Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to Newell Brands' Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open up the call for your questions. [Operator Instructions].

As a reminder, today's conference call is being recorded. this available of ir.newellbrands.com. webcast live call at is A

to the Vice Tsinis, I turn over you Sofya begin. Ms. will now Relations. call Tsinis, Investor President may of

Sofya Tsinis

quarter everyone. Newell Good Welcome you. morning, Brands' Thank second earnings call. to

the our and Peterson, CFO. CEO; are our President Erceg, with today Mark On call Chris me and

you outcomes we and to and the forward-looking I Relations SEC making Investor factors Form affecting statements, undertake involve factors filings earnings risks the I'd Before that XX-K, to statements. the be refer in our we like of update our on begin, Web to materially, forward-looking course risk statements. will during Actual site cautionary language may release, other available results no available obligation for and and uncertainties. Form you we inform of a and differ XX-Q discussion today's call, forward-looking our further which

in to those We Please non-GAAP they will tables measures that to SEC. and financial to be investors, be accordance refer non-GAAP remarks should in can GAAP. measures. release normalized these non-GAAP non-GAAP Explanations as although not including also considered today's believe are to useful superior certain measures, presented furnished measures measures between recognize these and measures the to found earnings today's GAAP that of were available and reconciliations with the referred

over call Thank the now, to Chris. you. turn I'll And

Chris Peterson

Good Thank call. Sofya. morning, you, quarter to everyone, welcome second and our

of with line ahead in our on were or results metrics. quarter all projections Second key

spending pressured normalizing As and on expected, category destocking. consumer discretionary inventory trends, top products line constrained retailer by results were

working reduction. as we all were cash productivity expectations earnings made initiatives of per on margins, Operating and ahead flow share meaningful capital progress and well

an we met the quarter, results for improvement absolute expectations for significant our or our forward. going While basis, aspire exceeded on

corporate is We're to the not set forward to creation we deployed play with is capability companywide created us. where assessment why clarity line. also new of path very based straight about how win an ahead of a the a we work choices. business integrated recently a But will strategy on to opportunity value comprehensive be and and the excited That bringing this the that and recognize

priorities During we which our progressing XXXX five all are key first earnings fiscal nicely. laid for out call, quarter

just Let each say a few me them. regarding of words

an sizing of First, starting our forecasting with driven flow. by planning we operating largely supply Year-to-date, cash through right levels year-over-year $XXX have inventory and a processes. million, over improvement improved

behind go-to-market which recall our Second, Project sequentially productivity Ovid will ongoing program gross operations. you margin domestic Newell's transformed performance and improved fuel completely

record chain. savings We year on track the productivity a high across on supply for are

Third, efficiencies. streamlining Project in track to Phoenix program is its pre-tax upon simplifying scale, and complexity, leveraging deliver and to by The driving model operating $XXX operational and well, is strengthening pacing implementation. savings the full million is organization million on $XXX the reducing

was count, other to down SKU as the XXX,XXX less than numerous as reduction to underway. ago, with over end our five be by the Fourth, year, recently years of also which is actions complexity expected XX,XXX

supply a chain operating successfully across customers on Newell top four with centralized and and operating model segments, to have we Finally, three our are in geographies. one manufacturing with transitioned approach and most new and

by brands and from resources to that important financial choice top and foundation and disproportionate organizational an where is organizational improved drive It our to focus made operational our of much we to this play amount fully on that XX% our and XX a we we profits. choices, how XX our sales was of have represent just the to Once our were decision turned informed and to which about completed. assessment capability each top which countries, win made, attention

said in understanding, in That's innovation, and retail to brand facing we why countries. pivot we in strategy leading in our brands to a consumer improve customer significantly are demonstrated consumer frontend last capabilities abilities assessment making execution. revealed the properly when we support month our communication new clearly us That building, need top major brand for our and Paris

win fill have Since capability clear KPIs to key are elements gaps these areas project. strategy, integrated improvement to talent started and how established cornerstone across action new plans choices and for have we of each the

For innovations. example, and in stronger and wants This we development, to customer around bigger on we enable longer and the focused are fewer, more upgrading concentrate ability needs. as leading understand company's impactful pipeline to should product insights and innovation actionable lasting claims consumer superior a

innovation insights. In underpinned process, Newell's be proprietary by addition, which will we recently consumer revamped

process plans, an this As determine implemented sharpen allocation of alignment designed tiering and bigger innovation biannual prioritization the the we innovation to company's identify work, and resource on instituted as enterprise-wide drive and system bets. and part we a project funnel,

place in in new brand place ensure communication, tracking we're initiatives accretive We building previously. not multiyear which and technology to rigor all and to for to enable centralized a drive a Relative put also function, financial appropriate system brand margins. management was comprehensive brand platforms building out

who redesigned managers teams them for governance process. Newell's in profitably multifunctional XX communications our countries XX brand support responsible a brand forward, alongside be the newly Going top growing and brands top will our

Finally, in as while leveraging opportunities, our teams and they've every across new Newell's to sales brands dramatically pursue are scale identified fundamentals to existing relates portfolio it also which of accounts. leading business, distribution sales retail the actively execution, our improving

to strategies in days, bringing were making early of integrated by how encouraged and life. I'm to it's where progress set to Although we play still the the win

into visited XX been the where our America and cascaded strategies the strategy the Europe these two last segment, are of corporate Latin Key to and functional formally across top we just organization, are six have driving the execution. plans. members regional in of months team throughout leadership countries the ensure is They've ongoing. I informing work Importantly, not and

want Now, before turning line we and have for of address estimates to year. half the to the our the call outlook our discuss Mark who to will made results I over in detail, the second financial revisions top

discretionary in of the products, cautious consumption on largely to student payments of we resumption are due First, October. the incrementally loan more

will a after consumers inflation, core income. lowered manage many restart undoubtedly given budgets high payments their have real to moratorium, multiyear tighter has even persistently consumer which As

on retail recently is their revised moving our direct major to terms shipping what Second, several domestic import from customers our known as of fulfillment. business,

While we we longer result move, to put a expect it for comes back a this half inventory one-time down does be because Newell on as pressure transition. weeks additional welcome term, coverage further change positive as of this of the shipments their

business our that inventory top our allows stores. and no maintaining we year, is outlook Baby. conservatively have are demand which most longer why for now we buyer adjusted forecast we the cash planning sales that the guidance made on year. to we modeling related the us the are back would of likely, continue assumed Revising Buybuy accordingly. now emerge half our operating have baby Up is Lastly, a more reduction, our bankruptcy progress we due to the of financial in the in Since of their for strong line now plan flow until

which centralized to in chain decision a consolidate Additionally, supply drive possible taking organization chain, productivity stronger made were we recent by structure. into are actions supply the a bold to our

optimizes manufacturing series global network building that Newell's minimizes we actions Newell's each to overhead are right asset the labor decisions one Specifically cost, to but utilization company's leverages total key scale. Newell force. a are landed easy, taking after we benchmarking never and discrete specific These are of global committed facilities, manufacturing a of site at size indirect optimized

Moving company's appropriate. regionalized look forward, network how to capabilities, plant automation we entire as transition to more assessing with plants are where optimize upgraded the to we digitization multi-source and

back-to-school as for relevant the the of We weeks. the on the top in course, to back details These we relative full share coming half more plans performance notwithstanding, into continue the year. of company will, line of half gear And which season, the we the stronger kicks much revisions are remain to first optimistic expect in finalized.

on speed company their change The their the pace me note, upon full organizational the we and strategy. built the our consumer-facing endorsement value strengthened several most new while for simultaneously and its strategy of over across are the CEO the has investment of as core, company's thank agility On we foundation new years. potential capabilities, distorting to focuses unlock attractive and have pools enterprise. personal and and the improving welcoming I past with Newell's of strong employees would company the to accelerated building to operational like the new a for At moving

delighting purpose Their by up moments me of inspires to every day. consumers our commitment lighting unwavering everyday

off We are have plenty believe of start. work ahead, but to a I sincerely we great

confident While accelerate challenging over to navigate the term, backdrop financial our the we remain term. in a ability to I performance long in the continue near macroeconomic company's through

now the I to Mark. hand over will call

Mark Erceg

morning, Chris. Thanks, everyone. Good

consumer with and subcategories quarter demand As destocking we continue the pressure significant since the have on of continue third year, Chris inflation namely to retailer. last of with spending soft macro-driven contending normalize, and the major to results QX reflect inventory continued trade earlier, discretionary along indicated bankruptcy to top put a pressures as line our been

Thus, a we believe underlying the examination made in as cash the the billion more in of the net thorough and on discouraging, XX.X% business we operating sales sales contraction flow are improve have strengthen while decline and core $X.X working the surface of the XX% structural be shows interventions might to intended. economics

basis both were from efforts example, Nonetheless, sales productivity basis and point helping XXX quarter margin last mitigate resulted versus last in X.X% due top critical Project normalized points XX.X%. normalized gross softness basis point which declined line year inflation. For contracted the improved during gross in to normalized Phoenix increase SG&A And margin sequentially XXX savings, significant year normalized basis operating operating margin enhanced XXX XXX Newell's and to to headwind margin versus points as the ratio. in the

did us ago, the decision million. to lower interest quarter reflecting last dividend $XXX the and expense million size overall rates million by nearly million, during allowed to interest debt quarter, the versus levels right debt in second a higher addition, $XXX nearly versus year year-over-year $XX in net inventory In reduction to $XX but increase

a share outlook the to Our better normalized had year previously in at XX.X% rate of $X.XX tax effective ago, brought was below considerably provided. per $X.XX, reviewed, just earnings the when other slightly which we with combined we diluted which elements normalized than $X.XX was

flow operating to quarter. from down year-to-date North cash flow, to through XX% planning job positive improved team cash managing second XX% the last million inventory fill This levels great a Turning us America of year-to-date allowed increasing $XXX year. the which operating generate rates, did to in while

throughout million $XXX confident be million this million Therefore, was last than even of in inventory Importantly, XXXX, will $XXX of year-ago below so levels inventory balance through six to same of and lower the stark encouragingly improved levels, as flow first cash approximately use months stands operating in the $XXX during of the more a cash June by transit period the year. contrast we XX are year.

nearly was and which The full than to leverage QX, leverage Xx one company's to end X.Xx drop has at the believe expect the peaked year. end We turn by increased the it approximately better of anticipated. of to

leverage long-term X.Xx. goal at Our to reach was

year, As towards reiterate incremental pressures facing, look laid we the balance them. of the Chris top so out line we I not will are the

to does further, bear that with cost this our a mentioning create fixed challenge. compression, coupled sales additional short-term However, balances does inventory it even decision absorption lower

existing company's will labor aggressively we Although optimizing force and deleveraging operating second still manufacturing costs network, planned on half the margins. are gross within our the our weigh confines fixed of

capability will implement also new margin our accelerate building and our by in of decision invest strategy. operating half to aspects and support be brand critical corporate to Second impacted

core billion to for $X.XX we've third sales down $X.XX the X% sales context, the to following assumed that quarter. Given with X%. of billion Net

instance, do represent think an inflection important quarter not comment we third to is gross out in point X absorption. commercial by gains simplification this primarily margin activity gross XX% we on July fixed as of Traditionally, efforts margin. cost expected home But and pricing point solutions it's respectively productivity across of to strong segment, only U.S. the inflation partially our inclusive and our are and business, roughly in offset normalized

analytics capabilities and support as to was customer terms We consumer year's drop growth impacted last invest SG&A in expect such quarter be execution, revenue by frontend a and we compensation accruals. higher Parenthetically, among increase of dollar a others. third retail SG&A in both a management, and meaningful as brand management as in understanding, percentage year-over-year basis favorably on data and sales

to expected be of Third to X.X% X.X%. operating is quarter range margin the in normalized

substantially share we're higher a be All-in, improve. We guiding forecast expense interest relative admittedly to half to year, is to to normalize the is and as decline ease mid-teens and expect year-over-year this business to in range first QX quarter third of versus of the should both economics While of expected structural earnings down the rate the rate. the $X.XX continue tax $X.XX. per to last

year, and XX% full earlier. margin expect top to X.X% reflect XX%. net Normalized driven to be the by expected through as is investments flow X.X% sales we capability we sales to incremental billion of $X.XX For to operating billion, core negative of decline line the discussed $X.X

Interest has expense is the should year create a versus done fourth ago and planning tax terrific be the some to tax sizable quarter. slightly forecast up in benefit which work, team

Assuming to $X.XX are is year zero. rate per the effective now close is expected $X.XX. to benefit be realized, to earnings normalized expected share to that full be Normalized diluted tax

to improve operating range cash million Project more million which free cash cash cash related above payments will operating one pre-tax $XXX which of anticipate year. $XXX $XXX to cash, $X number flow to $XX with on flow year, than to productivity inclusive XXX%. continue of million Relative of year-over-year billion flow to our track operating this midpoint priority was $XXX this savings by of flow, to $XXX cash to The remains we our million of million implies comfortably Phoenix, realize million

So the summarize said, that today's with key all call. let's from takeaways

destocking First, and line of top that balance comps, on we year. line easier persist cycle will expected moderates, core basis. relative we trade pressures slows improve our top results are But anticipate the a throughout the as inflation against to

Second, we improve business. business the significant back all interventions in of behind across structural economics of believe underlying the the half the facets will

half more second In XXX this range, Frankly, versus be to we ago, points at margin of outcome. fact, normalized this than good midpoint our points the XXX year. over first a guidance of operating versus year the basis would expect and basis expand half

unit midpoint to X we that drop sales are approximately since year-over-year July down using down range, increase approximately assume be of will again, to expected and billion XX% expect XX%. this volumes reasonably price could versus by the year impacted one our Since year. full net the be XX% negatively by $X.X Moreover, year inventory to production volume, last

financial hold amount flat, and see backdrop are Newell's of begin this takeout Thus, positive expanded, and is we to once macroeconomic provide let the our leverage required cost should the making frontend we stabilizes of benefits against major the the pivot gross not consumer-facing environment in inconsequential alone to significant margin capabilities.

in increase $X be itself. operating is flow least Third, expected the year-over-year cash for which billion, to speaks at

believe of very the investing win to a where comprehensive Finally, full based to companywide potential behind it have we we and strongly now a brands. of capability deliberate in strategy strategy are move assessment as with play unified corporate on how clear Newell's speed and choices. leading the portfolio We with to unlock

you open Operator, call to questions. if please could, the

Operator

Certainly. [Operator Truist Chappell of Instructions]. your from Securities, And line is our with first open. Bill question the line coming

Bill Chappell

morning. Good Thanks.

Chris Peterson

morning, Good Bill.

Bill Chappell

advertising marketing brands, and lot I looking moves the a it's or and core don't I of right lot understand promotional with the to whole guess on have focus more now or terms sounding or Newell's historically, a front-facing trying a of brand managers in And of model. categories kind more P&G of guess support.

of as necessary. not always kind was it so that And deemed

to you're lot that more doing competitors stepping going up stuff like of merchandizing, when So marketing, just won't. forward, trying a to be your going I'm understand and

will so how useful looked model understand And I'm the categories to will how at help, be. It you kind but trying it? just of when certainly applying to this this

Chris Peterson

Yes.

to try perspective. a of me Let bit provide little

from and a was been assessment like did years identified processes the the independently, on when place standardized coming that the we're approaches chain last the driving business every because unit of One operated we every not that over we supply on capability capability of did category backend. was things and have and the the we've frontend centralized we where sort four

good see pockets of the And at so company's you performance, you when performance. can look

like We believe, portfolio. consumer the Expo, the them in So And we're from which leading innovation, of thirds communication do parts building, swath brands. you all in market and place categories we We we recent two we're across because retail the understanding, because wide brands at are in of on Rubbermaid, top growing that company on leading businesses based in seen share all the growing compete. starting brands, consistently share We've over broadly. capability we model. The that we're applies share growing market examples most market XX not are our on Crockpot, periods, customer broadly brands not believe execution growing share look the brands the believe brand Sharpie, have we're in if the of do on people are that in. model on reason across of yet on but don't other a this were is market this and brand applying fact on

the and as operational standardize and the over the done we capability to we same build broadly to we've can more begin inflection think apply we think that last terms top and on rigor several point across years the of a chain drive it and line company And office, sustainable we amount have back so this a supply to in meaningful algorithm. growth the getting of more

Bill Chappell

Buybuy up, I'm I to Mark, guidance in in for that's of like the Baby, what retailers top of the terms you the a And terms roughly kind change how what us just line in but ask I'll impacting breakdown in can't of guidance give year? one can negatively it. this remember if maybe for follow the Got inventory, buckets allowed with anyways. just terms

Mark Erceg

that. with out you help me let Yes,

So little be let's point. anticipating this get than you on might more a you clear bit but were here,

towards So was end we to that prior lower $X.XX range. range and the $X.XX we'd be our said of

point. $X.XX the that are just lower in half. number to going From a take items starting our of sales back let's as the enumerated So there, Chris

levels have we we can won't cash to the chosen Along lower year. fairly But repeat our here. take those that, for range maintain to I full obviously order that inventory flow our in So consequential. even with ensure that's

half that items A&P kind are programs which there'll have investments high. that little are an And in We all-time related related. to transportation, that about second of be we we little there's in are little in a through will then takeout. positive partially mixed bit meaningful bit about the there actually talked by little held, year some addition, only take fuel our of capability we year. the This recited making, investments In resin a programs other the to costs offset a we a expect then well. more that as COGS progression have place. initiative in bit some FX out of of of X% of the bit be items Those And

will So that is taking let's benefit elements to contemplated which $X.XX. from And the $X.XX that we a to and of have all $X.XX brings together, it worth roughly that midpoint those take of provided we have call new put in $X.XX. that's you tax you That $X.XX, roughly $X.XX. range then down to we the

Chris Peterson

would And little to the repayment of line factors student of conservative that the say the Baby shift domestic is line, item, the import Bill, items. and smaller on discretionary the those Buybuy stance change. I to are I the bit two top on guidance more top as a first products The the cited, loan three biggest direct and the relative

Bill Chappell

Thanks it. much. so Got

Operator

is our from next line And with James, your line Olivia you. Tong the open. Thank of Raymond question coming

Olivia Tong

margin. gross Great. is My first on question

And show see half? that that if you your assumption? You continue about fair Is sequential of that? better gave hoping expect turn changes some in a to detail a the sales Thank to continue we should so, get that the underlying to progress, And you positive some outlook, to talk second could some margin, assuming color you. progress. to drivers it but which gross on lot sequential of on

Mark Erceg

where Yes, margin are gross about thank right we good now. you. with We feel really

of several first that margin versus driving progression. in now increased now. think our chain years XXX. second print placed where second results, confident at half And a were quarter What's that But roughly higher just program has XX%. a its gross consolidated in about half meaningful that number supply first very is we than the so the that we Phoenix program the the looked half was for you dynamics, that points hundreds productivity intensity the of we And XXX as only margin half, that gross basis was issued, XX.X%, gross probably behind has margin the will fuel organizational we If to be first have we're been changes. the

year to with is margin important, the We gross the negative pace XXX Inflation are because alone, line a about COGS like still is points of on more around which but inflation. this of of compression literally dealing the half, basis take inflation be in the we after because XXX of year first half of the we're basis running think points, in X% it'd of effects second itself. quite lot of probably out

assessment talked it go in XX that we The crews. talked to have a consolidation of from that after. about that more wall work X.X. be overhead $XX cost that doing after space just overhead of that [indiscernible] we're indirect are whole on operational going on other we're also direct square network there's an the We some other we things to range side getting annualized from X.X it about down done and going in past effectively million the shifting over the by DCs maybe basis along might a something script the -- XX. in getting The where DC things feet fact with like to just plant elements, we're And save four call down will million recently

the half. of the So we feel second reasons we gaining feel And like the we in only one other strength. pricing at margins. XXX bunch just good like Also, of effect the of put play, a that's program lot that [ph], bring is additional pricing will gross there's a things which into about productivity

we good margin. gross are we where about with So very feel

is hoping you year as every gross year And to we're margin the since that that had this Jarden turn acquisition. compression know, we've a think I the around.

Olivia Tong

can views level are it idea less, brands then seeing than versus are of are And your to updated us divergence and you're the more geography, you on on the spend brands currently where see give expecting potentially Thanks. rather there that going categories stands on across given and it. Got resource that then support? allocation whether some and brands less

Chris Peterson

our Yes, are plan, we spending we as of -- on money more part A&P. are

the So versus our half it And of the half planned significantly spend the that year front up disproportionately versus is brands. in and the of on leading year year. focused we last is A&P up back this

So the for in rates the reason the we in a fill which writing feel rates markedly, about The of despite business. feel example, in -- mid sell-in sales. our part to is fill for customer XXs was writing mentioned, improved had results being -- Mark and the we terrific period, just service XXs QX, and we're from back-to-school sales the to the business writing have as core back-to-school. We've on that up entering, high business good very QX the in company the low on core down

there's be we But investment year same A&P of this positioned this is that, than haven't money are share we that master year that in year and consumption At assets of going use we because well strategy that's when planning we're we have the of XX year. on. XX last for sales Our spend focusing improved the the we brands retailer yet. We the XX% a to that out versus And to believe of obviously that, dollars. time, seen represent we more good rolled believe said prior we're profits and against because season.

we is the are on same on investment brands, return those the the on higher much believe bottom spending we top time, XX. XX at de-prioritizing So because

Olivia Tong

Thank you.

Operator

coming your JPMorgan, Thank Andrea line from our you. question And of Teixeira next open. line is the with

Andrea Teixeira

go this huge give on then post you're and this seen are this optimizing a Chris. has course been to you. And comment comment consumption on what of go all category to is that doing selling and in just brands, or to much your that kind XX back of of of still Is kind Thank said wanted Olivia's to all as about impacts went that going I clarification, company all -- the been think some if process view this you. you also would starting on the a just reopening just haven't year. And reductions through of some I through. and question you like of this office that through I amid to brands brands of this that? transformation project being the want immune still like to divested. inventory any on positive pretty deleveraging that through is something going -- going some thoughts is about yet. given this wonder those your this reassessed conversely, And sell you was to is of be made or there back-to-school, more that through in and for giving this of you still transformation your retailers and have course Thank you this and all you

Chris Peterson

this dynamics discretionary, look market little writing normalized. more much up different. gain which cetera. We Yes, going at. business back-to-school on set so back-to-school confident is let consumer destocking, me pullback, are through The that very a It to is same retailer is the we not projection on depending start with the question. period, during The category feel you writing et share

writing the last year. to down be project category slightly versus people Some

people up it to project be be and people Some some to flat slightly.

the very period. I think of to take that. middle road up share very view confident to trying during market we're on But gain a well that set we're we're the

and sell. just company's XX% are speak, put to going are that to sales we But the buckets. going are I brands would XX profits, innovation in to brands resources. brand the represents continue less, of into that XX of we the so largest bucket to three support XX The On of question those terms

the are of resources, category. them dollars in innovation this other support fully we continue better resources, our terms A&P think sales but XX will We top to than spent our on

they're are So consider we that There's a those the significant. discontinue. And to distraction. sell for delisting category company's to type because brands just are and effort you of don't a And to think [ph] brands. frankly represent these small better it believe saleable. a believe we column, that are them. we if second going And of that trying we the look brands it's profits, will, revenues believe off sort go through worth don't they're of them very proactively of milk to percent even don't and we're a We

our be some then see going there'll divestiture be licensing a I or And to be category type That'll could going think So a brands to had category. opportunity. something want strong in like an We look which we're divestiture that and third market you're we've that that subset. there's just the in don't a to are the And where company. not change efforts different. of of XX% massive do represent small a to strategy. standpoint. on is portfolio. resources That past have sales M&A brands believe biggest our leading, focus a profit and we the from the our We that

Andrea Teixeira

And Chris, that. follow up a on just

these thinking like, that the the know you're each eventually we're delist gradually? into these headwind digit potentially headwind that So just if it is to you second that could that described. XX% size or that headwinds don't we going to about buckets were sell, we call your manage should like be of XXXX of happening, see something you of a to going bucket course or to about single some simply there's worried the be But assuming of potential mid

Chris Peterson

I Yes, we're manage I high. to it be don't it gradually. going think that to expect

to this single a it in be digit could really an rise to there time any we this? digit will I I over think I from the don't headwind Possibly. a mid thing. low in future But period level where given year. have going is think, be a type single think

Andrea Teixeira

Thank you.

Operator

with coming UBS, you. open. from our line Peter of is next Thank line And the Grom question your

Peter Grom

Good operator. Thanks, everyone. morning,

guidance fourth But much in terms the I the margin for this year. So hoping in expansion. just the basis to of margin, understand of hundred for just the on it blocks quarter thank color building operating you just implied implies so seems ramp points was operating -- several the outlook

So gross on you optimistic sounded quite margin.

that seems to mentioned that months, the but ahead in that. for below sales you quarter year, then just operating what's June, margin So be implied back XX core in the a think would you I rate the expansion And fourth exit of bit? well next algorithm it was on of can just something algorithm, unpack implying or XX kind

in that year? So margin be Thanks. expansion we next anything of operating XQ terms about is really shouldn't thinking there about specific into extrapolating

Mark Erceg

great a question. It's

what the all reasons for going with above fuel that's productivity are efforts points half place, of have in effects half. the think tend just mentioned first the XXX gross the margin dynamics, the trade I'd down year as higher and in the cited, a and getting along. So look, versus grow second along I abate as half, the the we there's second percentage be roughly go some slightly margin is would earlier, first to I Without half balance to this we of what and half this normal I we think through basis we is is sequentially that year. expect the offer the bogged say. think everything pricing We the back quarter where actually seasonality destocking guess about And continue business will to going our gross it, to we further in sales total I as

comps get easier. Our

We very amount income half about well. litany reasons we have the second in There's see points. growing following that by operating along XXX sales more also that as of roughly so why margin have very, confident With a And strongly, the progression we we're than basis first percent we whole of that half. right. the have gross same

way demonstrated seeing through positive I and things affect making, you're we margin the cost notable talked of as about to we're the that is ability line. investments One the the very in I think gross capability think we've a

that really than provided to level that was Deutsche as technology earlier the XX mentioned -- we about true moderate against put I have choosing top on in to business, we're first think to going half to number talent might going be go be asked more make is next second we spending If consumer process to be going going there's to was in we more external we additional think about guidance because second question half explicit to at talked think XX improvements, question to management however, a about the XX going where And and we roughly don't be A&P line but months, overhead, commentary that's actually the we that doing capabilities, you still about if smaller part, data accelerate change to than say to high, about tried the maybe on regard. the in characterized the those the the some probably the challenges it spent XX% drag on in in upgrades, of be the that was is we're on top be we XX first brands focus the destocking. months start compelling will relates being by resources half against With be a believe brands where inflation it heard provided investments as What propositions. to that, to that we the and per then enhancements. overhead earlier, there will your versus dollars you Chris what offset what comparable, side, we're the the next of we when Bank se. the XX And

dollars I we that the maybe the as to concerned built now mild maybe thing. be would effort. be that and seems we're fronting less brand which recession spoken But it time good going we'll think that capability towards a rationalization like are that, relevant out doing is about to avoid we've during the

a year, we given will have on over true. at quarter. first. had evergreen to explicit done. as operating roughly in targeting said going cash wasn't that's based target, So half we Again, year income any going for our percent And be are over we said versus we we said And strong be This progression to operating we're really A&P basis points. the clearly, XX on behind the our margin of put to that the below second sales above, is order to free making make that target, be that's now margin choices to guidance which at time with being more marketing choose balance XXX support this sales expansion then additional we will evergreen and on good line be We bottom core investments in that or think progression some the work there's top rates. the

going to good really about be feel we it's approach where forward. going So We balanced are. a

that If we it's would you P&L, have of look out way sequentially element hoped. across the every playing the

Peter Grom

I core just then, had a the visibility. pruning. straight question That's a of are outlook been bit around And second super you've sales the moving helpful. very things historically and on Kind Chris, particularly lower, quarter here where

of murky? to still where like feel remain visibility you see a conservatism, will, can I point back down we that bit has to -- outlook it improved if you another you kind guess I call does the So that just really get so the in don't or

Chris Peterson

encouraged we're from the What in dealing with on will sales Yes. primarily and is line as normalization nature guidance massive that in on are having period, say that's better. middle our I on that's it this getting is visibility that for challenging we purchases, because dealing down once that COVID, we core pandemic result. retailer consumer inflation dealing growth. of inventory impact were in lifetime came a with visibility I range to with is the come a on say the starting we're would a we're QX The top in patterns visibility right unusual of a that

on And provide go, we're guidance. more the what's at challenging line the the we hit is investments. focused top QX to in on is pace it further our capability The So on mark you the guidance. out control? we the moving that are Obviously, thing

Management chartered talent, we We Consumer customer that months. and Insights. believe to the Brand are begin building, about these of to will we And go immediately, We've to specifically a happen the changed amount play to And make things pace Head because that. XX Innovation, a we XX on of and have is improvements, and business the next a our we retail out have next new take in take can communication after when They're leadership in couple we when organization office that thing segment. recreation brand time. as not very But new those with we you over in excited projects -- President the back about, of talked things and brought areas brand we're going performing some improvement years. very cost driving we this that supply takeout where delivering over those consumer a innovation, about and of understanding, execution. we're outdoor optimistic the that's chain record levels, couple And high

Peter Grom

it so Thanks pass much. I'll on.

Operator

of your next Barclays, is Lauren Thank you. with And the Lieberman line our line open. question coming from

Lauren Lieberman

ahead I I'm to of not guess in as to talked the crazy how of margin might want just I thanks. have But seem average Great, costs what guys evergreen leverage Good know positive and about line. further I could think and understand curious, all unequivocally structural sure longer But top reinvestment a look doing, expansion. it kind out the basis that opportunity about capabilities this just and point. way XX kind of well. at be operating because predictable stable P&L getting stronger the to you're I takeout conversation terms benchmarking, that the with more was But on to morning. term about you points

so if period the a the can as if in proper like that 'XX playing numbers go step change be over or benchmark quarter does anything So you're year of thinking if this my there. that or term willing investment I on probably, with about I maybe would right level keep four be reaching building? on that P&L longer a you business. I offer you're of just general guess helpful Thanks. like structure And now, benchmarking just of even to at expense, at should I look look making And kind

Chris Peterson

bit little Yes, help. to let me try a of provide

me start 'XX. let with So

'XX. margins. be have a year inflation in Inflation, give number in back 'XX them. 'XX to and largely the than rolling that likely number And particularly we're just in today, was nature capitalized effectively much we've of which be And behind I'll seeing off, operating are half bit based smaller a to to 'XX, is should a that in of significant year, a this think bounce of on one-time in got of because variances us. allow a of -- first result, it what are you should as that we're in a be things we of terms expect I few 'XX

also with dealing impact year, down revenue of materially cost a we're be smaller the top than 'XX because plus that. recall to 'XX We expect decline inventory absorption we're fixed that this in on taking

somewhat fixed number cost one-time nature. in is that absorption so And

We our year. a that got to drive up very we've continue and productivity to ramping next is also we mentioned funnel believe strong that going very productivity is strong

call that, with excess as what at obsolete we clean discount this and And to being liquidating we've inventory destocking inventory gotten we'll we that one-time and we addition a are nature. obsolete reducing and In year that better. are we inventory of our year think inventory, is we're some to we end head as on into next level year aggressive do excess we that the as obviously, levels in have inventory somewhat don't a the retailer then inventory so

I what algorithm tell for. And that believe certainly 'XX, we're And so the the all year on margin of that you things above though. should in of those that's would 'XX an have story we end don't shooting margins. is

be for the to really we're next have Because for to HPP driving is category our large initiatives. of the capabilities years. to forward place innovation build I develop And going, you that addition opportunity MPP getting continue is segments, tend brands is think when is for, going which three in our significant operating Because also putting the strategy line that front-facing going. those to five a calls on lot margin leading get targeted strategy. in going top focused we a gross to accretive margins that that to and growth margin

gross growth, and consumer-facing our as the lead better market that We so standpoint. believe better pipeline improvement believe from we place, this innovation mix category will And get gains share will a to put pipeline stronger. margin in capability we innovation

in higher we are where than that so is And business all those have margin us this opportunity significantly today. longer of things confident term the

Mark Erceg

just I second for the the makes fact And in half around it right that Chris be to We We could Yes. Lauren, that, just point talked if is considerably one to stronger the going that about reasons reiterated. margin relevant. gross QX. add had XX%

we capacity frankly exit our given rate XX% are we're points when manufacturing chain. single sourced geographic So XXs, right operating in that's still basis And probably the to beyond aren't that. locations sites, will of with really and supply are which the utilization low now of which the in be several optimize hundred where many global XX

we overhead spend us. efficient all to come tremendous will will ability that So to cost on innovation there'll which think as as be side more more in give back have we over that operating HPP we the the time think forward opportunity brought I push the on get the takeout line more also be forward, to as meaningfully well MPP, us the considerably A&P, expand sales while our margins revenue starts to

So of very we time. proposition feel over period reasonable good business any about the this us monetizing of

Lauren Lieberman

really comprehensive. much. so it. appreciate I thanks Okay, was It

Operator

line next Deutsche your is Bank, the Stephen with of from our open. Powers line And you. Thank question coming

Stephen Powers

much. very Thanks

and exiting exciting. Okay, about terms articulated 'XX lot bounce to grounded. then months about to year Everything circle so everything about I to do to was of to a commentary of Peter asking Chris XX back the Mark being run XX and me is back the in to to you in straight and kind months seems XX you good a not just more described months XX 'XX want ago what the a being next line. sense counter next just that few makes

in a in in think grounded message commentary. we just but it's back your a June versus very maybe how like kind about half and recent So to of 'XX as commentary seems just macro different change 'XX assumptions, grounded

that you just square circle me. if for can So

Chris Peterson

Yes.

or is we're the at back, we're capability to predict. macro is moderate, a that they right But going that in say, it's going that's And know know just we We it's we've when together strategy turnaround the are a the happen. Phoenix. to also If improvement that moving we're a when drive new but weeks because improvements, tough way capability and exactly to these and step I those drive to the a into And model currently operates. -- to to with in, you you going company track least the put significant hard to think you in things that changes the predict hard Project from trying company to to on ago. the that macro is turn company context situation tailwind a environment time think deployed operating it's we that headwind, take six significant

in But show from it's results which hard very is those And up now. to quarter that up to or the quarter that three show financial after We're next two they to confident hard up. the the years investments predict so quarter, predict. capability exactly show after whether quarter do they

left quarter-by-quarter that But now what the of be. believe material basis to think path improvement to know being trying exactly we're I the that message significant we I on that going were believe we the seen a are that line look the years if and -- the where lower from slope going company. to in tell don't line of the is so back you just to is a upper from not right. performance you couple going we is from today, can't have of And straight a we deliver We the forward the on line

Mark Erceg

to the going that forward we obviously reasons and very Right. going been operating discussing saying then XXX% our expansion better. core free And so and extreme, one we in it's below continue is say cash today, part thing. because will big takeout when be were to to probably gross to growth and sales cash be period, it's that going come above targets, priority is going going to is this could target, we're And that our that evergreen margin And be margin we're all moving productivity if be the so or during of flow year the top the we've I look, to add confident pass. and because

feel like be XX our a challenge over margin cash the be will next will and months, but XX sales real we might to So focus. progress

Stephen Powers

low I time guess maybe Okay. at I'm as order a of margin of prioritization lot expansion line And drivers. there we'll aspirational the time we them was part where it's kind progress Or you strategy, how I of the communicating longer the about kind elements achieving then course thinking is as scorecard you some -- guess like go your point, you is of both can more hanging of do is anticipate think of forward, this over go? of of fruit kind take term against more track and those of that. there of kind -- But accelerators we progress? top versus as kind kind there and also a we the are of of

Chris Peterson

we have put it's that obviously just detailed together. an sort scorecard Yes, good I And of have a think we that's very thought. internal

finalize the So all owners, to clear timelines projects They strategy, chartered And different effectively of once the we of against pursuing with have simultaneously. KPIs, them we relative each timelines them. improvement execution. we capability are

brand creating So and the for consumer timeline. organization different and understanding improvement timeline, capability plan customer example, looks than a management

forward. go as will we to endeavor we clarity so some more And on provide that

commissioned place the at all we're we've projects. where the think I

have owners. We

timelines. have We

capability is how last terms dramatically, of accelerating the We about supply in improvement Typically, have which pace prepared systems, people not company the over program, simplification last it we've improvement, And and that on the a think years, the the capability the et is applications, capability We're the change dramatic changing thing people, of and and SKU about office that do back we're oftentimes if about process, chain clear say is is to couple plan. the We've and/or mentioned you think I cetera. lot because count, we're IT made when you productivity running. project, any delaying ERP would a in been I that improvements. improvements. why to off taking technology. the the in the the be that rate talking whether in the The it on were these remarks of difficult fuel

That longer. it actually the backend, than well. gone oftentimes frontend, And we're a about focused. the process the the and harder on meaningful be has is more takes component to supply that tends In to is technology what required chain people there's talking that do that frontend. of in All

So mean faster. easy, it's it happen it can doesn't but

make begin projects timelines And so the we aggressive have the owners progress. to and on to charted

Stephen Powers

much. you Thank Okay. very

Operator

Thank comes you. And the from our from Falorni Filippo last line questioner Citi. of

is line open. Your

Filippo Falorni

organization changes the of covered is Good you programs, areas to restructuring Hi. I potential end, a in focus change we Any Chris, changes recent of that of know in think like everyone. lot we The clearly on. ground. want more add capital just frontend, more there's like terms thinking on coming allocation. strategic the about? further should announced other the lot where morning, be on your in changes of I maybe, you kind a

Chris Peterson

we're change, think from done point at I for with model and the a a all we're let's where deployed, least strategy we've call standpoint operating think new XX the XX, at this point, I assessment the point we've the -- the capability we've at with company work of it. or where strategy a the got at

strategy to every gets to the organization, that, that got cascading to that communicate takes trajectory this And as the strategy. as into life to to to the ultimately got we've focus work at And to to you that that begin enterprise. have doesn't the now at strategy you the segments, strategy right think have the to unless Our geographies, strategy sort point, debate drive change a throughout execute point it functions, execution. the the you've and you've the we it really individual's make to strategy do sure And of communicate And drive you attack. need rather the and you because come it direction than into got that of shifting And communicate is of execution. to you we it plan. it you're time

to I hear that us is driving you're expect changes into progress strategy about talk this going I more don't execution. action so at and we're strategy And expect what in at significant have going the to point. our

Filippo Falorni

Great. That's helpful. Thank you.

Operator

you Ladies of Thank today's your will for Web company's replay ir.newellbrands.com. this call. gentlemen, at on and you. conference available site today participation. call later Thank be the A today's concludes

day. great Everyone, disconnect. have You now may a

Newell Brands (NWL) 28 Jul 232023 Q2 Earnings call transcript