NEWELL BRANDS INC. Q1 FY2025 earnings call

• Strong Q1 results with core sales in-line or ahead of expectations across key metrics. - Normalized gross margin expanded for the seventh quarter, up 150 basis points. - Product innovation pipeline rebuilt with consumer-led proprietary products launching in the second half. - Strategically positioned to benefit from global trade realignment due to proactive sourcing from alternate geographies and robust domestic manufacturing. - Implemented programs like peak for continuous improvement in manufacturing plants, with 42 global plants and progress in various phases. - Took actions to mitigate tariff impacts, including procurement cost savings, pricing adjustments, and targeted tariff-related price actions.

Core sales were down 2.1% but improved sequentially and year-over-year. Learning and Development and the International business delivered core sales growth. Normalized gross margin increased by 150 basis points for the seventh consecutive quarter, contributing to a 4.5% normalized operating margin which was above guidance. Revenue contribution details weren't specified for each segment beyond the mentioned segments having growth.

• Maintained net sales guidance but moderated category growth from flat to down 1%-2%. - Normalized operating margin remains 9%-9.5%, normalized EPS range $0.70-$0.76. - Second quarter 2025 expected net and core sales decline 5%-3%, operating margin 10.4%-10.8%, normalized EPS $0.21-$0.24. - The 125% China tariff is handled separately as a sensitivity outside guidance, with an estimated unmitigated impact of $0.20 on normalized EPS, but plans to mitigate at least half.

• Impact of the 125% China tariff, which is fluid and could affect earnings if not mitigated. - Potential supply chain disruptions and volatility during the transition period related to tariff changes. - Uncertainty in macroeconomic environment affecting consumer behavior and category growth.

Q: Andrea Teixeira from JPMorgan asked about retail destocking, consumption exit rate, and mitigation of the 125% tariff.

A: Chris Peterson said they lowered market growth assumption due to caution, no significant retailer inventory change in Q1, and outlined pricing actions and inventory management for baby gear.

Q: Lauren Lieberman from Barclays asked about utilizing U.S. capacity and private label.

A: Chris Peterson clarified they're not doing private label but working with retailers to replace China-sourced branded products with their U.S.-made brands.

Q: Steve Powers from Deutsche Bank asked about China tariff impact timing and sensitivities.

A: Mark Erceg said tariff impact would be larger in the second half, widened cash flow range, and Chris Peterson mentioned ongoing competitive advantage discussions in 19 categories.

Q: Bill Chappell from Truist Securities asked about guidance forecasting.

A: Mark Erceg explained they have visibility on most business not tariff-impacted and provide guidance for clarity.

Q: Brian McNamara from Canaccord Genuity asked about China tariff impact on small kitchen appliances.

A: Chris Peterson said there would be consolidation and market share gains, and Mark Erceg noted ongoing efforts to mitigate the 125% tariff impact.

Q: Filippo Falorni from Citi asked about pricing and baby gear exemptions.

A: Chris Peterson said pricing net of elasticity is expected to be up a point or two, and they're actively lobbying for baby gear exemptions.

Q: Olivia Tong from Raymond James asked about market share, pricing in other categories, and capacity.

A: Chris Peterson discussed market share outlook, limited pricing in other categories, and no significant excess capacity in advantaged categories with ongoing retailer discussions.