Newell Brands Inc. (NWL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects mixed signals: while the company has a strong innovation pipeline and strategic pricing adjustments, it faces challenges such as a decline in full-year EPS and operating cash flow. The Q&A reveals cautious optimism with innovation driving growth, but management's avoidance of certain specifics and flat sales guidance tempers enthusiasm. Given the market cap and these factors, a neutral stock price movement is expected.
Key Financial Performance
Fourth Quarter Net Sales $1.9 billion, down 2.7% year-over-year. Core sales declined 4.1%. Reasons include improved consumer demand in December, strong baby business performance, and better-than-expected results in Latin America.
Fourth Quarter Normalized Gross Margin 33.9%, up 70 basis points year-over-year. Excluding $0.10 per share of tariff-related headwinds, gross margin would have been up significantly.
Fourth Quarter Normalized Operating Margin 8.7%, up 160 basis points year-over-year. Reasons include enhanced promotional activity and increased advertising and promotion (A&P) spending.
Fourth Quarter Normalized EBITDA $241 million, up nearly 12% year-over-year. Driven by productivity and overhead savings, partially offset by higher A&P levels.
Fourth Quarter Normalized Diluted Earnings Per Share $0.18, at the midpoint of the expected range.
Fourth Quarter Operating Cash Flow $160 million, reflecting strong cash generation despite $174 million of gross cash tariff costs incurred in 2025.
Full Year Net Sales $7.2 billion, down 5% year-over-year. Core sales decreased by 4.6%. Reasons include tariff-related impacts and category contraction.
Full Year Normalized Gross Margin 34.2%, up 10 basis points year-over-year. Incremental gross tariff costs of $114 million impeded further expansion.
Full Year Normalized Operating Margin 8.4%, up 20 basis points year-over-year. Includes a 50 basis point increase in A&P support.
Full Year Normalized Earnings Per Share $0.57, compared to $0.68 in the prior year. $0.05 of the $0.07 differential is attributed to temporary incremental China tariffs.
Full Year Normalized EBITDA $882 million, down $18 million year-over-year. Decline compares favorably to $114 million of incremental tariff-related P&L pressure.
Full Year Operating Cash Flow $264 million, in line with updated expectations. Reflects cash tariff costs and higher cash bonus payouts.
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Operating Highlights
Sharpie Creative Markers and EXPO Wet Erase: These products supported strong performance in the Writing segment, showcasing consumer-preferred innovation.
Graco's Turn2Me Car Seat and Siting Bassinet and Swing: These innovations drove strong performance in the Baby segment, contributing to a 160 basis point increase in market share for the year.
Rubbermaid Easy Store Lids: Recent innovation in the Kitchen segment received positive consumer feedback.
Yankee Candle relaunch: Improved innovation and execution led to growth in the Home Fragrance segment in Q4.
Tariff-advantaged business wins: Secured $40 million in incremental tariff-advantaged business wins in the second half of 2025.
Distribution gains: Distribution is expected to turn positive in 2026 for the first time since the Jarden acquisition, supported by line reviews and tariff-advantaged manufacturing wins.
Global productivity plan: Designed to enhance competitiveness, simplify the organization, and support long-term value creation through automation, digitization, and AI.
Sourcing diversification: Reduced China sourcing exposure to below 10%, down from 35% a few years ago, strengthening supply chain resilience.
Pricing actions: Executed three rounds of pricing to protect structural economics, expand normalized operating margin, and increase advertising and promotional support by 50 basis points.
Capability-based transformation: Focused on rebuilding front-end capabilities (e.g., consumer understanding, brand building) and back-end capabilities (e.g., manufacturing, IT) to drive sustainable growth.
Innovation pipeline: More than 25 Tier 1 or 2 launches planned for 2026, the strongest lineup since the Jarden acquisition.
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Risk or Challenges
Tariffs and Pricing Actions: Tariffs significantly impacted consumer behavior and retail dynamics, leading to multiple pricing actions that disrupted sales trends. The company faced challenges in maintaining competitiveness due to slow pricing actions by competitors and tariff-related disruptions in international markets.
Supply Chain and Sourcing: The company had to reduce its reliance on China for sourcing, lowering exposure from 35% to below 10%. This diversification was necessary to mitigate risks from tariffs but required significant adjustments and investments.
Home and Commercial Segment: The Kitchen category faced soft consumer demand, distribution losses, and elevated promotional intensity, which pressured performance. Promotional adjustments were necessary to remain competitive.
Economic and Market Conditions: The company experienced category declines of 2-3% in 2025, with expectations of a further 2% decline in 2026. Economic uncertainties in international markets like Argentina and Brazil also posed challenges.
Tariff-Related Costs: Incremental tariff-related costs amounted to $114 million in 2025, with an expected increase to $150 million in 2026, creating significant financial pressure.
First Quarter 2026 Challenges: The company anticipates a decline in core sales of 7-5% in Q1 2026 due to retailer shipment timing, delayed shelf resets, and international market normalization.
Competitive Pressures: Elevated promotional intensity in certain categories, such as Kitchen, required adjustments to pricing and promotional strategies to maintain competitiveness.
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Guidance & Outlook
2026 Category Performance: The company expects the categories it participates in to decline by approximately 2% for the year. However, Newell Brands aims to outperform these categories and grow market share for the first time since the Jarden acquisition.
Innovation Pipeline: Newell Brands plans to launch more than 25 Tier 1 or 2 innovations in 2026, marking the strongest innovation lineup since the Jarden acquisition. These innovations are expected to drive market share growth and improve distribution.
Distribution Gains: Distribution is expected to turn positive in 2026 for the first time since the Jarden acquisition, supported by line reviews and tariff-advantaged manufacturing wins.
Supply Chain and Procurement: The company expects its supply chain and procurement teams to generate enough productivity savings to offset inflation and higher year-over-year tariff costs.
Operating Margin: Normalized operating margin is expected to expand in line with the company's evergreen financial model, with a modest increase in advertising and promotion support.
First Quarter 2026 Performance: Core sales growth is not expected in the first quarter due to the timing of major shelf resets and innovation shipments, which are slated to begin in the second quarter.
Full-Year 2026 Financial Guidance: Net sales are expected to range from down 1% to up 1%, with core sales in the range of down 2% to flat. Normalized operating margin is projected to improve by 50 basis points, and operating cash flow is expected to increase by 40% to $350-$400 million.
Capital Expenditures: CapEx is planned at $200 million for 2026, down from a historical run rate of $250 million, as major ERP and supply chain projects have been completed.
Tariff Impacts: The total gross cash tariff impact is expected to be $130 million in 2026, with a total gross P&L impact of $150 million. The company plans to mitigate these impacts through sourcing actions, productivity, and targeted pricing.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the company's outlook for sales growth in the upcoming year, and what factors contribute to this outlook?
A:The company expects sales to flatten out over the course of the year, with core sales guidance at minus 2% to flat. This outlook is based on three factors: the strongest set of innovations since the Jarden acquisition, visibility into shelf space wins and promotional slots, and strong A&P support. The company also assumes that the categories will remain challenged, with a 2% decline in 2026.
Q:What are the key innovations and their expected impact on sales?
A:The company has 25 Tier 1 and Tier 2 innovations planned for the year, the largest number since tracking began. Examples include the Graco EasyTurn rotating car seat, which became the #1 selling baby item in the U.S., and the relaunch of Yankee Candle, which saw 6% core sales growth in Q4. These innovations are expected to drive growth across all business units.
Q:How is the company addressing pricing and tariff impacts?
A:The company has adjusted pricing in response to tariff rollbacks. For example, in the Baby business, prices were reduced to reflect a rollback from 30% to 20% tariffs. In the Kitchen segment, a 15% price reduction was implemented for the Rubbermaid Easy Store Lid food storage product due to tariff advantages and cost efficiencies.
Q:What is the company's perspective on consumer spending trends and retailer dynamics?
A:The company observes a K-shaped economy, with higher-income consumers spending more, middle-income consumers spending about the same, and lower-income consumers pulling back. Retailers are optimistic about a potential mini-stimulus effect from $100 billion in tax refunds, but the company has not factored this into its guidance.
Q:How does the company plan to manage potential delays in shelf resets and inventory sell-through?
A:The company has accounted for potential delays in its plans, particularly in categories like Yankee Candle, which have longer reset times. It has also reduced production lead times by 10 days to respond more quickly to demand shifts.
Q:What is the company's long-term outlook for category growth?
A:The company expects long-term category growth of 0% to 1%, with its evergreen model targeting 2% to 3% growth through strong innovation and brand building. Factors like real income growth, the end of COVID-related purchase cycles, and premiumization in categories like Baby are expected to drive growth.
Q:What is the company's approach to innovation and its success rate?
A:The company has significantly increased its innovation pipeline, with 25 Tier 1 and Tier 2 innovations planned for the year. About 70% of past innovations have met or exceeded expectations, with examples like the Graco EasyTurn car seat and Yankee Candle relaunch showing strong results. The company is also leveraging AI to accelerate product development and marketing.
Q:What are the company's expectations for Q1 and the rest of the year?
A:Q1 is expected to be the weakest quarter, with net sales down 4% at the midpoint of guidance. However, the company expects net sales to turn positive in Q2 and remain stable through Q4, driven by innovation launches and shelf resets.
Q:How is the company leveraging A&P spending to support growth?
A:The company has increased A&P spending to at least 50 basis points more than the previous year in Q1, supporting innovation and driving retailer engagement. This has improved the company's hit rate in line reviews and contributed to stronger consumer purchase behavior.
Q:What is the company's strategy for addressing challenges in specific business units?
A:The company is focusing on innovation and relaunches across all business units. For example, the Baby business is introducing new car seat and stroller innovations, while the Home Fragrance segment is expanding the Yankee Candle relaunch globally and relaunching Chesapeake Bay and WoodWick brands.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the potential impact of tax refunds on categories and top-line growth, stating that it is speculative and difficult to predict. They also did not provide specific details on the structural growth rate of categories over the next five years, instead offering general factors that could contribute to growth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America Asia
America environment
Asia track
Baby footing
Baby tariff
Brands Full
Brands capability
Brands future
Brands summer
CAGNY couple
EXPO
Graco
Kitchen
Latin America
Learning Development
acquisition
activity
advertising
automation
brand building
cash discipline
channel
demand
end capability
exposure
financials outlook
focus
import fulfillment
margin cash
marketing
model
observation
portfolio
pressure
procurement
productivity plan
response
support
turnaround
world class
NWL Transcript
Newell Brands Inc. (NWL) Q4 2025 Earnings Call Transcript
Unknown2-6
The earnings call reflects mixed signals: while the company has a strong innovation pipeline and strategic pricing adjustments, it faces challenges such as a decline in full-year EPS and operating cash flow. The Q&A reveals cautious optimism with innovation driving growth, but management's avoidance of certain specifics and flat sales guidance tempers enthusiasm. Given the market cap and these factors, a neutral stock price movement is expected.
Newell Brands Inc. (NWL) Presents at Morgan Stanley Global Consumer & Retail Conference 2025 Transcript
Neutral12-3
Newell Brands Inc. (NWL) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call revealed multiple concerns: a decline in normalized operating margin, reduced operating cash flow, and significant tariff impacts. Despite a slight EPS improvement, Q&A insights highlighted challenges like aggressive pricing leading to uncompetitiveness, reduced organic sales, and a conservative Q4 outlook. While some optimism exists for 2026, the current negative trends and uncertainties, especially with the market cap size, suggest a negative stock price movement in the short term.
Newell Brands Inc. (NWL) Presents At Barclays 18th Annual Global Consumer Staples Conference 2025 Transcript
Neutral9-3
NWL Report
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