Spectrum Brands Holdings, Inc. Q1 FY2025 earnings call

• Fiscal 2024 was a transformative year with restored operating momentum, strengthened balance sheet, and returned capital to shareholders.
• Momentum continued in fiscal 2025 with net sales up 1.2% (1.9% organic), adjusted EBITDA $77.8 million.
• Invested in brand-focused initiatives, innovation, and working capital management. Strengthened balance sheet with net leverage under 1.1 turns.
• Addressed tariff impacts: HBC business affected, with plans to source 35%-40% of U.S.-bound appliance products outside China by end of fiscal 2025. Mitigating tariff impacts through supplier concessions and pricing/cost improvements.
• HPC strategic transaction slowed due to geopolitical factors, but business continues to perform well.

Global Pet Care (GPC)

• Reported net sales decreased 6.1%; excluding favorable foreign currency impacts, organic sales decreased 6.4%. Sales declined in companion animal and aquatics categories. Adjusted EBITDA decreased by $1.2 million to $51.5 million, driven by lower sales volume and inflationary pressures offset by operational productivity improvements.

Home and Garden (H&G)

• Net sales increased 27.9% in Q1, driven by seasonal inventory build and extended fall season. Adjusted EBITDA was $9.3 million compared to a loss of $700,000 last year.

Home and Personal Care (HPC)

• Reported net sales increased 1.4%; excluding unfavorable foreign exchange, organic net sales increased 3.1%. Adjusted EBITDA was $26.7 million, flat to last year. E-commerce sales accounted for over 30% of quarterly global sales.

• Fiscal 2025 net sales expected to grow low single digits, driven by brand-building investments offsetting FX headwinds.
• Adjusted EBITDA expected to grow mid to high single digits, aided by higher sales volumes and cost improvements, offset by ocean freight inflation and tariff expirations.
• Expect to mitigate vast majority of recently announced tariffs in fiscal year. Depreciation and amortization expected $100M-$110M, cash payments for restructuring $30M-$40M, capital expenditures $50M-$60M, cash taxes $40M-$45M.

• Tariff impacts on HBC and HPC businesses, including incremental tariffs on Chinese-sourced products.
• Geopolitical factors affecting timing of HPC strategic transaction.
• FX headwinds impacting reported sales numbers.
• Soft consumer demand in aquatics category and trade-downs in GPC North America.

Q: Brian McNamara asked about Home and Garden retailer commitment and weather impact.

A: Retailers are committed, with inventory looking good; prudent approach to expectations, but good weather could boost performance.

Q: Ian Zaffino inquired about M&A and pet category growth.

A: Building adjacencies organically, underlevered balance sheet, but maintaining discipline in M&A; pet e-commerce growing, but premium products face consumer pressure.

Q: Olivia Tong asked about tariff actions and HPC competitive dynamics.

A: Mitigating tariffs through supplier cost, retail price, and cost improvements; HPC facing competitive pressures, but flexibility in supply chains.

Q: Peter Grom questioned capital allocation and HCC transaction clarity.

A: Continuing share buybacks, fundamentals will win; HCC transaction slowed by geopolitical factors, but team working through short-term headwinds.

Q: Bob Labick asked about marketing spending.

A: Spending more evenly throughout the year, monitoring returns; Q1 spending up $8M year-over-year, full-year spend likely to be up but more balanced.