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NEWELL BRANDS INC. (NWL)·Q3 2025 Earnings Summary

Executive Summary

  • Mixed quarter: revenue and normalized EPS were below Street, while margins and cost discipline showed underlying progress excluding one‑time tariff impacts; management cut full‑year top‑line, margin, EPS and cash flow outlooks and introduced a conservative Q4 guide .
  • Three discrete headwinds drove the miss: accelerated retailer inventory reductions (including a direct‑import to domestic shift), international softness (Brazil/Argentina), and competitive “price scraping” after NWL led tariff pricing in several categories .
  • Management emphasized structural improvements: normalized overheads down ~120 bps YoY, A&P at the highest rate in nearly 10 years, and ex‑tariff gross margin expansion, with AI tools expected to drive further efficiency gains .
  • Outlook reset: FY25 sales, normalized operating margin, EPS and operating cash flow all lowered; Q4 guide embeds conservative category growth and pricing assumptions; dividend maintained at $0.07 per share as a signal of stability .

What Went Well and What Went Wrong

  • What Went Well

    • Margin resilience ex tariffs: normalized gross margin would have expanded by ~40–55 bps without the one‑time 125% China tariff impact; normalized operating margin would have expanded by ~80 bps ex tariff .
    • Cost and capability progress: normalized overheads fell ~120 bps YoY; management is deploying “leading edge AI tools” and expects overheads as a % of sales to keep declining .
    • Segment proof points: Outdoor & Recreation sales were flat YoY with substantial operating improvement; Writing and Baby are supported by strong innovation and distribution gains into 2026 .

  • What Went Wrong

    • Top‑line pressure: net sales down 7.2% and core sales down 7.4% YoY on retailer destocking, international softness (Brazil down ~25% in September), and pricing competitiveness issues in Kitchen .
    • Tariff drag: Q3 carried $55m net P&L tariff expense ($0.11 per share), with FY25 net P&L tariff impact now $115m ($0.23 per share) and incremental cash tariff cost estimate raised to ~$180m .
    • Guide reset: FY25 sales, normalized operating margin, EPS, and operating cash flow lowered; Q4 outlook assumes category −3% and risk of continued “price scraping” .

Financial Results

Headline metrics by quarter (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$1.566 $1.935 $1.806
Core Sales Growth YoY (%)(2.1)% (4.4)% (7.4)%
Gross Margin (%)32.1% 35.4% 34.1%
Normalized Gross Margin (%)32.5% 35.6% 34.5%
Operating Margin (%)1.3% 8.8% 6.6%
Normalized Operating Margin (%)4.5% 10.7% 8.9%
GAAP Diluted EPS($0.09) $0.11 $0.05
Normalized Diluted EPS($0.01) $0.24 $0.17

Q3 2025 actual vs S&P Global consensus

MetricActualConsensusBeat/Miss
Revenue ($USD Billions)$1.806 $1.886*Miss
Normalized EPS ($)$0.17 $0.18*Miss

Values retrieved from S&P Global.

Segment performance – Q3 2025 vs Q3 2024

SegmentNet Sales Q3’24 ($m)Net Sales Q3’25 ($m)Core Sales Growth YoY (%)Normalized Op Inc Q3’24 ($m)Normalized Op Inc Q3’25 ($m)Normalized Op Margin Q3’24 (%)Normalized Op Margin Q3’25 (%)
Home & Commercial Solutions1,047 942 (9.8)% 122 64 11.7% 6.8%
Learning & Development717 681 (5.6)% 154 130 21.5% 19.1%
Outdoor & Recreation183 183 (0.9)% (15) (1) (8.2)% (0.5)%

KPIs and balance sheet

KPIQ3 2025Prior Period
Normalized EBITDA ($m)225 250 in Q3’24
Operating Cash Flow YTD ($m)103 346 YTD’24
Gross Debt ($m)4,777 4,595 (Dec 31, 2024)
Cash & Equivalents ($m)229 198 (Dec 31, 2024)
Net Debt ($m)4,548 4,397 (Dec 31, 2024)
Leverage Ratio (mgmt)5.3x (Q3) ~5.5x (Q2 → −20 bps)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025(3%) to (2%) (5.0%) to (4.5%) Lowered
Core SalesFY 2025(3%) to (2%) (5.0%) to (4.0%) Lowered
Normalized Operating MarginFY 20259.0% to 9.5% 8.4% to 8.6% Lowered
Normalized EPSFY 2025$0.66 to $0.70 $0.56 to $0.60 Lowered
Operating Cash FlowFY 2025$400m to $450m $250m to $300m Lowered
Net SalesQ4 2025n/a(4.0%) to (1.0%) New
Core SalesQ4 2025n/a(5.0%) to (3.0%) New
Normalized Operating MarginQ4 2025n/a9.0% to 9.5% New
Normalized EPSQ4 2025n/a$0.16 to $0.20 New
Dividend/ShareNext Payable—$0.07 payable Dec 15, 2025 (record Nov 28) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Tariffs and mitigationQ1: Could offset tariffs except incremental 125% China; sensitivity highlighted . Q2: FY25 incremental cash tariffs est. ~$155m; GP impact $105m ($0.21) .Incremental cash tariffs now ~$180m; FY25 net P&L impact $115m ($0.23); Q3 net tariff P&L $55m ($0.11) .Worsened; higher tariff drag vs Q2 plan.
Gross margin trajectoryQ1: 7th straight YoY improvement; normalized GM 32.5% . Q2: 8th straight; normalized GM 35.6% .Normalized GM 34.5% (−90 bps YoY), but would have expanded ~40–55 bps ex one‑time China tariff .Softening on reported basis; ex‑tariff constructive.
Overheads and A&PCost focus ongoing; margin expansion .Normalized overheads −~120 bps YoY; A&P at highest rate in ~10 years .Positive efficiency; brand investment up.
Pricing and competitionQ1: Pricing among mitigation levers .Led pricing in Kitchen; competitors delayed → “price scraping”; taking promo actions to restore competitiveness .Near‑term pressure; expect competitor pricing to catch up.
Retailer inventory dynamicsRetailers tightly managing inventory (context) .One‑time DI→domestic shift and destocking hit Q3; largely behind entering Q4 .Headwind abating.
International marketsQ1/Q2: International core +1.6% through H1 .Brazil/Argentina macro/political shock in Sept; expect return to growth in Q4 .Temporary setback; recovery expected.
Innovation/DistributionOngoing innovation momentum .>20 tier‑1/2 launches planned for 2026; distribution turning net positive from Q4 .Strengthening into 2026.
AI/technology enablementNot highlighted.AI use cases expanding; expected to further lower overheads .Emerging tailwind.

Management Commentary

  • “Gross margin would have expanded by 55 basis points in the third quarter if not for the temporary impact of one‑time China tariffs.”
  • “Normalized overheads as a percentage of sales declined for the first time in three years, dropping by approximately 120 basis points… and we expect this trend to continue as we… deploy leading edge AI tools across the organization.”
  • “Combined, these three factors [retailer inventory reductions, international softness, and pricing dynamics] reduced third‑quarter sales by four to five points…”
  • “We expect our international business to return to growth during the fourth quarter… Competitive pricing actions are gaining traction, especially in key categories like Writing…”
  • “Normalized diluted EPS… includes about $55 million of net tariff P&L expense, or approximately $0.11 per share, in the third quarter.”

Q&A Highlights

  • Drivers of the miss concentrated in September: larger‑than‑planned retailer inventory reductions (including destock ahead of Yankee Candle restage), Brazil down ~25% in September amid policy/tariff shock, and competitor price lag vs NWL’s tariff pricing in Kitchen .
  • Pricing dynamics: Kitchen was “caught offside” as competitors delayed price increases; promotional actions were taken to restore competitiveness; Writing now seeing competitor shelf prices move up in October, improving NWL’s relative position given domestic manufacturing .
  • Outlook stance: Q4 guide embeds category −3% with risk of continued price scraping; sequential improvement expected on more tariff‑advantaged wins, stronger promotions, and international recovery .
  • Inventory/DI shift: Direct‑import to domestic shift largely completed; management does not expect further material DI→domestic changes in Q4/2026 .
  • Cash/leverage: Operating cash flow reduced by higher cash tariff outlays and excess inventory; leverage at ~5.3x with expectations for stronger 2026 cash flow on lower cash taxes, lower CapEx, and improved working capital .

Estimates Context

  • Q3 2025 vs S&P Global consensus: revenue and normalized EPS both missed (see table above). Management’s tariff disclosures and competitive pricing dynamics suggest Street models may need to reflect higher tariff drag and more conservative Q4 category assumptions .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Momentum ex tariffs is healthier than the headline: margins and overheads progressing; tariff headwinds obscured underlying improvement this quarter .
  • Near‑term top‑line risk persists in Kitchen and international, but management indicates retailer destocking and DI→domestic shift are largely behind the company as it enters Q4 .
  • The FY25 guide reset lowers the bar; delivery on Q4 profitability and cash flow will be a key stock narrative driver alongside evidence of category normalization and competitor price follow‑through .
  • Watch for sequential improvement catalysts: international recovery (Brazil/Argentina), competitor pricing catch‑up in Writing/Kitchen, and incremental tariff‑advantaged wins .
  • 2026 setup: robust innovation slate (>20 tier‑1/2 launches), positive net distribution, and AI‑enabled efficiency create a medium‑term margin/cash pathway if macro stabilizes .