Newell Brands’ Home & Outdoor Living segment, which includes Coleman and Marmot, posted a $1.1 billion operating loss after impairment charges. Net sales in the segment were $547 million in the first quarter compared with $627 million in the prior-year period, reflecting a core sales decline of 11.3 percent.
The segment also includes Chesapeake Bay Candle, Contigo, ExOfficio, First Alert, WoodWick and Yankee Candle.
In a statement, Newell Brands said the core sales decline includes the impact of the temporary closure of all North American retail stores in mid-March as a result of the COVID-19 pandemic. The decline also reflects the impact of unfavorable foreign exchange and the exit of 44 underperforming Yankee Candle retail stores during the first quarter.
The Home Fragrance, Outdoor & Recreation and Connected Home & Security business units all experienced core sales declines.
The reported operating loss for the segment of $1.1 billion, or negative 204.9 percent of sales, compared with an operating loss of $2 million, or negative 0.3 percent of sales, in the prior-year period. The year over year change was primarily due to a $1.0 billion impairment charge related to goodwill and intangible assets in the three business units. Normalized operating loss was $11 million compared with normalized operating income of $12 million in the prior-year period. Normalized operating margin was a negative 2.0 percent compared with a positive 1.9 percent in the prior-year period.
Companywide, highlights of the quarter included:
- Net sales were $1.9 billion, a 7.6 percent decline compared to the prior-year period, reflecting a 5.1 percent decline in core sales and the unfavorable impact of foreign exchange.
- Reported gross margin was 32.7 percent compared with 32.1 percent in the prior-year period, as productivity initiatives and pricing more than offset headwinds from tariffs, inflation and mix. Normalized gross margin was 32.8 percent compared with 31.7 percent in the prior-year period.
- Reported operating loss was $1.4 billion compared with operating income of $12 million in the prior-year period.
- Impairment charges of $1.5 billion and $63 million were incurred in the current and prior year periods, respectively, primarily related to goodwill and intangible assets. Beyond the $1.0 billion impairment charge in the Home & Outdoor Living segment, an impairment charge of $299 million was taken for the Appliances & Cookware segment (Calphalon, Crock-Pot, Mr. Coffee, Oster, and Sunbeam).
- Reported operating margin was negative 74.7 percent compared with positive 0.6 percent in the prior year. Normalized operating income was $113 million compared with $124 million in the prior-year period. Normalized operating margin was 6.0 percent, compared with 6.1 percent in the prior-year period.
- Interest expense was $63 million compared with $80 million in the prior-year period, attributable to a reduction in outstanding debt.
- The company reported a tax benefit of $204 million compared with a benefit of $20 million in the prior-year period due to discrete tax benefits in both periods. Normalized tax expense was $3 million, compared with $4 million in the prior-year period.
- The company reported a net loss of $1.3 billion, or $3.02 diluted loss per share, compared with a net loss of $151 million, or $0.36 diluted loss per share, in the prior-year period.
- Normalized net income was $39 million, or $0.09 diluted earnings per share, compared with $53 million, or $0.12 diluted earnings per share, in the prior-year period, with an increase in normalized earnings from continuing operations more than offset by the foregone contribution from divested businesses.
Beyond the Appliances & Cookware and Home & Outdoor Living segments, Newell’s other segment include Food and Commercial (Ball, FoodSaver, Rubbermaid, Sistema, Rubbermaid Commercial Products, Mapa, Quickie and Spontex) and Learning and Development (Aprica, Baby Jogger, Dymo, Elmer’s, EXPO, Graco, Mr. Sketch, NUK, Paper Mate, Parker, Prismacolor, Sharpie, Tigex Waterman and X-Acto).
“The turnaround plan that we have been executing against puts Newell Brands on a stronger footing to confront the significant and unprecedented challenges inherent in the global COVID-19 pandemic,” said Ravi Saligram, Newell Brands president and CEO. “We have established three key priorities in this rapidly changing operating and economic environment. First and foremost is the safety and well-being of our employees. Second, we are taking decisive actions to sustain the company’s financial vitality with a laser focus on maximizing cash flow and ensuring strong liquidity. And finally, we are working diligently to keep our manufacturing facilities and distribution centers operating where possible, so that we can continue to provide critical products to our consumers and customers. Although we delivered performance in line with or ahead of expectations in Q1, we expect Q2 to be a very challenging quarter. We are encouraged, however, by the pockets of strength we are seeing in the Food and Commercial businesses as well as recent point of sale trends in the Appliances & Cookware business in the U.S. We remain confident in our liquidity position and our ability to successfully navigate the enterprise during these difficult times.”
Chris Peterson, chief financial officer and president, business operations, said, “Despite the disruption from COVID-19, the company’s first-quarter results were in line with or ahead of guidance across all key metrics, as better than expected performance during the first two months offset a significant slowdown in March. Disciplined focus on productivity, overhead cost savings and complexity reduction drove a better than expected operating margin. We generated positive operating cash flow in the seasonally slow first quarter, a $223 million improvement versus year-ago results, attributable to the strong progress on working capital initiatives implemented as part of our turnaround plan.”
Newell Brands full statement is here.
Photo courtesy Marmot