjusted EBIT decline. We continue to be laser-focused on mitigating cost pressures while maintaining marketing support for our brands.

Finally, as outlined in our press release, we reiterated fiscal 2026 guidance, which continues to include the expected tariff impact and the related mitigating actions. Todd will provide more details on our guidance in a moment.

As highlighted last quarter, we are strengthening our focus on consumers and their evolving needs. I want to remind you of the framework we shared last quarter and underscore the strategic lens we apply when shaping how our brands show up. Our brands are uniquely positioned to compete and excel in these growth areas. While we use this framework to guide consumer-led innovation, it also guides our brand activations.

A great example is our Rao's sauces campaign, which focuses on the elevated Rao's experience, highlighting the origin of its high-quality ingredients supporting the unique nature of the food we make. Additionally, we recognize that continued focus on providing an attractive value proposition is critical to be successful. An example of this during the past quarter is our multipack Goldfish focus during the back-to-school period, where we've seen double-digit increases in consumption versus prior year through strong retail execution and promotional support during the important consumer occasion, meeting the need for a wholesome convenient snack at the right value.

By concentrating our efforts and executing with clarity and discipline, our diverse and advantaged portfolio can build deeper consumer connections, meet their evolving needs and unlock meaningful sustainable growth. We remain committed to crafting high-quality food at the right value as well as investing in omni-channel execution, brand activation and innovation.

Turning to Slide 7. Total company leadership brands saw stable share performance in Q1 with consumption down 1%. As a reminder, our leadership brands represent approximately 90% of our enterprise net sales. The first quarter marked the ninth consecutive quarter that our Meals and Beverages leadership brands have held or grown share. Consumers at-home cooking behavior was once again a tailwind for several of our brands within the division, especially our condensed cooking soups, broth and Italian sauces.

Turning to Snacks. Consumers are still snacking, but how people are snacking is evolving. We are maintaining our solid share position within snacking as consumers choose snacks that meet their needs within premiumization, flavor exploration and health and wellness. In Q1, 4 of our 8 Snacks leadership brands grew or held share. We believe our powerful portfolio of Snack brands remains distinctly advantaged in today's environment, and we are staying close to consumers' evolving needs through our brand activations, innovation and strong omnichannel execution.

Let's take a closer look at each division, beginning with Meals and Beverages on Slide 8. Organic net sales decreased 2% for the quarter. Unfavorable volume and mix of 3% reflects the elasticity impact of tariff-related pricing actions, which was partially offset by favorable net price realization. Additionally, although the in-market consumption of our leadership brands was flat, our overall consumption within the division was down 1%.

Turning to Slide 9. Our total soup portfolio slightly lagged the category on share as cooking varieties within our condensed soup portfolio and broths remained strong while eating soups remained under pressure. In the first quarter, broth consumption grew for the ninth straight quarter driven by segment momentum that included increased households and buy rates as well as distribution gains and healthy velocities.

Younger generations continue to drive the majority of the momentum with Swanson posting 6 consecutive quarters of millennial buy rate gains. Our Pacific brand also performed well with dollar consumption growth up 25% and volume consumption up 31%.

Our condensed soup portfolio grew share for the eighth consecutive quarter. Dollar share gains in condensed were fueled by a focused strategy to drive more occasions for Campbell's cooking soups into the repertoire of consumers at home cooking behavior. Our condensed cooking momentum led to a continued household penetration gain within the overall condensed portfolio and added over 2 million new buyers, including 1.2 million Millennial and Gen X households versus a year ago, pointing to the strength of our cooking soups across cohorts.

In the ready-to-serve segment, the headwinds we experienced in the past quarters continued in Q1 with dollar share down in the quarter. On the positive side, Pacific and Rao's were strong performers, gaining share on both a dollar and volume basis. However, select price increases put pressure on our mainstream RTS portfolio consumption, resulting in market share declines. In addition, our RTS results reflect the last quarter of impact from the discontinuation of Well, Yes!

We believe that the pricing action is the right approach to be able to support this segment of our portfolio while we're experiencing disproportionate tariff-related inflation. However, we are conscious of the importance of providing appropriate value in the marketplace, particularly during the critical soup season.

Turning to Slide 10. From holiday classics like the green bean casserole to new and fresh recipes, side dishes made with Campbell's products were served at Thanksgiving tables across the country. Over half of our condensed soup portfolio is cooking soups, including soups like Campbell's Cheddar Cheese Soup, used to make America's fastest-growing side dish preferred by Gen Z, mac & cheese. Our condensed cooking soups grew dollar share and consumption for the past 5 quarters, and we believe there continues to be ample opportunity for growth driven by recipes for the holidays and everyday occasions.

Rao's continued its growth in both consumption and overall share. During the quarter, Rao's outpaced the Italian sauce category by delivering low single-digit dollar consumption growth with growth in both dollar and volume share and remains the #1 brand in the category. We continue to be encouraged by the growth potential of this great brand driven by sustained household penetration gains and high repeat rates as consumers continue to prioritize elevated experiences at home.

Earlier this morning, we announced we entered into agreements to acquire a 49% interest in two La Regina entities, the privately held producer of Rao's tomato-based pasta sauces. Founded in 1972 with the philosophy of producing the highest-quality Italian homemade premium and super premium tomato pasta sauces, La Regina has been a key partner of Rao's since 1993. What makes Rao's the best pasta sauce in the world is the ingredients, the recipe and the care with how it's prepared. Rao's sauces are simmered slowly and made in small batches with only the finest ingredients like Italian olive oil and naturally ripe tomatoes from Southern Italy.

Rao's sauces have no tomato blends, no paste, no water, no starch, no filler, no and no added sugar. The result is an authentic, nutritious, delicious tomato sauce consumers can rely on to serve as a restaurant quality meal at home. With this transaction, we are solidifying our strategic partnership with the Romano family to continue to fuel rails momentum. Over the years, La Regina has perfected its proprietary cooking process, invested in state-of-the-art capacity and maintained a commitment to excellence, ensuring every jar of Rao's sauce delivers a premium and unique experience.

Campbell's investment in La Regina secures access to unique high-quality ingredients, expands our innovation capabilities and reinforces our commitment to producing Rao's sauces with only the finest ingredients. Together with the Romano family, we look forward to continuing this journey. We could not be more excited about the momentum and growth strategy of our Rao's brand.

Now let's turn to our Snacks business on Slide 12. While snacking occasions are growing, consumer preferences continue to evolve to health and wellness and the desire for worth it experiences, many of which are aligned with the consumer growth pillars I discussed earlier. We believe our powerful portfolio of brands remains advantaged in today's environment, especially in terms of premiumization and flavor exploration. We are taking steps to further improve the health and wellness benefits of our Snacks leadership brands. for example, by providing consumers with avocado oil in our chips portfolio, and we have an exciting innovation pipeline for both the short and long term.

Organic net sales declined by 1% driven by volume declines, which were partially offset by positive net price realization, reflecting pricing actions taken to address input cost inflation, primarily in cocoa and eggs. The headwind from partnering contract brands was about 1 point to net sales as expected. The difference between the year-over-year decline in net sales and consumption is driven by shipment timing of holiday-related activities.

As shown on Slide 13, we held our gain share in about half of our portfolio with solid performance in Pepperidge Farm cookies, Snack Factory and Late July and are focused on accelerating share recovery in pretzels and crackers. To support this momentum, we are prioritizing delivering clear consumer value, including leveraging price pack architecture while accelerating our innovation pipeline. We're also strengthening in-market omni-channel execution with targeted activation during key drive periods such as the holidays and upcoming sports championships where snacks play a big role in gatherings.

Let's talk more about our Pepperidge Farm fresh bakery and cookies business, which held share and was relatively flat from a consumption perspective. I will start with the standout performance in cookies, where we outperformed the category and gained share in both dollars and volume through successful innovation launches, including the fall LTOs like Pepperidge Farm Milano Pumpkin Spice, Milano Chai Latte and Soft Baked Pumpkin Cheesecake. The double-digit consumption growth we are driving in Milano continues to contribute materially to overall category growth for the third consecutive quarter.

Within our fresh bakery business, dollar and volume share were both relatively flat. However, the overall category remained under pressure as consumers are more selective in their purchases of fresh bread, favoring premium differentiated products. Our latest innovation in farmhouse, Thin Slice, is outpacing sandwich segment trends. delivering strong repeat rates, reflecting consumer demand for healthy products without compromising in taste.

Now let's talk about our salty portfolio. In chips, we held share with relatively flat consumption due largely to sequential improvement in our Late July brand as we continue to be well positioned with consumers that are looking for better-for-you offerings. We're also benefiting this quarter from a club promotion that shifted into the first quarter from Q2 last year. Our Kettle brand held market share while Cape Cod lost share against the broader potato chips category.

In pretzels, we experienced overall share and consumption pressure as strong performance of our Snack Factory franchise was not sufficient to offset the softness in Snyder's of Hanover. Snack Factory saw share and volume gains for the quarter, driven by the innovation of Pops and Bites. Additionally, as consumers are increasingly seeking flavor experiences, our Pumpkin Spice LTO was a great driver of growth for Snack Factory in the quarter, and we are excited about the White Peppermint LTO that's on the shelves now in time for the holiday season.

The softness in Snyder's of Hanover was driven by our intentional removal of less effective promotions as well as continued competitive pressure. However, with core expansion at club, impactful holiday messaging and an upcoming new visual identity to drive shelf presence, we have a lot of conviction in both our pretzel brands.

Now let's talk about crackers. In crackers, we are encouraged by Goldfish's successful back-to-school campaign, which beat key competitors in the 10-week back-to-school window. The success of the campaign helped Goldfish finish Q1 as the cracker share leader over the last 13 weeks. Despite the great back-to-school campaign, consumption declined in the quarter, which shows we still have more work to do. I am confident that our strategy of incremental marketing support, exciting innovation and a strategic approach to value will return this flagship billion-dollar brand back to growth.

As we enter the holiday season, our Snacks portfolio will play an important role in driving moments of connection and celebration. Our Pepperidge Farm cookies, crackers and bakery items remain a staple of holiday gatherings. Additionally, we are leading into holiday activations like white cream and peppermint Snack Factory pretzel crisps, Snyder's of Hanover holiday cabin kits and brown sugar vanilla tortilla chip from Late July to capture heightened seasonal demand while maintaining a sharp focus on execution and in-store displays. Collectively, these actions will position our Snacks business to deliver strong engagement throughout the season and support our broader commitment to consistent, profitable growth.

Before turning it over to Todd, I would like to highlight again how we're delivering today while building for tomorrow. As the operating environment remains dynamic and consumer preferences continue to evolve, strong day-to-day execution is critical. Our portfolio is well positioned. We remain confident in our leadership brands and our ability to serve delicious at-home cooking options, better for you options and elevated experiences that delight and excite consumers. We are committed to crafting high-quality food at the right value with a continued focus on omni-channel execution, brand activation and innovation.

Specifically, in Meals and Beverages, we remain focused on brands and offerings that will continue to shape at-home cooking momentum because we believe it's a trend that's here to stay. While we continue to enhance our Snacks portfolio, reigniting Goldfish is a top priority. We continue to focus on productivity and cost savings initiatives across the organization to mitigate elevated inflation and invest in our brands, while we strengthened our overall foundation as we drive change to deliver sustainable, profitable growth.

With that, let me turn it over to Todd.

Thank you, Mick, and good morning, everyone. As Mick mentioned, our first quarter performance was in line with our expectations and reflected focused execution amidst a dynamic operating environment. At a high level, organic net sales decreased 1%. Adjusted EBIT decreased 11% to $383 million, primarily due to lower adjusted gross profit, partially offset by lower adjusted administrative, marketing and selling expenses, while adjusted EPS decreased 13% to $0.77.

Now let me provide more details on our financial performance and guidance. Turning to Slide 18. Net sales were $2.7 billion, a decrease of 3%. Organic net sales decreased 1%, primarily due to unfavorable volume and mix, partially offset by net price realization.

On Slide 19, first quarter adjusted gross profit margin decreased 150 basis points to 29.9%, driven by cost headwinds of 520 basis points inclusive of cost inflation and other supply chain costs and the impact of gross tariffs. These costs were partially offset by cost savings and supply chain productivity improvements and favorable net price realization. Gross tariffs had a 200 basis point negative impact on the adjusted gross profit margin in the quarter.

In the first quarter, Campbell made progress towards its fiscal 2028 cost savings target of $375 million by delivering approximately $15 million in new savings, bringing total cost savings achieved to $160 million. The company intends to use these savings as one of several levers to help offset tariff headwinds. As we look at the second quarter, we expect an increase in both promotional activity and marketing investment to further strengthen top line performance. .

Turning to Slide 20. Adjusted marketing and selling expenses decreased 2% versus prior year, primarily due to lower selling expenses, the benefit from cost savings initiatives and lower incentive compensation, partially offset by higher marketing expenses. Adjusted marketing and selling expenses were 9% of net sales, consistent with the prior year. In the second quarter, we expect marketing and selling expenses to be at the upper end of our target range of 9% to 10% of net sales. Adjusted administrative expenses decreased 9%, mainly driven by the benefit from cost savings initiatives and lower incentive compensation.

As shown on Slide 21, first quarter adjusted EBIT decreased 11%, primarily due to lower adjusted gross profit, partially offset by lower adjusted administrative and lower adjusted marketing and selling expenses.

On Slide 22, adjusted EPS decreased 13% to $0.77, driven by lower adjusted EBIT. Lower interest expense provided a $0.01 benefit, offset by a 60 basis point increase in the adjusted tax rate, which was EPS dilutive of $0.01. The divestiture of noosa also had a $0.01 negative impact for the quarter. As a note, the gross impact of tariffs to Q1 adjusted EPS was $0.14 while the net impact of tariffs was $0.04 through EPS for the quarter.

Turning to Slide 23. Meals and Beverages first quarter reported net sales decreased 4%. Excluding the impact of the noosa divestiture, organic net sales decreased 2%, mainly driven by declines in U.S. soup, Canada, SpaghettiOs, Pace Mexican sauces and V8 beverages, partially offset by gains in Rao's. An unfavorable volume/mix decline of 3% and was partially offset by favorable net price realization of 1%. First quarter operating earnings in the division decreased 13%, primarily due to lower gross profit and the impact of the noosa divestiture.

Operating margin was lower by 190 basis points, primarily due to lower gross profit inclusive of a 280 basis point gross impact from tariffs and cost inflation and other supply chain costs. This was partially offset by cost savings and supply chain productivity improvements and favorable net price realization.

On Slide 24, Snacks reported a 2% decrease in net sales, which includes the impact of the Pop Secret divestiture. Organic net sales decreased 1%, driven primarily by lower net sales in third-party partner and contract brands, Snyder's of Hanover pretzels, fresh bakery, Goldfish crackers and Cape Cod potato chips, partially offset by gains in Pepperidge Farm cookies. Organic net sales were impacted by unfavorable volume/mix decline of 3% and favorable net price realization of 2%.

Snacks first quarter operating earnings decreased 10% while operating margin decreased 100 basis points. The margin contraction reflected cost inflation and other supply chain costs, gross tariff impact and unfavorable volume/mix, which more than offset benefits from cost savings and supply chain productivity improvements and favorable net price realization.

Turning to Slide 25. We generated $224 million in operating cash flow in the first quarter, in line with prior year. We continue to prioritize reinvestment back into the business to drive incremental growth with Q1 capital expenditures of $127 million. We also remain committed to returning cash to our shareholders with $120 million in dividends paid and $24 million in anti-dilutive share repurchases in the quarter. As of November 2, 2025, the company has approximately $174 million remaining under its anti-dilutive share repurchase program.

Our net debt to adjusted EBITDA leverage ratio at the end of first quarter was 3.7x. We remain committed to deleveraging the balance sheet towards our goal of 3x leverage. At the end of the first quarter, the company had approximately $168 million in cash and cash equivalents and approximately $1.4 billion available under our revolving credit facility.

With respect to the La Regina transaction Mick mentioned earlier, we anticipate closing in the second half of fiscal 2026. The transaction is expected to be neutral to the reaffirmed guidance for fiscal 2026 and adjusted EPS. Further details on the acquisition can be found in the company's Form 8-K filed today with the Securities and Exchange Commission.

Based on the company's first quarter performance, we are reaffirming our full year fiscal 2026 guidance ranges provided on September 3, 2025. Fiscal 2026 guidance ranges are based on the exclusion of the additional week in fiscal 2025, which represented approximately 2% to net sales, 2% to adjusted EBIT and $0.06 to adjusted EPS.

In fiscal 2026, we continue to expect a significant impact from tariffs. Gross tariffs are projected to be approximately 4% of cost of products sold, approximately 60% related to Section 232 steel and aluminum tariffs and the remainder largely from global tariffs. We continue to expect to mitigate approximately 60% of this impact in fiscal 2026 through a number of actions, including continued inventory management, supplier collaboration, alternative sourcing opportunities, productivity and cost savings and, where absolutely necessary, surgical and responsible pricing actions.

I will close by saying that just 50 days in, I share a mixed conviction in the strength of our leadership brands, our capabilities and our people. Maintaining focus on our strategic priorities will be key as we continue to navigate short-term macroeconomic challenges while investing to build long-term shareholder value.

That concludes our prepared remarks. Now let's turn it over to the operator and begin the Q&A session.

[Operator Instructions] Our first question today comes from Tom Palmer from JPMorgan.

Todd, welcome. I wanted to follow up on the La Romano announcement. Perhaps we could get some added detail on the reason for the acquisition and the timing and also perhaps some added details on the option on the remaining 51% such as how the purchase price would be determined.

Yes. Good, Tom. And so when I look at the La Regina investment, first of all, it obviously supports our conviction around Rao's. And as we've obviously talked in the past about sauce is boss for Rao's, so partnering up with the proprietary producer of the tomato-based sauces is absolutely critical from my perspective. Rao's has had a long relationship with La Regina, as I described earlier. And since the acquisition, we've also been developing that relationship with the Romano family. This investment is really strengthening that partnership with both La Regina but also with, as you're pointing out, the Romano family. And I'm really looking forward to bringing that relationship to the next level.

On the one end, it obviously secures supply. And we describe a lot of the uniqueness of the product, and we've talked about that. It's obviously a key component of Rao's and Rao's growth, the unique ingredients, but overall also the process with which we're making the sauce and with which the sauce is cooked, as we described earlier. So making sure that we have supply of the high-quality Rao's sauce is absolutely critical. That's what this investment helps us with. That's what this supports. It kind of supports the overall conviction around the growth story. On top of it, also the partnership with the Romano family will allow us to continue to work closely together in areas like innovation, really a kind of mutual interest in order to continue to support the growth of this main brand, which I personally think has a long way to go.

And if you look at -- we obviously described some of the details. We were currently acquiring 49% of La Regina for $286 million. This represents a high single-digit EBITDA multiple. And as Todd also described in his prepared remarks, we expect it to be EPS-neutral in fiscal '26. I personally think this comes at an opportune time where we have integrated the Rao's acquisition and we have continued to build this relationship, back to your question around timing. We continue to build this relationship and, as a result, this is a very logical, call it, like addition to building that overall conviction around the Rao's brand.

I don't know, Todd, any additional thoughts around the option that we have?

Yes. So just to be clear on the timing. So the first payment, again, we anticipate closing sometime in the second half of this year, $146 million cash payment immediately. One year later, there will be a second payment of $140 million, I guess, the $286 million for the 49% ownership portion. After that first year, we do have a call option. We can purchase the remaining 51%. There will be likely a premium depending on the performance of up to 20% of premium on the second half of the piece.

The valuation approaches around $600 million ultimately if we exercise that option. And the Romano family has a put option of 4 years after we close on the transaction for us to purchase the remaining. So again, about as close to around a $600 million ultimate valuation. As Mick pointed out, high single-digit multiple. Just super excited about this opportunity. It's going to be a great partnership. It's going to improve the margins of the Rao's brand. So it's a win-win for everybody.

Our next question comes from Andrew Lazar from Barclays.

Great. Welcome, Todd. I think last quarter, Campbell spoke about its intention to stabilize the Snack segment in the second half of the fiscal year, and it looks like you're still expecting that to be the case. I guess based on the data we can all see, it doesn't seem that trends improved maybe as much sequentially in the fiscal first quarter as you might have expected. I was hoping you could go through what gives you the conviction in a back half stabilization? And how do you think this is impacted, if at all, from a key snacks player, more about affordability going forward?

Yes. Thank you, Andrew. So maybe stepping back, first, with regard to the overall categories. And when I look at the snacks categories that we are participate in, in the aggregate, the dollar consumption trend was sequentially relatively stable, i.e., it didn't deteriorate further for the third quarter in a row. So I do expect as a result that you're basically going into next quarter. You're going to continue to see that category pressure, and I don't expect that to immediately change within the next couple of months.

However, as we're getting into the second half, arguably, comps should become a little bit easier, and that should allow categories overall to start to stabilize. That being said, we're obviously, as I described also during my prepared remarks, we are focused on what we control. And we clearly see that snacking is evolving, and I described it extensively in my prepared remarks, but like we are very focused on making sure that we continue to evolve our portfolio with that.

When I look specifically at our portfolio performance in Q1, if you look at bakery, cookies, one of the things that actually worked well is the innovation and particularly the cookie innovation. And that really is something that we've got to make sure that we keep that momentum going. If I look within salty, within chips, some benefit from timing of certain promotional activities. So I expect that we're going to continue to feel a little bit of pressure on chips, also a relatively competitive, call it, like subcategory within salty.

Within pretzels, we have great results around Snack Factory. They're really encouraging. We got to make sure that we keep that momentum going, a lot around innovation but also in market execution. With regard to Snyder's of Hanover, we still got some work to do. And then when I look at crackers, which is the third major category within our Snacks portfolio, it's really coming back to making sure that we reignite Goldfish. Now when I look at Goldfish in Q1, as we also described, the back-to-school performance was quite good and encouraging.

Really also focused back on price pack architecture, I mentioned that in the past and the importance of that during the right moments, making sure we provide the right value to the consumer. And that came through with the multipack execution during the back-to-school period. So there's definitely some green shoots throughout. That being said, making sure that, for instance, we are getting Goldfish back to growth is absolutely critical for not only the cracker performance within our cracker category, but also more broadly within our Snacks portfolio. So that's something that we are very focused on.

When I look at Q1, we made some progress. We got still more work to do. As I pointed out, there are some proof points that we are going to continue to amplify throughout the year. I also think it's going to be really important to make sure that we see some of these proof points come together in Q2. And that will inform us around the second half trajectory of our Snacks business. So hopefully, that gives you a little bit of context around kind of our performance.

Our next question comes from David Palmer from Evercore ISI.

Just a follow-up on salty snacks. I know you won't be surprised to hear that people are really thinking about mega trends with regard to salty snacks right now. And obviously, GLP-1 usage, people are concerned that, that's going to be ramping into 2026. And of course, there's that issue that some cited about COVID era overpricing, just a hangover particularly within certain income cohorts.

I'm wondering if you feel like these factors are relevant more to some subcategories? I know that salty snacks right now overall is up 1% in the latest dollar sales that we see ending November 30. So it doesn't look like it's that bad of a category. So it's a little bit confusing just -- it sounds worse than it is, so to speak. But I'm wondering how you're thinking about those mega trends and how they might interact with certain subsegments and how you're perhaps thinking about that going into '26.

Yes. Thanks, David. It's something that we are very focused on. And you heard me talk a little bit about this in the beginning of the prepared remarks as well. And I really -- kind of that focus on the consumer value across those different occasions or those distinct needs, as we described it on one of the pages, is really the way that we are approaching it.

First of all, and this has been a focus since I became the CEO, is really making sure that we elevate the focus on the consumer needs across the organization. You see that come through in these different mega trends that we've identified around whether it's premiumization, flavor exploration, health and wellness and cooking and comfort.

For snacking specifically, people are still snacking, as you're describing, However, snacking is evolving. And we see that really taking place within those three key pillars that I described earlier, whether it is that elevating the experience or people want an exciting experience, which comes back to premiumization of flavor exploration or the focus on health and wellness. And our brands are, call it, premium snacking brands, really have a place to win within those different trends.

We just need to make sure that when we innovate, we're very conscious of what the consumer is looking for. So that allows us to continue to evolve our portfolio. And at the same time, from a messaging perspective, when we communicate to connect with the consumer, we need to make sure that we bring it back to these core focus areas that we know the consumer is focused on. So we're working through that. And definitely, some areas are working. Others, we've got some more work to do.

The one thing that is an overarching, call it, like important feat that I pointed out also when I talked about Goldfish is to continue to focus on value. And that you see across the overall consumer spectrum, and that's something that goes for both divisions.

Next question comes from Robert Moskow from TD Cowen.

I guess I really have two. I wanted to know, Mick, you said two things about the soup business. You said that it's important for you to raise price to cover costs, but also you recognize the importance of providing value and that there's been some share losses in eating soup. So these two things kind of clash with each other. Do you think you'll need to improve affordability of eating soups? And how have competitors responded to the price increases?

Yes, yes. So definitely something we're very conscious of, right? And by the way, Rob, maybe stepping back for a minute. If you look at our total soup portfolio, obviously, on the one hand, cooking. Cooking is really working. We're really feeling some of the pressure on the eating side. Within cooking, that's really coming back to broth on the one hand. We are seeing, by the way, that private label is recovering. And as a result, though, I still expect continued, one, growth of the category, but also growth for us. I do expect that we're going to feel some of that share pressure that we've talked about in the past to start to materialize as private label continues to recover.

Now from a condensed perspective, the condensed portfolio is really split in two. And it's interesting when you peel that back and you really see the growth on the cooking side of condensed, which you're really back to a lot of the creams, for instance, that are being used in recipes as ingredients and then some of the more eating-focused oriented products within our condensed portfolio. That's where you're feeling some of the pressure in general. Then when I get to RTS, or ready-to-serve soups, which is a broader portfolio for us, right? That includes Chunky. It includes Home Style. It did include in the past Well, Yes!, which we've now discontinued.

That's where we felt the most pressure, which is on the one hand, because of what I described earlier, a little bit of the pressure on eating soups in general. And then in combination with some of the pricing actions that we have taken that -- listen, we've taken them -- we talked about it last quarter. We've been really surgical about it. But because of the disproportionate inflation, we did believe it was important to implement some of the pricing. Elasticities have materialized the way that we expected. We also believe that it's important for, as you're pointing out, the long-term value of our brands, although in the short term and particularly during the beginning of this quarter, it's definitely led to some pressure from a consumption as well as overall share perspective, which you saw on one of the slides.

Now that being said, we're also very conscious to bring it back to your piece around value is important. And value is important when it really matters. So going into the soup season, we have taken selective incremental actions in order to make sure that we are competitive in the marketplace. And if you look at the L4 trend, you actually see that RTS is growing slightly and that share declines are much more subdued.

Our next question comes from Michael Lavery from Piper Sandler.

Just wondering if you could come back to La Regina for a minute. You mentioned the margin benefit. But I suppose at 49%, would that still come through in operations? Or would that only occur after, if and when you have full consolidation? And then in either case, maybe could you just touch a little bit on what, if any, implications the deal has for top line momentum. It's always been a strong brand, but it's certainly, as it gets bigger and bigger, grows a little bit more slowly. How do we think about just what you can do to keep the momentum going on the strength of the top line as well?

Maybe I'll start off with the top line and, Todd, if you can then add a little bit around the consolidation piece and the margin piece. So from an overall growth perspective, you did see that we continue to have growth this past quarter. We talked about this in the past as, call it, net to high single-digit growth has always been the focus going into this fiscal year. We had 4% consumption growth this past quarter. A little bit of timing of promotional activity between Q1, Q2 and, still, I'm very comfortable that we're going to see that mid- to high single-digit growth trajectory materialize.

From a P&L impact, because of the call option that we have, we will actually consolidate 100% of the P&L into our business. So we will get the full gross margin impact. It will be significant for Rao's, obviously not terribly significant for the entire company, but will have a very favorable impact on the brand. We will then back out 51% of the earnings of La Regina through a minority interest line. And then obviously, we'll have any additional interest expense coming through as we finance the purchase. As we talked about earlier for this year, it should be a wash to EPS over time. Obviously, we believe it will be accretive.

And can I add a quick follow-up? If that's the case then, and you've got greater margin opportunity and flexibility, does that do anything to impact how you might think about funding AMC?

More to come, Michael. It gives us obviously flexibility from lots of aspects to invest in the business, as you intimate. Innovation, channel, strategy, just gives us a lot more flexibility on the brand. And so we think it's going to be a great impact for us.

Our next question comes from Peter Grom from UBS.

So Todd -- I kind of had a broader question for Todd, and I guess I know it's only been a few weeks. But maybe just some initial perspectives as you step into this role, kind of where you see the biggest opportunities for improvement, where you see them today and whether that be growth, profitability, cash flow. What kind of stands out to you?

Yes. Look, I took this position for a couple of reasons. One is, I think the brands are just incredible, powerful, absolutely have a right to win, slightly declining today, but I'm very confident they're going to be growing in the future. And I want to be a meaningful part of that. The people here that I met through the interview process, amazing. And as I continue to meet more people through this organization, the people here are just terrific. And that's, quite frankly, when you work every day, that's 80% of the battle, coming in and making sure you're working with people as you really appreciate and want to work with.

Look, this is a big business. It's a complex business. I think I can add value in streamlining analysis, making sure we focus on the right things, making sure we have the right people working on the right things, making the right investments. Having worked for 20 years for a similar-sized company, that being Hershey, and then working for two $1 billion companies over the last 8 years, gives me, I think, a unique perspective on both larger cap food companies and then the advantages of smaller companies who are higher growth and how they think, how they act and how they're more nimble.

So hopefully, I can bring some of that perspective to the company over the next several years.

Our next question comes from Jim Salera from Stephens.

Mick, I wanted to maybe circle back on Goldfish because it sounds like that's going to be really the key lever to reigniting the Snack segment growth as a whole. Can you just walk us through, has Goldfish lost households? Or have you seen consumption frequency step back among existing households? And maybe if you could give a detail on what the focus of the incremental marketing is going to be there.

Yes. Yes. Sure. So you're absolutely right. It's making sure that we get Goldfish right is really important. Obviously, one of our billion-dollar brands across our broader portfolio and making sure that we have that growth back will help Snacks, but obviously will help our broader organization. When I look at Goldfish itself and I look at kind of these key focus areas, first of all, maybe specifically to your question, household penetration, relatively stable. It's really buy rate that we felt a little bit more of the pressure.

When I think about what are you, as a result, going to do about it, making sure that we provide, one, a clear message with regard and reminder of what Goldfish is and that Goldfish is here and what Goldfish provides, at the same time, from an innovation perspective, making sure that we give people also choices within the Goldfish portfolio. And one of the examples of that is, for instance, the Goldfish pretzel innovation that is coming out. So making sure that we provide kind of the full power of the franchise is really important in order to support that buy rate in combination with reminding people what Goldfish stands for.

At the same time -- and so that comes back to innovation, brand messaging. At the same time, as I described earlier, and I described this also in the past, is price pack architecture, I think, is really important, which brings it back to making sure that we have the right value at the right moment. And that's something that we're very focused on across not only Goldfish but the broader portfolio, but that also is really important for Goldfish itself. And a proof point of that is what you saw with the multipack growth during the back-to-school period this past quarter.

And then the last thing that I'd say is, call it, like the daily blocking and tackling. I referred to omnichannel execution in my prepared remarks as well, I really look at it as making sure we have really good execution in the marketplace is absolutely critical. So it's really those different components that should allow us to get back to growth with Goldfish in a brand that arguably has a right to win in the marketplace.

Our last question comes from Chris Carey from Wells Fargo.

I wanted to ask about margins. Guys, I think this is historically low gross margin in the quarter going back some time. And so I wanted to get a sense of how the quarter from a gross margin perspective has come in relative to your own expectations and whether you think that the rest of the year gross margin relative to current levels, whether on an absolute basis or a year-over-year basis, see some steady improvement.

And I ask that in the context of, I think, this is going to be the peak inflation quarter, relative for your guidance anyways. And there potentially is some relief through the rest of the year. So it's kind of how it came in relative to expectations and phasing from here? And then as you look at the business and you've handled this inflation cycle, just any thoughts on the prospects for margins over time?

Sure. Look, so obviously, incredible inflation both from just normal inflationary input costs, labor costs, plus a very large impact from tariffs in the quarter and throughout the majority of the year. So it came in exactly as we expected it would be and, as we had in our slides, over 500 basis points of total cost pressures with 200 basis points approximately of that being tariffs. Inflation throughout the entire cost system also was a similar amount to the tariffs for the quarter. And then we had incremental depreciation, higher logistics costs and a number of other items that put some additional pressure on it.

Now the good news is the supply chain team is doing an incredible job and was able to offset 70% of those costs. So kudos to them. We would be in much worse shape if not for their incredible efforts. This inflation will remain for the vast majority of the year. It will be a similar impact in Q2. Just FYI, gross margins, which was down 150 basis points in Q1 will be down a similar amount, maybe even a little bit more in Q2, probably will get a little bit better as we get into Q3. And then as we begin to lap some of the tariff impacts that we started to have in Q4 and some of the cost improvement opportunities that the supply chain is working on now come to full fruition, as second half comes together, we will see improvement throughout the quarters, particularly in Q4, again, because we will be lapping some of those tariff impacts.

Look, we're not happy about where the gross margins are clearly. We know we need to get them well above 30% over time, and we have a number of cost initiatives in place to ensure that happens.

We are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Hello, and welcome to the Annual Meeting of Shareholders of The Campbell's Company. Please note that today's meeting is being recorded. [Operator Instructions]. It is now my pleasure to turn today's meeting over to Keith McLoughlin, Chairman of the Board of Directors of the company. Mr. McLoughlin, the floor is yours.

Thank you, operator. Good morning, ladies and gentlemen. I'm Keith McLoughlin, Chair of the Board of Directors. On behalf of the Campbell's Company, welcome to the 2025 Annual Meeting of Shareholders. I'm pleased to convene the meeting. I would like to introduce those with me today, Mick Beekhuizen, President and Chief Executive Officer; Charlie Brawley, Executive Vice President, General Counsel and Corporate Secretary; and Todd cunfer, Executive Vice President and Chief Financial Officer. All of the incumbent directors who were nominated for reelection by the Campbell Board are participating today via electronic means. In addition to myself, please allow me to introduce the director nominees by name: Fabiola Arandondo, Howard Averill, Mick Beekhuizen; Bennett Dornce Jr.; Grant Hill, Tessa Hilado, Sarah Hofstetter, Marc Lautenbach, Mary Alice Dorrance Jr., Kurt Schmidt and Archie Van Beuren. Information about all of the nominees can be found in the proxy statement. Adela Forsyth, an employee of Computershare, is serving as Inspector of Election; and Charlie Brawley, Executive Vice President, General Counsel and Corporate Secretary of the company, will act as Secretary of the meeting.

The company's independent audit is performed and certified by the independent registered public accounting firm of PricewaterhouseCoopers LLP. Gray Lambe and Timothy McGrath of PricewaterhouseCoopers are present today. Although they have declined to make a statement, they will be available to answer questions regarding the fiscal 2025 audit during the general session, question-and-answer session later this morning. The Inspector of Election has in her possession an affidavit of mailing attesting that Notice of this Meeting was duly given. Inspector of Election has also reported that more than the majority of shares required for a quorum as specified in the bylaws are present either in person or by proxy. Accordingly, a quorum is present, and the meeting is in order to proceed. Let me give a brief overview of how we plan to conduct the meeting. Proposals will be presented in order outlined in our notice of meeting and proxy statement. We have 3 management proposals and 2 shareholder proposals. The proposals are: one, the election of 12 directors; two, the ratification of the independent registered public accounting firm for fiscal 2026; three, an advisory vote on fiscal 2025 executive compensation known as "Say on Pay", four, a shareholder proposal regarding simple majority voting; and five, a shareholder proposal regarding a report on the effectiveness of our regenerative agricultural program, including pesticide reduction outcomes.

Following consideration of the formal agenda items, we will answer any questions submitted online regarding the formal agenda items. We will then report the results of the vote. After we adjourn the formal part of the meeting, as time permits, we will answer questions submitted online regarding the operations of the Campbell's Company. Shareholders who sign in with a 15-digit control number may submit questions by clicking on the Q&A icon at the top of the annual meeting website at any time during the meeting. you wish to submit a question online regarding the formal agenda items, please note the proposal number to which it relates. Posted on the annual meeting website is an agenda that includes a list of the nominees for director and the resolutions for the other agenda items. The rules for the conduct of the meeting are also posted on the annual meeting website. It is our experience that your adherence to these rules will enhance the overall effectiveness of the meeting. The minutes of the 2024 Annual Meeting are available for inspection by shareholders upon request. Accordingly, may I have a motion to waive the reading of those minutes and approve them as presented.

Mr. Chair, so I move?

Second.

All those in favor? Any opposed? The motion is passed. The minutes are duly approved. Thank you. Now I'll introduce the items of business to be brought before the meeting. Polls for voting are open on the annual meeting website. You may vote by clicking on the icon at the top of your screen on the Annual Meeting website entitled Vote. Shareholders who have already voted by proxy do not need to submit electronic ballots unless you want to change your vote. The first proposal is the election of the 12 director nominees. Directors are elected for a 1-year term. The names of such persons have been placed in nomination, and because the Secretary has not received any notice of shareholder nominees, I declare that the nominations are closed. The Board of Directors unanimously recommends that shareholders vote for the 12 director nominees named in the proxy statement.

The second item on the agenda is the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for fiscal 2026. Board of Directors unanimously recommends that shareholders vote for this proposal. Third item on the agenda is the advisory vote on fiscal 2025 executive compensation. The SEC requires that shareholders be given the opportunity to cast an advisory vote on executive compensation.

As an advisory vote, the outcome is not binding, but it does give shareholders the opportunity to express their views on executive compensation during a given fiscal year. The Board of Directors unanimously recommends that shareholders vote for this proposal. This brings us to the shareholder proposals. The fourth item on the agenda is a shareholder proposal submitted by the Accountability Board, Inc. regarding simple majority voting. We will now connect with Matthew Prescott, a representative of the Accountability Board, Inc. to present the proposal. Out of respect for other shareholders in attendance and to allow time for Q&A, we ask that you, Mr. Prescott, limit your comments to a period of 3 minutes and restrict your comments to the proposal before the meeting. I will now ask the operator to unmute the line to allow Mr. Prescott to present his proposal.

Thanks so much. I can keep these comments pretty brief just for the sake of everybody's time this morning. I've read and shareholders will have seen the Board statement opposing this pretty straightforward proposal to eliminate supermajority voting requirements. We think the proposal speaks for itself, and we would refer folks to the proxy statement for more information. I just want to emphasize that in 2021, the last time this topic came up for a vote at Campbell's, over 70% of the vote went in support of eliminating supermajority requirements if you exclude shares controlled by officers and directors. Yet Campbell's opposition statement seems to focus on the claim that somehow supermajority voting requirements prevent single shareholder groups from acting unilaterally and result in important changes needing to be supported by a large number of shareholders. But this 2021 proposal that got over 70% of the outside vote is a great example of how Campbell's supermajority voting requirements actually do the exact opposite.

Campbell's officers and directors controlled enough of the vote to unilaterally rejected the proposal, even though it was supported by 70% of the vote amongst other shareholders. And it would have passed in a land slide had those shares not been concentrated in that way. So yes, we'll leave it there. And again, we think the proposal speaks for itself. We encourage shareholders to vote in favor of it. Thank you.

Mr. Prescott, your line is now muted.

Thank you, Mr. Prescott. After careful consideration, the Board has determined that adopting this proposal is not in the best interest of the company or its shareholders. The Board believes that the current supermajority voting standard, which is limited to a small number of critical matters, helps preserve and maximize long-term shareholder value. Supermajority thresholds prevent any single shareholder group from acting unilaterally while also ensuring that temporary coalitions or activist investors cannot affect lasting structural changes without Board and inclusive consensus. This balance provides stability, protects the interest of all shareholders and reinforces long-term value creation.

For more information regarding the Board's position on this proposal, please see the Board's full statement and opposition, which is available on Pages 79 and 80 of the company's proxy statement. The Board unanimously recommends a vote against this proposal. The fifth item on the agenda is a shareholder proposal submitted by As You Sow on behalf of the Pleiades Trust and Sarah Gourevitch regarding a report on the effectiveness of our regenerative agriculture program, including pesticide reduction outcomes. We will now connect with Cailin Dendas, a representative of As You Sow, to present the proposal. Out of respect for other shareholders in attendance and to allow time for Q&A, we ask that you, Ms. Dendas, to limit your comments to a period of 3 minutes and restrict your comments to the proposal before the meeting. I will now ask the operator to unmute the line to allow Ms. Dendas to present her proposal.

Ms. Dendas, your line is now open.

Good morning, Mr. Beekhuizen and members of the Board. My name is Cailin Dendas Senior Coordinator at As You Sow. Thank you so much for the opportunity to present proposal number 5 on the proxy on behalf of the Pleiades Trust.

This proposal asks The Campbell's Company to disclose the success of its Regenerative Agriculture Program by reporting its outcomes, including, but not limited, to pesticide reduction. By counting the benefits of this program without measuring or disclosing outcomes, the company is receptible to reputational and litigation risks, including claims of green washing, a fundamental principle of regenerative agriculture is soil health. The cornerstone of natural capital. Pesticide use, which degrades healthy soil can harm farm and supply chain resilience, in turn, raising commodity prices and raising longer term viability concerns for our company. Pesticide use can also result in the poisoning of farm workers and pesticide drift can reach nearby communities, elementary schools, causing serious health conditions like asthma and cancer.

Biodiversity, pollinator health and air and water quality also suffer as a result of pesticide use. While our company claims its regenerative agriculture initiative focuses on advancing core regenerative principles with the goal of scaling soil health, it fails to include pesticide reduction as a key component.

Campbell's also fails to measure and report pesticide use reduction by its suppliers, leaving shareholders unable to determine whether the company's program is successful in regenerating soil health and in reducing harms to humans and the environment. Meanwhile, Campbell's competitors, Conagra and Lamb Weston are publicly reporting the amount of pesticides used or avoided to demonstrate the success of the regenerative agriculture program. As a leading food manufacturer, Campbell's has the ability to engage its suppliers and collect and disclose pesticide data. Disclosing such data could demonstrate the success of its program, the resilience of its supply chain and the avoidance of risks associated with harmful pesticide use. We look to the company to provide investors with this key information so they can make informed investment decisions. We urge a yes vote on this resolution. Thank you.

Ms. Dendas, your line is now muted.

Thank you, Ms. Dendas. After careful consideration, the Board has determined that adopting this proposal is not in the best interest of the company or its shareholders. The Board believes that producing a separate prescriptive report disclosing if and how the company intends to measure and disclose the effectiveness of its regenerative agricultural program, including pesticide reduction outcomes would be duplicative, at cost and could divert energies and resources from where they matter most, building grower participation in our program and collaborating with them to advance the principles of regenerative agriculture.

The company already discloses meaningful information regarding responsible pesticide management and pesticide risk outcomes. Furthermore, the company believes that adding a discrete pesticide reduction goal could undermine grower participation in this regenerative agricultural program. For more information regarding the Board's position on this proposal, please see the Board's full statement and opposition, which is available on Page 82 of the company's proxy statement.

The Board unanimously recommends a vote against this proposal. This completes the proposals. I will now open the meeting up to questions related to the formal agenda items. Seeing that no questions have been submitted regarding the formal agenda items, we will now proceed to voting. If you have not voted, please do so now. The Inspector of Election will now take charge of the polls.

[Voting]

Since it appears that all those who desire to vote have done so, polls are now closed. I will now ask the Secretary to report the preliminary voting results.

Mr. Chair, I have received the preliminary voting results from the Inspector of Election. The inspector has determined that based on the votes cast and received that each of the director nominees set forth in the proxy statement has been elected for a 1-year term and that the ratification of the appointment of PricewaterhouseCoopers and the advisory resolution on fiscal 2025 executive compensation have both been approved.

The shareholder proposal regarding simple majority voting was not approved, and the shareholder proposal regarding a report on the effectiveness of our regenerative agricultural program, including pesticide reduction outcomes was not approved. We'll be reporting final voting results in a Form 8-K filed with the U.S. Securities and Exchange Commission within 4 business days after this meeting.

Thank you, Charlie. There being no additional business to come before this meeting, I declare this meeting adjourned.

Now I will ask Mick Beekhuizen, our President and Chief Executive Officer, make a brief statement and we'll then respond to questions submitted relating to the business or operations of the company. Please refer to the non-GAAP reconciliation document posted on the Annual Meeting website to find reconciliations of the non-GAAP measures that we may use when discussing the company's financial results. Mick?

Thank you, Keith. Good morning, everyone. I'll begin with our financial performance. We delivered results in fiscal 2025 that were slightly ahead of our expectations, driven by our focus on execution in a dynamic operating environment. For the full year, net sales were $10.3 billion, an increase of 6% versus the prior year, primarily driven by the contribution of the Sovos Brands acquisition.

Organic net sales decreased 1% versus the prior year, driven by modestly lower volume and unfavorable mix and net price investment. By division, organic net sales were flat in Meals & Beverages and decreased by 3% in Snacks. In fiscal 2025, we delivered $145 million of enterprise cost savings under the $250 million cost savings program announced in September 2024. Building on the progress achieved to date through our continued focus on efficiency, the company increased its cost savings program by 50% to $375 million by the end of fiscal 2028. The company intends to use these savings as one of several levers to help offset tariff headwinds. Our adjusted EBIT increased 2% compared to the prior year, driven by the contribution of the acquisition and the additional week in fiscal 2025, partially offset by lower adjusted EBIT in the base business. Our fiscal 2025 adjusted EPS decreased 4% to $2.97, primarily reflecting higher adjusted net interest expense, partially offset by the increased adjusted EBIT. In fiscal 2025, we continue to generate strong operating cash flow at $1.1 billion, slightly lower than the prior year, driven by changes in working capital, in part due to tariff mitigation strategies.

We remain focused on returning cash to shareholders with $459 million in dividends paid, including a 5% increase per share that we announced in the second quarter and $62 million in share repurchases. Fiscal 2025 capital expenditures were $426 million, an 18% decline compared to prior year. Looking ahead, we are focused on delivering today while we are building for tomorrow by leveraging our category leadership and innovation capabilities to keep our brands at the forefront of consumer trends. We will continue to invest in our brands while maintaining a clear focus on improving efficiency and effectiveness across the organization to drive sustainable long-term growth. With that, I'll close my remarks, and I would like to answer any questions that you may have. Since no questions have been asked, I will now turn the meeting back over to our Chairman.

Thank you, Mick, and thank you to our shareholders and other guests for attending this year's annual meeting. With there being no additional business to discuss, the meeting is now concluded.

Ladies and gentlemen, this does conclude the meeting. Thank you for your participation, and you may now disconnect.