Newell Brands reported its Outdoor & Recreation segment, which includes Coleman, Marmot and several other brands, saw core sales growth of 2.5 percent in the second quarter on top of 25 percent in the year-ago period. Ravi Saligram, Newell’s CEO, told analysts that sales in the Outdoor & Recreation segment are expected to decelerate in the back half due to inflationary pressures.
“Accounting for the shift of some retailer orders into the first quarter and assuming that inflationary conditions impact purchase decisions, we expect the business momentum for Outdoor & Recreation to decelerate in the back half,” said Saligram on a conference call.
During its first-quarter conference call, Newell said a shift in customer order patterns due to the ongoing supply chain constraints would benefit the first half of the year at the expense of the back half.
Key brands in the Outdoor & Recreation segment include Campingaz, Coleman, Contigo, ExOfficio, and Marmot. Smaller brands include Aerobed, Bubba and Stearns.
Newell officials noted that the 2.5 percent core sales growth in the second quarter from the segment came on the most challenging comparison of the year. Saligram said, “Growth in outdoor equipment across the international markets was complemented by continued post-pandemic recovery of the beverage business.”
Overall, sales in the Outdoor & Recreation segment reached $427 million in the quarter compared with $453 million in the prior year period, representing a decline of 5.7 percent. The decline reflected exits from low margin categories and unfavorable foreign exchange.
Reported operating income at the Outdoor & Recreation segment was $46 million, or 10.8 percent of sales, compared with $48 million, or 10.6 percent of sales, in the prior year period. Normalized operating income was $52 million, or 12.2 percent of sales, compared with $52 million, or 11.5 percent of sales, in the prior year period.
In the half, sales in Newell’s Outdoor & Recreation segment rose 3.3 percent to $815 million from $789 million a year ago. Operating income came to $91 million, up 44.4 percent from $63 million a year earlier. Normalized operating income climbed 40.3 percent to $101 million from $72 million a year ago.
Companywide, Newell’s sales were $2.5 billion, a 6.5 percent decline compared to the prior year period, as core sales growth of 1.7 percent was offset by the impact of the sale of the CH&S business at the end of the first quarter, unfavorable foreign exchange, as well as category and retail store exits. Net sales were above the second quarter 2019 level, excluding the CH&S business during both periods.
Sales were at the high end of Newell’s guidance, calling for revenue in the range of $2.52 billion to $2.57 billion.
Newell’s portfolio of brands also includes Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Oster, Sunbeam, and Mr. Coffee. The Outdoor & Recreation segment makes up about 14 percent of sales.
Net income came to $204 million, or 49 cents diluted earnings per share, compared with $197 million, or 46 cents, in the prior year period. Normalized net income was $236 million, or 57 cents, compared with $239 million, or 56 cents, in the prior year period.
Non-GAAP EPS of 57 cents beat Newell’s guidance calling for normalized net income in the range of 45 to 48 cents a share and Wall Street’s consensus estimate of 47 cents.
Looking ahead, Newell is updating its full year 2022 outlook for foreign exchange while maintaining its top and bottom line outlook on a constant-currency basis. The full year calls for:
- Sales are expected to range between $9.76 billion to $9.98 billion, down from previous guidance in the range of $9.76 billion to $9.98 billion;
- Core Sales are still expected to be flat to 2 percent growth;
- Normalized Operating Margin is expected to range between 11.2 percent to 11.4 percent, down from previous guidance of 11.5 percent to 11.8 percent; and
- Normalized EPS is expected to range between $1.79 to $1.86, down from previous guidance of $1.85 to $1.93.
“As we look forward, inflation remains elevated, and we expect a tougher second half relative to the first half,” said Saligram on the analyst call. “There is greater macro uncertainty and consumer demand headwinds with some retailers taking a tougher stance on their inventory positions. Higher cost of living during inflation pressures shoppers’ wallets, weighing on sentiment and consumer demand, particularly at the lower-income levels.”
He noted that Newell had already started to plan for more-challenging conditions, and some categories, mainly home fragrance, have seen a pullback in consumer demand that has been more acute than initially anticipated and mitigation steps are being taken. The strengthening of the dollar has been another key development in the past few months to challenge Newell’s outlook.
He said, “We are doubling down on our efforts to mitigate the unfavorable impact of both currency and inflation as we accelerate our productivity actions, further honing on overheads and discretionary spend management and evaluate pricing opportunities in the international markets.”
Photo courtesy Ravi Saligram, CEO, Newell Brands