Fortune Brands Innovations, Inc. ((FBIN)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Fortune Brands Innovations, Inc. recently held its earnings call, revealing a mixed sentiment. The company celebrated significant achievements in its digital business and strategic partnerships, which are expected to bolster future prospects. However, challenges such as sales declines, particularly in the water innovations and security segments, and uncertainties surrounding tariff impacts and consumer demand, indicate a balanced outlook.
Strong Performance in Digital Business
The digital business of Fortune Brands Innovations continues to thrive, with over 200,000 device activations in the first quarter. The segment is on track to deliver approximately $300 million in sales by 2025. A notable highlight is the 180% increase in Flow sales over the first quarter of 2024, underscoring the segment’s robust growth trajectory.
Insurance Partnerships Boost Flow Business
The Flow business has gained momentum with the addition of three major insurance partnerships, including Liberty Mutual Insurance. These partnerships are expected to drive strong growth due to the product’s value proposition of protecting homes and lowering insurance premiums, enhancing its market appeal.
US Manufacturing Advantage
Fortune Brands Innovations benefits from a significant manufacturing advantage, with 60% of its cost of goods sold (COGS) sourced from the US and 70% from North America. This positions the company to better mitigate tariff impacts and gain market share from competitors heavily reliant on Chinese manufacturing.
Positive Brand Developments
The company’s brands are experiencing positive developments, with Moen being recognized as the most trusted faucet brand for the 10th consecutive year. Additionally, Master Lock and SentrySafe brand campaigns have launched successfully, resulting in increased sales and website traffic.
Decline in Sales
Despite the successes, Fortune Brands Innovations reported a 7% decline in first-quarter sales compared to the same period in 2024, totaling $1 billion. This reflects a softer demand environment and inventory reductions across various channels.
Challenges in Water Innovations Segment
The water innovations segment faced a 10% decrease in sales, or 7% organically when excluding China and FX. The segment experienced low single-digit point-of-sale declines and inventory reductions at both wholesale and retail levels.
Uncertain Impact of Tariffs
The company anticipates fully offsetting the $200 million tariff impact for 2025 through supply chain opportunities, cost-out activities, and strategic pricing actions. However, uncertainties in consumer demand pose challenges to providing detailed full-year financial guidance.
Security Segment Sales Decline
Sales in the security segment declined by 4% in the first quarter, attributed to low single-digit point-of-sale declines and the continued destocking of older product lines.
Forward-Looking Guidance
Looking ahead, Fortune Brands Innovations is focused on mitigating the anticipated $200 million tariff impact for 2025. They plan to offset this through strategic measures and expect the full annualized impact of tariffs in 2026 to be around $525 million, which they also plan to fully mitigate. Although detailed full-year financial guidance was not provided due to consumer demand uncertainties, they outlined a potential EPS range of $3.70 to $4.20 based on different volume scenarios. The company remains committed to maintaining a strong balance sheet and leveraging its North American-based manufacturing footprint to drive market share growth and sustain strategic investments.
In summary, Fortune Brands Innovations, Inc.’s earnings call presented a balanced outlook. While the company celebrates significant achievements in its digital business and strategic partnerships, challenges such as sales declines and uncertainties in tariffs and consumer demand remain. The company is poised to navigate these challenges with strategic measures and a focus on leveraging its manufacturing advantage.