Despite mixed third-quarter results, Newell Brands CEO Chris Peterson said the company’s business transition is taking hold.
Reported net loss was $198 million, or 48 cents per diluted share, versus $218 million, or 53 cents per diluted share, in the prior year period. Normalized net income was $69 million, or 16 cents per diluted share, compared with $154 million, or 37 cents per diluted share, in the year-earlier period.
In addition to its GAAP reported results, the company stated, Newell provides certain non-GAAP financial metrics, including those referred to as normalized measures, which provide investors supplementary information about underlying operating performance. In the third quarter, the company changed its normalization practice. It had excluded from normalized results inventory write-downs and accelerated depreciation charges relating to restructuring and exit activities within its restructuring-related costs non-GAAP adjustment. The company no longer excludes these charges from its normalized results. The change had no impact on reported diluted earnings per share and a negative impact of about two cents on normalized diluted earnings per share for the third quarter. The company also has ceased to exclude from normalized results previous period adjustments related to a bad debt reserve and subsequent recovery associated with the bankruptcy of an international customer.
A Yahoo Finance-published analyst consensus estimate was for normalized earnings per share of 16 cents and revenues of $1.96 billion.
Net sales were $1.95 billion, down 4.9% in the quarter year over year, as core sales declined 1.7%. Core sales exclude the impacts of acquisitions, divestitures, retail store openings and closings, certain market and category exits, and changes in foreign exchange from year-over-year comparisons. Operating loss was $121 million versus $159 million in the year-before period. Normalized operating income was $185 million, versus $152 million in the year-before period.
Newell’s Home & Commercial Solutions segment generated net sales of $1.05 billion versus $1.12 billion in the year-prior quarter, reflecting a core sales decline of 2.3%, as well as the impact of unfavorable foreign exchange and certain business exits. Core sales gained in commercial, primarily due to international pricing that offset inflation and currency movements, and declined in kitchen and home fragrance, according to Newell.
Reported operating loss for the segment was $94 million versus operating income of $64 million in the year-prior quarter. Normalized operating income was $122 million versus $91 million, in the period a year prior.
The Outdoor & Recreation segment generated net sales of $183 million versus $231 million in the prior-year quarter, reflecting a core sales decline of 16.8% as well as the impact of unfavorable foreign exchange and certain business exits.
Reported operating loss for the segment was $23 million versus $42 million, including a non-cash impairment charge of $22 million in the prior-year quarter. Normalized operating loss was $15 million versus $16 million in the period a year prior.
The Learning & Development segment generated net sales of $717 million versus $694 million in the prior-year quarter, reflecting core sales growth of 4.4% as well as the impact of unfavorable foreign exchange. Core sales gained in the baby business and decreased in the writing business.
Reported operating income for the segment was $75 million, including the impact of a non-cash impairment charge of $70 million, versus a loss of $127 million, including a non-cash impairment charge of $241 million, in the prior-year quarter. Normalized operating income was $154 million, versus $123 million in the period a year prior.
In announcing the financial results, Chris Peterson, Newell Brands president and CEO, said, “This is the fifth full quarter since we deployed our new corporate strategy, and based on our reported results, it is clear that Newell Brand’s business transformation is well underway. During the third quarter, year-over-year sales performance improved sequentially. We drove continued gross and operating margin improvement while purposefully increasing our level of A&P investment, and we meaningfully de-levered the balance sheet through both debt reduction and EBITDA growth. While much work remains and the macroeconomic backdrop is still uncertain, we are confident that the actions we are taking and the capabilities we are building are laying a solid foundation for the company’s future.”
Mark Erceg, Newell Brands CFO added, “Our reported gross margin in the third quarter increased by 460 basis points compared to the same quarter last year, marking the fifth consecutive quarter of significant gross margin expansion. Importantly, outstanding productivity and cost reduction efforts drove third quarter gross margin to the highest level achieved since 2020 on both a GAAP and normalized basis. In addition, leverage metrics improved notably as we continue along our multi-year journey towards earning an investment grade credit rating. Given strong third quarter results, we are increasing our 2024 normalized operating margin, normalized earnings per share and operating cash flow outlook for the second time this year.”
