ACCO Brands Earnings Call: FX Tailwinds, EPOS Lift

ACCO Brands Corp ((ACCO)) has held its Q1 earnings call. Read on for the main highlights of the call.

ACCO Brands struck a cautiously upbeat tone on its latest earnings call, as reported revenue and adjusted EPS topped expectations and the newly acquired EPOS unit began to contribute. Management highlighted solid margin progress and a strong FX tailwind, yet acknowledged ongoing softness in underlying demand, elevated leverage and inventory, and potential cost inflation that justify a conservative outlook for organic growth.

Reported Revenue Growth Above Outlook

First quarter consolidated reported sales rose 8% year over year, coming in ahead of management’s outlook and signaling early traction in the company’s strategy. The upside was powered largely by favorable currency translation and the initial contribution from the EPOS acquisition, rather than a strong rebound in core end-market demand.

Adjusted EPS and Operating Income Beat

Adjusted earnings performance outpaced guidance as ACCO posted adjusted operating income of $12 million, a $5 million improvement from the prior year. The stronger profitability translated into adjusted EPS above expectations, underscoring the impact of cost actions and mix management even in a sluggish demand environment.

Foreign Exchange Provides a Tailwind

Currency movements were a notable driver in the quarter, providing roughly a 6% benefit to reported revenue. Management cautioned that this FX tailwind should moderate to about a 1% benefit for the full year, suggesting that headline growth will rely more on execution and less on currency support as 2026 progresses.

EPOS Acquisition Bolsters Peripherals Portfolio

ACCO closed the EPOS acquisition in the first quarter and recognized a $38 million bargain purchase gain, highlighting the attractive deal economics. The company expects EPOS to add about $80 million of sales over 11 months in 2026, deliver modest profit, carry a slightly higher-than-average gross margin, and yield roughly $15 million of cost synergies within 12 to 18 months.

Gross Profit Growth Amid Stable Margins

Gross profit climbed 7% to $107 million, reflecting the benefit of higher reported sales and ongoing cost discipline. Gross margin held at 31.1%, down just 30 basis points as a lower-priced product mix modestly diluted margins even while gross profit dollars increased.

Americas Segment Profitability Improves

In the Americas, adjusted operating income reached $13 million, up about $3 million from a year earlier, driven by ongoing cost savings initiatives. Segment margin improved by 140 basis points to 7.2%, showing that restructuring and productivity gains are flowing through despite pockets of volume pressure.

International Momentum and Product Enhancements

International sales advanced 15%, boosted by FX and the addition of EPOS, while comparable sales declines moderated to roughly 3%. Adjusted operating income for the segment was $11 million with margins essentially flat year over year, indicating stable profitability as product improvements and new offerings begin to take hold.

Cost Reduction Program On Schedule

Management reiterated confidence in achieving $100 million of cost reductions by year-end, framing this effort as central to restoring and protecting margins. The company pointed to its track record of productivity savings as a key lever to offset inflationary pressures and support earnings in a low-growth backdrop.

Early Back-to-School and Accessories Strength

Early back-to-school buying trends were better than anticipated, and ACCO now expects the full season to be flat to up low single digits. Computer accessories in the Americas posted solid sales gains, driven by new product launches and a growing end-user pipeline that provides some visibility into near-term demand.

Capital Position and Shareholder Returns

ACCO returned $7 million to shareholders via dividends during the quarter and ended with about $252 million available on its revolving credit facility. The company reaffirmed its full-year free cash flow outlook of $75 million to $85 million, signaling confidence in its ability to fund investments, integration costs and shareholder returns.

Underlying Comparable Sales Remain Soft

Beneath the strong reported numbers, comparable sales fell just under 3% overall in the first quarter, with the Americas down about 2% and International down roughly 3%. This continued organic softness underscores that FX and M&A are masking sluggish end-demand, prompting management’s more measured stance on sustainable growth.

Office Products Under Pressure

Core office products sales declined across the Americas, reflecting structural demand challenges and shifting customer preferences. These headwinds partially offset gains in higher-growth areas such as peripherals and computer accessories, highlighting the ongoing mix transition in ACCO’s portfolio.

Gaming Accessories Face Industry Headwinds

Gaming accessories under the PowerA brand were hit by industry-wide headwinds and weaker consumer spending, especially following a soft holiday season. Retailer inventory discipline weighed on first-quarter performance, though management expects some improvement as the year progresses and channel conditions normalize.

Gross Margin Feels Mix-Driven Pressure

The company’s gross margin rate slipped 30 basis points to 31.1% as sales skewed toward lower-priced products, even though gross profit dollars increased. This mix-driven pressure illustrates the trade-off between capturing volume in more value-focused categories and protecting overall profitability.

Inventory Build and Tariff-Linked Working Capital

Inventory rose $67 million since the start of the year, including $27 million from EPOS, with the remainder tied to seasonal stock builds and higher tariff costs. The increase is putting pressure on working capital and contributed to muted free cash generation despite stronger reported sales.

Geopolitical Risks Could Drive Cost Inflation

Management flagged that geopolitical tensions in the Middle East could push up fuel and raw material costs, particularly in the back half of the year. These potential cost increases may offset some of the planned savings from the company’s cost-reduction program, adding another layer of uncertainty to margin planning.

Elevated Leverage and Limited Tariff Upside

Consolidated leverage stood at 4.1 times at quarter end, above ACCO’s year-end target range of 3.7 to 3.9 times, keeping balance sheet improvement on the priority list. A tariff-related claim of about $25 million is not expected to be received in 2026, limiting near-term liquidity upside that could otherwise accelerate de-leveraging.

Restructuring and Integration Weigh on Cash

The company recognized $7 million in restructuring charges, largely tied to EPOS integration and broader cost actions. Management expects about $25 million of restructuring payments this year, a sizable cash outlay that will temporarily depress free cash flow even as earnings benefit from the savings.

Conservative Full-Year Outlook Despite Strong Q1

Despite the first-quarter beat, ACCO reaffirmed its full-year outlook for reported sales to be flat to up 3% and adjusted EPS between $0.84 and $0.89. This cautious stance reflects macroeconomic uncertainty and ongoing organic demand softness, suggesting that management is prioritizing credibility and balance sheet repair over chasing short-term growth.

Seasonal Low Free Cash Flow

Free cash flow came in at just $1.4 million in the quarter, roughly in line with the prior year despite higher reported sales. Management attributed the weak figure to seasonally front-loaded working capital needs and integration-related spending, and still expects cash generation to ramp later in the year.

Guidance and Outlook Emphasize Discipline

Looking ahead, ACCO reiterated guidance for 2026 reported sales to be flat to up 3%, adjusted EPS of $0.84 to $0.89, and free cash flow of $75 million to $85 million, alongside a year-end leverage goal of 3.7 to 3.9 times and no significant debt maturities until 2029. Second-quarter sales are expected to rise 1% to 4% with adjusted EPS of $0.24 to $0.28, while EPOS is projected to add around $80 million in 2026 sales, be neutral to EPS, and deliver $15 million of synergies as part of a broader $100 million cost-reduction drive that also factors in a smaller FX tailwind and potential fuel and raw material inflation.

ACCO Brands’ latest earnings call painted a picture of a company executing well on costs, M&A and FX benefits, while navigating sluggish core demand and rising macro risks. For investors, the story is one of disciplined management using acquisitions and efficiency gains to support earnings and de-leveraging, even as organic growth remains a work in progress.