FBHS - Earnings call transcript Q2 2022 | Fortune Brands Innovations, Inc.

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Operator

Good afternoon. My name is Diego and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands Second Quarter 2022 Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. now turn would to call I Mr. Instructions] like the to over [Operator Vice and of Barry, President Dave Senior Finance Investor Relations.

You conference call. our may begin

Dave Barry

results may not required or anticipated. detailed forward-looking as risks by are cause earnings per that will on charges cash Hallinan, Chief Nick those SEC. are results Executive and statements flow & share remind fbhs.com either current our on Chief operating references question-and-answer earlier. revise the website. has webcast from remarks of Officer; everyone can had law. focus company section income Good are to on uncertainties Fortune various chance today that of With based before the expectations statements to earnings want call currently actual to or unless to welcome Financial differ the Investors and earnings and outlook, except in update These any subject today's Pat and a our with make the release we and on Security the market obligation on release be and session call the a The otherwise our to basis in Home replay are associated forward-looking issued call certain everyone any materially I afternoon, call today to Any call filings or XXXX earnings and undertake second our prepared gains and found of Hopefully, in Officer. the the specified. margin, on or our to risks me webcast. Fink, this review in does quarter The our everyone Brands the audio

Nick. we've Following question. to call allowed to over I will our some now turn the prepared address remarks, time

Nick Fink

I and Fortune you busy everyone to certainly forward. I months like everyone of at associates beyond summer to who Dave, for continue call delivered enjoying our would of again, you, including results, thank and business is three a it's been quarter all Once on us teams and our hope above a Brands, move the Thank joining their work our personally to today. high-single and thank to strong year. into of power also Fortune the is traded EPS the testament continued pleased previously advantaged our and companies strength publicly class to growth of schedule. the brands I'm OI ahead that a team progressing channel into industry-leading versus work the of separate last to sales, capabilities. two partners These Brands announced rates our results, plan report digit to servicing our at our hard world to of

made have key of quarter. in expect and exceptional the draft our We progress with initial to SEC number later Form-XX of file the this a milestones

sales year labor and growth shipping higher together compares improved quarter realization. with price fueled X% availability very reflects against Our ago from a stimulus well second and

future planned Importantly line each create cost segment offset which as and digital expectations, margin transformational than included made our in the was with for our operating margin inflation. and price a actions growth operating year-over-year margin improvement Consolidated investments to quarter platform strategy in in more expansion.

market to slowing portfolio the value That increases any drivers of expectations. will the short-term interest will The targets. much industry, account. conditions. well inflation year and housing full homes rest are execute of said, of pace home manage of fundamental in drive results interest rate The We the with slowdown equity has that continue the favorable, positive demographics pricing XX fundamentals we prior under supported housing growing deliver We've consistent highs. value best-in-class periods home book, proactive performance, of quarterly will and housing levels period in of and the outlook our we of are rise new and as of millions agile the year supportive existing remain continue sellers higher period behavior of be rates. continue including that the long-term been flow softness mortgage of changing target. above and were to consumer taking measures short-term believe creation, market strong softness and remain margin U.S. adjustment sales, for market is by The in realign solid here are To we our or buyers and a cash of a intact. anticipation our the starting and to which in expect delivering we ensure and rapid any macro-driven rate levels to is financial remains consistent as pauses face before signs torrid see we see of market relatively demographics and remain Our prepared remain cooled we and at of on with to historic demand to we and response and

create another and to second how proof quarter knows team point is value this. of Our our

by As class I into on impressed publicly future world I'm mentioned earlier, separation companies. our progress traded made have our teams two the

As business increasingly evidenced independently. by is its to continued stand industry-leading performance well-positioned the Cabins

making look with result significant both that it companies opportunities the unfolds. as Importantly, in we're art our the progress great their to creation will I'm strategic and also for of the possible that forward for around fortunate confident I value new and in brands you work separation sharing stakeholders.

to on water the China. turn quarter seeing. of the innovations, businesses color down provide will to digits in what due mid-single each Beginning shutdowns the of some I Now in with we're the were impact sales COVID to

industry-leading resonate innovation with and our channel customers and positions. by up was Moen in and Excluding core the both levels strong Sales brands for driven a market House as digits, POS. inventory reduce facing continue have Rohl results of strength are of safety our destocking to China delivered service We to consumers. growth U.S. our continued sales of high were mid-single these as our period enabled single-digit stock

of past in have were margins actions the Our rates service proactive chain level. inflation pre-COVID we by and expense across the quarter improvement Total price offsetting cost been and driven years overcome the backlog management. of supply see nearly signs to hard teams board. XX% Water of operating nearing and working innovations and challenges are couple the

continue in to by Shifting and realization investments growth Therma-Tru any and market positioned business sales leading Security, strong growth. sales strategic to at Security digits driven continues portfolio double-digit engineered openings wholesale to driving high-single by price sales driven conversion wood. mid-single the grew share prioritize Outdoors in of from part remains digits, tempered Decking gain by entry sales commercial inventories. environment. well robust XX% by outperform up us were and to We business, grew volume which doors

base. team successfully Our to critical commercial broad-based technology security our diversify deliver continues mission to to into connected applications, product global customer safety leveraging

margin is customers. operating by working being Our Outdoors improved availability ESG year basis constraints strategy, about Security XXX consumers with well we supply portfolio very improved XX cost from safety an our and basis excited received chain are how prior and the commercial quarter. sequentially inflation first aligned and developing points and impacted and points is plus, labor versus and and as offset price security

continued more strong an efforts Order will actions tailwinds basis towards shifting margin Cabins, and volume chain and our our sales patterns offset our products completing to became sequentially more higher-end improve and the XX% for quarter labor operating and provide be delivered points continued actions right-size to our availability semi-custom appear our our basis business growth realized Cabinets P&L, remains and eased. cost teams XX capacity continue with and structure. to transformational and over to premium Builders our bands. fully versus market homes, year. our price the cost in month of pricing conditions business. points XXX environment stock growth positive labor than was our Finally, aggregate impacting exceptional backlogs and which supply prior operating remained acting are elevated up Within as as inflation Price across deliver. constraints remain and

Our transformational the capacity scalable with flexible reposition towards generate the work results. to and to market of continues efficient, heart the business

its continues Our business marketplace the Cabinets for to outperformance. win transformation position team in continued the and ongoing

as our ensure manage levels with to period leave right through move to softness. improved been we company, expected independent of working as We're suppliers and chain we past flow. market-leading quarters. value the own have service and future proactively stronger By never their capabilities, have team's the cash levels, channel a portfolio, public Fortune short-term a through partners inventory result our continue the Brands inventory footing closely working capital team to our exists the the they few of throughout leveraging a channel will As for success. positions Across prepares on of

Now market. add some housing on thoughts the I'd like additional to current

for need not. built to is said before millions discretionary been to while formation no trends houses change timing be more the household itself I've over the can in of in to years. fundamental coming As housing There has growth of order satisfy be the housing

aggressive the inflation to begun homes. and rate impact selling of high buying pace persistently interest and by However, Fed increases the has

coming a do meantime, to expect the new As that the materialize XXXX. builders I'm an pocket complete air into which the end or year starts of softness this some much towards were in our strength strong undertaken, product our R&R with process construction confident during the not end the month interest. sure in the pandemic. and sort the We portfolio of of remain as business. construction we in could In result, or the needed persistently continue towards

to to continues home interest high. equity price offsets and higher due While increase challenge sales, home do exist. its rates to home a appreciation from poses current all-time Capital affordability

have mortgage under majority fixed Additionally, of homeowners the rate a X%.

spending portfolio brands, our portfolio innovation, move remains Water of resiliency The consumers factors to differentiator do that alternatives, of We Secular not deliver upon growth strong will standards to by by supply positioned. significant higher is & which driven combined cost Outdoors industry-leading service versus deliver low is continued and expect quality proposition our private levels, R&R value both our across for trends which added homes further provides backed and are with brands propel which with provide Security promise. our Innovations best-in-class our a tailwinds label these engine. that well continued in and same innovation and we

optimizing our offering prior and position that efficiency of advancing our in total the our As share operational consumers difficult in flexible by innovation, will gain enables strong more slowdowns, a We what we've improvements service believe offering seen to capacity within and continue be brand, new margin through transformation any be manner will environment. to This appeals firepower and Brands. accelerates improve during attract product we improvement. environments. well strength even that And of cost our to Fortune increasingly performance Cabinets, structure customers the continues us in ongoing formula and and will that the market

and related generate to future accretion despite our inflation, for support were still chain expect perfect and maintaining expenses a results the scenario while above a making our line strategic Fortune the less adjusting full investments taking separation. doing our and thoughtful, and Brands to required now strong impressive incremental with committed company year long-term to quarterly growth. way margins actions margin into investments cash In We're environment, to and summary, margin important are to preserve performance We in measured critical year top what in be than to also and XXXX so goals recognize market and advantage supply improve drive we guidance We're XXXX. planning ongoing a the dedicated remain capabilities.

are and managing before of by areas including growth as slowdown, navigated share, and XXXX equipped proactively accelerating sustainable recently XXXX successfully to have through gaining shareholders opportunity. deliver and any challenging our environments in as for We well

fulfilling will while now greater call day products our the the turn people leader our we on Pat? like We to ESG through deliver responsibility make, purpose to Pat of commitment quarterly to the and millions and quality go do over the would performance in dreams as corporate every improve a for our home. I of of financial to detail. of in life being so maintaining

Pat Hallinan

Thanks, Nick.

ongoing a the charges focus comments majority on of income performance. reminder, order will and to my best gains in before segment As reflect

otherwise Additionally, all comparisons will noted. be year, unless last same made period against the

up was income X%. three our thoughts and on with $X.X second X%. was included margin Sales million, XX.X%, start quarter Total across overall quarter. X% were and and up consolidated me billion, EPS $XXX the margin for $X.XX operating segments. were quarter, up expansion operating company results year-over-year the Let all

points. and Price to service increased inflation chain sales Nick year-over-year high teams, the segments. constraints by demand government basis sequentially realize backlogs produced than our strong from each mentioned, stimulus quarter segment work incremental offset portfolio ago company unprecedented supply dedicated across XXX is and a single-digit our of through quarter, driven comping the year teams the impressive. Labor while Operating price. margin leading to and especially each and quarter more the in order our second a enabling As during cost improved delivering levels brands in growth actions by of eased and in

including drive journey, Additionally, we continue strategies, key future invest digital transformation to outperformance. behind our our which will

Looking And are consumer a have robust, rise and delivering the we impact, to for companies. rates keenly independent of the rapid committed in long-term what in forward, the term. interest public be on the too will healthy near are future will strong aware

remains ahead portfolio of we resilient of flow. maintain progression the deliver acting across much demand slowdown our While a today, potential strong margin are to and cash

the We against successfully any to experience have results have market slowdowns navigated before deliver and backdrop.

or Sales We're with me X%. results, down let segment more provide impact foreign $XX the exchange. color million $XXX Water Innovations. beginning excluding Now down on X% our were million, of

shutdowns China. localized by impacted was quarter second Coronavirus-related The in

strong House X% income $XXX realization Moen driven Rohl million, Operating million. both expense $X and the or in POS the proactive China price by for result of XX.X%, of U.S. was Excluding Operating up the management. margin was down growth better and X% was

we quarter with forward, expect a channel Looking associated recovery. be prior build down level continued and service to mid-single Water digits, low to China year due Innovation's in comping sales disruptions growth to inventory third

growth Water and to quarter. brands, the single-digit as lights We of portfolio collection water high strong. Innovations during continue gravitate Innovations Moen margins as the of leader in of to Artisan to the delivering House consumers. vibrant remain ever, as our and The home as continues Water in expect Rohl remains the future the the POS Consumers expansion enjoy resilient

with retail to sales Turning continue catch the up as destocking to completions sales within labor strong up to together Doors Sales XX%. to LARSON were the construction softening doors. & high as up and $XX franchise. or digits down start and growing our Therma-Tru strong grew entry channel help drive DIY shipping and period. in continues improved work were Outdoors the an material million, Single-family $XXX Therma-Tru digits toward by view million activity. promote Therma-Tru low-single new LARSON to builders a period, double-digits retail in composite Security. alternative availability were driven to efficiencies continue sales Decking future single performance.

advanced in sales to plans continue conversion in robust over wood our securities composite and Decking to in Therma-Tru drive the for been adjust up from We Decking quarter sales inventories the now monitor XX% were believe remain continue Commercial and for demand of materials we quarter. channel case capacity of a as will our accounting trends revenue long-term adoption will Security business. has accordingly. over mid-single digits grew the period. wholesale

was momentum and million, $XX or Security XX and year way XXXX. a was Our operating the benefit into income ago. XX.X%, operating connected Segment in Outdoors in now ESG & over versus significant will security points $XX XX% million segment future. margin a up basis products up

as million availability to chain grew Turning quarter. low-teens labor of and to Cabinets improve $XXX an cabinets double-digits or strong throughout grew $XXX XX%. the Cabinets. Sales increase make were order million, supply Stock and

backlogs price most positive volume elevated price quarter. in was also drove points. resilient sales Overall, remains the demand and across remain growth growth, While primarily

was the XX% for and $XX at this basis XX.X% $XX XX direction. to this representing MasterBrand income prepare leadership its Operating we level company, at quarter, to exciting the or margin It million. is was right an a lead high standalone As continues year. point million, last a Operating business higher with on for as quarter time heading margins public is execution improvement in operations track a time. second over all over business and in widen up execute the

accretive price back margins the goals. full long-term deliver as improvement year and to continuous support inflation progression to year during margin our offset of We and the half expect at further

balance Turning to the sheet.

strong. debt debt finished on Our balance $XXX net remains We total with of million, leverage to $XXX revolver. quarter cash sheet at EBITDA of liquidity net $X With of times. our the billion and X.X million

the our purchases total cash $XXX We efficient to purchased We quarter, committed first during the XXXX management. and which sheet remain of balance million brings to and half $XXX through effective also in million. stock

expenditures of to already recent future capital light Our central working are and capital the teams action. our bank and in manage acting expected

produce high slowing near-term the response home and Fed products. Continued for outcome. demand, expected including the the inflation from consumer A of

While cash now uncertainty margin maintain are journey deliver exists, we acting and our strong to flow.

so and challenging executed have teams to that now do deliver With provide in throughout guidance. Our environments the again we'll XXXX an to shareholder past update value. mind, I'll in our

new remains full R&R XXXX challenges backlogs unchanged. U.S. half and With offsetting strength Our U.S. R&R global in retail market and and outlook China year slowing construction DIY. first

market a of of to grow X.X% dynamic us, to remain outlook growth market environment With year-to-date and guidance OI expansion. X% to basis have half year committed more half global of continue full heading for strong year, expansion X% to U.S. Our X%. second year points channel margin we continued expected the at results to with inventory XXXX, still year net to X% target behind our reflect the XX of tightened growth remains to the into and X.X% sales the margin We expected we including beyond this approximately to achieving OI reductions. than

We $XX of growth segment the now includes sales net of million XX%. million. to growth separation XX% operating net with $XX costs around to account expect million. investments expense, for separation year per fully tax of XX.X% of XX.X%. up Outdoors EPS X% to around a down of costs to our count. approximately including XX%. with $XXX interest of to $X.XX On rate Cabinets expenses margins EPS of to operating $XXX tax we XXXX of margins outlook X% for $XXX with $XXX million., share around million rate XX.X% to following to to expense sales updated Security sales are and Innovations and operating Water assumptions. XX% incremental net with average updated shares of margins to XXXX XX% updating and Interest segment-by-segment the to XXXX XX% $X.XX about full basis, million and associated guidance $XXX growth XX% and Corporate transformation a up diluted of for million This share digital

we few companies strategic growth we operating cabinets margin in and New enable next Fortune the Brands optimize in lean will and continued as both investment expansion. for models SG&A to Over years, both deploy

and million rate to expect approximately conversion free a of XX% $XXX XXXX We flow and cash cash $XXX million XX%. anticipate between

cash we to adjust $XXX capital market of flow We focused growth. current proactively outlook intact. rate and first strong as a full the includes to continuing million remains contributed $XXX In free while to expenditures forecast our year enable summary, results have million conditions, of better of the our half anticipated on Our future investment reflect to than year managing quarterly positioned come. actively pursuing questions, stakeholders our our open of back any business attractive value margin Dave Long-term objectives. to Dave? supported call conditions fundamentals market well remain to we by prepared the for while years all the for the and I to line our pass for now remain portfolio our across will and are capture conclude through remarks demographics housing to

Dave Barry

Pat. our That quarter. concludes second Thanks, the on remarks prepared

open who you begin now for the a question. a limit questions begin the initial We question. to ask Since session. two can be queue to the that to turn number of Thank you you line then operator there taking may of will would re-enter now ask will a ask the over I you. and questions. I'll question, back your number question-and-answer to call to like additional limited please the Operator,

Operator

comes state Sachs. from question. our [Operator Please you. question Susan Instructions] And Thank Goldman your with Maklari first

Susan Maklari

actually that's that color around other afternoon, us can mentioned spin. you more schedule. is ahead give Thank bit Can update details that everyone. you just the how have a you. together us you that any on it's coming Good of moving and Nick, question first My you with?

Nick Fink

quarter's when from Susan talk announced about to you. it. I'd Sure, hear to call. last and good Happy we say,

granularity how answer, and tight, of group et began kept post and announcement so a really of execution small of the at Form-XX speed in the drafting was it, we audit we the it very, a that getting fast I'd our do very through through very scoping cetera., in worked we to benefit know mean on but this before with I confidence on like us the Here a an many and they from that this but really in say that just also team to to off the that it team is of the experience and corporate start. and exceptionally been we got no have surprises know

management pretty and years coupled quickly. think a it move that financials to us our allowed the good of with through has I systems processes and over lot of

we're together. not schedule quarter, this filing So and Form-XX which coming is ahead targeting the that's well of

the brand and that after. standpoint, now even And business standpoint, possible, in Cabinets business to energy that's certainly right strategy what excited building to I more what's unfolds. behind emerge fruit a that get has on they focus side, really the on can double things against can off we this what And are so on get and this initiatives and we're reaction and do the much and appreciated think from from we it's to a of really Brands and we've gives about focus down of more you flexible to on strong we that house. really time do start Fortune then the the our strategy starting now, more great. more really, get to let's simplification they that happening, bear that as new deliver. side further we'll And management, even process on see the down going art year, update of see system invest investors how just and them use And allow and believe agile been into the say, a the out our innovation coming that's look you a could tightly slowing and to really to more team leader ton able some these That capacity getting re-imagine to they wanted are we've delivery really, to really they in really their business focus a the as of of results that of really us going and is believe with I quarter towards you more that channel together about but focus I think last end to us as brand the and have innovation things and

by there. heading buy very which about the larger, so pace having are they And and we're are excited things at where in

Susan Maklari

Yeah.

That's to Okay. hear. great

As consumer that further is but a perhaps during gave, the clearly to I of follow-up, it been all you commentary consumer, a and the there a lot you could the how talk appreciate then reduced that shift changed of And you focus for, mentioned on the mix little steps the steps? what on a and how are executing there? saw today that where times macro or that watching we the you perhaps you're of to you're playbook determine couple future quarter in future state potential

Nick Fink

data been link has think I started, get and pull guess I really from across a enlightening consumer. sure into -- not at stare digital it. the whole happy about be I'm on of you, for talk going come its Hope lot surprisingly do I'd more couple years a transformation our last consumer good able the over we to more we've our of really is, start point headline we've start still this as resilient. Yeah. through the a been to and to portfolio data to data and

that call, all stimulus last said the with giant the last continued a along the As year dollars absent tracking we've quarter. POS I way seen on through

the the last that degree take we all way saw interesting. you're spend, any an positivity In the still inflection of fact, fact week, really seeing that In actually is wouldn't to one I bank, through week but upward.

you some so pockets see think softness strength forward, pockets and of I and Now, of waiting. some we as still can look we're

air to about do as if think going through we the new data from consumer I said off. unexpected builders materializes I sales a home in But certainly traffics as read that construction unfolds, gear ourselves and and prepared we the -- I think the an foot home in perspective. for remarks see pocket that say again, comes we're

and internally have then do healthy that. Really questions And resilient paranoia executing it's how think it's against how are I some is, we pretty prepare first the for the it? part, here. two-fold. So and your answer we manage business we in

before, we are at preparing expense you're 'XX this been we went or if of margin CapEx call really management, management, steps So XXXX already taking through and capacity look to in 'XX, ourselves and was through we've through detrimental QX management, XX%.

I think example of execute to piece when investment an the in I they in team choose still that's and that's and have the looking execute priorities. so the really can while air team internally through key preserving after confidence absolute how can the really go any pocket strategic well,

continue that the heart margins we On product it's and right the at and the whole at there, the to making really the to right product across have really continue and geared think the you've as the where where mean, coming market, using homes I sure externally over last facing we up have meet they portfolio piece, that's has our go of understanding the going into the millennials the there the portfolio seen we consumer, out and have really back and we play three years them portfolio meet strength level the of the and few started trade entry and saw it, do years, the to the so that's when move portfolio I there. in pretty insights to have kind set can dollars we we we in flexibility over and you last how going about even And under strength equity homes where the see that X%, this can meet robust at across the them amount then they couple look are. off we'll And meet of mortgages a real of of to product and home stretch so to margins perspective the saw in think float forward. them years, we the if consumer age going we're I to our out it continue to you from and there, think on that's some of

Susan Maklari

That's for you luck. everything, Thank and good Okay. color. great

Dave Barry

you. Thank

Nick Fink

Thank you.

Operator

ISI. Stephen Kim ahead. comes with question next Evercore Our go Please from

Stephen Kim

a talking the made points, in when end. you you're Thanks I kinds the you price of Yeah. various believe were very comment through high going the about much Cabinets business guys.

maybe being seem a they some to order, think curious, or the maybe maybe end, simply cabinets? price, or was at you at high-end it high dynamic I performance I'm by which to like stock I portfolio and maybe segments concerns the differentiated did weakness or May in were little more guess the macro impacted did bit a your see much different greater this little limited relative better. And across they other to across

Nick Fink

Cabinets little much give pretty that a continue the to other. some [indiscernible] could through just bit be one have I wish It's no, strength bit of it seems to it's Rohl unabated. and we real House saw through you and the way to quarter limited of Yeah. But advances a

of and that And our so, think hasn't on should we little a the in Cabinets forward, really, some a allow is that bit using side the more semi-custom machine we've as, they're the part I for the team value and gotten think because to better delivery, and drive going is lot side the limited there at of think rolls service getting spot in last in really (ph) been that help of a is was simplification business. The whole couple that the respite I now great to even it levels of Security years quality the work for service premium side, which business. to

Stephen Kim

I might how or severe don't that I but going exactly ball then with know of I earlier, or obviously "right the there also housing. to level strike we inventory materialize of buyer proactively to your whether Thanks curious, to across that look to this of have process, segments. little crystal think bit was anticipating not, I you on a How have going light And can your you're proactively may about you you in guess, be a That's manage this but hiccup different talk that's different inventory." managing that. for it management And might level a right mentioned Okay. be, on working helpful. the of the what in customers

managing to going If us insight you can that? give how into some you're be

Nick Fink

Yeah.

I'll foremost, you the seemed add. lens where is first vectors. the a we're right Pat it levels give some think I consumer through to of trying it's and may inventory But where think good some perspective, I a have on and have it's, color are. couple to of

ourselves problems think we hard the well -- last from taking were two customers years as serving of course so, ahead a step on the about our the competitive learned service through set. lot of we whereas were back a of And customers, as subsequently I we

customer's of a as inventory into good that spot. So got levels a result we've

safety I some start stock cross-industry, also down. see than think take you sooner permitted which to customers

a effect see bit you second in quarter. the of in of right that plumbing Now

of work those have we've sure we getting point try insights to need And try the so to in consumer not part we part customers use of Fortune to make and we do think sure way through generally, that inventory to share the that customers I category been are make successful make provide we reaction with as under been knee-jerk insights from they and to the capabilities the a of sale that. and at building aren't a we're to that to pretty we that them that and rational it with our to what management is as investments really work doing and sure Brands advantage, data out

to extent working match and is match we are The down, that going so pace other it come can piece get trying capital investments to they transparency, to our to accordingly. the to

consumer there'll in really But bit ability in safety out the Now long anticipate fair run seen that some expect to then in the vectors QX to and cetera., capacity, information with stocks. with into combined the help et amount again, people here, where a that. some and expense management share we this as be take where those help softness we come is are I manage more of I business customers think you've I think out to which close as couple quarter, see a stay a we last as going

Stephen Kim

very guys. Thanks Great. Okay. much

Nick Fink

Yeah. Sure.

Operator

Michael from Morgan. comes Thank JP go ahead. you. next with Please Rehaut our question And

Michael Rehaut

taking Thanks. Good for questions. afternoon. Thanks my

another First, I the inventory, to but wanted from back angle. actually just circle on

are just I both and in was Water up perhaps get X% and earlier a in so in mentioned think your ex-China POS Water XQ sales that other I'm was a you kind half? How on continued guidance any revenue the Innovations have within inventory a full in -- back you your of contemplating X% inventory sense year trying sorry, of an from up the on to had reductions also and impact if or XQ basis, standpoint incorporating segments. Innovations much and reduction

Pat Hallinan

headwind it in the partners, below to quarter. across in sales would growth for to probably And already. in for quarter was be ordering the and in did chains quarter, point partners longest to obviously, it channel us products in the see lines channel I supply Mike. people about tends with Yeah, and you, start the product we many of tell a this our POS

people of have interest on cost uncertainty can not of commodities future up the inventory and the do with of You has rates. their but gone inflation mind, the the only imagine with

in our market expected And least second be channel proactive of to so expect year for position consistent million have $XXX capital balance happening on a to traffic now. foot down will from traditional was be right the are and lack $XXX a for of be to is, half year By just year working that for doing as balance we're when dimension would start the a of would people what proactive head our the Nick script, right dynamic the referring thoughtful, but in that So construction the put time result next into I and and the you likely as sheet also of the for expected the point and be end at to we've throughout And new the capital it the of Stephen the we been are would going we expect to million and prepared to year. being is is working sheet order what appropriate with the the and we to perspective, half have of same and reduction. what that probably headwind inventory inventory. of second a is be to place backing partners saying proactive just year of balance of that that's of kind to maintain as this more levels or is compete we'll being dynamic on back it two in to our that's for share, back the half of

Michael Rehaut

it. No, helpful. that's Right. appreciate I

full we year gears Obviously, if the you how inventory there industry. believe is Secondly, from segment case, and that still that talked your towards of for big in in the some standpoint, on have you're last the for concerns you you to or expectation the of one about also shift just Wanted did health from capacity reduction the and XX% business know heard sales digits the quarter growth additions if high-single the also you about believe players this XX% have business growth of pricing talked that of around still guidance around given growth come thinking I is of raise X% a about decking. last that had thinking. I part some the quarter an in first year. to quarter. quarter, said growth plus you that's the

Nick Fink

full and a color. as with a say color some not may that in you would Pat time. out year, more may you bit jump come expectation I we off the some give I'll look but overall to So have

the strength And mid bit level, they're to inventory in seeing here, of still that's you're we that investments in I in I pretty completely mix, looking -- well accordingly. kind making that's the so I evenly impacted describing, we we're we'll hearing place say pretty that and think being we strength, full. it downstream here less committed making discussed some at think sure place think Yet spread watching the decking capacity some we're through the healthy both them a the commodity, we've this we've adds some But are time across other year. And capacity as we've the of you last long-term I really zone in other call pull adjust is pointed that that think also level, pointed if but what be around are out and capacity a think plan mindful the I where the the very seen so and set we to in plumbing high-teens should solid the to still and be are wholesale, will and to double-digit inventories it's appropriate by will I POS we're targeting. out. growth. been what growth. investments Hopefully, with there, see flexible so as quite

say is in I'd the and And the it's maybe you'd high-teens. and some strong be not pulling more very maybe wholesale add. it to so a still watching 'XXs as Pat, go. we're year we through mid But inventory anything in a

Pat Hallinan

in the quarter. and the up particularly of quarter a the performance The and in the be reduction offsetting that would the driving are is guidance line strong second security. guidance for product Those things in more of had driving excellent Yeah. sales things than that the and line and true product that the the as slight the segment decking commercial up are year a Therma-Tru doors expectation well. Therma-Tru

get to tailwind to that nice so you're So line builders trying compete and business. that's very to product marketplace completions seeing very for continues in continues resonate its and respective successfully that's It what are strongly. that done

Nick Fink

price total second at value consumers. Michael your a the to look And when huge basis, we've price. on part been either of committed to question achieve it's that on still of and value was able decking very or We're the to with project product you

going serving making that channel partners getting move is for right, And and our it into really, to get to market, getting much sure more going innovation forward. our it around paid really we we're the really, so focus as be well

Michael Rehaut

Great. Thank you so much.

Operator

question from Truman with Wolfe state Patterson comes next Please Our question. your Research.

Truman Patterson

'XX? guided maybe pricing on I'm you my us to quarter's inflation into viewing call, some of a I Good as down we give hoping then, color $XXX on And Pat us dynamic in as X% think how think and seen material just moving pricing everyone. potential freight raw tailwind help for inflation, last of come recently. costs you labor questions. Thanks can sit think that taking pseudo through we've and you're can brass million afternoon, I'm today. Hey. hoping you I about

Pat Hallinan

to Happy both. Yeah. comment on

It to the call, that had was was X% you inflation so, amounts like it's it's provided the $XXX that in carry about from XX% material last up last closer logistics of last prior of of XX% and COGS the think range year to correct. that inflation or I'd ticked year. a and I million, XX% we logistics certainly, roughly again So material to be COGS. $XXX year's you about of get point was million were dollar and will a probably say

XX% this of resins. from last new to predominantly ground hardwood about change freight have drivers in and XX% and quarter the quarter, been in the carry So XXXX

into of things for standpoint, unsurprisingly, inflation the 'XX inflect two probably of And next dilution that the continuous that are pricing across expect this improvement has and cost oil-related adds quarters that there. in the being XX% And it hardwoods. price or equation -- $XXX to board, another price from margin roughly million So labor year that. we a the the then the quarter to I'd the say did of probably fully a covering and to avoiding and and case high of be through single-digit price persist for year that

for phenomena of signs hit it brass, that year. it may expect those to copper obviously very into to months type part will XXXX six you're to somewhat an statements terms is to that down and will of dynamics copper, of mostly mostly referring early so of statements, It has our early financial been be financial year deflation show some would what this but the end material we our In about flow about of XX% recently. starting take next see

Truman Patterson

my Okay. plumbing like if And have it math like down been looks China might correctly XX% doing I'm XX%. to then,

Pat Hallinan

to XX%. Closer

Truman Patterson

XX%.

Pat Hallinan

quarter. a on XX% to Closer

Truman Patterson

an since should that's might think over to it plumbing of whole. any op business for that your industry that revenue margin the elevated 'XX guide how the you whether guide I for on there's primary the we in new last maintaining weighing your it's in decremental trying potentially real shifts soften operating decade as get about driver an plumbing downturn, I'm and plumbing then, margin margin. all just been in idea or well a But op are decremental been take a growth

Pat Hallinan

would all expect worse I that, that's playing it XX% right guidance innovations change driver was be of the very would would managing a you working It's updated If were really there and team, beat for no be decremental we proactive plumbing water to businesses, as you their is business. just We to out to the tell in not of be to to but dynamic the included the downturn that's year, probably China, No. down XX% be XX% primary be Group. as at guide a trying than stated, we going to the Water XX% our Innovations to Innovations it's but Water now, the down to margin quarter. in our

be that to is to our out then the driven. on one addition half FX are points expect quarter is a business to basis a security or probably I the think getting other destocking where the but area a you're XX it's forces point point it's in level consolidation basis Water about Innovations closer the that noting two we the And year. back our of playing in worth would

try ahead POS like, talking China. really you're plumbing uncertainty the digits, seeing something like across very quarter and just high-single you're you're destocking of to FX and partners talking robust of you're at seeing you most and of If look in channel seeing you're with wholesale get POS that business

to business Water healthy. China is a grow levels. that's is a going market, like So U.S. or at China above we very long Innovations is market term. the

they the much that with as For a much can us headwinds and -- new has offset It's China. have headwind a expense about market. innovate, and the because consumer, to great we the great the face a we done They've had market closer route we're team in job for in China. sooner it's market into place get product that management to as profitable us read to they've you sales

But dynamic strong Water really there growing we Innovations market China at changes navigate barrier we'll nothing operating part and the the with this of is China above into having not if like that least year. next is the of margins. through going So, year, a really business on and market

into that's [indiscernible]. we next what would So going expect year

Truman Patterson

I'm kind Okay. sorry. Pat, op Fortune clarity. for for the correct? XX% just of Brands, margin, decremental that's The new

Pat Hallinan

beat and speak decremental business for that certainly and is to margins to Dave be to attractive but assume very to aggressively do like going working stay, I Yeah, I'm he's have that this it his going we contribution margin. Banyard going manage also

Day, that all the maybe year. our So, faced we'll expect I'm part balance the that through managing but we this way be Investor talk the of would early on uncertainty to sure businesses more of I year, of next about

Nick Fink

structure a sort of worst-case proof scenarios in it's I'd in than what 'XX, question night answer and when to XXXX day point we I a different XXXX that and you of to of your the think your lessons of was which to you learned, XX flexible the earlier it business decremental QX if different in answer speed if far was 'XX mean were point respond is, absolutely, scenarios, the or than I the it more margins in saw margin is you’re was rebuilt is decremental times faster the then. to as had working, business part back at compare has and we yet way

it flexibility over to so the that able the we in both team's do and because bought structurally very time but be And because tool great, the so do to that very, different.

Truman Patterson

the for time. guys Thanks Perfect.

Nick Fink

Sure.

Operator

from Please And with John Lovallo question. next your Thank UBS. state you. comes our question

John Lovallo

Hey, guys. my taking Thank for question. you

has one where consumers trade lower that a end of, a really a been pricing we that product? approaching but been pivot lever for there date might hasn't spoken you've sense you that first solid point down of going you and The is obviously to kind the get start be

Nick Fink

seen great consumable in question. it's categories, mean, the certainly I John, it right. Yeah. you a

think that across hearing you premium trade if about, We're think going very, is might premium are consumables about categories luxury -- of and about, seen see that the very continue live to price yet research question fungible. and products to that consumers seeing of I to time and kind down consumers But off I are so portfolio have trade haven't we long are this be we haven't the and you're a view not. earlier question for it you to seeing they where We're portfolio. daily downs and the in these with strong. they're we long, move parts the

so in at substance innovation to to trade-down. point, mere least and compromise these and think consumers brand I are categories going I'm And on at invest choosing and over choose quality this the

more Now predictable more I is now to implied than that inflation or also is so it turned was moderate. starting out be months to XX and predictable it being

the and in And of not has and been I as consumer. in to this and been taking that time our taken net to it positive for that have rewarded been we've has the that's favor that of process, innovation consumer through We've we more think is we've favor price the consumer all rewarding and easier us that the net taken But equation so debt the had consumer. just we're mean an the price. a fact and going says take and now I price share that the they're share, with the in

we the we from measured in that about it committed we can return going that believe were and price completely be we've forward, So and to we'll here. the awarded but taken that build consumer

John Lovallo

channel the in actual the improvement how inventory availability? could versus Great. about in That's you helpful. much demand labor of think chain that And if supply do tonight you curious then, parse you've or is out moderating improvement talked

Nick Fink

have I some think start the latter. I'll But color. Yeah, more and may more Pat it's much

levels performance which higher much safety certainly having supply stocks. you're chain of people take So allows

of as think measure come then that's are I we're said, some seeing a having out Pat and it wholesalers. you

not take down that yet softness may of POS, think it seen come, in through, but right. necessarily inventory I anticipation we've

say, a talked to even we're our insights want category to about service be point at And a level. don't to you so don't customers hey, we have where bit little inventory That's work you also enough where to inventory management. using

are level there heavily so demand at service working that and But come not service now, actually be two-fold. channel is that an capital. we've can in until invested element careful a I the you're as officers high, out I seeing right would I slowdown. because think think just So

Pat Hallinan

No. what that go getting it in would I to perceive will uncertainty would feels people say direction. a as ahead like date concur. mostly I they of that certain

John Lovallo

you. Thank you. Got

Operator

you gentlemen, concludes and you. And our time have for that call. joining call. questions that's And we Thank all for conference today's ladies the Thank today.

You day. great may now disconnect. Have a

Fortune Brands Innovations (FBIN) 27 Jul 222022 Q2 Earnings call transcript