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Apr 03, 2022
Spectrum Brands Q2 2022 Earnings Report
Spectrum Brands' financial performance was affected by supply chain disruptions and input cost inflation, but top-line growth was achieved through pricing actions.
Key Takeaways
Spectrum Brands Holdings reported a 6.2% increase in net sales and a 2.0% increase in organic net sales for the second quarter of fiscal 2022. However, the company realized a net loss from continuing operations of $25.1 million, and adjusted EBITDA declined to $79.0 million due to supply chain disruptions, input cost inflation, and higher restructuring costs. The company is updating its 2022 earnings framework to reflect the impact of the Tristar acquisition and other headwinds.
Net sales increased by 6.2%, with organic net sales up by 2.0% despite challenges from prior-year stimulus spending.
Gross profit margin decreased by 270 basis points due to accelerated freight and input costs outpacing pricing adjustments.
Operating income decreased due to the gross profit margin decline, higher distribution costs, and investments in marketing and new products.
The company is updating its earnings framework to reflect the Tristar acquisition, expecting mid-to-high teens net sales growth and mid single-digit adjusted EBITDA growth.
Forward Guidance
Spectrum Brands is updating its Earnings Framework to include the impact of the war in Ukraine, the impact of unfavorable early season weather on H&G sales and the impact of the Tristar Business acquisition. Reported net sales growth is now expected to be in the mid-to-high teens in Fiscal 2022, with foreign exchange expected to have a negative impact based upon current rates. The Company expects Fiscal 2022 adjusted EBITDA to increase in the mid single digits. The Company continues to expect $310-$330 million of additional inflation during Fiscal 2022 and intends to offset most of the high inflation through pricing actions.
Positive Outlook
- Reported net sales growth is now expected to be in the mid-to-high teens in Fiscal 2022.
- Company expects Fiscal 2022 adjusted EBITDA to increase in the mid single digits.
- Company intends to offset most of the high inflation through pricing actions.
- Reiterating a long-term net leverage target ratio of 2.0 - 2.5 times after full deployment of HHI proceeds.
- Most Pricing Actions Implemented to Offset the Majority of Currently Projected Inflationary Increases of $310-$330 Million
Challenges Ahead
- Includes the impact of the war in Ukraine.
Historical Earnings Impact
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