• Core Sales: Decreased by 2.1%, at the high end of guidance range.
• Normalized Gross Margin: Increased by 150 basis points to 32.5%.
• Normalized Operating Margin: Achieved 4.5%, above guidance range.
• Normalized Earnings Per Share: Recorded a loss of $0.01, $0.05 to $0.08 above guidance range.
• Net Interest Expense: $72 million, an increase of $2 million from prior year.
• Operating Cash Flow: Outflow of $213 million, compared to a positive $32 million in the prior year.
• Net Leverage Ratio: 5.3 times, improved from 5.6 times in Q1 2024.
• 2025 Financial Outlook: Net sales expected to decline 4% to 2%; normalized operating margin at 9% to 9.5%; normalized EPS at $0.70 to $0.76.
• Second Quarter 2025 Guidance: Net and core sales expected to decline 5% to 3%; operating margin between 10.4% and 10.8%; normalized EPS of $0.21 to $0.24.

• Warning! GuruFocus has detected 4 Warning Signs with NWL.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Newell Brands Inc (NASDAQ:NWL) reported Q1 results that were in line or ahead of expectations across all key financial metrics.
• The company achieved a 150 basis point increase in normalized gross margin, marking the seventh consecutive quarter of improvement.
• Newell Brands Inc (NASDAQ:NWL) has significantly reduced its dependency on China for sourcing, decreasing from 35% to 15% of total cost of goods sold.
• The company has invested nearly $2 billion in US manufacturing since 2017, enhancing its domestic production capabilities.
• Newell Brands Inc (NASDAQ:NWL) is actively pursuing new distribution opportunities in tariff-advantaged categories, with early wins in food storage and vacuum sealing bags.

Negative Points

• Core sales declined by 2.1% in Q1, although this was at the high end of guidance.
• The company faces potential challenges from a new 125% tariff on Chinese imports, particularly impacting the baby gear category.
• Newell Brands Inc (NASDAQ:NWL) has moderated its expectations for category growth, now anticipating a decline of 1% to 2% due to lower consumer confidence.
• Operating cash flow was negative $213 million in Q1, compared to a positive cash flow of $32 million in the prior year.
• The company is experiencing a dynamic and uncertain macroeconomic environment, which could impact future performance.

Q & A Highlights

Q: Can you explain the impact of retail destocking and the 125% China tariffs on your guidance? A: Christopher Peterson, President and CEO: We delivered core sales growth of -2.1% in Q1, which was at the high end of our guidance. We lowered our market growth assumption from flat to down 1%-2% due to consumer confidence and macroeconomic forecasts, despite not seeing a decline in consumption levels. Regarding tariffs, we've taken proactive actions to mitigate all except the 125% China tariff, which primarily affects our baby gear category. We've paused orders from China and have inventory to manage the short-term impact.

Q: Are you considering private label manufacturing for retailers to leverage your US capacity? A: Christopher Peterson, President and CEO: We are not set up for private label manufacturing. Instead, we are recommending retailers replace their private label products with our branded products, which are not subject to tariffs. For example, our blender plant in Mexico can supply the US market without tariffs, providing a competitive advantage over China-sourced products.

Q: How are you handling the potential long-term impact of the 125% China tariffs on your financials? A: Mark Erceg, CFO: The tariff effects would largely impact the second half of the year, with about 40% in Q3 and 60% in Q4. If the $0.10 impact on EPS materializes, it could reduce operating cash flow by $30 million. However, we have widened our cash flow range to $400-$500 million to accommodate this. We are optimistic about mitigating the impact further as the year progresses.

Q: Why are you maintaining guidance despite the challenging environment? A: Christopher Peterson, President and CEO: Over 90% of our business is not significantly impacted by tariffs, and we have a plan to offset the impact where it exists. We believe providing guidance is helpful to the market, and we feel confident about our position, especially given our competitive advantages in US manufacturing.

Q: What is your pricing strategy in response to tariffs, and how are you managing elasticity? A: Mark Erceg, CFO: We expect pricing net of elasticity to contribute 1-2 points to core sales growth. We've taken selective pricing actions, particularly in the baby gear category, to offset tariff impacts. We are also actively lobbying for tariff exemptions in this category.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.