Newell Brands reported its Home & Outdoor Living segment generated net sales of $768 million in the fourth quarter compared with $809 million in the prior-year period, reflecting a core sales decline of 2.8 percent, the impact of unfavorable foreign exchange and the exit of 75 underperforming Yankee Candle retail stores during 2019.
The Home Fragrance business unit generated positive core sales growth offset by core sales declines in Outdoor & Recreation and Connected Home & Security. The reported operating loss was $10 million, or negative 1.3 percent of sales, compared with operating income of $46 million, or 5.6 percent of sales, in the prior-year period. Normalized operating income was $72 million compared with $108 million in the prior-year period. Normalized operating margin was 9.4 percent compared with 13.3 percent in the prior-year period.
The segment includes Chesapeake Bay Candle, Coleman, Contigo, ExOfficio, First Alert, Marmot, WoodWick, and Yankee Candle.
Companywide, net sales were $2.6 billion, a 3.1 percent decline compared to the prior-year period, reflecting a 1.5 percent decline in core sales and the unfavorable impact of foreign exchange.
Reported gross margin was 32.5 percent compared with 34.6 percent in the prior-year period, as productivity and pricing were offset by headwinds from tariffs, inflation and mix. Normalized gross margin was 33.5 percent compared with 34.2 percent in the prior-year period.
Fourth-quarter 2019 reported operating income was $133 million compared with $74 million in the prior-year period. Impairment charges of $75 million and $170 million were incurred in the current and prior-year periods, respectively. Normalized operating income was $296 million compared with $307 million in the prior-year period. Reported operating margin was 5.1 percent compared with 2.7 percent in the prior-year. Normalized operating margin was 11.3 percent, unchanged from the prior-year period.
Interest expense was $71 million compared with $104 million in the prior-year period, attributable to a reduction in outstanding debt.
The company reported a tax benefit of $720 million compared with a benefit of $99 million in the prior-year period due to discrete tax benefits in the quarter. The normalized tax expense was $52 million compared with $70 million in the prior-year period.
The company reported net income of $794 million, or $1.87 diluted earnings per share, compared with $184 million, or $0.41 diluted earnings per share, in the prior-year period, with the year over year change largely reflecting a more favorable tax benefit compared with the prior year.
Normalized net income was $180 million, or $0.42 diluted earnings per share, compared with $297 million, or $0.66 diluted earnings per share, in the prior-year period, with the year over year change attributable to the foregone contribution from divested businesses. Earnings of 42 cents a share exceeded Wall Street’s consensus estimate of 39 cents.
For the full-year, net sales for the full-year ended December 31, 2019, were $9.7 billion, a decline of 4.3 percent compared with $10.2 billion in the prior-year. Core sales decreased 1.9 percent.
Reported net income was $107 million compared with a net loss of $6.9 billion in the prior-year. Reported diluted earnings per share were $0.25 compared with a reported diluted loss per share of $14.65 in the prior year. Normalized net income was $722 million, compared with $1.2 billion in the prior-year. Normalized diluted earnings per share were $1.70 compared with $2.46 in the prior-year.
“2019 was an important year of inflection for Newell Brands,” said President and Chief Executive Officer Ravi Saligram. “We developed a turnaround framework and delivered consistently against our goals in the early stages of the turnaround. Four of our eight business units delivered core sales growth in 2019, our international business returned to growth, we generated operating margin improvement of 50 bps reflecting diligent cost management and we more than doubled free cash flow. We’ve strengthened the executive leadership team through an expanded role for Chris Peterson, the previously announced hiring of Steve Parsons as Chief Human Resources Officer, and the addition of two new key executives, Mike McDermott and Kris Malkoski, each of whom bring unique strengths and relevant backgrounds to galvanize the organization to win in the marketplace. In 2020, we will be laser-focused on positioning the company for sustainable and profitable growth through clarity and stability of direction, strengthening the innovation funnel across the portfolio, striving for excellence in eCommerce and social marketing and executing flawlessly in the marketplace.”
Chris Peterson, chief financial officer and president, business operations, said, “Q4 marked a strong finish to the year reflecting steady progress in our turnaround. Core sales, earnings per share and operating cash flow were ahead of outlook, fueled by double-digit eCommerce growth and a disciplined focus on productivity, overhead cost savings, complexity reduction and working capital initiatives. We more than doubled free cash flow in 2019 and reduced debt by more than $600 million in the quarter. As we look to 2020, we expect another year of progress, with core sales flat to down 2 percent, normalized operating margin up 10 to 40 basis points and normalized diluted EPS of $1.46 to $1.56. Operating cash flow is projected in the range of $1.0 to $1.15 billion, with free cash flow productivity in excess of 100 percent.”
The company’s overall portfolio includes Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Coleman, Marmot, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Rubbermaid, Contigo, First Alert, Mapa, Spontex and Yankee Candle.