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    Newell Brands Inc (NWL)

    Business Description

    Newell Brands Inc. is a leading global consumer goods company known for its diverse portfolio of well-known brands. The company operates in nearly 200 countries and focuses on enhancing and brightening consumers' lives both at home and outdoors by creating moments of joy, building confidence, and providing peace of mind. Newell Brands sells a wide range of products, including household items, writing instruments, baby gear, and outdoor lifestyle products .

    1. Home and Commercial Solutions - Offers commercial cleaning and maintenance solutions, closet and garage organization, hygiene systems, material handling solutions, household products, kitchen appliances, food and home storage products, fresh preserving products, vacuum sealing products, gourmet cookware, bakeware, cutlery, and home fragrance products .

      • Brands: Ball, Calphalon, Crockpot, FoodSaver, Mapa, Mr. Coffee, Oster, Rubbermaid, Rubbermaid Commercial Products, Sistema, Spontex, Sunbeam, WoodWick, Yankee Candle .

    2. Learning and Development - Provides baby gear and infant care products, writing instruments (markers, highlighters, pens, pencils), art products, activity-based products, and labeling solutions .

      • Brands: Dymo, Elmer’s, EXPO, Graco, NUK, Paper Mate, Parker, Sharpie .

    3. Outdoor and Recreation - Focuses on active lifestyle products for outdoor and outdoor-related activities, technical apparel, and on-the-go beverageware .

      • Brands: Campingaz, Coleman, Contigo, Marmot .

    Q3 2024 Summary

    Initial Price$6.46July 1, 2024
    Final Price$7.53October 1, 2024
    Price Change$1.07
    % Change+16.56%

    What went well

    • Newell Brands' trailing 12-month EBITDA has increased by 22%, driven by productivity improvements in the supply chain and centralization, as well as exiting unprofitable businesses, leading to significant margin expansion and a stronger portfolio.
    • The company is showing sequential improvement in core sales decline, from double digits last year to only 1.7% decline this quarter, and is gaining market share in more of its top 25 brands, indicating progress towards sustainable top-line growth expected in 2025.
    • After exiting unprofitable businesses, Newell expects distribution to be a positive driver in 2025, plans to increase A&P investment from historical 4% to 6-7% over time to support innovation, while achieving higher operating margins through gross margin improvements and overhead reductions.

    What went wrong

    • Uncertainty in Achieving Sustainable Top-Line Growth: Despite sequential improvements, Newell Brands has not yet returned to sustainable profitable top-line growth and acknowledges it is premature to provide guidance due to macroeconomic uncertainties. The company states, "we are acutely aware that we have set out a goal of returning the company to sustainable profitable top-line growth... I expect that we're going to get to top line growth at some point during next year, during 2025, but it's a little premature for us to give guidance at this point given the uncertainty in the macro context."
    • Continued Underperformance in the Outdoor & Recreation Segment: The Outdoor & Recreation segment, including iconic brands like Coleman, remained significantly down with core sales declining 16.8% year-over-year in the third quarter. The company admits this segment "is going to take the longest to turn around" and meaningful innovation impact is expected in 2026. ,
    • Profitability Driven by Cost Savings Amidst Underutilized Capacity: The company's recent profit improvements have been driven largely by cost reduction efforts and productivity savings, rather than revenue growth. Newell Brands' capacity utilization is roughly 40%, indicating significant underutilization. The CFO acknowledges, "I'm not sure we're going to be able to drive EBITDA growth at a 22% rate... I think we can drive very strong EBITDA growth going forward." ,

    Q&A Summary

    1. Sustainability of Profitability Improvements
      Q: Can profit gains continue even if growth remains uneven?
      A: The company sees strong opportunities for profit improvement, expecting revenue to improve due to category growth and front-end capability investments. They plan to drive margin improvement on both the gross margin and operating margin lines through productivity savings across the supply chain and back-office functions. While a 22% EBITDA growth in a year is exceptional, they are confident in continuing strong EBITDA growth and have reduced net debt-to-EBITDA from 6.5x to 4.9x over the past five quarters.

    2. Return to Sustainable Growth
      Q: When will the company return to sustainable growth?
      A: The company is focused on returning to sustainable, profitable top-line growth. They have invested in consumer insights, redesigned the innovation pipeline, and implemented a brand management model focused on their top 25 brands. Sequential improvement is evident, with core sales decline improving from double digits last year to down 1.7% this quarter. They expect to reach top-line growth at some point during 2025, though it's premature to give guidance given macroeconomic uncertainties.

    3. COVID Demand Normalization
      Q: Is COVID demand normalization ending?
      A: The company confirms that the pull-forward of demand during COVID and subsequent category decline are coming to an end. They expect category growth dynamics to be better next year, contributing to improved market conditions. Along with better market share due to innovation and brand investments, they are well-positioned for the future.

    4. Tariff Risks and Supply Chain Diversification
      Q: How are tariffs affecting supply chain strategy?
      A: The company has diversified its supply chain, reducing products sourced from China and sold in the U.S. from over 30% to below 15%, aiming for below 10% by the end of next year. With strong U.S. manufacturing facilities, they could benefit if tariffs are implemented in certain categories. Their primary residual tariff risk is in the Baby business, but these products have been exempted from tariffs in the past.

    5. Category Performance Outlook
      Q: Will key categories return to growth?
      A: The company expects categories like kitchen appliances to return to growth as the COVID pull-forward effect wanes. Industry projections indicate these categories will see core sales growth next year. Innovative products in Baby and Writing, such as the Graco SmartSense Bassinet priced at $400 (compared to competitors at $1,500), and premium S-Gel pens at $10, are expected to drive growth. A relaunch of Yankee Candle is also anticipated to boost Home Fragrance sales.

    6. Distribution and SKU Rationalization Impact
      Q: How is SKU reduction affecting sales?
      A: The company has reduced SKUs from over 100,000 to 20,000, tripling revenue per SKU. While SKU rationalization caused a distribution headwind in 2024, they expect distribution to become a positive driver of core sales in 2025. They anticipate gaining distribution next year as they no longer have the headwind of exiting unattractive businesses.

    7. Investment in Innovation and Advertising
      Q: How much is being invested in innovation and advertising?
      A: Historically spending about 4% of sales on A&P, the company increased this to nearly 5% this year and expects long-term spending to be around 6–7%. They aim to be ROI-driven, ramping up spending consistent with innovation launches. Despite increased A&P, operating margins improved by 200 basis points through gross margin enhancements.

    8. Cost Savings Initiatives
      Q: What savings are expected from cost initiatives?
      A: The FUEL productivity program is generating over 6% cost of goods sold takeout this year, significantly improving gross margins. This program continues into next year with expectations for further gains. They also see opportunities in back-office efficiencies, including implementing AI in customer and consumer service functions.

    9. Competitive Landscape Impact
      Q: How does a new competitor affect your business?
      A: The company views the entry of a strong innovator as positive, validating their strategy focused on innovation and branding. It demonstrates that their categories respond well to these efforts and shows what's possible with their leading brands.

    10. Retail Inventory and Shipping Dynamics
      Q: Are retailer behaviors impacting sales forecasts?
      A: The wide guidance range for Q4 is due to retailer shipping windows' timing, not inventory destocking. Retailer inventories are in a good place, but inventory intake for shelf resets doesn't align neatly with fiscal quarters. They expect the market to remain down low single digits during the holiday season, with consumers spending more on essentials than general merchandise.

    Key Metrics

    View all financials →
    Revenue by Segment - Metric (Revenue in millions USD)Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023Q1 2024Q2 2024Q3 2024
    Home and Commercial Solutions-9711,0581,1231,2768939621,047
    Learning and Development684564813694635559813717
    Outdoor and Recreation211270333231165201258183
    Commercial Solutions355-------
    Home Appliances399-------
    Home Solutions636-------
    Revenue by Geography - Metric [USD Million]Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023Q1 2024Q2 2024Q3 2024
    North America1,1841,1841,4951,396-1,0761,3891,319
    International621621709652-577644628
    Total1,8051,8052,2042,048-1,6532,0331,947

    Executive Team

    NamePositionStart DateShort Bio
    Christopher H. PetersonPresident and Chief Executive OfficerMay 16, 2023Christopher H. Peterson has been serving as CEO since May 16, 2023, and as President since May 5, 2022. He was previously the CFO from December 2018 to January 2023 and has held various senior positions within the company, including Interim CEO and CFO in 2019 .
    Mark J. ErcegChief Financial OfficerJanuary 9, 2023Mark J. Erceg has been the CFO since January 9, 2023. Before joining Newell Brands, he was the EVP and CFO at Cerner Corporation and held CFO positions at Tiffany & Company, Canadian Pacific Railway, and Masonite International Corporation .
    Bradford R. TurnerChief Legal and Administrative Officer and Corporate SecretaryAugust 2017Bradford R. Turner has been in his current role since August 2017. He joined Newell Brands in 2004 and has held various legal roles, including Senior Vice President, General Counsel, and Corporate Secretary .
    Tracy L. PlattChief Human Resources OfficerDecember 2023Tracy L. Platt has served as the Chief Human Resources Officer since December 2023. She was previously the EVP and CHRO at Cerner Corporation and held various HR leadership roles at Medtronic, Cardinal Health, Lands’ End, and GE Healthcare .
    Michal J. GellerPresident, e-Commerce and DigitalApril 2021Michal J. Geller has been the President, e-Commerce and Digital since April 2021. Before joining Newell Brands, he was the SVP of Global e-Commerce Marketing and Data Science at PepsiCo and held various roles at Amazon .
    Michael M. HayesChief Customer OfficerApril 2020Michael M. Hayes has served as the Chief Customer Officer since April 2020. He was previously the SVP, Sales & Sales Strategy at Georgia-Pacific LLC and has held various sales and marketing leadership roles at several companies .
    Melanie HuetPresident, Brand Management and InnovationFebruary 2023Melanie Huet was appointed as President, Brand Management and Innovation in February 2023. She served as a consultant to the company between October 2022 and January 2023 and held executive positions at Serta Simmons Bedding LLC and Kraft Heinz .
    Dennis SenovichChief Supply Chain OfficerApril 2019Dennis Senovich has served as the Chief Supply Chain Officer since April 2019. He was previously the Global Head of Procurement at Newell Brands and has extensive experience in supply chain leadership roles at companies like Nestlé and PepsiCo North America .
    Michael P. McDermottSegment CEO, Home & Commercial SolutionsJanuary 2023Michael P. McDermott was appointed as Segment CEO, Home and Commercial Solutions in January 2023. He was previously the Business Unit CEO, Commercial and held executive positions at Bass Pro Shops and Lowe's Companies Inc. .
    Kristine K. MalkoskiSegment CEO, Learning & DevelopmentJanuary 2023Kristine K. Malkoski was appointed as Segment CEO, Learning and Development in January 2023. She previously served as Business Unit CEO, Writing and Business Unit CEO, Food .
    Nicolas DuranSegment CEO, Outdoor & RecreationJanuary 2024Nicolas Duran was appointed as Segment CEO, Outdoor and Recreation in January 2024. Before joining Newell Brands, he held several leadership roles at Dorel Industries Inc. and began his career at Reebok International .
    Bridget Ryan BermanChair of the BoardMay 8, 2024Bridget Ryan Berman has been serving on Newell Brands' Board since April 2018 and was designated as the Chair of the Board, effective May 8, 2024. She has over 35 years of experience in retail, including roles at Victoria's Secret Direct, Giorgio Armani Corporation, and Apple Computer, Inc. .
    James KeaneBoard MemberFebruary 15, 2024James Keane was elected to the Board of Directors, effective February 15, 2024. He has significant leadership experience from his 25-year career at Steelcase and serves on the Board of Rockwell Automation .
    Anthony "Tony" TerryBoard MemberJanuary 1, 2024Anthony "Tony" Terry was elected to the Board of Directors, effective January 1, 2024. He has over 26 years of experience in financial analysis and strategic planning, having held leadership roles at Marriott Vacations Worldwide Corporation and The Walt Disney Company .

    Questions to Ask Management

    1. Given that the broader general merchandise market remains down and consumer spending is shifting towards basic needs, how confident are you in your strategy to focus on higher-priced, premium products, and what gives you confidence that this will drive sustainable top-line growth?

    2. You mentioned meaningful improvements in gross margin driven largely by FUEL productivity efforts; can you provide more specifics on how these productivity gains were achieved, and how sustainable they are in the long term?

    3. With the significant investments in advertising and promotion increasing from about 4% to nearly 5% of sales and a potential target of 6% to 7%, how do you plan to balance this increased spend with the need to improve operating margins, and what ROI are you expecting from these investments?

    4. Despite sequential improvements, some of your key segments like Outdoor & Recreation are still experiencing significant declines; what specific strategies are you implementing to turn around these underperforming segments, and what is the realistic timeline for seeing positive growth?

    5. The core sales guidance range for the fourth quarter is quite wide, and there's mention of uncertainties like consumer dynamics and upcoming elections; how are these factors impacting your ability to provide more precise guidance, and what contingency plans do you have in place to mitigate risks from potential macroeconomic volatility?