Newell Brands Navigates Challenging Macroeconomic Conditions

Newell Brands, a leading global consumer goods company, has faced a complex operating environment in recent quarters marked by soft global demand, retailer inventory rebalancing, and significant inflationary pressures. Despite these headwinds, the company is working to optimize its cost structure, strengthen its front-end capabilities, and position itself for long-term sustainable growth.

Financial Performance Overview

For the three months ended September 30, 2024, Newell Brands reported net sales of $1.947 billion, a 4.9% decrease compared to the prior year period. This decline was driven by soft global demand, net distribution losses, and product line exits, primarily in the Home and Commercial Solutions (H&CS) segment, partially offset by pricing actions, especially in international markets. Changes in foreign currency also unfavorably impacted net sales by 3%.

Gross profit increased 9% to $679 million, with gross margin improving to 34.9% from 30.3% in the prior year. This was driven by productivity gains and lower restructuring-related charges, partially offset by the impact of lower sales and inflation.

The company reported an operating loss of $121 million, an improvement from the $159 million operating loss in the prior year period. This was due to the higher gross profit, savings from restructuring actions, and lower restructuring and restructuring-related charges, partially offset by higher incentive compensation, advertising, and amortization expenses.

Table 1: Consolidated Operating Results

Metric	Q3 2024	Q3 2023	$ Change	% Change
Net Sales	$1,947	$2,048	$(101)	(4.9)%
Gross Profit	$679	$621	$58	9.3%
Gross Margin	34.9%	30.3%	-	-
Operating Loss	$(121)	$(159)	$38	23.9%
Operating Margin	(6.2)%	(7.8)%	-	-

For the nine months ended September 30, 2024, net sales decreased 7% to $5.633 billion, with gross profit increasing 8.7% to $1.882 billion and gross margin improving to 33.4%. The company reported operating income of $58 million, compared to an operating loss of $75 million in the prior-year period.

Segment Performance

Newell Brands operates in three reportable segments: Home and Commercial Solutions (H&CS), Learning and Development (L&D), and Outdoor and Recreation.

The H&CS segment saw a 6.8% decline in net sales for the third quarter, reflecting soft global demand, product line exits, and distribution losses, partially offset by pricing actions. Operating results declined due to a $190 million non-cash impairment charge related to an indefinite-lived tradename, higher advertising and promotion costs, and additional amortization expenses.

In the L&D segment, net sales increased 3.3% in the third quarter, driven by growth in the Baby business, partially offset by a decline in the Writing business. Operating income improved significantly, from a loss of $127 million to a gain of $75 million, primarily due to gross productivity, restructuring savings, and lower impairment charges.

The Outdoor and Recreation segment experienced a 20.8% decrease in net sales for the third quarter, reflecting soft global demand and distribution losses. Operating loss improved from $42 million to $23 million, largely due to the absence of a $22 million impairment charge recorded in the prior year.

Table 2: Segment Operating Results

Segment	Q3 2024 Net Sales	Q3 2023 Net Sales	$ Change	% Change	Q3 2024 Operating Income (Loss)	Q3 2023 Operating Income (Loss)	$ Change
H&CS	$1,047	$1,123	$(76)	(6.8)%	$(94)	$64	$(158)
L&D	$717	$694	$23	3.3%	$75	$(127)	$202
Outdoor and Recreation	$183	$231	$(48)	(20.8)%	$(23)	$(42)	$19

Liquidity and Capital Resources

Newell Brands believes its cash generating capability, borrowing capacity, and available cash and cash equivalents provide adequate liquidity to fund its operations, support growth initiatives, and execute its business plans. At September 30, 2024, the company had $494 million in cash and cash equivalents, of which $403 million was held by non-U.S. subsidiaries.

Cash provided by operating activities was $346 million for the nine months ended September 30, 2024, a decrease from $679 million in the prior-year period. This was primarily due to changes in working capital, including an increase in inventory compared to a significant decrease in the prior year, as well as higher incentive compensation payments.

The company has a $1.0 billion senior unsecured revolving credit facility that matures in August 2027. As of September 30, 2024, the company had $170 million of outstanding borrowings under the facility, with $801 million of net availability.

Strategic Initiatives

Newell Brands is implementing a new strategic plan focused on driving improvements in its front-end capabilities, such as consumer understanding, brand management, and go-to-market execution. The company is also disproportionately investing in its largest and most profitable brands, fastest-growing channels, and key geographies, while leveraging its scale to achieve cost savings and fuel reinvestment.

To support this strategy, the company has initiated several restructuring and cost-savings programs, including:

1. Project Ovid: A multi-year, customer-centric supply chain initiative to transform the company’s go-to-market capabilities in the U.S., improve customer service levels, and drive operational efficiencies.

2. Project Phoenix: A restructuring and savings initiative intended to strengthen the company by reducing complexity, streamlining the operating model, and driving operational efficiencies.

3. Network Optimization Project: A restructuring and cost-savings initiative to simplify and streamline the North American distribution network, improve the cost structure, and maintain focus on customer and consumer fulfillment.

4. Realignment Plan: An organizational realignment to strengthen the company’s front-end commercial capabilities, improve accountability, unlock operational efficiencies and cost savings, reduce complexity, and free up funds for reinvestment.

These initiatives are expected to result in significant restructuring and restructuring-related charges over the next few years as the company transforms its operations.

Outlook and Risks

Newell Brands continues to face a challenging macroeconomic environment, including soft global demand, retailer inventory rebalancing, and significant inflationary pressures. The company has taken various actions to mitigate the impact of these conditions, such as securing selective pricing increases, accelerating productivity initiatives, optimizing advertising and promotion expenses, and adjusting demand forecasts and supply plans.

However, the duration and severity of these macroeconomic trends remain highly uncertain and could continue to negatively impact the company’s operating results, cash flows, and financial condition. Additionally, the company faces risks related to its substantial indebtedness, supply chain and operational disruptions, competition, major retailer bargaining power, and the potential inability to attract and retain key employees.

To address these challenges and position the company for long-term success, Newell Brands is focused on executing its strategic initiatives, improving its front-end capabilities, and transitioning to a high-performance organization. While the path forward may be challenging, the company remains optimistic about its ability to navigate the current environment and deliver sustainable growth over time.