Rising LeverageA sharp increase in leverage reduces financial flexibility and raises sensitivity to earnings or interest-rate shocks. Higher debt magnifies downside risk if margins or growth underperform, constraining capital allocation and increasing refinancing or covenant pressure over the medium term.
Margin Compression And VolatilityAlthough profitability remains solid, margins have contracted from prior peaks, signaling pricing pressure, higher costs, or mix shifts. Persistent margin volatility could limit free cash flow upside and reduce the cushion against demand or cost shocks, affecting long-term profitability resilience.
Elevated SG&A And Working-Capital BuildHigher marketing, infrastructure spend and a planned working-capital increase will pressure near-term cash conversion and margins. Sustained elevated SG&A or inventory builds to mitigate tariffs can reduce free cash flow and amplify funding needs, especially given higher leverage.