Newell Brands Inc. said sales at its Outdoor & Rec division declined again in the second quarter but sales are improving sequentially as the division anniversaries Coleman‘s loss of distribution as a key U.S. retailer.
“Core sales for the Outdoor & Rec division were down year-over-year, but now that the business has lapped major distribution losses, we are starting to see a sequential improvement and share trends as well as in POS.” —Chris Peterson, Interim CEO and CFO, Newell Brands
Newell hasn’t identified the retailer that reduced distribution for Coleman but has noted that the category was coolers.
Besides Coleman, Newell’s Outdoor & Rec division includes Marmot, Contigo, Aerobed, Bubba, Campingaz and Stearns.
The Outdoor & Rec division is part of the Home & Outdoor Living segment, which saw sales decline 5.0 percent in the second quarter, to $705 million. The segment also includes the Home Fragrance division, led by Chesapeake Bay Candle, WoodWick and Yankee Candle, and Connected Home and Security, led by BRK, First Alert and Onelink.
The Home & Outdoor Living segment’s decline was attributed to the impact of unfavorable foreign exchange, the exit of 72 underperforming Yankee Candle stores in the first half, and a core sales decline of 1.1 percent. The Home Fragrance and Connected Home and Security divisions posted positive core sales.
Reported operating income in the Home & Outdoor Living segment was $19.2 million compared with operating income of $9.4 million in the prior-year period. Reported operating margin was 2.7 percent compared with 1.3 percent in the prior-year period. Normalized operating income was $39.7 million compared with $48.4 million in the prior-year period. Normalized operating margin was 5.6 percent compared with 6.5 percent in the prior-year period.
Companywide, Newell’s earnings dropped in the second quarter but came in above Wall Street’s consensus estimates. Newell also indicated that it delivered significant improvements in operating margin and operating cash flow.
Net sales from continuing operations were $2.1 billion, a decline of 3.9 percent compared with the prior-year period. Core sales from continuing operations declined 1.1 percent from the prior-year period.
The company reported net income of $89.8 million, or 21 cents a share, compared with $132 million, or 27 cents, in the prior-year period.
Normalized net income was $190 million, or 45 cents per share, compared with $379 million, or 78 cents, in the prior-year period. Wall Street’s consensus estimate had been 36 cents a share.
Newell said it has decided to retain the Rubbermaid Commercial Products business, which was previously included in discontinued operations and on the selling block. The company has also has decided to relocate its corporate headquarters to Atlanta, GA, to consolidate its operations there. Three of the company’ seven operating divisions are already in Atlanta.
Management issued guidance for the third quarter and updated its view for 2019. Net sales, core sales and normalized operating margin outlook for the third quarter and 2019 reflect the inclusion of Rubbermaid Commercial Products, being part of continuing operations, effective third quarter.
For 2019, net sales are now projected to be in the $9.1-$9.3 billion range along with a core sales decline in low single digits. Earlier, net sales were anticipated to be $8.2-$8.4 billion. Further, operating cash flows are now projected to be $600-$800 million compared with $300-$500 million guided earlier. Normalized earnings per share are still envisioned in the band of $1.50-$1.65 for the year.
For third-quarter 2019, Newell estimates net sales of $2.42-$2.47 billion along with core sales decline 2-4 percent. It also anticipates normalized operating margin contraction of 100-130 bps to 11.9-12.2 percent. Normalized earnings per share are expected within 55-60 cents for the quarter.
Photos courtesy Coleman