Spectrum Brands Holdings, Inc. (SPB) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presented mixed signals. The company showed strong performance in the Global Pet Care and Home & Garden segments, but challenges in Home & Personal Care led to a decrease in sales. While there is optimism for future growth, especially in Pet Care, and strategic improvements, uncertainties remain. The management's reluctance to provide specific guidance and the current financial health, with significant debt, suggest a cautious outlook. Given the market cap, the stock price is likely to remain stable, resulting in a neutral sentiment.
Key Financial Performance
Net Sales Decreased 3.3% year-over-year, excluding the impact of $18.5 million of favorable foreign exchange. Organic net sales decreased 6%, primarily due to demand softness in the Home & Personal Care business and an accelerated seasonal inventory build by Home & Garden customers in the prior year. This was partially offset by growth in the Global Pet Care business.
Gross Profit Decreased by $16.2 million, with a gross margin of 35.7%, down 110 basis points year-over-year. The decline was driven by lower volume, higher trade spend, and higher tariff costs, partially offset by pricing, cost improvement actions, operational efficiencies, and favorable foreign exchange.
Operating Income Decreased by $17.6 million to $27.1 million, primarily due to the decline in gross profit.
Adjusted EBITDA Decreased by $15.2 million to $62.6 million, driven by lower volume and reduced gross margins.
Adjusted Free Cash Flow Generated nearly $60 million in the first quarter, despite the period typically being characterized by cash usage for the Home & Garden season.
Global Pet Care Net Sales Increased 8.3% year-over-year, with organic net sales up 5.8%. Growth was driven by high single-digit increases in Companion Animal sales and low double-digit increases in Aquatics sales. The growth was supported by a softer prior year comparison and market share gains in key brands like Good n Fun, DreamBone, and Nature's Miracle.
Home & Garden Net Sales Decreased 19.8% year-over-year, primarily due to an accelerated seasonal inventory build by customers in the prior year. However, the brand gained market share in the U.S. pest control category, and e-commerce sales reached their best-ever first quarter.
Home & Personal Care Net Sales Decreased 7.6% year-over-year, with organic net sales down 11.1%. The decline was driven by mid-single-digit decreases in Personal Care and high single-digit decreases in Home Appliances, impacted by consumer softness and higher product costs from tariffs.
Cash Balance Ended the quarter with $126.6 million in cash and $492.2 million available on a $500 million cash flow revolver.
Total Debt Outstanding Approximately $578.9 million, consisting of $496.1 million of senior unsecured notes and $82.8 million of finance leases.
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Operating Highlights
Global Pet Care: Returned to growth this quarter, driven by strong performance in Companion Animal and Aquatics categories. Key brands like Good n Fun, DreamBone, and Nature's Miracle gained market share. New product launches, such as Nature's Miracle outdoor stain remover and FURminator grooming products, contributed to growth.
Home & Garden: Launched successful products like Spectracide Wasp, Hornet & Yellowjacket Trap and Hot Shot flying insect trap. Expanded distribution and marketing investments are expected to drive growth in fiscal '26.
Home & Personal Care: Introduced a multi-brand global ice cream maker and expanded TikTok Shop to Germany and the U.S. Remington recognized as the #1 flat iron in the U.S.
North America: Gained market share in Companion Animal categories within Global Pet Care. Strong performance in pest control categories for Home & Garden.
Europe: Good Boy brand expanded across Continental Europe, gaining traction and new distribution points. Tetra's NutriEvolution launch drove market share gains in Germany.
LatAm: High teens growth driven by new product launches in Personal Care and Home Appliances.
Financial Position: Generated $60 million in adjusted free cash flow in Q1. Repurchased 800,000 shares for $42.3 million year-to-date. Maintained a strong balance sheet with $127 million in cash and net leverage of 1.65 turns.
Operational Excellence: Continued deployment of SAP's S/4HANA platform in appliance business and international regions. Focused on cost improvement actions and operational efficiencies.
M&A Strategy: Exploring acquisition opportunities in Global Pet Care and Home & Garden businesses. Committed to finding a strategic solution for the Home & Personal Care business.
Brand Investments: Adopted a 'fewer, bigger, better' approach to focus resources on high-impact initiatives. Investments in innovation and marketing are driving market share gains.
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Risk or Challenges
Tariff-related disruptions: The company faced significant challenges due to tariff-related disruptions in fiscal '25, which impacted supply chains and increased product costs. These disruptions continue to affect the Home & Personal Care business, reducing sales volume and profitability.
Softness in global consumer demand: Global consumer demand remains subdued, particularly in the Home & Personal Care business, with continued softness in both Home Appliances and Personal Care categories. This is impacting sales and overall financial performance.
Seasonal inventory build timing: The Home & Garden business experienced a decline in net sales due to an accelerated seasonal inventory build by some customers in the prior year, which created an unfavorable comparison for the current quarter.
Higher tariff costs: Higher tariff costs have negatively impacted gross margins and adjusted EBITDA across multiple business units, including Global Pet Care and Home & Personal Care.
Operational challenges with ERP implementation: The ongoing deployment of the SAP S/4HANA platform has been a significant undertaking, requiring substantial resources and posing operational challenges.
Retailer inventory adjustments: One major retailer in EMEA was left with higher inventory levels following a weaker-than-anticipated holiday season, resulting in lower replenishment orders and impacting sales in the Home & Personal Care business.
Macroeconomic volatility: Macroeconomic conditions remain challenging, with volatility impacting consumer sentiment and demand, particularly in durable goods and Home & Personal Care categories.
Category demand softness: The Home & Personal Care business continues to face category demand softness, particularly in North America and EMEA, which is affecting sales and profitability.
Reduced product portfolio: The company has taken SKU rationalization actions to address changes in trade policy, which has reduced the product portfolio and impacted sales in the Home & Personal Care business.
Weather-dependent sales in Home & Garden: The Home & Garden business is highly dependent on favorable weather conditions, which could impact sales if weather patterns do not align with expectations.
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Guidance & Outlook
Revenue Expectations: The company expects net sales to be flat to up single digits for fiscal 2026, with growth in Global Pet Care and Home & Garden businesses, while Home & Personal Care is expected to decline.
Adjusted EBITDA: Adjusted EBITDA is expected to grow in the low single digits, driven by sales growth in Global Pet Care and Home & Garden businesses, expense management, continuous improvement initiatives, and FX favorability.
Adjusted Free Cash Flow: Adjusted free cash flow as a percentage of adjusted EBITDA is expected to be around 50%.
Home & Garden Business: Net sales growth is expected in fiscal 2026, with strong category POS trends and expanded distribution of new product launches. Growth is anticipated to be weighted towards the second half of the fiscal year.
Global Pet Care Business: Modest growth is expected for fiscal 2026, supported by strong innovation, brand activation, and improving POS trends. The business has returned to growth in Q1 2026.
Home & Personal Care Business: A decline in full-year net sales is expected due to global consumer demand softness and a reduced North American product portfolio. Sequential improvement is anticipated in the second half of the year.
Operational Excellence: The company continues to make progress on the deployment of the SAP S/4HANA platform, with further rollouts planned for the appliance business and international regions.
M&A Landscape: The company is optimistic about acquisition opportunities in Global Pet Care and Home & Garden businesses, aiming to be the consolidator of choice in these categories.
Tariff Mitigation: Tariffs are expected to be largely offset through pricing and other mitigation actions.
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Shareholder Return Plan
Dividends: During the first quarter, the company returned $46 million to shareholders through buybacks and dividends.
Share Repurchase: The company repurchased approximately 600,000 shares in the first quarter and continued to buy back shares after the quarter ended. Year-to-date, approximately 800,000 shares have been repurchased for $42.3 million. Since the close of the HHI transaction, the company has returned approximately $1.4 billion to shareholders through share repurchase programs, reducing the share count by almost 45%. A new $300 million share repurchase program has been authorized by the Board.
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Key Q&A
Q:One of your competitors stated their belief that we've reached a bottom in Pet. Do you agree with that assessment and can you provide any color around your view?
A:David Maura stated that he could not predict tops and bottoms but emphasized the company's focus on investments and market share gains in Pet. He acknowledged turbulence in the Pet category and soft pockets but refrained from making a definitive statement.
Q:How committed are your retailers to the Garden category this upcoming season? Are you in a position to chase if the weather cooperates and demand is better than in the last few years?
A:David Maura expressed bullishness on the Home & Garden business, citing operational improvements, innovation, and consumer endorsement of new products. He noted that while weather impacts the business, current POS trends are encouraging. He projected Q2 to be flat or slightly up year-on-year, with a strong back half for Home & Garden.
Q:Can you talk about your views in terms of the arc of anticipated improvement as you get from the flat to plus low single digits for the year?
A:Faisal Qadir explained that the Pet business is back to growth and expected to continue growing. Home & Garden is expected to have a strong back half due to normal weather seasonality. Home & Personal Care will face pressure in Q2 but stabilize in the second half. Overall, growth will vary by business segment.
Q:Are the levels of investment in brands where you want them? Might they increase or decrease?
A:Faisal Qadir stated that investments in Global Pet Care and Home & Garden are at the right levels. Investments in Home & Personal Care have been pulled back due to top-line challenges but could be increased if the second half improves. The focus is on reconfiguring investment dollars for better returns.
Q:Are you at the level of new product introduction you want to be at for FY '26 and beyond?
A:Faisal Qadir highlighted successful product launches in Home & Garden and Global Pet Care, with plans to expand distribution and introduce more products. He expressed confidence in the innovation pipeline for both segments.
Q:How would you characterize the progress made towards objectives for the HPC business? What gives you confidence in executing plans for the business?
A:David Maura discussed challenges like tariffs and supply chain disruptions but expressed satisfaction with managing volatility and achieving $20 million in EBITDA in Q1. He noted industry challenges but highlighted the company's strong financial position and outlook for improved profitability in fiscal '26.
Q:Can you provide perspective on EBITDA cadence and confidence in achieving the full-year objective?
A:David Maura explained that Q2 will remain challenging due to global market disruptions but expects Q3 and Q4 to drive EBITDA growth in the appliance unit. He emphasized the company's efforts to stabilize and improve profitability.
Q:Is there an opportunity to grow faster than low single digits in GPC? What is the demand outlook for Aquatics?
A:David Maura expressed optimism about Companion Animal growth and ongoing strategic improvements. He noted recovery in Aquatics in Europe but acknowledged challenges in North America. The focus is on innovation and better category management to drive growth.
Q:Can you quantify net wins in shelf space and their impact on the coming quarter?
A:Faisal Qadir declined to provide specific details but expressed optimism about growth from product launches and distribution gains in Home & Garden and Global Pet Care.
Q:Should we expect any unusual changes in working capital this year? Will it be a source or use of cash?
A:Faisal Qadir stated that working capital management has been strong and is expected to remain stable for the year, with no significant impact on cash flow.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on net wins in shelf space and their impact on the coming quarter, as well as refrained from making definitive statements about reaching a bottom in the Pet category.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America sale
Appliances Personal
Fun DreamBone
Garden business
Grooming
Home Appliances
Home Personal
POS brand
POS trend
Personal Care
Slide sale
Stain Odor
UK market
approach
brand market
category POS
consumables product
control category
decline sale
demand Home
deployment
effectiveness
expertise
holiday season
market share
mid teen
objective
people
position
preparation
progress
regard
result expectation
return
sale Home
sale result
share win
sign recovery
softness consumer
tariff disruption
tariff pricing
teammate
SPB Transcript
Spectrum Brands Holdings, Inc. (SPB) Q1 2026 Earnings Call Transcript
Unknown2-5
The earnings call presented mixed signals. The company showed strong performance in the Global Pet Care and Home & Garden segments, but challenges in Home & Personal Care led to a decrease in sales. While there is optimism for future growth, especially in Pet Care, and strategic improvements, uncertainties remain. The management's reluctance to provide specific guidance and the current financial health, with significant debt, suggest a cautious outlook. Given the market cap, the stock price is likely to remain stable, resulting in a neutral sentiment.
Spectrum Brands Holdings, Inc. (SPB) Q4 2025 Earnings Call Transcript
Unknown11-13
The earnings call revealed mixed performance: Global Pet Care and Home & Garden showed positive trends, while Home & Personal Care struggled. The Q&A highlighted management's strategic focus and optimism but lacked clarity on tariffs and M&A. Positive factors include a strong shareholder return plan, cost reductions, and diversification efforts. However, the decline in Home & Personal Care sales and cautious consumer behavior are concerns. Given the market cap and mixed signals, the stock is likely to remain stable, resulting in a neutral outlook.
Spectrum Brands Holdings, Inc. (SPB) Q3 2025 Earnings Call Transcript
Unknown8-7
The earnings call reveals significant sales declines across multiple segments, due to tariff-related issues and weak consumer confidence. Despite cost reductions and optimistic guidance for Q4, the lack of specific financial projections and vague management responses in the Q&A section raise concerns. The market cap suggests a moderate reaction, leading to a 'Negative' prediction.
Spectrum Brands Holdings, Inc. (SPB) Q2 2025 Earnings Call Transcript
Unknown5-10
The earnings call reveals several negative factors: declining sales and margins, consumer demand uncertainty, and competitive pressures. The Q&A highlights significant supply chain challenges and unclear management responses about tariff impacts, adding to uncertainty. Despite a strong share repurchase program, the negative elements outweigh positives. The market cap indicates moderate volatility, suggesting a stock price movement of -2% to -8% over the next two weeks.
SPB Slides
SPB Report
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