Newell Brands(US:NWL)2023-04-28 16:49Financial Data and Key Metrics Changes - The company reported a net sales contraction of 24% year-over-year to $1.8 billion, reflecting an 18% decline in core sales, with a 2% headwind from currency and a 4% impact from divestitures [68][70] - Normalized operating margin contracted 820 basis points to 2.4%, with normalized gross margin declining 410 basis points to 27.1% [69][70] - Operating cash flow was a use of $77 million, an improvement of nearly $200 million compared to the previous year, driven by a $150 million reduction in inventory [71][72] Business Line Data and Key Metrics Changes - The Writing division was flat in core sales despite the overall company being down 18% in Q1, indicating market share growth since 2019 [9] - The Outdoor & Recreation segment experienced a significant decline, with core sales down in the high 20s, which is below the company average [122] Market Data and Key Metrics Changes - Retailers are experiencing normalized inventory levels, with a shift in back-to-school shipments expected to occur later in the season [11][10] - The company anticipates that the macroeconomic environment will continue to pressure discretionary spending, particularly in the U.S. and Europe [49][60] Company Strategy and Development Direction - The company is implementing Project Phoenix to simplify operations and drive efficiencies, with a focus on reducing complexity and enhancing supply chain management [46][48] - A new One Newell sales model is being adopted to strengthen partnerships with top customers and improve customer experience [47] - The company plans to take incremental pricing actions across roughly 30% of its U.S. business to address inflation and improve structural economics [84] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future despite current macroeconomic pressures, emphasizing the importance of operational excellence and innovation [42][50] - The company expects significant year-over-year improvement in operating cash flow, driven primarily by working capital reductions [78] - Management reaffirmed the outlook for 2023, expecting to be at the lower end of the guidance range due to cautious views on consumer discretionary spending [60][78] Other Important Information - The company is undergoing a leadership transition, with Chris Peterson set to become the new CEO [39][41] - The company has taken proactive steps to minimize credit exposure to Bed Bath & Beyond, which filed for bankruptcy, accounting for less than 2% of sales in 2022 [58][59] Q&A Session Summary Question: Can you comment on underlying category growth and changes since February? - Management noted continued pressure on consumer spending in discretionary categories due to inflation on essentials, with no significant change in the fundamental dynamics since February [89][90] Question: How did cash flow come in relative to expectations for the quarter? - Cash flow improved by about $200 million year-over-year, primarily driven by better working capital performance, particularly in inventory [102][104] Question: What are the expectations for gross margin trends and pricing sensitivity? - Management expects a significant reversal in gross margin from the first half to the second half of the year, with pricing actions being monitored closely in light of the macroeconomic environment [112][115]