Newell Brands Inc. ((NWL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Newell Brands Inc. presented a mixed sentiment, reflecting both significant operational improvements and ongoing challenges. The company showcased notable strides in gross margin and innovation, yet it continues to grapple with core sales decline, tariff impacts, and a sluggish growth environment. This narrative underscores a company in transition, with promising growth and efficiency gains, but also facing external pressures and economic uncertainties.
Improvement in Operating Margin
Newell Brands reported a slight increase in its normalized operating margin, which rose by 10 basis points to 10.7%. This improvement was driven by positive performances across all three business segments, marking a significant milestone as it is the first time since Q3 of 2022 that all segments have shown positive results.
Record Gross Margin
The company achieved a record normalized gross margin of 35.6%, an 80 basis point increase, representing the highest rate in four years. This marks the eighth consecutive quarter of year-over-year improvement, highlighting Newell’s ongoing focus on operational efficiency.
Strong Innovation Pipeline
Newell Brands is banking on its robust innovation pipeline to drive future growth. Key initiatives include the refresh of the Yankee Candle brand and the introduction of new Sharpie and EXPO products, which are anticipated to significantly impact Q4 results.
Tariff-Related Business Wins
The company has capitalized on tariff-related advantages, securing incremental business in 13 out of 19 categories with domestic manufacturing capabilities. This strategic move is expected to bolster Newell’s competitive edge in the market.
Positive Core Sales Growth in Key Segments
Despite challenges, Newell’s international business delivered its sixth consecutive quarter of positive core sales growth. Additionally, the Writing and Home Fragrance segments also reported growth, showcasing resilience in key areas.
Core Sales Decline
However, Newell faced a 4.4% decline in core sales during the second quarter, slightly below the operating plan. This decline interrupted previous sequential progress and highlights ongoing challenges in the market.
Impact of Tariffs
Tariffs continue to pose a financial challenge, with an expected incremental cash tariff cost of approximately $155 million, impacting the company’s profitability in the coming years.
Challenges in Category Growth
The market growth has been subdued, with a low single-digit decline in the first half of 2025. This downturn is largely attributed to consumer pullback and retailer actions, affecting overall performance.
Higher Effective Tax Rate
Newell reported a normalized income tax provision of $24 million, resulting in an effective tax rate of 19.2%, which is higher than the mid-teens rate initially projected.
Increased Net Leverage
The company’s net leverage ratio increased to 5.5x for the quarter, slightly above the previous year. However, Newell expects to reduce this ratio to about 4.5x by year-end.
Forward-Looking Guidance
Looking ahead, Newell Brands anticipates a sequential improvement in core sales during the latter half of 2025, driven by distribution gains, innovation launches, and increased marketing investments. The company has updated its full-year guidance to reflect lower category growth but expects favorable foreign exchange impacts to offset this. Newell maintains its normalized operating margin outlook at 9% to 9.5% and highlights its strategic advantage from its North American manufacturing base amid global tariff-driven trade realignment.
In summary, Newell Brands Inc.’s earnings call painted a picture of a company navigating through a transitional phase. While operational improvements and strategic initiatives offer a promising outlook, external pressures and economic uncertainties remain significant hurdles. Investors will be keenly watching how Newell leverages its strengths to overcome these challenges in the coming quarters.