Spectrum Brands Holdings, Inc. Q3 FY2025 earnings call

• Tariff Response: Faced tariff torpedo, paused nearly all finished good purchases from China when tariffs spiked, negotiated pricing with customers, stopped shipping to some customers during stalled negotiations, and reduced internal costs through layoffs, adjusting investment spend, and reducing discretionary and external spend.
• Supply Chain: Went 8 weeks without importing product from China, leading to out-of-stock issues, but regular supply is now back. Working on diversifying supplier base.
• Q4 Performance: Had a strong start in July, with Global Pet Care and Home & Garden delivering growth. Home & Garden benefited from improving weather and new product launches. Global Pet Care gained new distribution and shelf placement.
• Strategic Priorities: Focus on protecting balance sheet, generating free cash flow, diversifying supplier footprint, reducing cost profile, preparing for acquisitions in Pet and Home & Garden businesses, and managing the delayed transaction for Home & Personal Care

Global Pet Care

• Reported net sales decreased 9.6%. Excluding favorable foreign currency impacts, organic net sales decreased 11.1%. Q3 adjusted EBITDA was $44 million, $12.7 million lower than last year. Adjusted EBITDA margin was 17.2% compared to 20.1% last year.

Home & Garden

• Net sales decreased 10.3%. Adjusted EBITDA was $38.6 million compared to $43.3 million last year. The adjusted EBITDA margin was 20.4%, 10 basis points down from last year.

Home & Personal Care

• Reported net sales decreased 10.8%. Excluding favorable foreign exchange, organic net sales decreased 11.4%. Q3 adjusted EBITDA was $7 million compared to $11.8 million last year. The adjusted EBITDA margin was 2.7%

• Due to continued unpredictability of global tariffs and trade negotiations, and consumer demand softness, no earnings framework for 2025 is provided. Reiterates expectation to deliver approximately $160 million in free cash flow in fiscal '25. Q4 has started well with more normalized sales than Q3

• Global Tariffs: Unpredictable nature of global tariffs and trade negotiations, especially between U.S. and China, which could impact costs and sales.
• Consumer Demand: Softness in U.S. and Europe consumer demand, leading to category declines in some businesses

Q: Could you reasonably quantify how much sales you left on the table by stopping shipments and other internal actions in Q3 and what impact lingers into Q4?

A: Estimated $30 million left on the table in Q3, with less lingering into Q4 Q: Why is guidance still difficult even with improved clarity on tariffs?

A: Q3 had a lot of noise with supply chain disruptions, cost cuts, etc., and trade situation is still fluid, so it's irresponsible to predict accurately but things are looking better in Q4 Q: Talk about capital allocation strategy in a soft consumer environment and changes to where you are investing?

A: Capital allocation focuses on brand investment, with plans for accretive acquisitions in Pet and Home & Garden, and continuing share buybacks. M&A environment has uncertainty but is improving slowly Q: Give more color on pet category, channel mix, share gains, and supply constraints?

A: Pet category faced challenges from consumer sentiment and trade downs, but pricing is in place, and there's optimism with new leadership and product launches. Share gains in some areas despite supply constraints Q: View on consumer demand across price points and pricing implementation?

A: Consumer has been resilient, with more judicious spending. Pricing is strategic and targeted, with an annualized incremental target of $20 million to $25 million for '26 to mitigate tariff exposure