Consumers struggling with inflation are buying less of the pricey pretzels and chips.
Campbell Soup (CPB) surprised some on Wall Street this week by reporting that sales at its snacks division, which carries products ranging from Snyder's L'ance Pretzels to Cape Cod Chips and Goldfish Crackers, fell 1% in the most recent quarter.
Volumes were down 2% last quarter.
“I think what we really saw this quarter was a normalization of the growth line. [for snacks] “And we're seeing some increased pressures as it relates to the broader economy,” Campbell Soup CEO Mark Close told Yahoo Finance (video above).
Close doesn't think there's anything “structural” wrong with the company's snacks business, which has seen steady demand since Memorial Day.
But while he acknowledged that a robust inflationary environment was making consumers more cautious in the supermarket aisle, he refrained from calling snacks a new “luxury item.”
“Right now, if you're a low- or middle-income household, you're still struggling with high interest rates, rising rents and probably your car insurance is taking a hit,” Close added.
Campbell is not the only one feeling the pressure on snacks, a category once thought to be immune to consumer spending cuts.
PepsiCo's (PEP) Frito-Lay North American business saw its volume fall 2% in the first quarter. Slim Jim owner Conagra Brands (CAG) saw its volume fall 0.8% in the quarter.
“Snacks, especially salty snacks, are slow to respond to scanners. [sales tracker] Data was one of the last categories I felt [consumer] “It's resilient,” Brian Spillane, a packaged foods analyst at Bank of America, wrote in a client note.
“Snack sales may moderate somewhat as summer (snack season) approaches and promotional and merchandising activities may increase demand.”
Revenue Summary
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Net Sales: $2.4 billion, up 6% from last year
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gross profit: 31.2% vs. 30.9% a year ago
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Adjusted EPS: Up 10% YoY to $0.75
Other notable features
Wall Street steps in
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“Better-than-expected EPS guidance incorporating Sovos and above-fear organic sales revisions should support modest outperformance for the stock in our view.” — Matthew Smith, Stifel (Hold rating, $45 price target)
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“Fundamental business challenges keep us on the sidelines.” — Rob Dickerson, Jefferies (Hold rating, $44 price target)
Amid a complex economic climate, CEOs are preparing for a hotly contested presidential election season that could impact consumer buying habits on everything from soup to new cars. Ford (FORD) CEO Jim Farley discusses election risk in the latest episode of the “Opening Bid” podcast. Listen below.
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