Newell Brands’ Outdoor & Recreation segment delivered modest revenue growth in the third quarter as strength at Coleman and Contigo helped offset challenging year-ago comparisons. Newell officials remain confident that heightened interest in outdoor activities coming out of from the pandemic will continue to be a tailwind.

“The consumer continues to show interest in outdoors, a trend we think will endure and one we will continue to leverage throughout our innovation,” said Ravi Saligram, Newell Brands’ president and CEO, on a conference call with analysts.

The Outdoor & Recreation segment includes Aerobed, Bubba, Campingaz, Coleman, Contigo, Marmot, Stearns, and ExOfficio.

The Outdoor & Recreation segment generated net sales of $391 million in the quarter ended September 30 compared with $383 million in the prior-year period, a gain of 2.1 percent. The growth reflected core sales growth of 1.7 percent and the impact of favorable foreign exchange. Net sales exceeded the 2019 level.

“Core sales improvement was fueled by the strength in the outdoor equipment and on-the-go beverage categories, with the latter continuing to rebound during improved consumer mobility,” said Saligram. “We are encouraged by the momentum in the outdoor and equipment unit with POS exceeding 2019 levels.”

Saligram noted that Coleman’s growth benefited from an enhanced product lineup in 2021, with strong innovation plans in place for 2022. He said, “Many of our Coleman products such as the Skydome tent, cooler bag and two-burner stove are featured by USA Today as perfect gifts for people who love to travel.”

Reported operating income in the Outdoor & Recreation segment was $27 million, or 6.9 percent of sales, down from the reported operating income of $39 million, or 10.2 percent of sales, in the prior-year period.

Normalized operating income was $34 million, or 8.7 percent of sales, compared with $46 million, or 12.0 percent of sales, in the prior-year period, representing a year-over-year decline of 26.1 percent.

In the 2020 third quarter, core sales had grown 8.1 percent. Normalized operating income had improved to $46 million, or 12.0 percent of sales, compared with $37 million, or 10.4 percent of sales, in the prior-year period.

The segment has grown three straight quarters with the 2.1 percent gain in the third quarter following gains of 28.3 percent in the second quarter and 9.4 percent in the first quarter.

Sales in the 2020 fourth quarter had declined 7.4 percent. Overall, sales were off 8.6 percent in 2020 to $ $1.29 billion due to weakness in the first half of the year caused by the initial impact of the pandemic. During the second half of 2020, demand for outdoor products and coolers, primarily in North America and Asia, improved, partially offset by decreased demand in apparel and beverage products. Demand for beverage products faced challenges as on-the-go occasions still faced restrictions.

Newell Brands’ Companywide Results Top Analyst Expectations
Companywide, net sales were $2.8 billion, a 3.3 percent increase compared to the prior-year period, largely reflecting core sales growth of 3.2 percent. Net sales were 8.5 percent above the third quarter 2019 level. Sales in the latest quarter marginally beat the analyst consensus of $2.78 billion.

Newell operates four other segments: Commercial Solutions, Home Appliances, Home Solutions, and Learning & Development. Other major brands outside the Outdoor & Recreation segment include Rubbermaid, Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Coleman, Marmot, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Contigo, First Alert, Mapa, Spontex, and Yankee Candle.

Core sales in the quarter increased 3.2 percent, driven by “excellent performance” across five business units—Writing, Baby, Home Appliances, Home Fragrance, and Outdoor & Recreation.

“This was no small feat given the difficult year-ago comparison of 7.2 percent core sales growth, which embedded a recovery across the majority of Newell’s businesses,” said Saligram. On a two-year stack basis, Newell’s core sales grew low-single-digits in the third quarter. The CEO added, “We also saw strong domestic consumption relative to 2019 across each of our business units, a terrific result and a testament to the significant progress that we’ve made in forging stronger relationships with shoppers as we leverage consumer insights and foresight in new product launches.”

Reported operating income declined 22.6 percent to $281 million from $363 million in the prior-year period as headwinds from inflation and an increase in advertising and promotion expense more than offset benefits from lower overhead costs, fuel productivity savings, business mix, and pricing. Normalized operating income declined 21.3 percent to $317 million, or 11.4 percent of sales, from $403 million, or 14.9 percent of sales, a year ago.

Net income fell to $190 million, or 44 cents per share, from $304 million, or 71 cents, a year ago. The year-over-year change primarily reflects the decline in reported operating profit and a change in the tax provision due to a reduction in discrete benefits. Normalized net income slumped 35.1 percent to was $231 million, or 54 cents, from $356 million, or 84 cents, a year ago, but ahead of Wall Street’s consensus target of 50 cents.

2021 Outlook Raised, 2022 Focus Shifts To Margins
Newell Brands raised its 2021 full-year net sales outlook from $10.38 billion to $10.46 billion from its previous range of $10.1 billion to $10.35 billion. The company also improved its 2021 full-year outlook for normalized earnings per share from $1.69 to $1.73 from its previous range of $1.63 to $1.73.

Saligram said the updated guidance implied that normalized operating profit would grow high-single-digits “despite significant inflationary and supply chain-related pressures that continue to plague the industry.”

“Although we are certainly not immune to the external forces, the strategic decisions we have actioned over the past several years have substantially strengthened the company and have made our portfolio much more resilient,” said Saligram. “First, we invested in omnichannel capabilities that have been instrumental in capturing consumer demand across all channels and, on the direct-to-consumer side, recently completed the migration of our sites in North America to one consolidated platform with a dedicated team focused on continuous improvement on consumer experience. We substantially strengthened our innovation and marketing muscle, leveraging consumer insights and foresight. And we’ve sharpened brand positioning for many of our top brands. We have established joint business plans and enhanced relationships with key strategic retail partners. We’ve instituted a new hybrid organizational model that brings our domain experts closer to our customers and consumers while leveraging the center for scale and efficiencies. We have made productivity a way of life. We’ve reduced complexity and overheads, improved the cash conversion cycle, and strengthened the balance sheet. 2021 has been a turning point for Newell despite challenges posed by supply and inflation.”

Newell Brands now expects to deliver 10-plus percentage core sales growth this year, although easy comparisons aided the first-half gain of 23 percent.

Said Saligram, “In the second half, we are lapping strong growth from 2020. The fact that we grew 3.2 percent in Q3 on top of last year’s growth is an indication that our brands are resilient, are being rejuvenated and we can grow even in this context of strong comps. The power of our diverse portfolio is coming through.”

Looking forward, Saligram said Newell Brands expects the supply challenges and inflation to persist. He said while 2021’s focus was on top-line growth, 2022 will focus on improving margins through five primary levers.

Saligram said, “First, an intense focus on pricing and optimizing promotional spending. We have now taken price increases in 2021 across all of our eight businesses in most geographies. Our posture will be to maximize the impact of carryover pricing from 2021 into 2022. And we will be prepared to take further increases in 2022 based on inflationary trends to protect gross margin. Of course, we’ll do this in consultation with our customers and ensure that our brands remain a great value for consumers. Second, we’ll accelerate our efforts to improve the profitability of our international business by reducing duplication, consolidating operations and adopting q new approach. Third, we will price innovations to be margin accretive. Fourth, we will continue to be more efficient with our overheads. And finally, we’ll continue to strive to be best-in-class in our productivity efforts and drive about 3 percent to 4 percent improvement in COGS as we have done over the last few years.”

He concluded, “I’m extremely thankful to our 31,000 hard-working employees for their unwavering commitment, tenacity and perseverance. I remain optimistic that Newell can create tremendous shareholder value, and our best days are ahead of us. Onward and upward.”

Photo courtesy Contigo