Newell Brands Outdoor & Recreation Core Sales Fall 21 Percent In Q2
Posted by: SGB Media / Jul 28, 2023
Photo Courtesy of Marmot
Newell Brands, the parent company of Marmot, Ex Officio, Stearns, Bubba, Coleman, and Contigo, among others, generated net sales of $333 million, down 22.0 percent compared with $427 million in the prior year period. The decline reflects a core sales decline of 20.9 percent, as well as the impact of unfavorable foreign exchange.
Reported operating income from the segment was $5 million, or 1.5 percent of sales, down 89.6 percent compared with $48 million, or 11.2 percent of sales, in the prior year period. Normalized operating income was $14 million, or 4.2 percent of sales, a decline of 74.1 percent compared with $54 million, or 12.6 percent of sales, in the prior year period.
Companywide, Newell’s sales and earnings were in line or slightly above guidance but guidance was still reduced for the full year.
Sales were $2.2 billion, a decline of 13.0 percent compared with the prior year period. Core sales declined 11.9 percent compared with the prior year period. Newell had projected a 14 percent to 10 percent decline and sales between $2.13 to $2.24 billion.
Reported gross margin was 28.5 percent compared with 33.0 percent in the prior year period, as the impact of fixed cost deleveraging, inflation and higher restructuring-related charges more than offset the benefits from pricing and FUEL productivity savings. Normalized gross margin was 29.9 percent compared with 33.1 percent in the prior year period.
Reported operating income was $120 million compared with $328 million in the prior year period. Reported operating margin was 5.4 percent compared with 12.9 percent in the prior year period, as the impact of lower net sales, lower gross margin, non-cash impairment charges and an increase in restructuring and related costs more than offset benefits from pricing, FUEL productivity savings and Project Phoenix savings. Normalized operating income was $201 million, or 9.1 percent of sales, compared with $355 million, or 14.0 percent of sales, in the prior year period.
The company reported net income of $18 million, or $0.04 diluted earnings per share, compared with $199 million, or $0.48 diluted earnings per share, in the prior year period. Normalized net income was $101 million, or $0.24 normalized diluted earnings per share, compared with $232 million, or $0.56 normalized diluted earnings per share, in the prior year period. Newell had forecast normalized income between 10 cents and 18 cents.
Newell operates two other segments – Home & Commercial Solutions and Learning & Development. Its other major brands include Rubbermaid, Sharpie, Graco, Rubbermaid Commercial Products, Yankee Candle, Paper Mate, FoodSaver, Dymo, EXPO, Elmer’s, Oster, NUK, Spontex, and Campingaz.
The updated outlook for the year calls for:
Sales in the range of $8.2 to $8.34 billion ($8.4 to $8.6 billion previously);
Core sales showing a 12 percent to 10 percent decline (8 percent to 6 percent decline previously);
Normalized operating margin between 7.8 percent to 8.2 percent (9.6 percent to 10.1 percent previously); and
Normalized EPS between $0.80 to $0.90 ($0.95 to $1.08 previously).
Chris Peterson, Newell Brands President and Chief Executive Officer, said, “Since my appointment two months ago we have created and deployed a new corporate strategy based on a comprehensive company-wide capability assessment. Building on the solid operational foundation we have already put in place, we are now focused on significantly strengthening the company’s consumer-facing capabilities while prioritizing the top 10 countries and top 25 brands, which represent about 90 percent of sales. Consistent with the new strategy, we are investing in consumer and customer understanding, brand building, brand communication, innovation and retail execution as part of our One Newell approach to unlock the full power of our leading consumer brands, create and leverage scale and drive operational excellence. While we have lots of work to do, we are off to a great start, which is why I remain confident in our ability to accelerate the company’s financial performance over the long term, while we continue to navigate through a challenging macro-economic backdrop in the near term.”
Mark Erceg, Newell Brands CFO, said, “Restoring strong operating cash flow and improving the underlying structural economics of our business remains our primary financial focus this year. Against those two measures, we were very pleased with our second quarter results, with operating cash flow up over $500 million dollars versus last year and normalized operating margin ahead of expectations. As we look toward the balance of the year, we expect top and bottom-line pressure to persist as consumers continue to wrestle with elevated levels of core inflation and the resumption of student loan repayments. Despite these pressures, and because of the conviction we have behind our new strategy, we have chosen to invest more in capability building and brand support during the second half of the year. While some of these investments will lower near-term earnings, we remain confident in our operating cash flow guidance for the full year and, just as importantly, because of the meaningful interventions we are making across all facets of the business, we expect second half normalized operating margin to be up significantly versus both the first half of this year and the second half of last year.”