FBIN - Earnings call 4 2023 | Fortune Brands Innovations, Inc.

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Operator

Good afternoon. My name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs.

You may begin the conference call.

Leigh Avsec

welcome Year Fortune Webcast. XXXX and Quarter Innovations everyone, Full and Earnings afternoon, to Brands the Fourth Good Call and everyone chance issued a has the Hopefully, release earnings to earlier. review had replay The earnings can found fbin.com. the in this website, of section our this be of of Investor release call webcast audio and current subject are either cause differ that question-and-answer remarks from prepared or are the associated remind and I statements market make risks may those our want filings certain risks everyone outlook to uncertainties that various on in to actual we are expectations based and on anticipated. These session, forward-looking the the our the and call today, results materially SEC. detailed with to in currently in to except forward-looking The or update company does as be law. revise statements, not by required obligation any may any undertake references income, Any our charges cash specified. unless per flow focus share on otherwise today's earnings and a or EBITDA, on call non-GAAP before will basis results operating on margin, gains to Please visit our website for reconciliations.

the on Nick Chief Executive and call are me Joining Chief our Officer. Dave Financial Fink, Officer; Barry, our today

we allowed Following remarks, questions. have prepared time some to our address

I Nick. will call Nick? turn now to the over

Nicholas Fink

and everyone today. to thank Leigh, for us joining you, Thank you

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to will Dave. over I turn call the now

David Barry

Nick. Thanks,

gains focus otherwise reflect unless performance. As a All results comparisons the against made on my year, will and comments last business reminder, will best period ongoing be charges before to noted. same

results Nick As strong teams a delivered highlighted, and free cash and executed margin flow market. amidst well solid sales our performance and challenging

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growth quarter by fiscal items and was extra in EPS was cash prior approximately $XXX Cabinets impacted separation flow rate million. to period the year-over-year Our onetime the Fourth free XXXX. week related

X%, $X.X XXrd organic the and sales down week billion, down full sales year, were excluding FX. For X% were the and

million. $XXX Consolidated company XX.X%. operating operating income Total was was margin

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and deliver executing our solid focused channel innovation However, to and results. on in strength key strategies our is brands, leveraging team

to may are a and long-term trough XXXX, starting on remain As highly outperformance. we we signs we that see be enter focused demand reaching

We remain and in to are drive opportunities accelerated progress continuing Fortune and focusing Brands of ability deploy generating towards to previously while immediate pursuing on committed on cash the focused margins make while in to to expanding capital to growth. ways. targets I impactful our above-market those effective communicated growth, continue confident am we'll our our long-term

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larger we new the the returns-focused $XXX continued R&R $XXX first investment softness forward, full Operating Looking million of are including there the results. generating was with Consistent margin operating part fourth income single-family growth. Water for income construction are million. parts showing was our are into our expect certain investments channel, brand XX.X% year Moen which full XXXX, and Innovations for for of strategy, of quarter. in our signs was the XX.X% although the Operating quarter year. market,

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year. quarter decline consumer single soft The in China remains XXXX. and as new the starts though sales to home sales the the delayed and declined market accelerated, high Chinese projects digits And of throughout cautious. continue Chinese remains completion fourth the full for

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FX. were X% Fourth million, X% for week were to down of impact when the quarter XXrd the $XXX Turning net adjusting Outdoors. and sales and down

were XX% XXrd the or and full down billion year, for FX. $X.X and sales down when week XX% adjusted impact For the were

improved sales XXXX. versus throughout prior sequentially our year Importantly, the

brands, $XXX For Recent We weaker our down $XX and income during tailwind our attractive Outdoor low on partially strong Doors, the Innovations retail POS. softness growth. Therma-Tru, indicates segment Operating sales a in should growth quarter of and inventory to in half single for offset was see was Larson our inefficiencies most were million, the mid-single channel wholesale by construction as single-digit category. for data full be the was first Outdoors which profitable our R&R sales that reflecting million construction, the XXXX. Decking quarter. quarter income margin growth focused new Segment for the XX.X% full the offset down products includes year reduction digits we sales operating operating and actions. serve high X%. Solar and remain were XX.X% new year. are the in quarter, this starting down in in single-family which digits was portions operating

quarter lower fourth our higher were XXXX basis net operating fourth quarter Importantly, margins on results points XX our sales. than

the were the up quarter quarter Finally, sales XXrd XX%. quarter segment the for well with Fourth $XXX when and in performed our year of up Security impact million, and organic X% the FX. in week of fourth adjusting sales

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this optimized increasingly to see we progress and forward, margin to growth business. in expect Looking continue

to balance sheet. Turning the

available cash is our reflecting quarter. year, We debt-to-EBITDA $X.X our commitment and fourth acquisition. billion in strong with on $XX to in following $XXX leverage including with the shares million revolver. the million of remains the the sheet full of debt our balance $XXX Our our purchased $X.XX million, full of finished billion We delever net midyear year X.Xx, net

to initiatives of $XXX cash our XXXX working reflects free million due lower our the and to of capital sheet. Our shrink balance our performance flow specific business

flow together. In is cash conditions. entire how demonstrates power solid and delivered Fortune teams working of continuing performance to and is increasingly organization We for prepared effectively newly aligned results this worked the and aligned is company proof our our any to of that including macro a XXXX organization Brands our into year the the in innovation, digital to outstanding summary, long-term position transform respond point best brand agile while to building organization Our to invest growth, an strategically transformation. investments

Fortune in outlined value sustained believe his remarks, uniquely creation. of deliver on to long-term our Nick ever and is As more Brands now positioned commitment that growth than we

to record a results to of outperformance. I have categories remain growth We have there by confident where those deliver where the ability are on proven focusing win. fully track our opportunities in we right and unique

turning backdrop. to on of details Before first XXXX, thoughts market the for me some the outlook our let provide

a our which best As consumed, estimate the trends our market of reflects reminder, effects. outlook due of to when our lag timing from products macro differ are may

global X% For X%, be and our and between expect completions be X%. the up China up with to we single-family expect X%. X% market between construction market mid-single XXXX, down up low down to and and U.S. new our be between Within single the digits. And to market housing X% products with flat be the we starts for digits market to forecast, U.S. for to this X%. products X% to down down R&R flat U.S.

at first market our the half midpoint remains year in the below lower as of We the end our full expect range R&R the of of to estimate. the year be

evolves, As X.X% X% up to performance, continue as and up those on guidance expect market Based we net be our full update to warranted. our X.X% as if trends we'll to sales to net down we year with sales assumptions, organic the year will X%. well monitor

which points XXX improvement. margin of implies We basis expect XX.X%, the of between operating margins and midpoint XX.X%

expected fixed initiatives, by We improvement leverage incremental and partially expect productivity be around cost XX%. internal cost. Margin offset is driven operating to price favorable investments, of favorable leverage by

We expect to to our improvement. expect EPS Based the and of each represents the which equally $X.XX, good results. expansion margin roughly XX% our assumptions, within $X.XX XXXX a delivering to full on this versus to range of these item have sight of we contribute increase line midpoint year

it Now, overall speak as for guidance. each our our outlook to let relates to me segment

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margins with XX.X% net segment expect up net to XX% to to up between and XX.X%. margins and X% operating net segment flat XX.X%. be XX% and and X%, between to between We Security operating sales sales XX% XX.X%. organic with up XX.X% Outdoor margins X%, sales operating

which net free cash free We XXX% including expect around $XXX million, cash of of million. around around expenditures XXXX income implies of flow capital flow of $XXX conversion

investment authorization, priorities. Consistent following approved and share an March with repurchase ultimately X. and our replace repurchases remain share $XXX confidence this to our Today, our million new record, to our the business long-term expires and new organic Board our in allocation X-year opportunistic we strength a shareholders. dividend, track authorization of announced authorization our for current paying signals attractive M&A which This top that driving the our value continued commitment

making journey in market with cash. we XXXX discussed, our acceleration for by As market and margin confident the our our and and We long-term the are long-term the best going more into returns of both while positioned for on of growth focused opportunities well progress aligned ability growth. organization, to outperform focusing remain market on to as fundamentals parts a the those generating when

Leigh. I back Thank call will you. the to pass now

Leigh Avsec

Dave. That Thanks, remarks. concludes our prepared

number of questions. I a the reenter ask initial the limited like questions and to you question, a ask number will queue the your session. then a the question-and-answer be limit taking of begin begin will operator that to who there now I will may to to to questions. back you would now two We ask Since call turn additional

Operator

Susan is Maklari from Goldman [Operator Sachs. first Instructions] with question Our

Susan Maklari

talk had coming with Thank lot you. congrats you're behind having obviously that year. a connected and that, How comments way products business potentially year, of you the together? the in about that? and the think Good about one on focus a the My growing question, can a come there bit mentioned your the the things core first spin investments is is and the good afternoon, Nick, acquisitions opportunity strategically, And a of cabinet, bit you thinking this Can that the into of a in more accelerating on you everyone, there. in initiative. you

Nicholas Fink

Yes, things separate And and two those happy both interconnected. are to.

of talk I we much made you the share margin of our team of our the the serve And cetera. you we is how improvement. it right? with remarks drive pretty the core time all has core just et start DNA we gained brand, if how mean and them I'll But just have of imprinted those healthy, think to be channels, So back them. about business core, a the the our period delivered over long to So if that customers, in brands

And that, we is therefore is about and certainly those fact actually just the in the about rocket really, margin keep building to continue have healthy. that to additional improvement that a healthy but It are really businesses for reinvest to that to important, very, very businesses us, lot also dollars about because it the it combination bottom. fuel isn't is

And like core, that. in basis, a strides year, making we even some significant starting even strong brand results though strong has consideration, really that across past of it portfolio, so in continue top of the brand the brand the like to in great Moen 'XX, invest brand, awareness, growing spot growing in is even the from off investment off

really is Investing The in healthy. pipeline really, innovation.

in remains But very in also advantages it's just fact, it XX% We itself. product to investing channel customers. new on and the our healthy serving And all is our a innovation our not XX% sales healthy sales. ratio, driving not channel, which for then to target you continue is helping ratio tells core on and because our a

growth the products a really work that's connected really is we our over we August drive can is the combining categories though, really look the through of innovation, what we really in as that ] across and create time Yale things. And one so innovative taking of of this [indiscernible] is material. And is doesn't see younger very that's rate things What's stride years we an core attractive it did that. rate start company. Leveraging symbiosis business, home to the found both a brand. whole to excited the with leading figure are in to Consumers compounding buying is their core to like what over business. the core and like longer organic that term at first you while in them really team today CAGR, as then tech really and continued whole drive connected digital the They're CAGR important, back organic this historical are very growth before so to a know-how, the looking be time the historic our into the that come connected future a why because looking those from of a bold and the we're at off become creating for through X%, than invest starts together And we resonates above compounding that. perspective, type longer lot tick scale, growth as which that to it the really into And then because And opportunity brands, big to make things smaller as which incremental we've brands. particularly consumers between forward about will supercharge for [

it it advertised. there. so out well not they brands, that press, for They're or they're it of resonates the seeing seeing in whether And back They're and health. into really seeing an be consumer really, connected may immediate

very, well things together. we of those kind So very working

Susan Maklari

then but color. turning today. bit, health characterize great on thoughts And any a how consumer would That's the Okay. you the perhaps of

You in talked come across points R&R activity coming to? this a through half you potential could you to in to different see see you And are the do the how year. think of the and do lift exposed that think it it What products takes about price that back together?

Nicholas Fink

Yes.

now I about it thing. wouldn't we're a which where little As bad a be bit point consumer, might we to a think think to normal, back the coming be

and pre-COVID we as figure XX%. the you resiliency back product things for guys data, to sort -- a consumer a of think think and of really was digest searches looking had data, bunch last obviously which continue pulled the I all been as years. ourselves versus or some the for home mean, since of our XXXX they've across all We're renovation intent be I of averages purchase of as about at long-term seeing lot look to over that above this. But categories. few is step the consumer, at to to CAGR surprised up like at But I the for just much So we've why firstly,

supply the now, you have stock on of equity -- course, aged I And backdrop. then, you the of housing so and just $XX [indiscernible] underbilled low fundamentals, very very trillion and all top that, the so and think, of in have that home

that I rates was either a bit to 'XX there's to to we think that renovate a point little and home I now about think wanting when think I through that new as some where pressure noise there back lot wanting do cause start or reconsider. And in consumers of prices, coming hopefully, saw the you and home of of we're underlying to a turn. But step data.

last the the lower for a exactly of growth, term, did particular, was weeks of us being to of positive. I that So at first cautious [indiscernible]. when. our consumer year, accelerating cold resilient which coming we to an over this focus returns improvement we're snap looking couple home and and it's that about absolutely the start sequential a it's had data on is hard is part in we to see But year long to through through ago. the all as expect think We We're going this with points call that

David Barry

in our pre-pandemic and In improvement from were This behind still of X.XX%, shortly housing bit we little what's a the around where a which after guidance. an assumes between mortgage is fixed-rate base I'd color affordability X.X% just case, of is Dave. our challenging add XXXX, pandemic. but XX-year over embedded

XX to incremental what roughly of points Our if modeled equates can interest from we growth rates to to a dropped our for closer full And what see basis teams XX rates point in year X%, business a basis. move closer have basis on X.X%.

with this guide improved we and we've what the today XXXX, some year out So the the with tailwinds beyond and demand see of built affordability throughout around expecting. point, if we're will this and next of agile coming plan what the remain team

Operator

Patterson with Our next Wolfe is Research. question Truman from

Truman Patterson

some of to claw some there. to pretty as in back centers there's aggressively trying of years just well an kind update trying of I'm past builders. been some negotiations as on about couple get vendors, home comments question, general First for the pricing the over

products haven't less if product, a defensive, segmentation that be If your brand a will? bit any what to might you changes, more seen you susceptible all any little makes And maintaining bit price? pricing

Nicholas Fink

returned some about strategy give a just earlier, XXXX think Sure. Dave step year relationships, small I'll Truman, a may if very normal. that as brands some to innovation invest to and broader year our channel interactions building think fundamental add fortunately, we're incremental pricing second. And generally for you hoping of in color. But comes price kind the more happy. as and how and investment brand bit are and we're these best our taking to things perspective then about in our I of ability I'll in And little fairly some and categories back our in we even said but consistent seeing out. price and in

we And a here up the customers. reinvest it and the allows the in of critical. see keeping because margin. our for and inflationary and you COVID, way take expectation we And life because period business is to business that of it way water even pricing all height low through were consumers leaders That's the pricing very to only do we think through, philosophy pricing fuel about the because both business like and the single-digit of that were us the big that, both way, manage a we able our is

not portfolio, Now in at level. you the as play particular, entry our across tend look we to

see contracting brands above like increasingly brands things private of could price premium. positive label. not share They that and All teams, seeing just of and with interactions right, sign the not premium of we're And a data really of here is with that couple our we more some interacting and some in of up. points weeks some our ago are below, which we our with are should

The our consumer, other say category as in heavily of would analytics the understand leveraging set. I data done Fortune is that the part the And thing tool to the Brands shelf. to understand responsive management invested and and we've that really category understand

adjustments understanding work management actually pocket discussion some next. win are. And really our make successful for price sometimes go go the by know And with that customers from it them such share in partners. changed things our of way margin can up they we that a generate win-win it's more the been when approach. It to to way consumers it's together about a that because us one delighting to into is and those we the and much but and moving is the and shelf is down, lose-lose of us a where allows going And super a from in as some it just about gross net velocity sensors to elasticities, home channel meeting kind big

pocket to do It's to to expect or in 'XX, opportunities So as discussions 'XX. look in we'll growth a going we I But we for pricing our continue net contributor another. can. for where see around or one price to be those

David Barry

sense to as And price drive and assess they discussed to promotions where last we implement quarter, and make Truman, we a continue repositions strategic return.

be years, return. we've So and that drive around past price a next repositions over few across management data, built business point, the really leveraging our category strategic capabilities our a the those

price our included you single-digit low positive single-digit also results look XXXX contribution guide low positive a a If contribution at price. XXXX, and in our includes from

to investments just and customers that normal As value the ultimately the Nick pricing our our incremental drive each we to innovation mentioned, brands of in consumer price by end and actually of year pre-pandemic day. to philosophy, the sit at back supported more

Truman Patterson

peak stranded us material us has you et levels. Perfect. raw looking expansion I'm as kind were can guide costs. main explanation. you gets incremental XX drivers talking potentially? the could chain about Thank there Okay. margin cost operating help potential pricing you improved that or back think to think you decent supply earlier, of Is help I'm at XXXX hoping takeout for some [ us Plumbing When your through of ] some But through cetera. continued from

sequentially. light driving a of kind op what's little in And came Just in asking I'm fourth that? margin bit quarter

I'm the just understand there. to So hoping rebound

David Barry

Yes.

we're confident XX%. not they And the to I we is quarter-on-quarter, feel think and around regarding XX.X%, at our they so trying view, we to expected year, around in XX% and which finish optimize be to quarter good and the our the year to where are in XX% path about water margin signaled our XX.X%. finished for

really initiatives are margin of As portion I prepared the highlighted my threefold. remarks, in our expansion

initiatives productivity our savings, distribution combined cost that organization. sourcing internal sourcing, have their savings. We'll driven of procurement by savings, favorable leverage. as indirect fixed these So strategic Think

to say, you of XXXX, margin. water half, first them. again, in those keeping then inventory. there our in from three reduced of business. it's is goal we some normal -- benefit would in with XX.X%. to XX%, be is impact And And of we favorable water. get the And than price/cost the the as to path I'd our there to XX% we water it to return -- a return As that of back as especially plus, did each a see headwinds theme, expect recall still P&L what This margins we normal as had then from a a bit long-term initiatives, volumes we

Operator

from with Barclays. Bouley is Matthew question Our next

Matthew Bouley

and cadence outlook the one First of on year. through growth kind the organic the maybe

sounds the the heard end of towards full your low the R&R below year think you is the year the kind I year range. that say like I half you're of thinking midpoint It guide. of full of be would first

midpoint given So seeing business, finer where kind on you what just specificity particularly couple a operating by below pieces. now? mean What right January? on point you business are a of And is the half. -- into first of any Love Outdoors to there's get then color into little that a the the

David Barry

Matt, that this with one. is Dave. I'll start

the X%, but gets We down it probably quarter year about half, X%, a in better second R&R down XXX around getting exited basis probably first first the think challenged the the versus by sequentially you guide, in U.S. expect to be the second little if by more X%, so So assumption. maybe mentioned, half market around first from we points or half half the we driven our with as X.X%, better bit R&R there. then

the would consistent around they'll in first be the digits, for total same up organic, X%, I of the digits. sales second and half to expectations think half. low would In up low organic And with growth we our half, sales expect sales X% pretty single total imply POS single first be then organic would with the X.X% to down which X%

which X or to seen data has So The what extreme BofA, past home down came We through. POS in it cold I'd retail of January Bank improvement year, mid-teens cold and the that up start down for actually is with e-commerce -- the the card been over amount. say our we've and slow. impacted the weeks a America similar credit data consistent that's published see

XX.X%, prior new do from and We activity in that X% improvement support year. an of construction inventory EPS So the for margin to basis The and overall levels. I'd $X.XX. to say have healthy for imply points operating first seeing demand quarter would to looking $X.XX expect margins last quarter, ahead which we're year. XXX expectations are of X% of segments the versus around of to remains demand margin steady parts improvement all XXX at channel that the sales growth XX% in

which expectations see feel feel to good about in we We order start channel putting then pretty that outdoors promising, sales reflect for which are about in good some rates up for we year their inventory January So the spring to well. and say specifically, I'd and The looks getting have the progress. And season, ready the a the outdoors. actually held channels spring.

Nicholas Fink

And Dave the just interesting. since add mentioned Dave, [indiscernible] to as weather

last X Flo for channels e-commerce our weeks. through uptake exceptional saw also We over the

it lot going base, it, and extent come lot seeing kind between of a there's will saw like that. do homes a of time of and some further correlation the to it did to we to small damaged we're into leaks just through a but Now the build, freeze in e-commerce. We but take

very a point. it's interesting So

Matthew Bouley

is That Yes. Nick interesting. Dave. And Agreed.

and all Second one, appreciate That color. was I perfect. that

Just flow. cash a high-level question on

cycle cash you've has XXXX. right got before speaking whole the the about evolved were it in realignment. You're that kind of new kind organizational of conversion XXX% stands normalizing recent portfolio conversion forward a of What's sort where the to to to spin, as going Obviously, portfolio the acquisitions, the through you think way with to relative today?

David Barry

that. We business can extremely -- the conversion. flow by to think cash for at Yes, business, X this near free prior interestingly, evidenced now be will touch we're averaging cash And and the back almost generative. million I if year, And cash our I'm step look over drove this $XXX conversion on cash XXX%. as happy results years XXX% and of you

I 'XX post-COVID feel a swings management back got this us inventory the base. so kind in like -- or demand steady of challenges, the And supply to the through of chain end last result challenges,

then able you where we that if income capacity cash fulfill going XXX% initiatives deployment the think to deliver standpoint a in net effectively. goal So key quite around capital while and with I continuing XXXX, flow expenditure free in And flow, hard cash we're better, look from of what to did or needed. at forward, capital our to business invest conversion strategic working

the So and we've X.Xx in assets dividends to Water repurchased acquired $XXX business down and million. million from paid about We million business. Outdoors ABLOY, was deleveraging closed and of $XXX $XXX capacity $XXX ASSA the to million We've CapEx, EBITDA. on invested our of about $XXX shares about of that debt for net million in while

to point really we that continue the XXXX. And cash good of look proof organization and think then so it driving and us into aligned effectively, forward a deploying going I

Operator

Our next is Phil question from Ng Jefferies. with

Philip Ng

flattish for quarter margins for of to from year. the as margin had well as you're business But quite XQ kind Security strong guiding The a a standpoint full XXXX.

if So step-up just be fourth why well. very one-offs in because trying there in come had a I'm bigger was seems any gauge of ASSA along to integration and to profitability perhaps the just the quarter

Nicholas Fink

great And minute can feeling security to from grower quite a and and give the want move really Why what something progress generate drive we progress. around that team Dave historically and exciting that about it a a margin can path. to executed business it healthy philosophy, we invest, [ of you was that on again, this some into can fabulously perspectives more back has down. margins growth ] top so GDP bit the the good Yes. take as here I don't the break we're question. and line is But business sort a Phil, just security

we're And now. we're there, that really seeing so progress and

to out what very and I it for feel break we to progress, it piece over that And do this great on acquisition to. you'll the hand you organic made path is the Dave, want we now so and much between just business the before it's

David Barry

cetera. I'd And the the we'll Yale in we And we're we're of high in as quarter-to-quarter, and a generation August business, know, say half on deliver answer, absorbing expect expand that business, and Phil, timing the et in continue are margins margin, then load-ins, to and to -- margin year on fluctuate XXXX. just the a going bit a organic customer teens based to them simple investment you

expect margin we half so like acquisition high of single more And comping their the the first is in a we're digit.

that about forward. is excited some well. going the So with Security wins that's But business the accelerating, overall performing the mentioned into August seeing really dilution and and wins, retail where Yale come prepared business we you're in the base accelerating We're segment. as online remarks, some

Nicholas Fink

And double-digit add on comparable margins for the then there investing contribution just I'll to is. our that with conversion [indiscernible] really just and growth the portfolio digital business,

Philip Ng

that Certainly in stuff the Okay. of price you terms we that but through should talking Any and down? a to favorable calm -- normal about impact spread, as in playing How are about of And of stuff back Has kind Super. lot things. that. about how sorry... And And flow of to do importing then, out? inflation of I some like inflation the guys of is we back us of think nature? supply that how business chain well were to on guess, appreciate well? a components. started Sea you think Dave, as then I Red cost should expecting news and components terms side talk

Nicholas Fink

Yes.

Canal David I'll and then start lost turn the Obviously, bit talk of kind things I'll of and not on hand-in-hand. a to us Red working Sea sort and inflation. of two the the So those there about impacts Panama the

order to to great done customers, more we year we our it disruption have that ensure more don't to Red put which is have that off Panama will seem for maintain customers. We business, but preferable ensure That take the year to service Sea, us have alliance work But which always of customer levels. onetime don't service measures, we we has challenging. service allows other or very Our we for in protect capital been this job do be expense It that improving disruptions obviously find does absorb we to because mean service think feel Canal, levels. that will news good put may expense to to somewhat a with the protective to in to the team our the capital may to that. from work this perspective protect bit a has the that's

David Barry

And deflation. then overall, Phil, on inflation,

looking So -- XXXX, actually with year we net the starting the P&L. with inflation finished in

into account by materials labor freight If indirect inflation. with continued having you and offset slight take and deflation

deflation on capacity. and inflation some pressure and forward, as balance that off going seeing sheet we freight come and indirect with into water trend P&L. shortage in on on both with restrictions Panama do we mentioned, will of like and on see looking labor But what's the above from again, the Now Canal have areas Middle through East Nick the things

X% is our over XXXX, and inputs costs all we base, if overall for less looking COGS that $X.X than deflation characterize roughly of expect would the you but of think net that would base. at I So when billion,

Operator

is next from question with UBS. John Our Lovallo

John Lovallo

repo the million the top share on $XXX is which new one is million. of $XXX first on The authorization,

Just $XXX curious if million. million But the about go you're to how you're you in doing sort context 'XX, of of last year. $XXX you that back thinking did

I $XXX million think XXXX. did in you

list? where aggressive repos capital do how priority guys fit you allocation be? kind And the could of So within

Nicholas Fink

John, great question.

much to, addition in other million $XXX that first. one but So that expires

to returns-focused million how foremost, first done do returns. are then sort play run go in our always, opportunities. authorize you a time, now our a to We out, share most I surest track model more really for if Those at $XXX the perspective, it we of forward look well. And dislocations and be has really, we've, opportunistically from the plans. so has And our and repurchases or reflects mean against in priority our really own highest value. to record been will tended until organic over look it's and own

share then XX-XX out is repurchase tended interestingly, acquisition the long over opportunities the work between And just to of it way run. kind and

acquisitions, with returns we Now very also remain focused.

we will look repurchase plenty preferable. we and are there capacity, may dislocations, on don't if times itself. where feel comfortable are is those of share to nice be those I things pass But so There speaks some think And might continue our for a there. be we'll the when take there opportunistically. that track returns And record are

there. be will We

David Barry

Yes, share I an look of was -- at you good think had a if acquisition you example, as repurchases. that John, we nice fewer if XXXX, size,

interplay not, we back if -- what -- opportunistically it So that is really can right, M&A? shares. attractive buy accretive there between is And

we'll deploy think as And other effectively, delevered lever as remains that it we've it we us flow opportunity long do. to our we And strong The acquisition ratio. it expected continue ASSA will, faster continued we watch and is following to in than as leverage gives path our the delever further cash to XXXX.

John Lovallo

you But on magnitude production the And sort of is, lapping. know most be then the of recovering are of phenomenon? will that the of helpful. all this each can That's the of $XX you anticipate just segment? number remind reversal, impact that. us half I whatever a million of impact you by guys don't And first

David Barry

Yes.

off supply our just a pulled in and of started high of if 'XX right, into and extremely coming chain to 'XX, we're Sales slow 'XX. So it then half second -- XXXX with about back put sales. think production to early context, late into you hard we year

XXXX. we but plan production in we're level at sales, to balanced Our has XXXX that were more that not

in fully not 'XX. we're P&L why that's overhang the So we recovering in that the experienced

between at any large year the the favorable you big towards Outdoors, a XX-XX. yes, not probably ramps we're as we're is And Water line if bit absorption through timing production to have Water in you're producing and more Outdoors, these as think will quarter. X bit in it building demand. in recover with And split, -- going split it, than I a look more it maybe of the

Operator

from with Associates. Zelman Our next Baumgarten Adam & question is

Adam Baumgarten

to your comment troughing. demand around back going Just potentially

think some I think that weather in in about there. sequential I business? But know more of there some anything the out optimism we you're indicators. you a the talked is a confidence bit the And lot maybe seeing cited of macro you're areas we're throughout year. gives given a of I close more to seeing the that [indiscernible]? side But January bottom improvement

Nicholas Fink

I'd a longer data longer, than it's -- Yes. X of I when more more say series mean, weeks sort I like the say item. of

this is of consistent we is data lower since way in we mean like we data things are [indiscernible] look snowblowers hard the here up. look were it look then ours, improvement, where the that was top the well, -- I with the temperature at just in just at sequential like SKUs. when data and coldest to So that mean, year read very shovels January I'd a region time things we that and The say you that, drivers, at XXXX. On it through. we've Dave referenced given look that. I volume we at of search purchasing sequential anyway, throw and data,

towards series so few more stuff series, a we And see think that. it point we'll definitively weeks in I would can the longer but shorter need before

Adam Baumgarten

it. the and good from that shift about long-term the the in a XXXX what sense. is year. just maybe Okay. given you're thinking a Makes sales just perspective, last on And then portfolio SG&A, percentage Got over how of in

David Barry

lot driving of Adam, Still, a Yes. transformation.

plan seeing investments pacing incremental And investments. pace we margin contemplated those that the before some we gave, the so the we say investments through line have XXXX, so in margin within we're appreciation make those them guide but and team through a built seeing top and be you'll that come them around to come I'd see thoughtful the are

our quartile back we to making can be the as as investments and we're the of the and term, efficient We as transformation of in activities think goal non-core brands get drive as we as And I creating investments lot that to are then value today our efficient. is be branded performer. activities the in house in want some innovation transformation, innovation. aren't of invest in longer top continue to to a We to want a

goal. So long-term the that's

about some still knowing think that's I we'll you transformation. year would this it to how investments think make drive

Nicholas Fink

So line what of core historically. coming growth things you of core functions company expense. of actual done well the over time, corporate don't look of portion the to and referred transformation advantage at like but growth. to, in will CAGR then capabilities, this really brands quick the the guess example me, would have and that sort number growth of just drive probably really, from investment really the in And front continue have corporate I things our if below inflation of that Dave is rest have a I digital kind

Operator

Kim Our last ISI. with from Evercore is question Stephen

Stephen Kim

rates the to a ask X.X% question I incorporating opportunity Appreciate which The you was made -- rate assumption. that striking, Dave, I here. would you you But comment, to were for in I year pretty that, I to that thought add you the think believe basis a X.XX% mortgage mentioned only a mean points said basis than assume rates your lower came overall XX it XX full that you Could did probably color I points about are right? you like sales. mortgage dramatically lower scales XXX or something say, that let's it does low. -- seems first of if, assume of us points helpful. hear I that basis because can And that and very all, But think some your sort I analytics be stuff, you said more the just team little that. give a very you numbers would around ran

David Barry

Steve. Yes, to, happy

market looking So use environment back forecast we're team And we that's at rate time. to we data that our the relative that what have going sensitized create demand over the seeing. to the

didn't our U.S. around we outside the change demand. Now assumptions

it. of piece a be could that So

that single just a that points as ran math points in is than digits guide incremental basis XX U.S. But bit XX the a, down they a us Canada rate would basis So worse and growth. in high China, remains model be, be yes, in of the a think, I for

data more. is The use model our correlated We're probably where in the murky. refinement could rates, more think more data. definitely to some I new R&R construction is

based there's outside we're up. rate. to see coming growth just on that R&R harder is maybe picking not correlation directly So from That

Stephen Kim

you. Got

probably we'll that, take Well, fine. Okay. that's on over but the

that clarify, XXXX. points, from -- because to might have The guidance exclude I an week in second they the assume was extra under extra just an question, just any your I week impression impact you I

hotter Just this would what rate for for D&A? wanted to clarify you that. us a good kind be give sense ran quarter. D&A a Can the And we run then than also, of a little expected bit

David Barry

Yes. tired that. of No extra fiscal week. We're talking about

in running not So And close one I'd D&A, say for $XX have million. XXXX. to to happy then

Stephen Kim

quarter, obviously? Per you mean,

David Barry

quarter. Yes, Yes. per

Operator

call. joining for conference you Thank today's

may now disconnect. You

Fortune Brands Innovations (FBIN) 30 Jan 242023 Q4 Earnings call transcript