Newell Brands, the parent company of Marmot, Ex Officio, Stearns, Bubba, Coleman, and Contigo, among others, reported fourth-quarter net sales of $2.1 billion, a 9.1 percent decline compared to the prior-year Q4 period, reflecting a core sales decrease of 9.3 percent, as well as the impact of category exits and favorable foreign exchange.
The company reported a gross margin of 29.9 percent of sales in Q4, compared with 26.3 percent in the prior year as the benefits from its Fuel program productivity savings and pricing more than offset the impact of fixed cost deleveraging and higher restructuring-related charges. Normalized gross margin was 32.3 percent of sales, compared with 26.6 percent in the prior-year period, representing the second consecutive quarter of year-over-year improvement.
The reported operating loss was said to be $10 million for the 2023 fourth quarter, compared with $273 million in the prior year period. Non-cash impairment charges of $68 million and $326 million were incurred in the current and prior-year periods, respectively, related to goodwill and intangible assets.
The reported operating margin was negative 0.5 percent of sales, compared with negative 11.9 percent in the prior-year period, as the contribution from pricing, Fuel program productivity savings and Project Phoenix savings, as well as lower non-cash impairment charges, more than offset the impact of lower net sales and higher restructuring and related costs.
Normalized operating income was $159 million, or 7.7 percent of sales, compared with $113 million, or 4.9 percent of sales, in the prior-year period.
Net interest expense was $70 million in Q4, compared with $64 million in the prior year.
Reported tax benefit was $78 million in the fourth quarter, compared with $81 million in the prior-year period. The normalized tax benefit was $10 million compared with $5 million in the prior-year period.
Reported net loss was $86 million, or a 21 cents diluted loss per share, compared with $249 million, or a 60 cents diluted loss per share, in the prior-year period.
Normalized net income was $92 million, or 22 cents normalized diluted earnings per share, compared with $65 million, or 16 cents normalized diluted earnings per share, in the prior-year period.
“Since our leadership transition in May 2023, we introduced and deployed a comprehensive corporate strategy, which focuses on disproportionately investing in innovation, brand building, and go-to-market excellence in our largest and most profitable countries and brands as part of a clear set of Where to Play and How to Win choices,” said Newell Brands President and CEO Chris Peterson.
“Behind this clear focus, and amidst a difficult external environment, we drove record productivity across the supply chain, significantly improved cash flow by rightsizing inventory, further reduced Newell’s SKU count and took decisive actions to strengthen the company’s front-end commercial capabilities, which are critical to returning Newell to sustainable and profitable growth. The tangible progress on our strategy, together with our actions to reduce overhead cost structure, bolster our confidence that we are taking appropriate actions to strengthen the organization, improve its financial performance and create value for our stakeholders.”
Newell Brands CFO Mark Erceg added, “We dramatically improved the underlying structural economics of the business during the fourth quarter, as both gross margin and operating margin expanded significantly versus last year. In addition, full-year operating cash flow was very strong, increasing by $1.2 billion to $930 million, which allowed us to reduce debt by about $500 million. We remain confident that despite a challenging macro-economic backdrop, the significant investments we are making to augment our core capabilities and accelerate our business transformation will allow us to fully operationalize our new corporate strategy and strengthen the company’s performance going forward.”
The Outdoor & Recreation segment, home to the active outdoor lifestyle brands owned by Newell, generated net sales of $165 million in the 2023 fourth quarter, compared with $211 million in the prior-year Q4 period, reflecting a core sales decline of 21.8 percent. The reported operating loss was $45 million, or negative 27.3 percent of sales, compared with $14 million, or negative 6.6 percent of sales, in the prior-year period. Normalized operating loss was $25 million, or negative 15.2 percent of sales, compared with $4 million, or negative 1.9 percent of sales, in the prior-year period.
Full Year 2023
Consolidated Newell Brands net sales for the full year ended December 31 were $8.1 billion, a decline of 14.0 percent compared to the prior year, reflecting a core sales decrease of 12.1 percent, the impact of the sale of the Connected Home & Security business at the end of the first quarter 2022, as well as the impact of certain category, exits and unfavorable foreign exchange.
Reported gross margin was 28.9 percent of sales compared with 30.0 percent in the prior year, as the impact of fixed cost deleveraging, inflation and higher restructuring-related charges more than offset the benefits from Fuel productivity savings and pricing. Normalized gross margin was 30.2 percent, in line with the prior year.
The reported operating loss was $85 million, or negative 1.0 percent of sales, compared with operating income of $312 million, or positive 3.3 percent of sales in the prior year. Non-cash impairment charges of $342 million and $474 million were incurred in the current and prior year, respectively, primarily related to goodwill and intangible assets. Normalized operating income was $570 million, or 7.0 percent of sales, compared with $956 million, or 10.1 percent of sales, in the prior year.
Net interest expense was $283 million compared with $235 million in the prior year.
Reported tax benefit was $155 million compared with $40 million in the prior year. The normalized tax benefit was $68 million compared with a tax provision of $17 million in the prior year.
The reported net loss was $388 million, or 94 cents diluted loss per share, compared with net income of $197 million, or 47 cents diluted earnings per share, in the prior year. Normalized net income was $330 million, or 79 cents normalized diluted earnings per share, compared with $654 million, or $1.57 normalized diluted earnings per share, in the prior year.
Full-year operating cash flow increased by $1.2 billion to $930 million, compared with the outflow of $272 million in the prior year.
Balance Sheet
The company reduced debt to $4.9 billion at the end of 2023 compared with $5.4 billion at the end of 2022.
In January 2024, the company announced an organizational realignment, which is expected to strengthen the company’s front-end commercial capabilities and result in restructuring and related charges in the range of $75 million to $90 million and annualized pre-tax savings in the range of $65 million to $90 million, net of reinvestment.
The company initiated its full-year 2024 outlook for net sales decline of 8 percent to 5 percent and normalized earnings per share of 52 cents to 62 cents a share.
Project Phoenix and Organizational Realignment Update
In January 2023, the company announced a restructuring and savings initiative, Project Phoenix, which was substantially implemented by the end of 2023. It incorporated a variety of initiatives designed to simplify the organizational structure, streamline the company’s real estate, centralize its supply chain functions, which include manufacturing, distribution, transportation and customer service, transition to a unified One Newell go-to-market model in key international geographies, and otherwise reduce overhead costs. The company implemented the new operating model in the first quarter of 2023, consolidating its five operating segments into three operating segments: Home & Commercial Solutions, Learning & Development, and Outdoor & Recreation.
The company realized $154 million in pre-tax savings during 2023 and is on track to realize annualized savings in the range of $220 million to $250 million by the end of 2024. The company incurred $97 million in restructuring and related charges associated with Project Phoenix during 2023.
In January 2024, the company announced an organizational realignment, which is expected to strengthen the company’s front-end commercial capabilities, such as consumer understanding and brand communication, in support of the Where to Play / How to Win choices the company unveiled in June of 2023. In addition to improving accountability, Newell’s organizational realignment should further unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment.
As part of the organizational realignment, the company is making several organizational design changes, including standing up a cross-functional brand management organization, realigning business unit finance to support its new global brand management model, further simplifying and standardizing regional go-to-market organizations, and centralizing domestic retail sales teams, the digital technology team, business-aligned accounting personnel, the Manufacturing Quality team, and the Human Resources functions into the appropriate center-led teams to drive standardization, efficiency and scale with a One Newell approach.
The company will further optimize Newell’s real estate footprint and pursue other cost-reduction initiatives, which are expected to be substantially implemented by the end of 2024.
Once the organizational design changes are executed, the company expects to realize annualized pre-tax savings in the range of $65 million to $90 million, net of reinvestment, with $55 million to $70 million expected in 2024. Restructuring and related charges associated with these actions are estimated to be in the range of $75 million to $90 million and are expected to be substantially incurred by the end of 2024.
Image courtesy Coleman