Newell Brands reported that sales in its Outdoor & Recreation segment fell 26.1 percent for the third quarter ended September 30. The decline reflects an 18.4 percent fall in core sales and the impact of exiting certain low-margin categories and unfavorable foreign exchange rates.
The Outdoor & Recreation segment includes Campingaz, Coleman, Contigo, ExOfficio and Marmot.
Reported operating income in the Outdoor & Recreation segment was $8 million, or 2.8 percent of revenue, compared to $27 million, or 6.9 percent of revenue, in the prior-year period. Normalized operating income was $18 million, or 6.2 percent of revenue, compared to $34 million, or 8.7 percent of revenue, in the prior-year period.
Company-wide, Newell’s second-quarter results beat expectations, but it lowered its full-year guidance. Revenue of $2.252 billion was marginally better than the consensus of $2.25 billion. Adjusted EPS of 53 cents beat analyst consensus of 46 cents.
Other Newell brands include Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Oster, Sunbeam and Mr. Coffee.
“After a strong performance in the first half, third quarter results slowed, reflecting a difficult operating environment as many retailers adjusted inventory levels, reflecting inflationary pressures on both consumers and our business, and the impact of a stronger dollar.” said Ravi Saligram, CEO of Newell Brands. “We anticipate economic uncertainty and external disruptions to persist in the near-term and remain agile as we adjust our playbook to reflect this environment while taking decisive action to maximize profits and liquidity. We remain confident in the strength of our brands and our ability to drive sustainable and profitable growth over the long term.”
Chris Peterson, President and Chief Financial Officer, said, “During the third quarter, we improved Newell’s financial flexibility and maintained strong cost discipline as results were impacted by the reduction of top-line debt. We remain focused on aligning the company’s cost structure with the macro backdrop, reducing inventories and strengthening cash flow while continuing to invest in core competencies.”
Summary of the third quarter of 2022
- Net sales were $2.3 billion, a decrease of 19.2 percent compared to the same period last year, including the year-over-year impact of the sale of the Connected Home & Security (CH&S) business at the end of the first quarter of 2022.
- Core sales fell by 10.8 percent compared to the same period last year. One in seven business units increased core sales compared to the prior-year period.
- Reported operating margin was 1.6 percent, including the impact of a $148 million non-cash impairment charge, compared to 10.1 percent in the prior-year period. Normalized operating margin was 10.2 percent compared to 11.4 percent in the prior-year period.
- Reported diluted earnings per share were $0.07 compared to $0.44 per share in the prior year period.
- Normalized diluted earnings per share were $0.53 compared to $0.54 per share in the prior year period.
- The Company strengthened its financial flexibility and refinanced its unsecured revolving credit facility and senior notes due April 2023 (April 2023 Notes). In September, the Company issued $1.0 billion of senior notes and in October used the net proceeds along with available cash to repay the April 2023 Notes.
- The company’s leverage ratio was 3.9x at the end of the third quarter compared to 3.1x in the same period last year and 3.0x at the end of 2021.
Outlook for the fourth quarter and full year 2022
- Revenues in the range of $9.35 billion to $9.43 billion (previously $9.37 billion to $9.58 billion);
- Core sales will be down 3 to 4 percent (previously down 2 to 4 percent);
- Normalized operating margin in the range of 10.0 percent to 10.3 percent (previously 10.0 percent to 10.5 percent); and
- Normalized earnings per share in the range of $1.56 to $1.61 (previously $1.56 to $1.70).
Fourth quarter revenue is expected to be in the range of $2.18 to $2.26 billion, core revenue down 9 to 12 percent, normalized operating margin to be in the range of 5.1 to 6.5 percent and normalized Earnings per share expected to be in the range of $0.09 to $0.14.
Photo courtesy of Newell Brands/Marmot