Newell Brands Inc. (NWL) has been facing significant headwinds in recent months, with its stock price plummeting as much as 21.5% in the past three months. This decline comes amidst a broader downturn in the Zacks Consumer Products – Staples industry, which has dipped 1.9% during the same period. The stock’s current trading level is a concerning 36% below its 52-week high of $10.72.
The company’s struggles are largely attributed to a challenging macroeconomic environment and elevated levels of core inflation, leading to weakened demand for discretionary and durable products. This trend has manifested in Newell Brands’ recent financial performance, with revenue declining 7.8% year-over-year in the second quarter of 2024, following a 4.2% decline in the previous quarter. The decline was primarily driven by reduced core sales, adverse currency impacts, and business exits.
Looking ahead, Newell Brands’ management has provided a bleak outlook for the upcoming quarters. The company anticipates a 4-6% decline in net sales for the third quarter, with core sales expected to be flat or decline by 2%. For the entire year of 2024, Newell Brands forecasts a year-over-year sales decrease of 6-7%, accompanied by a core sales decline of 3-4%. These estimates reflect anticipated pressure across various product categories, with expected declines in low single digits. Additionally, the company is facing a higher-than-expected headwind from foreign exchange fluctuations, based on current spot rates.
This challenging outlook underscores the difficulties Newell Brands is facing in navigating the current economic environment. The persistent challenges of inflation and market volatility have led to a lack of optimism regarding the company’s earnings prospects. The Zacks Consensus Estimate for 2024 earnings per share stands at 65 cents, indicating a year-over-year decline of 19%.
Despite the current setbacks, Newell Brands is actively pursuing strategies to improve its performance and position itself for future growth. The company is focused on enhancing productivity and efficiency through various initiatives, including productivity plans, automation, and the full rollout of Project Ovid. Additionally, Newell Brands is working to optimize its product mix within each business unit.
Another key initiative is Project Phoenix, aimed at reducing overhead costs and streamlining operations. This project is expected to contribute positively to the company’s financial results. Furthermore, Newell Brands is demonstrating resilience in its core business, evidenced by a 490 basis points (bps) expansion in gross margin during the third quarter of fiscal 2024. This expansion was driven by gains from the productivity program and pricing actions, marking the fourth consecutive quarter of gross margin growth for NWL.
Normalized operating margin also increased by 170 bps, backed by productivity improvements, pricing adjustments, favorable product mix, and savings from organizational restructuring. To enhance its appeal to consumers, Newell Brands is focusing on innovation, introducing new products like the Graco SmartSense Soothing Bassinet and Swing, and the Rubbermaid Brilliance line. The company is also launching battery-powered Rubbermaid Commercial carts and the FoodSaver Handheld Plus, a cordless vacuum sealer for food preservation.
Newell Brands is also advancing its e-commerce efforts by investing in digital channels and enhancing customer engagement. The company has implemented buy-online, pick-up in-store, and ship-from-store services at its Yankee Candle stores. These efforts demonstrate Newell Brands’ commitment to adapting to the evolving consumer landscape and its potential for long-term growth.
While Newell Brands faces a challenging environment, the company’s focus on productivity, efficiency, and innovation, along with its commitment to e-commerce and core business resilience, suggests a potential path toward a turnaround. However, investors should closely monitor the company’s performance and its ability to execute its strategies effectively in the coming quarters.
