In the second quarter, Spectrum Brands posted a net loss and lower sales as the company realigns the business, an effort that took another step forward with a settlement with the United States Department of Justice.
Net loss from continuing operations was $75 million, or $1.83 per diluted share, versus net loss from continuing operations of $25.1 million, or 61 cents per diluted share, in the year-before quarter. Adjusted for one-time events, diluted loss per share from continuing operations was 14 cents versus diluted earnings per share of 41 cents in the year-previous quarter.
An analyst consensus estimate published by Yahoo Finance called for adjusted diluted earnings per share loss of five cents per diluted share of five cents and revenues of $759.3 million.
Net sales were $729.2 million compared to $807.8 million in the quarter a year prior. Operating loss was $77 million versus $8.1 million in the period a year earlier.
In the Global Pet Care segment, net sales were $296.7 million versus $295.1 million in the year-past quarter while operating income was $30.3 million versus $19.9 million. In the Home & Garden segment, net sales were $153.3 million versus $196.6 million in the year-past period while operating loss was $39.8 million versus operating income of $30.4 million. In the Home & Personal Care segment, net sales were $279.2 million versus $316.1 million in the year-past quarter while operating loss was $37.3 million versus an operating loss of $19.8 million.
Factors that boosted net sales in Global Pet care included growth in companion animals, driven by chews in North America and dog and cat food in Europe, the Middle East and Africa, partially offset by declines in other hard goods and aquatic environments as compared to elevated levels in the 2022 period.
Spectrum attributed the net sales decrease in the Home & Garden segment primarily to a reduction in retailer inventory and also adverse weather conditions.
The company asserted that the net sales decline in the Home & Personal care segment was due primarily to lower consumer demand, particularly in kitchen appliances, and continued retailer inventory management in North America.
In announcing the financial results and commenting on the Department of Justice deal, David Maura, Spectrum chairman and CEO, said, “I am pleased to announce that, with the settlement agreement with the DOJ, we have reached a critical milestone in the completion of the sale of our Hardware and Home Improvement business to ASSA ABLOY for $4.3 billion in cash. We remain confident that the transaction will close no later than June 30, 2023. We believe that HHI will be better positioned for growth and innovation under ASSA ABLOY’s stewardship, and are excited for our HHI colleagues who have found an excellent home. This is a meaningful strategic pivot for Spectrum Brands, which will strengthen our balance sheet by making us a net debt-free company and allow us to devote all our resources to and prioritize the long-term growth of our remaining businesses. This transaction will also bring us closer to our long-term goal of becoming a faster growing, higher margin, pure play Global Pet Care and Home & Garden company.”
As to operations, Maura said, “While our Global Pet Care and Home & Personal Care businesses performed in line with or better than our expectations, we are disappointed with the results in our Home & Garden business for this quarter. We are facing some additional short-term headwinds as our key retail partners for the home and garden categories have continued to reduce inventory in the quarter compared to a typical seasonal build. Based upon the lower first-half demand and this further inventory reduction by our retailers, we are lowering our expectations for the year. We now expect our sales in the year to be below consumer demand, which should normalize once we get past the current fiscal year. On the positive side, our renewed focus on profitability, working capital discipline and cost management continues to pay off as we have reduced our inventory by over $340 million in the last nine months and generated positive free cash flow so far this fiscal year.”