Argus Downgrades Campbell Soup to Hold Amid Persistent Volume Weakness

Publication Date: June 20, 2025 Related Stock: CPB (The Campbell's Company)

Argus Research has revised its rating for The Campbell's Company (NASDAQ:CPB) from 'Buy' to 'Hold', citing ongoing challenges with sales volume and sustained pressure on profit margins. This downgrade comes despite a recent slowdown in the aggressive price increases Campbell implemented during the peak inflationary period.

Volume Declines and Consumer Behavior

During the height of inflation, Campbell Soup significantly raised product prices, a strategy that, while aimed at offsetting rising costs, adversely impacted unit sales. Although the pace of these price hikes has moderated, the company has yet to see a meaningful recovery in sales volume. Data indicates that six out of the past eight quarters have shown either flat or negative year-over-year volume trends.

This persistent volume weakness is largely attributed to evolving consumer behavior. Faced with prolonged inflationary pressures and broader economic uncertainties, consumers are increasingly shifting their purchasing habits towards more affordable private-label alternatives. This trend poses a significant challenge for established brands like Campbell, which traditionally rely on strong brand loyalty and premium pricing.

Margin Pressures and Input Costs

Beyond volume issues, Campbell has also contended with escalating input costs, which continue to exert downward pressure on its profit margins. The combination of softer sales volumes and higher operational expenses creates a difficult environment for profitability. Despite efforts to manage costs, the company's financial performance remains constrained by these dual headwinds.

Strategic Acquisitions and Future Outlook

Despite these near-term challenges, Argus maintains a positive long-term view on certain strategic moves made by Campbell. Specifically, the research firm highlights the company's recent acquisition of Sovos Brands, which includes the highly regarded premium Rao’s brand. This acquisition is seen as a potential catalyst for enhancing the performance of Campbell's Meals & Beverages segment over time, offering a pathway to premiumization and market share gains in a competitive landscape.

However, the immediate outlook remains cautious. Argus's decision to downgrade to 'Hold' reflects a perception of limited upside potential for CPB stock at its current valuation. The lack of immediate momentum in sales volume recovery, coupled with ongoing profitability headwinds, has led the research firm to adopt a more conservative stance, moving to the sidelines until clearer signs of fundamental improvement emerge.

Analyst Perspective

This downgrade underscores the difficulties faced by consumer staples companies in navigating a post-inflationary environment where consumers are more price-sensitive. While strategic acquisitions like Sovos offer long-term promise, the immediate focus remains on Campbell's ability to reignite volume growth and effectively manage its cost structure to alleviate margin pressures. The market will be closely watching for signs of stabilization in sales trends and improved profitability in upcoming financial reports.