Newell Brands(NWL) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales increased by 21.3% year-over-year to $2.3 billion, driven by core sales growth of 20.9% [51] - Normalized operating profit roughly doubled year-over-year to $230 million [54] - Normalized earnings per share grew more than threefold year-over-year to $0.30 [55] - Normalized gross margin contracted by 60 basis points year-over-year to 32.2% due to inflationary pressures [53] - Normalized operating margin expanded by 410 basis points year-over-year to 10.1% [53] Business Line Data and Key Metrics Changes - Home Appliances core sales increased by 38.9%, with growth across all major regions [56] - Home Solutions segment saw core sales growth of 33.8%, driven by double-digit growth in Food and Home Fragrance [57] - Writing business rebounded with core sales growth of 17.3%, reflecting strong performance in writing and labeling categories [57] - Outdoor & Recreation segment returned to core sales growth, increasing by 7.0% [57] - Baby business experienced mid-teens growth rate, driven by strong share gains and e-commerce penetration exceeding 50% [29] Market Data and Key Metrics Changes - International markets saw core sales growth of nearly 27%, outpacing North America [10] - U.S. experienced strong consumer demand, particularly in the last month of the quarter, aided by fiscal stimulus [10] - E-commerce sales growth accelerated into the mid-40s range, with global sales penetration improving to approximately 21% [12] Company Strategy and Development Direction - The company is focused on five strategic priorities, including galvanizing employees, sustaining top-line growth, becoming an innovation engine, accelerating international growth, and reducing complexity [37][41] - Plans to launch 3 to 5 major new product innovations per year that can scale to $50 million to $100 million in sales [40] - The leadership team has been strengthened to drive execution and innovation [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued sales momentum in Q2 and beyond, despite uncertainties in the second half of 2021 [42] - The company is proactively managing inflationary pressures and supply chain challenges through productivity improvements and selective price increases [49][50] - The outlook for 2021 has been raised, with net sales forecasted to be between $9.9 billion and $10.1 billion, representing 5% to 8% growth [64] Other Important Information - The company redeemed $94 million of its senior notes and repurchased $5 million of its senior notes due in 2023 [60] - The net debt-to-normalized EBITDA leverage ratio improved to 3.3x, moving closer to the target of 3x [59] - The company has over $2 billion in available short-term liquidity, including $682 million in cash [60] Q&A Session Summary Question: Concerns about operating cash flow guidance - Management indicated that operating cash flow guidance remains strong, with expectations for continued progress on cash conversion cycle despite seasonal cash outflow in Q1 [76][77] Question: Outlook for the Writing business - Management expressed optimism about the Writing business, noting that 61% of school districts are back in-person, which bodes well for future orders and shipments [79][80] Question: Update on the outdoor business - Management acknowledged that the outdoor equipment segment is performing well, with innovations and increased consumer interest driving growth [88][89] Question: Breakdown of volumes against price/mix in appliances and Baby business - Management highlighted strong international performance in appliances and ongoing innovations, while the Baby business benefits from strong brand power and new product launches [100][110] Question: Supply chain disruptions and outlook - Management confirmed ongoing supply chain challenges but noted significant improvements compared to previous months, with proactive inventory management in place [112][114] Question: Capital allocation strategy post-leverage target - Management stated that the primary focus remains on investing in the business, maintaining dividends, and reducing leverage, with future capital allocation decisions to be guided by shareholder value creation [120][122]