ACCO BRANDS Corp Q1 FY2025 earnings call

• Sales were in line with outlook and adjusted EPS above outlook. - Gross margin expanded 60 basis points due to favorable sales mix and cost savings. - Made progress on $100 million multiyear cost reduction program, realizing $7 million in Q1 savings. - Took actions in response to US tariffs, including reducing dependency on China, evaluating manufacturing network, and implementing price increases in North America. - Repurchased $15 million in stock, paid dividend, and had a leverage ratio of 3.65 times. - Brazil returned to volume growth, and International had growth in computer and gaming accessories.

In the Americas segment, sales declined 12% with comparable sales down 8% due to lower sales of technology accessories and office products; early back-to-school shipments in the US were higher but offset by weakness in other categories. In the International segment, comparable sales declined 8% with softness in office products across most markets, but computer and gaming accessories grew mid single digits driven by a large B2B sale. Americas adjusted operating income margin decreased 40 basis points to 5.8%, while International adjusted operating income margin decreased to 6.7% due to volume declines and fixed cost deleveraging.

• No full-year guidance provided yet due to tariff uncertainty. - Second quarter outlook: Reported sales expected to be down 8% to 12% with lessening foreign exchange impact, adjusted EPS in range of $0.28 to $0.32. - Focus on paying down debt, and by end of 2025, insignificant high-tariff China sourced product remaining for slow moving categories. - Will rationalize SKUs and offer item substitutions for high-cost products.

• Uncertainties related to US tariffs impacting consumer and business spending. - Supply chain challenges in transitioning sourcing from China. - Unpredictable customer demand, price elasticity, and various tariff scenarios affecting sales volume beyond second quarter.

Q: About the large B2B contract's impact on future quarters, A: The one-time shipment had no incremental impact later; without it, business would have been roughly flat.

Q: International price increases and North America price increases, A: International had ~2% price increase, North America had two price increases with another anticipated in response to reciprocal tariffs by July.

Q: Details of the acquisition, A: Small acquisition in Australia New Zealand for ergonomic seating and business seating, expanding product portfolio in that region.

Q: New product timing and revenue from new products, A: Products for Nintendo Switch 2 launch in June, new products throughout year; working on refining target for revenue from new products but building it into business planning.

Q: Segment dynamics in International, A: International had slow start due to customers pulling in inventory at end of 2024 and softness in Germany; rest of markets performed close to expectations.

Q: Back-to-school sales pull forward, A: Some retailers pulled back-to-school orders from Q2 to Q1 in anticipation of tariffs, but well-inventoried to support season.

Q: Price increase quantum related to tariffs, A: First round price increases in North America were single digits, reciprocals could be up to 20% depending on tariff outcome.

Q: China purchasing, A: Moving most US-related purchases out of China by end of 2025, with insignificant high-tariff China sourced product remaining for slow moving categories.

Q: Cost savings target, A: Still targeting $40 million in 2025 with $7 million realized in Q1 split between COGS and SG&A