Newell Brands Inc., parent company of Coleman, Marmot, ExOfficio, Stearns and Contigo and Bubba, among other outdoor brands, reported it will lay off 13 percent of its corporate workforce in a major restructuring move. Newell is also consolidating its five operating segments into three. The Outdoor and Recreation Segment will remain intact as currently structured with Jim Pisani as segment CEO.
The restructuring and savings initiative, Project Phoenix, aims to strengthen the company by leveraging its scale to reduce complexity, streamline operations and drive operational efficiencies.
- Simplifying the organizational structure;
- Streamlining the company’s real estate;
- Centralizing its supply chain functions to include manufacturing, distribution, transportation, and customer service;
- Transitioning to a One Newell go-to-market model in key international geographies; and
- Reduce overhead costs.
Project Phoenix is expected to be “substantially implemented” by the end of 2023.
Connected with the Project, Newell said it expects to realize annualized pre-tax savings in the range of $220 to $250 million when fully implemented.
Restructuring and related charges associated with the program are estimated to be in the range of $100 to $130 million and expected to be substantially incurred by the end of 2023.
From the restructuring, Newell Brands expects to eliminate approximately 13 percent of its corporate positions.
The company will begin reducing headcount in the first quarter, with most of the layoffs completed by the end of 2023, subject to local law and consultation requirements.
“We are taking action to simplify and strengthen our organization by leveraging the scale and power of One Newell to optimize our cost structure and operate more efficiently. Specifically, we are evolving our operating model into three operating segments based on similarities of consumer and customer dynamics, which will reduce duplication and yield synergies,” said CEO Ravi Saligram.
Saligram continued, “Based on the success of Project Ovid, we are moving to a unified global manufacturing organization that we expect to drive meaningful margin improvement in the long term. Also, we are reducing international fragmentation by moving to a One Newell go-to-market approach in key geographies. These actions are a continuation of the simplification agenda that we have driven over the last four years and in response to the difficult macro environment. We expect to unlock significant savings from the restructuring initiatives, which should help partially offset the impact of macro-economic pressures on the business while making us a more nimble and agile organization.”
Newell is also implementing a new operating model, consolidating its five operating segments into three. The company will combine its previously reported Commercial Solutions, Home Appliances and Home Solutions segments into one—Home & Commercial Solutions. Learning & Development and Outdoor & Recreation will remain the company’s other two operating segments. The company said it would report on this basis, effective January 1, 2023.
The three segments and related brands include:
- Home & Commercial Solutions: BRK, Calphalon, Crockpot, First Alert, Mr. Coffee, Oster Mapa, Quickie, Rubbermaid, Rubbermaid Commercial Products, Spontex, and Sunbeam
- Learning & Development: Aprica, Baby Jogger, Dymo, Elmer’s, EXPO, Graco, Mr. Sketch, NUK, Paper Mate, Parker, Prismacolor, Sharpie, Tigex, Waterman, and X-Acto
- Outdoor & Recreation: Campingaz, Coleman, Contigo, ExOfficio, and Marmot
- Kris Malkoski was named the Segment CEO for Learning & Development.
- Mike McDermott was named the Segment CEO for Home & Commercial Solutions. Malkoski had been Business Unit CEO, Writing and Food, while McDermott was Business Unit CEO, Commercial.
- Dennis Senovich, chief supply chain officer, will continue to lead the company’s manufacturing, distribution, transportation, and customer service functions globally.
- Jim Pisani continues as CEO, Outdoor & Recreation segment.
The restructuring comes after Newell reduced its guidance for 2022 in September and again in late October due to a deceleration in sales after a strong performance in the first half.
Newell officials attributed the softening to weak ordering from retailers rightsizing elevated inventories. In the mass channel, Walmart and Target have been impacted by elevated inventories as consumer spending has slowed amid inflationary pressures, and supply chain bottlenecks have eased.
The reduced guidance also reflects inflationary pressure on the consumer and its operations and the impact of a stronger dollar.
In the third quarter, Newell’s companywide core sales, excluding sales from sold businesses, were down 10.8 percent, following an increase of 1.7 percent in the second quarter and growth of 6.9 percent in the first quarter.
In the Outdoor & Recreation segment, core sales were down 18.4 percent in the third quarter, following gains of 2.5 percent in the second quarter and 22.9 percent in the first quarter.
Companywide inventories ended the third quarter at $2.53 billion, up 20.4 percent versus the same period a year ago.
For the year, Newell’s guidance calls for the following:
- Sales in the range of $9.35 to $9.43 billion against $10.6 billion in 2021;
- Core sales decline in the range of 3 percent to 4 percent;
- Normalized operating margin from 10.0 percent to 10.3 percent, down from 11.0 percent of sales in 2021; and
- Normalized EPS in the range of $1.56 to $1.61, down from $1.82 in 2021.
Before reducing its guidance last September, Newell expected sales for the year in the range of $9.76 to $9.98 billion, flat to 2 percent core growth, normalized operating margin in the range of 11.2 percent to 11.4 percent, and normalized EPS in the range of $1.79 to $1.86.
Chris Peterson, president, said on Newell’s third-quarter analyst call, “What we’re seeing is retailers continue to pull back on inventory levels, particularly at many of our top retailers in the U.S. And so, what we’ve contemplated in our guidance is very much a continuation of that dynamic in Q4 that we saw starting in Q3. We are trying to navigate it as best as possible. Our inventory positions at retail continue to be in good shape. It’s more that we’re getting caught up with broader actions that retailers are taking. And in some cases, as we’re heading into the holiday season, we’re concerned that retailers are operating with lower than what we would like inventory levels on our items. But we expect that rightsizing to continue because [retailers] are overstocked in general merchandise broadly, and we think the environment remains challenging through at least the end of this year.”
The company will provide more detailed information about Project Phoenix during its upcoming fourth quarter and full-year 2022 earnings call on February 10.
Photo courtesy Newell Brands