Newell Brands’ Turnaround Strategy Showing Progress

Newell Brands, a leading global consumer goods company, has been working on a multi-year turnaround plan to improve its financial performance. The company’s latest quarterly results show that its strategy is starting to yield tangible results, despite ongoing global challenges.

Overview of Financial Performance

For the three months ended March 31, 2025, Newell Brands reported net sales of $1.57 billion, a 5.3% decrease compared to the same period in the prior year. This decline was driven by soft global demand and net distribution losses, as well as the impact of business exits, primarily in the Home and Commercial Solutions (H&CS) segment. However, the company’s gross margin improved to 32.1% from 30.5% in the prior year period, thanks to gross productivity, pricing actions, and lower restructuring-related charges.

Operating income for the quarter was $21 million, up from $16 million in the same quarter of 2024. This improvement was due to benefits from gross productivity, savings from restructuring actions, and lower restructuring and restructuring-related charges, partially offset by higher advertising and promotion costs.

The company reported a net loss of $37 million, or $0.09 per diluted share, compared to a net loss of $9 million, or $0.02 per diluted share, in the prior-year period. The improved operating performance was offset by higher interest expense and a lower income tax benefit.

Segment Performance

Newell Brands has three operating segments: Home and Commercial Solutions (H&CS), Learning and Development (L&D), and Outdoor and Recreation (O&R).

Home and Commercial Solutions (H&CS): H&CS net sales decreased 9% due to soft demand across all businesses and net distribution losses. The segment reported an operating loss of $2 million, compared to operating income of $16 million in the prior-year period, primarily due to lower gross profit resulting from unfavorable fixed cost leverage and inflation, partially offset by gross productivity and lower restructuring and restructuring-related charges.

Learning and Development (L&D): L&D net sales increased 2%, driven by growth in the Baby business, partially offset by a decline in the Writing business. Operating income for the segment increased to $98 million, up from $94 million in the prior-year period, due to higher gross profit from the increased sales and gross productivity, partially offset by inflation and higher advertising and promotion costs.

Outdoor and Recreation (O&R): O&R net sales decreased 9%, as improvements in certain international markets were more than offset by declines in the U.S. due to distribution losses. The segment reported an operating loss of $5 million, compared to an $18 million operating loss in the prior-year period. The improvement was due to higher gross profit from gross productivity and favorable pricing, as well as lower restructuring-related charges and lower amortization of certain tradenames.

Liquidity and Capital Resources

Newell Brands’ $1.2 billion, 4.200% senior notes will be maturing on April 1, 2026. The company plans to take additional steps to increase its liquidity, including pursuing a refinancing of these notes prior to their maturity. The company believes it will be able to refinance the notes, but there is no assurance that such financing would be available on acceptable terms.

If the company is unable to refinance the 2026 Notes, it would need to undertake various actions, such as drawing down on its credit revolver, deferring or eliminating discretionary spending, reducing or eliminating future dividends, and liquidating certain assets. The company believes these actions, along with its cash generating capability and available cash and cash equivalents, would provide adequate liquidity to fund its operations and execute its business initiatives over the next twelve months.

At March 31, 2025, the company had cash and cash equivalents of approximately $233 million, of which $185 million was held by its non-U.S. subsidiaries. Cash used in operating activities was $213 million for the quarter, reflecting a decrease in factored accounts receivable and higher incentive compensation payments, partially offset by an increase in accounts payable and lower restructuring payments.

The company maintains a $1.0 billion senior secured revolving credit facility, which had $350 million of outstanding borrowings and $35 million of outstanding standby letters of credit at March 31, 2025, resulting in $485 million of net availability.

Strengths and Weaknesses

Strengths:

• Strong portfolio of well-known consumer brands, including Rubbermaid, Sharpie, Graco, and Yankee Candle
• Significant U.S. manufacturing presence, providing a competitive advantage in certain categories
• Centralized procurement team with the ability to source from over 50 countries
• Improving gross margin and operating income trends, indicating the turnaround strategy is gaining traction
• Liquidity position, with access to a $1.0 billion credit facility and available cash and cash equivalents

Weaknesses:

• Declining net sales due to soft global demand and net distribution losses
• Reliance on debt financing, with a $1.2 billion senior note maturing in 2026 that needs to be refinanced
• Exposure to macroeconomic and geopolitical volatility, including tariffs and inflation, which could impact the company’s costs and operations
• Ongoing restructuring and reorganization efforts, which may continue to result in charges and disrupt the business

Outlook and Future Prospects

Newell Brands is in the midst of a multi-year turnaround plan, which is starting to show tangible results. The company is focused on returning to profitable top-line growth, expanding margins, further deleveraging its balance sheet, driving operational excellence, and strengthening its high-performance culture.

Key priorities for 2025 include:

• Returning to profitable top-line growth through product and commercial innovation, distribution expansion, and international market penetration
• Expanding gross and operating margins, building on the significant gains achieved in 2024
• Further deleveraging the balance sheet and improving cash flow efficiency
• Driving operational excellence through complexity reduction, technology standardization, and SKU optimization
• Strengthening the company’s high-performance culture, emphasizing accountability, innovation, and inclusion

The company’s ability to successfully execute on these strategic imperatives and navigate the ongoing global challenges will be crucial in determining its long-term sustainable growth prospects. Investors will be closely watching the company’s progress in refinancing its 2026 Notes, as well as its efforts to improve liquidity, reduce costs, and drive profitability across its business segments.

Overall, Newell Brands’ turnaround strategy appears to be gaining traction, but the company still faces significant headwinds and risks that it will need to manage effectively in the coming years.