By Charlie Lunan
Newell Brands Inc. (NYSE:NWL) will begin winding down businesses in the coming weeks it does not think it can sell, with the goal of closing them by the end of the year, its CEO told investors Thursday.
“We have made the choice to move quickly, more quickly than we originally envisioned, such that we drive the organizational change in the U.S. all the way to the end game by the end of the year,” CEO Michael Polk said in a presentation at the Barclay’s Global Consumer Staples Conference.
The end game refers to Newell Brand’s plan to divest unidentified businesses that generate $250 million to $300 million in annual revenue. Newell Brands has not said what businesses it plans to exit, but some speculate it will divest winter sports brands picked up April 15, when it closed its acquisition and merger with Jarden Corp.
“Ideally I would like to sell these assets versus simply walking away from them,” Polk told his audience Thursday. “Some of them are the kinds of businesses that would be difficult to sell and therefore, we should just shut down because they create no value for you and they are a distraction for us.”
Following The Money
Newell wants to dispose of the assets by the end of the year so it can focus on a dual strategy recently approved by its board of directors. The primary “brand innovation” strategy calls for focusing resources on brands that can outgrow the market by increasing their share of sales to leading retailers in North America, Western Europe and Japan. These brands compete in less consolidated categories where consumers are responsive to frequent product innovation. They generate, or have the potential to generate, 30 percent of their annual revenue from products introduced in the preceding three years.
“We are going to focus our energy against the big opportunities and we are going to minimize the distractions,” said Polk, noting that the company has already invested in research on Coleman’s brand equity and growth potential. “We’re going to follow the money with respect to the choices we make and the actions we take.”
The strategy closely tracks the formula Polk used at Newell Rubbermaid Inc. prior to its acquisition and merger with Jarden Corp. The resulting Newell Brands generates $16 billion in annual sales, including $2.74 billion from Jarden’s Outdoor Solutions segment, which owns Coleman, K2 Sports, Marmot, Rawlings, Berkley and dozens of other sporting goods brands.
Newell Brands’ second strategy is to foster a stable of more entrepreneurial brands that can enhance cash flow.
Cost Savings On Track
The company disclosed Wednesday that it expects cost synergies from the merger to come in near the high end of its forecast of $50 million to $80 million this year. The savings will come primarily from eliminating duplicate corporate services and executives and procurement savings.
It is creating “integrated customer development teams” to serve its 20 largest U.S. customers. About half of the company’s $10 billion in U.S. revenue comes from 20 retailers, including Wal-Mart Stores Inc., Target Corp. and other national food, drug, club, home improvement and discount retailers.
The company expects to eliminate $175 million in annual costs by 2017 and $500 million by early 2019, or a full year earlier than originally forecast, by eliminating duplicate spending and reducing supply chain complexity, taxes and working capital.
Photo courtesy Newell Brands