Margins Plunge in Snacks Amid Volume Declines (Image Credits: Unsplash)
The Campbell’s Company released second-quarter fiscal 2026 results that highlighted ongoing difficulties in its snacks business, prompting a downward revision to its full-year outlook.
Margins Plunge in Snacks Amid Volume Declines
Operating margins in the snacks segment collapsed by 390 basis points to 7.3 percent during the quarter ended February 1.[1][2] Net sales for the unit dropped 6 percent to $914 million, matching the organic sales decline driven by a 6 percent fall in volume and mix.[3] The company attributed this weakness to declines in chips and pretzels, supply constraints in fresh bakery products, and issues with third-party partner brands and contract manufacturing.
January winter storms worsened manufacturing and distribution disruptions at Pepperidge Farm’s fresh bakery operations, delaying recovery efforts. Overall company net sales fell 5 percent to $2.56 billion, with adjusted earnings per share at 51 cents, missing analyst estimates of 54 cents. First-half adjusted net earnings declined 22 percent to $382 million.
Key Pressures Weigh on Subcategories
Executives pointed to elevated competitive intensity in salty snacks as a major drag on performance. Fresh bakery execution faltered due to operational hiccups, while progress in the Goldfish crackers brand failed to offset broader declines. In-market consumption for snacks turned flat in the quarter after a 1 percent drop in the prior period, but still lagged expectations.
- Chips and pretzels saw significant volume reductions amid pricing competition.
- Pepperidge Farm fresh bakery grappled with storm-exacerbated supply issues.
- Goldfish showed sequential consumption gains through targeted value strategies and innovation.
- Third-party brands and contract manufacturing contributed about a 1 percentage point headwind to sales.
- Snyders of Hanover pretzels improved via holiday promotions, but chips like Kettle Brand faced headwinds.
These factors combined to erode profitability, with volume deleverage and higher marketing spend amplifying the margin squeeze.[2]
CEO Outlines Path Forward
President and CEO Mick Beekhuizen acknowledged the setbacks during the earnings call. “In Snacks, the recovery is taking longer than anticipated,” he stated. “We made sequential progress on Goldfish, but Fresh Bakery execution disruptions and elevated competitive intensity in Salty weighed on volume and margins.”[1]
The company deployed a cross-functional team to address bakery issues, reporting early improvements. Plans include sharpening value propositions, launching new innovations, enhancing salty snacks execution, and sustaining Goldfish momentum. Beekhuizen emphasized confidence in the portfolio’s long-term strength, forecasting modest sales improvement and margin expansion in the second half as bakery stabilizes by fiscal fourth quarter.
Full-Year Guidance Reflects Caution
Campbell’s adjusted its fiscal 2026 outlook downward, now expecting organic net sales to decline 1 percent to 2 percent, compared to the prior range of a 1 percent decrease to 1 percent increase. Adjusted earnings per share guidance shifted to $2.15 to $2.25, down from $2.40 to $2.55.[3] CFO Todd Cunfer highlighted slower snacks recovery, added trade investments, and a 10 percent global tariff as key factors.
| Metric | Prior Guidance | Revised Guidance |
|---|---|---|
| Organic Net Sales | -1% to +1% | -2% to -1% |
| Adjusted EPS | $2.40 – $2.55 | $2.15 – $2.25 |
Efforts to accelerate cost savings aim to counter these pressures, with $100 million in new overhead reductions identified alongside progress toward a $375 million target by fiscal 2028.
Campbell’s resilient meals and beverages division, bolstered by Rao’s surpassing $1 billion in trailing sales, provided some offset, but snacks remain the focal point for turnaround. As the company intensifies execution, stabilization in this key unit will determine its trajectory amid a challenging consumer environment. What do you see as the biggest hurdle for Campbell’s snacks recovery? Tell us in the comments.
- Snacks margins fell 390 basis points to 7.3 percent on 6 percent sales drop.
- Recovery delayed by bakery disruptions and salty snacks competition.
- FY2026 guidance cut; cost savings ramped up for margin support.
