ACCO Brands (ACCO) Q2 2025 Earnings Call August 01, 2025 08:30 AM ET Company ParticipantsChristopher McGinnis - Senior Director - IRThomas Tedford - President & CEODeborah A. O'Connor - EVP & CFOKevin Steinke - Managing DirectorHale Holden - Managing DirectorConference Call ParticipantsGregory Burns - AnalystJoe Gomes - Senior Research AnalystWilliam Reuter - AnalystOperatorHello, everyone, and welcome to the Akko Brands Second Quarter twenty twenty five Conference Call. My name is Ezra, and I will be your ...

Financial Data and Key Metrics Changes - Consolidated second quarter comparable sales decreased by 10.5%, aligning with guidance [8][19] - Reported sales for the second quarter decreased by 10%, with a slight favorable FX impact [19] - Gross profit for the second quarter was $130 million, a decrease of 15%, with the margin rate contracting about 200 basis points to 32.9% [20] - Adjusted operating income for the second quarter was $47 million, down from $65 million a year ago [21] - Year-to-date adjusted free cash flow was an outflow of $24 million, in line with expectations [24] Business Line Data and Key Metrics Changes - In the Americas segment, comparable sales declined by 14%, primarily due to purchasing disruptions and soft demand [21] - The international segment saw comparable sales decline by 4%, an improvement from the first quarter [23] - Gaming accessories grew mid-single digits, driven by the Nintendo Switch 2 launch [11][12] - Sales of office products remained soft in Europe, particularly in Germany, the UK, and France [12][23] Market Data and Key Metrics Changes - Sales in Latin America were weaker than expected, particularly in Mexico, due to constrained consumer spending and competition at lower price points [10] - In Brazil, sales were down modestly, with back-to-school sales expected to occur later in the year [11] - The company noted an increase in low-priced products entering Latin America from China, prompting adjustments in pricing and product assortment [11][41] Company Strategy and Development Direction - The company is focused on a $100 million multiyear cost reduction program, achieving over $40 million in cumulative savings to date [6][16] - Strategic price increases have been announced to mitigate tariff impacts while maintaining competitive positioning [7][27] - The company is expanding its product offerings in higher growth categories through both organic and inorganic initiatives [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current market dynamics with discipline and agility, despite ongoing uncertainties [17][29] - The outlook for the third quarter and full year anticipates reported sales to decline by 7% to 8.5% [28] - Management expects pricing actions to partially mitigate continued softness in consumer and business spending [28] Other Important Information - The company successfully settled a long-standing tax assessment in Brazil, reducing the reserve from $20 million to $7 million [22][61] - The company amended its bank credit agreement to increase its leverage covenant by 50 basis points for the remainder of 2025 [25] Q&A Session Summary Question: Impact of back-to-school season on sales - Management noted that the decline in sales is attributed to a mix of factors including shifts in purchasing and lower market demand, with inventory levels being managed tightly by retailers [31][34] Question: Contribution of new product development to revenue - Management indicated that the benefit from new products will be modest in the second half, with more significant impacts expected in 2026 [36] Question: Adjustments to product assortment in response to demand - Management confirmed that they are adjusting product assortments to remain competitive against lower-cost competitors from China [40][41] Question: Pricing increases and gross margin expectations - Management expects modest improvement in gross margin in the second half, with pricing initiatives aimed at covering tariff costs [46][47] Question: Market share expectations for back-to-school season - Management stated it is too early to determine market share changes, but they are well-positioned with strong brand offerings [71][72] Question: Incremental sales opportunities from gaming accessories - Management indicated it is premature to provide specific dollar amounts for gaming accessory sales, but they are optimistic about the upcoming holiday season [73][74]