Spectrum Brands Holdings remains well-positioned to weather macroeconomic and trade disruptions, but it impacted its second-quarter results.
Spectrum recorded net income of $1.8 million, or six cents per diluted share, in the second quarter, versus $49.9 million, or $1.65 per diluted share, in the year-prior quarter. Adjusted for one-time events, earnings per diluted share from continuing operations were 68 cents versus $1.40 in the year-previous period, the company stated.
A Zacks Investment Research analyst consensus estimate called for revenues of $694.9 million and earnings per share of $1.35.
Net sales were $675.7 million versus $718.5 million in the year-prior quarter. Operating income was $19.5 million or $75.9 million in the year-earlier period.
Spectrum pointed out that the net sales decline, down 6% overall and 4.6% in terms of organic revenue, which excludes a $10.1 million impact from unfavorable foreign exchange rates, primarily arose from category softness in the North American market in both the Global Pet Care and Home & Personal Care businesses and retailer inventory build timing in Home & Garden, where retailers pulled significant purchases into the first quarter, the company reported.
In the Home & Personal Care segment, net sales were $254.2 million versus $267.9 million in the year-prior quarter. Sales for both the personal care and home appliance categories slipped in the mid-single digits. Organic net sales were relatively flat, with mid-single digit growth in personal care offset by a mid-single digit decrease in home appliances. North American sales were down high single digits as each business suffered lower category demand and retailer reorder patterns.
In the Home & Garden segment, net sales were $152.3 million versus $160.7 million. Sales decreased 5.2% due to the phasing of seasonal inventory builds at certain retailers, which accelerated sales into the first quarter and the pull forward of sales into that period due to Home and Garden’s second quarter go-live on the S/4Hana enterprise application suite. Sales slipped mid-double digits in controls and mid-single digits in cleaning. Sales grew by mid-double digits in repellents and by low-single digits in household pests.
In the Global Pet Care segment, net sales were $269.2 million versus $289.9 million. Sales decreased by 7.1% and 6.3%, respectively, excluding foreign currency effects.
“While our second quarter results were challenged by macroeconomic and tariff pressures, we believe that Spectrum Brands is well positioned to navigate this period of uncertainty and ultimately thrive,” said David Maura, chairman and CEO. “For the quarter, consumer sentiment in the U.S. declined faster than we had expected for our Global Pet Care and Home and Personal Care businesses, impacting category growth. While our Home and Garden business delivered another good quarter, we saw quarterly comparable sales decline as expected because of retailer pull-forwards into Q1.”
Despite headwinds, he said, decisive actions position Spectrum for the future, Maura said..
“First, we benefit from the diversity, recession resilience and strong operating performance of our three business units and have a proven track record of navigating through difficult environments. Second, the strength of our balance sheet puts us in a unique position to capitalize on dislocation in our industry. We have one of the lowest leveraged balance sheets in our peer group and will protect our balance sheet and liquidity through cost reductions and working capital improvements. We believe our balance sheet makes us a strategic partner of choice, particularly amongst private equity-held companies. With asset prices resetting, we believe we are in an ideal position to strengthen our portfolio with attractive acquisitions.”
In response to tariffs, Maura said: “We pivoted our operating strategy to maximize cash. In addition, we have paused the import of virtually all finished goods purchases from China until the tariff levels decline to an amount where we can maintain our profitability and margins. I am happy to report that the transition of supply for the U.S. market out of China for our H&G and GPC businesses is happening relatively quickly. For H&G, we expect to have virtually eliminated this exposure by fiscal year-end. For GPC, after beginning the fiscal year with approximately $100 million of U.S.-bound product purchases from China, we expect to reduce that exposure to approximately $20 million by fiscal year-end. Our HPC business faces more of a challenge, and our teams are accelerating plans to supply appliances from lower-tariffed countries. On the positive front, HPC is our most globalized business, and historically, approximately 80% of its profits come from outside the U.S. market. Our best-in-class operations teams are hard at work securing new sources from outside of China. We believe that our long-standing relationships with suppliers and strong financial position will result in suppliers prioritizing our products in the transition out of China.”
Maura added that with the unpredictable nature of global trade negotiations and softening of U.S. and European consumer demand, the company does not have sufficient visibility to continue providing an earnings framework for fiscal 25 but does expect to generate approximately $160 million of free cash flow.”
