Newell Brands reported sales in its Outdoor & Recreation segment fell 26.1 percent in the third quarter ended September 30. The decrease reflects a core sales decline of 18.4 percent and the impact of exits from certain low-margin categories and unfavorable foreign exchange.

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

Reported operating income at the Outdoor & Recreation segment was $8 million, or 2.8 percent of sales, compared with $27 million, or 6.9 percent of sales, in the prior year period. Normalized operating income was $18 million, or 6.2 percent of sales, compared with $34 million, or 8.7 percent of sales, in the prior year period.

Companywide, Newell’s second-quarter results exceeded expectations but full-year guidance was lowered. Revenue of $2.252 billion was marginally better than the consensus of $2.25 billion. Adjusted EPS of 53 cents beat the analyst consensus of 46 cents.

Newell’s other brands include Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Oster, Sunbeam, and Mr. Coffee.

“Following strong performance over the first half of the year, results decelerated in Q3, reflecting a tough operating environment as many retailers rightsized their inventory positions, inflationary pressure on both the consumer and our business as well as the impact of a stronger dollar,” said Ravi Saligram, Newell Brands CEO. “We expect economic uncertainty and external disruptions to persist in the near term and are staying agile, as we adjust our playbook to this environment while taking decisive actions to maximize profits and cash. We remain confident in the strength of our brands and our ability to drive sustainable and profitable growth over the long term.”

Chris Peterson, president and chief financial officer, said, “During the third quarter we enhanced Newell’s financial flexibility and maintained strong cost discipline, as results were impacted by top-line deleveraging. We remain laser-focused on aligning the company’s cost structure with the macro backdrop, reducing inventory and strengthening cash flow, while continuing to invest in core capabilities.”

Third Quarter 2022 Executive Summary

  • Net sales were $2.3 billion, a 19.2 percent decline compared with the prior year period, including the year-over-year impact from the sale of the Connected Home & Security (CH&S) business at the end of the first quarter 2022.
  • Core sales declined 10.8 percent compared with the prior year period. One of seven business units increased core sales compared with the prior year period.
  • Reported operating margin was 1.6 percent, including the impact of a $148 million non-cash impairment charge, compared with 10.1 percent in the prior year period. Normalized operating margin was 10.2 percent compared with 11.4 percent in the prior year period.
  • Reported diluted earnings per share were $0.07 compared with $0.44 per share in the prior year period.
  • Normalized diluted earnings per share were $0.53 compared with $0.54 per share in the prior year period.
  • The company strengthened its financial flexibility and refinanced its unsecured revolving credit facility as well as its senior notes due April 2023 (April 2023 notes). In September, the company issued $1.0 billion of senior notes and in October, used the net proceeds, together with available cash, to redeem the April 2023 notes.
  • The company’s leverage ratio was 3.9x at the end of the third quarter versus 3.1x in the prior year period and 3.0x at the end of 2021.

Outlook for Fourth Quarter and Full Year 2022

  • Sales in the range of $9.35 to $9.43 billion ($9.37 to $9.58 billion previously);
  • Core Sales to show a 3 percent to 4 percent decline (2 percent to 4 percent decline previously);
  • Normalized Operating Margin in the range of 10.0 percent to 10.3 percent (10.0 percent to 10.5 percent previously); and
  • Normalized EPS in the range of $1.56 to $1.61 (previously $1.56 to $1.70 previously).

For the fourth quarter, sales are expected in the range of $2.18 billion to $2.26 billion, core sales to show a 9 percent to 12 percent decline, normalized operating margin to be in the range of 5.1 percent to 6.5 percent, and normalized EPS to be in the range of $0.09 to $0.14.

Photo courtesy Newell Brands/Marmot