From a margin perspective, adjusted EBITDA margin was 16.6%, down 40 basis points compared to the prior year. This reflects the impact of higher employee-related costs and some one-time benefits in the prior year fourth quarter, which our team worked diligently to partially offset through the benefits of our ongoing productivity actions. In Solutions Group, sales increased roughly 1.5%. This segment continues to lead our portfolio shift, with high-value categories now representing 60% of the Solutions Group ...

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $9.53 and $707 million of adjusted free cash flow for the full year 2025, demonstrating the durability of its franchise [3][15] - Adjusted EBITDA margin was 16.4% for the full year, reflecting resilience despite headwinds from trade policy changes and softer consumer sentiment [3][15] - Fourth quarter adjusted EPS was $2.45, up 3% compared to the prior year, driven by higher volume and productivity [15][25] Business Line Data and Key Metrics Changes - In the Materials Group, reported sales increased by 5%, although organic sales were slightly down due to deflation-related price reductions [4][17] - The Solutions Group saw sales increase by approximately 1.5%, with high-value categories now representing 60% of the portfolio, which helped offset declines in base solutions [6][19] - Intelligent Labels within the enterprise-wide platform grew mid-single digits, driven by strong performance in food, logistics, and other categories [7][20] Market Data and Key Metrics Changes - In developed markets, North America experienced low single-digit volume mix declines, while Europe delivered mid-single-digit growth [17] - Emerging markets in Asia Pacific and Latin America were up low single digits, indicating some resilience in these regions [17] - The apparel business was down roughly 7%, impacted by tariff-related uncertainties, while other categories like food and logistics showed high teens growth in Q4 [6][8] Company Strategy and Development Direction - The company is focused on driving growth in high-value categories, which now represent approximately 45% of total sales, and aims to expand this further [9][10] - There is a strong emphasis on innovation and digital capabilities to enhance operational productivity and customer solutions [10][11] - The company plans to maintain a disciplined capital allocation strategy while continuing to invest in productivity and innovation to strengthen market positions [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to stronger growth despite ongoing macroeconomic challenges, with expectations for adjusted EPS growth of approximately 6% in Q1 2026 [13][25] - The company anticipates that growth in high-value categories will continue to be a key driver, with a focus on expanding customer adoption and market penetration [9][39] - Management acknowledged the need to improve organic revenue growth and is taking decisive actions to address this trajectory [9][13] Other Important Information - The company achieved its 2025 sustainability objectives, including reducing energy intensity and enabling more sustainable products [11][12] - The balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 2.4, and the company returned approximately $860 million to shareholders in 2025 [16][25] Q&A Session Questions and Answers Question: Can you provide more detail on the 40 basis point drop in margin? - The drop was attributed to soft base volumes, wage inflation, and some one-time benefits in the prior year, along with the impact of extra calendar days in Q4 [28][30] Question: What are the growth expectations for Intelligent Labels in 2026? - Growth is anticipated to be above the low single digits seen in 2025, driven by increased adoption in apparel and logistics sectors [37][39] Question: How do high-value categories compare in margin to core categories? - High-value categories typically have higher variable margins than the rest of the portfolio, contributing to overall margin expansion [44][46] Question: Has the Walmart partnership increased inquiries from other grocery sellers? - Yes, the partnership has catalyzed interest from other grocery sellers, leading to a growing pipeline of inquiries [52][53] Question: What is the expected impact of temporary savings on 2026? - Temporary savings from incentive compensation in 2025 will be a headwind in 2026, similar in magnitude to the $50 million restructuring actions [55][56] Question: What is the outlook for the apparel market in 2026? - There is uncertainty due to tariff policies, but growth is expected as retailers adjust their supply chain strategies [61][63]

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $9.53 and generated $707 million of adjusted free cash flow for the full year 2025, demonstrating the durability of its franchise [3][14] - Adjusted EBITDA margin was maintained at 16.4% for the full year, despite headwinds from trade policy changes and softer consumer sentiment [3][14] - In Q4, adjusted EPS was $2.45, up 3% compared to the prior year, with reported sales increasing by 3.9% [13][14] Business Line Data and Key Metrics Changes - In the Materials Group, reported sales increased by 5%, with low single-digit volume and mix growth offset by deflation-related price reductions [4][15] - The Solutions Group saw sales increase by approximately 1.5%, with high-value categories representing 60% of the portfolio [5][19] - Intelligent Labels within the Solutions Group grew mid-single digits, driven by food, logistics, and industrial categories [6][18] Market Data and Key Metrics Changes - In developed markets, North America experienced low single-digit volume mix declines, while Europe delivered mid-single-digit growth [15] - Emerging markets in Asia Pacific and Latin America were up low single digits [15] - The apparel business was down approximately 7%, impacted by tariff-related uncertainties [5][56] Company Strategy and Development Direction - The company is focused on driving growth in high-value categories, which now represent 45% of sales, and aims to expand this further [8][10] - There is a commitment to accelerating innovation and enhancing digital capabilities to improve operational productivity and customer solutions [9][10] - The company achieved its 2025 sustainability objectives and is making progress towards its 2030 goals [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to stronger growth in 2026, anticipating adjusted earnings per share growth of approximately 6% at the midpoint [11][21] - The company does not expect macroeconomic tailwinds in the near term, focusing instead on internal levers to drive performance [11][38] - There is a recognition of the need to improve organic revenue growth, with decisive actions being taken to address this [8][12] Other Important Information - The company returned approximately $860 million to shareholders in 2025, including $572 million in buybacks and $288 million in dividends [14] - The balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 2.4 [14] Q&A Session Summary Question: Can you provide more details on the 40 basis point drop in margin? - The drop was attributed to soft base volumes, wage inflation, and some one-time benefits in the prior year [26][28] Question: What are the growth expectations for Intelligent Labels in 2026? - Growth is anticipated to be above the low single digits achieved in 2025, driven by increased adoption in apparel and logistics [32][34] Question: How do high-value categories compare in margin to core categories? - High-value categories typically have higher variable margins than the rest of the portfolio, contributing to overall margin expansion [40][42] Question: What impact has the Walmart partnership had on inquiries from other grocery sellers? - The partnership has increased interest and inquiries from other grocery sellers, leading to potential pilots and trials [47][48] Question: What is the expected timing for restructuring benefits throughout 2026? - Restructuring benefits are expected to be balanced across the year, with a more significant impact in the middle quarters [68][70] Question: What actions are being taken to drive organic growth in high-value categories? - The company is focusing on new customer acquisition, accelerating innovation outcomes, and leveraging digital capabilities [75][78]

Avery Dennison (NYSE:AVY) Q4 2025 Earnings call February 04, 2026 11:00 AM ET Speaker2Ladies and gentlemen, welcome to Avery Dennison's Earnings Conference Call for the fourth quarter, ended on December 31, 2025. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a Q&A section. At that time, if you would like to ask a question, please press star one on your telephone keypad to raise your hand and enter the queue. As a reminder, this webcast is being recorded ...

Core Insights - The company reported a solid third quarter with earnings up 2% year over year, driven by productivity and higher volume mix despite ongoing trade policy changes [3][12][21] - The apparel segment showed divergent trends, with high-value category apparel sales growing in the high single digits, while base apparel volumes remained down low single digits due to soft retail demand [4][5][17] - The Solutions Group achieved organic sales growth of 4%, supported by strong performance in high-value categories, particularly VESCOM and Embellix, both exceeding 10% growth [1][16][17] Financial Performance - Adjusted earnings per share reached $2.37, up 2% compared to the prior year, with reported sales increasing by 1.5% [12][21] - The adjusted EBITDA margin was strong at 16.5%, reflecting a 10 basis point increase year over year [12] - The company generated strong adjusted free cash flow of nearly $270 million in the quarter, maintaining a robust balance sheet with a net debt to adjusted EBITDA ratio of 2.2 [13] Segment Performance - The Materials Group experienced a slight revenue decline of 2% on an organic basis, primarily due to low single-digit deflation-related price reductions [14][15] - Specialty durable labels and adhesives continued to show strong growth, partially offsetting declines in graphics and performance tapes [2][15] - Intelligent Labels sales grew approximately 3% year over year, driven by key segments such as apparel, food, logistics, and industrial [4][17] Strategic Developments - The company announced a major partnership with Walmart to leverage RFID innovations in fresh grocery categories, marking a significant industry milestone [5][30] - The strategic focus on high-value categories is evident, with these categories now representing 45% of total business year to date [8][9] - The company is committed to disciplined capital allocation, having repurchased approximately $454 million in stock and grown dividends by 7% [10][13] Outlook - For the fourth quarter, the company anticipates reported sales growth of 5% to 7%, with organic growth expected to be between 0% to 2% [18][19] - The company expects to see high-value categories return to growth in the fourth quarter, despite current trade policy uncertainties [2][7] - The outlook incorporates seasonality and incremental productivity, with adjusted earnings per share projected to be in the range of $2.35 to $2.45 [19][21]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.37, up 2% year over year, exceeding the midpoint of expectations [11] - Reported sales increased by 1.5% compared to the prior year, with organic sales remaining comparable to the prior year [11] - Adjusted EBITDA margin was strong at 16.5%, up 10 basis points year over year, with adjusted free cash flow of nearly $270 million generated in the quarter [12][11] Business Line Data and Key Metrics Changes - Materials Group sales were down 2% on an organic basis, with modest volume mix growth offset by low single-digit deflation-related price reductions [13] - Solutions Group delivered organic sales growth of 4%, driven by high single-digit growth in high-value categories, while base solutions were down low single digits [15] - Apparel business saw high-value category sales grow high single digits, while base apparel remained down low single digits due to soft retailer demand [5][6] Market Data and Key Metrics Changes - North America and Europe experienced continued soft consumer product demand, leading to comparable volume, while emerging markets showed growth with Asia-Pacific up low single digits and Latin America up mid-single digits [14] - The company noted that general retail categories continued to experience tariff-related softness, with sales down mid-teens [16] - The enterprise-wide Intelligent Labels sales grew approximately 3% compared to the prior year, with growth in apparel and food segments [6][15] Company Strategy and Development Direction - The company is focused on leveraging its RFID innovation and solutions, particularly in the fresh grocery categories, as evidenced by a new partnership with Walmart [6][9] - The strategic shift towards high-value categories is underscored by these categories now representing 45% of total business year to date [9] - The company anticipates improved year-over-year growth in the fourth quarter, despite ongoing trade policy uncertainties [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macro uncertainties and maintain strong profitable growth [8][19] - The company expects slight improvements in organic sales growth and continued year-over-year EPS growth in the fourth quarter [18][19] - Management highlighted the importance of innovation and strategic partnerships in driving future growth, particularly in the food segment [6][9] Other Important Information - The company repurchased approximately $454 million in stock and increased its dividend by 7% year to date [10] - The acquisition of Tailor Adhesives for $390 million is expected to strengthen the Materials Group's high-value category adhesives franchise [10] - The company is transitioning to a fiscal calendar that aligns with the Gregorian calendar, which will add approximately 2% to growth in the fourth quarter [70] Q&A Session Summary Question: How are volumes progressing in the Materials segment given macro uncertainty? - Management indicated that while overall volumes were positive, they were less than expected due to lower retail volumes and muted demand from consumer packaged goods [22][23] Question: Can you discuss the Walmart partnership and its potential impact? - The partnership is seen as a critical validation of the company's technology, with expectations of high single-digit to low double-digit growth in Intelligent Labels revenue over the next couple of years [25][28] Question: What is the current status of the Intelligent Labels pipeline? - The pipeline continues to grow in both opportunities and dollar value, with good traction in key segments [31][32] Question: How does RFID technology coexist with other IoT technologies in Walmart? - The company believes UHF RFID is the best-suited technology for item-level identification, while other IoT technologies have specific use cases [49][50] Question: What are the expectations for the Embelex business going forward? - Management expressed optimism for continued growth in the Embelex business, particularly related to the World Cup [62][64] Question: Where is deflation occurring in materials, and how does it compare to price competition? - Deflation has been observed primarily in paper and chemicals, with slight headwinds from price inflation due to tariffs [73][74] Question: Why is there a positive disconnect this quarter between Intelligent Labels and apparel? - The difference is attributed to new rollouts and technology deployments that have been successful despite overall apparel weakness [77]

Financial Performance - The company reported net sales of $2.2 billion[16] - Adjusted EPS (non-GAAP) was $2.37, a 2% increase year-over-year[13, 16] - Strong adjusted free cash flow (FCF) of $269 million was generated[15, 16] - The adjusted EBITDA margin was 16.5%, up 10 bps[17] - The company returned $167 million to shareholders through share repurchases and dividends[16] Segment Performance - Materials Group reported sales increased 1.2% to $1.5 billion[27] but sales down 1.9% organically[27] - Solutions Group reported sales increased 2.0% to $700 million[30] and sales up 3.6% organically[30] - High-value categories delivered sales of approximately $1.0 billion, with low single-digit (LSD) organic growth[18] - Base categories delivered sales of approximately $1.2 billion, with low single-digit (LSD) organic decline[18] Outlook and Strategy - The company expects Q4 adjusted EPS to be between $2.35 and $2.45[14] - Full-year reported sales growth is projected at 5-7%, including a ~2% tailwind from currency translation and ~2% impact from extra days[45] - The company completed the acquisition of Taylor Adhesives for $390 million[15]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.42, up 5% sequentially and comparable to the prior year, with strong free cash flow of nearly $190 million in the quarter [17][18] - Adjusted EBITDA margin was strong at 16.6%, up 20 basis points compared to the prior year [18] - Sales were down 1% on an organic basis compared to the prior year, primarily due to deflation-related price reductions [17][18] Business Line Data and Key Metrics Changes - The Materials Group sales were down 1% on an organic basis, with modest volume mix growth offset by low single-digit deflation-related price reductions [19][20] - Solutions Group sales were also down 1% organically, with high-value categories up low single digits, while base solutions were down mid-single digits [22] - VESCOM, a suite of productivity solutions, was up roughly 10% in the quarter due to successful rollouts [10][22] Market Data and Key Metrics Changes - North America saw low to mid-single-digit organic volume mix growth, while Europe was down low to mid-single digits due to a strong prior year [19][20] - Apparel sales were down 6% in the quarter, with overall apparel and general retail categories experiencing reduced orders and inventory levels [8][11] - Food and logistics categories showed strong growth, with food up mid-teens collectively [11][22] Company Strategy and Development Direction - The company is taking a cautious approach to forward expectations, anticipating third-quarter earnings per share to be comparable to the prior year [13][24] - The focus remains on high-value categories and emerging markets, with a strong balance sheet allowing for organic and M&A investments [14][52] - The company is committed to improving network efficiency and expanding innovation, particularly in the Intelligent Labels platform [15][66] Management's Comments on Operating Environment and Future Outlook - Management noted that trade policy uncertainty impacted results, particularly in apparel and general retail categories [17][30] - Despite challenges, management expressed confidence in long-term earnings progression and the ability to navigate dynamic environments [15][24] - The company anticipates a return to earnings growth in the fourth quarter, assuming no significant macro shifts [25][41] Other Important Information - The company announced a 7% increase in the quarterly dividend to $0.94 per share, continuing a decade-long trend of annual growth [19] - The company returned approximately $500 million to shareholders through share repurchases and dividends in the first half of the year [18] Q&A Session Summary Question: Can you speak to whether you see pent-up demand and potential quicker turnarounds in the second half? - Management noted continued retail sales volume softness in Europe and muted customer sentiment, with expectations of low single-digit demand in apparel and general retail overall [30][31] Question: What are the expected volumes for the back half of the year? - Management reiterated that apparel business is expected to be down low single digits in Q3, with growth anticipated in Intelligent Labels in the second half [34][37] Question: What are the exit rates in your materials businesses into the third quarter? - Exit rates for the Materials Group were relatively flat overall, with slight improvements noted in June [98] Question: What is the outlook for Embellix and its reliance on global sporting events? - Management expects growth in Embellix to begin in Q4, with confidence in the long-term growth trajectory despite challenges in the apparel market [84][98] Question: How is the rollout with CVS going for VESCOM? - The rollout with CVS is progressing well, with strong growth anticipated as the company continues to leverage data for shelf-edge labeling solutions [86][87]

Financial Performance - The company reported net sales of $2.2 billion [16] - Organic sales decreased by 1.0% [16, 20, 29, 33] - Adjusted EPS was $2.42, comparable to the prior year [13, 16] - Adjusted EBITDA margin increased by 20 bps to 16.6% [18] - Strong adjusted free cash flow (FCF) was $189 million [17] Segment Performance - Materials Group reported sales increased 0.2% to $1.6 billion [29] - Solutions Group reported sales decreased 2.6% to $670 million [33] - High-value categories delivered sales of approximately $1.0 billion, up low single digits (LSD) organically and up mid-single digits (MSD) excluding estimated impact of tariffs [19] - Base categories delivered sales of approximately $1.2 billion, down LSD organically [19] Outlook and Strategy - The company expects adjusted EPS of $2.24 to $2.40 in Q3 2025 [14, 42] - The company anticipates slight sales growth versus the prior year [44] - The company is targeting approximately 100% adjusted FCF conversion [44]

Core Viewpoint - Avery Dennison Corporation (AVY) is experiencing growth driven by productivity improvements and cost-saving measures, supported by strong demand for consumer-packaged goods and e-commerce trends [1][3][4] Group 1: Financial Performance and Growth Drivers - Approximately 40% of Avery Dennison's revenues come from labeling non-durable consumer goods, with strong demand in this sector [3] - The company expects over 15% growth for its Intelligent Labels in 2025, reflecting a robust long-term outlook [8] - The Materials Group segment is benefiting from productivity improvements and higher volume, which are expected to continue boosting margins [6][5] Group 2: Strategic Initiatives - Avery Dennison is focusing on five key priorities: driving growth in high-value product categories, enhancing profitability in base businesses, pursuing productivity improvements, maintaining disciplined capital management, and leading with environmentally responsible practices [7] - The company is executing long-term restructuring initiatives to enhance growth in its base business while reallocating resources to high-value categories [8][9] Group 3: Challenges and Concerns - The company is facing higher raw material costs, particularly in paper and energy, which are expected to impact margins [2][10] - Supply chain challenges and currency translation issues are anticipated to affect top-line growth [11] - Avery Dennison's adjusted EPS for the second quarter of 2025 is projected to be between $2.30 and $2.50, indicating a year-over-year decline at the mid-point [11] Group 4: Stock Performance - AVY shares have declined by 19.7% over the past year, compared to a 7.6% decline in the industry [12]