Ravi Saligram
President and Chief Executive Officer at Newell Brands
Thank you, Sofya. Good morning, everyone, and welcome to our call. We delivered solid results in the third quarter, which reflect the effectiveness of our strategy as well as the resilience and agility of our operating model and portfolio. Year-to-date, core sales grew 15.2% versus 2020 as each business unit contributed to such a terrific outcome. Normalized operating profit improved over 21% and normalized earnings per share increased about 14%. We further strengthened our track record as the third quarter marked the fifth consecutive quarter of core sales growth and sixth straight quarter of domestic consumption growth for the company.
Core sales in the quarter increased 3.2% driven by excellent performance across five business units, Writing, Baby, Home Appliances, Home Fragrance and Outdoor & Recreation. This was no small feat given the difficult year ago comparison of 7.2% core sales growth, which embedded a recovery across the majority of Newell's businesses. To normalize for pandemic-related shifts, we think it's useful to compare this year's top line to 2019. On a two-year stack basis, Newell's core sales grew low single digits in the third quarter. We also saw strong domestic consumption relative to 2019 across each of our business units, a terrific result and a testament to the significant progress we've been -- that we've made in forging stronger relationships with shoppers as we leverage consumer insights and foresights in new product launches.
The resurgence in our Writing business continue. The team has done a superb job during the important back-to-school season with outstanding performance in consumption and share momentum. As anticipated, top line trends moderated against elevated year ago results in our Food and commercial businesses. However, sales as well as domestic consumption for both business units remain about 2019 levels.
Consumer behavior will undoubtedly evolve and categories will continue to normalize, but we believe that home-as-hub mindset will linger on, as well the heightened interest in outdoor activities and personal well-being. It's also evident in the company's consumption trends as domestic POS remains well ahead of 2020 and 2019 levels both in the third quarter and year-to-date, despite supply constraints.
Core sales in North America mirrored that of the total company. Outside North America, Latin America stood up once again, delivering another quarter of double-digit growth despite elevated comparisons. I'm also delighted that the strength of our iconic brands continue to come through this year, harnessing the benefits from the fortified innovation funnels and our brand-building efforts. Year-to-date, many of our largest brands such as Graco, Coleman, Oster, Yankee Candle, Sharpie, Rubbermaid, First Alert, Paper Mate, Dymo, EXPO, Ball and Mr. Coffee delivered excellent top line growth. Our brand strength has also helped to successfully implement price increases.
We are laser-focused on protecting the company's gross margin. And if necessary, we will take additional pricing actions to ensure that we fully recoup the impact of inflation over time.
Similarly, to the second quarter, e-commerce top line grew mid-single digits with digital penetration close to 22%, slightly above last year and significantly ahead of the mid-teens level from 2018. We continue to invest behind our omni capabilities and are well positioned to capitalize on consumer demand regardless of where they shop.
Let me spend a few minutes on our business units beginning with Writing, the third quarter superstar. Core sales increased at a double-digit rate, driven by broad-based strength in the U.S. and international markets. Core sales grew on a two-year stack basis as well, even though the commercial channel has not fully recovered yet. This is a testament to the excellent health of our Writing business. Consumption in the U.S. has been strong throughout 2021 and accelerated sequentially in the third quarter as we leaned into the business momentum with higher A&P investment.
The vast majority of K-12 schools in the U.S. returned to in-person learnings. During the back-to-school season, we saw a strong rebound in everyday Writing business. which benefited from innovations such as Sharpie S-Gel and Sharpie S-Note, strong merchandising plans and distribution gains. We picked up considerable share during the quarter in our Writing business as a whole, including key back-to-school categories such as pens, pencils, glue, permanent markets, dry erase markers and highlighters.
Over the past two years, we've meaningfully enhanced Newell's position in the pen category, where we've gained over 850 basis points of share. Thus far, in 2021, within highlighters, Sharpie S-Note has tripled its share of the growing highlighter market segment. Core sales for our Baby business increased at a double-digit rate, supported by terrific domestic consumption growth, both relative to 2020 and '19. Q3 marked the fifth consecutive quarter of core sales growth driven by expanded points of distribution, innovation, continued strength in e-commerce as well as stimulus funding.
While Baby is the most highly penetrated business online with the Newell's portfolio, we leveraged our omni progress to further boost our digital penetration in the quarter into the mid-50s. We believe child tax credits as well as increases in disposable income and durable goods consumption have all benefited the gear market over the past several quarters. While the category is likely to moderate, we expect it to remain healthy. In the U.S., Graco continued to gain momentum and picked up share in the rapidly growing market.
Home Fragrance turned in its fifth consecutive quarter of core sales improvement as core sales grew both versus the elevated 2020 level as well as relative to 2019, driven in large part by EMEA. In the U.S., Yankee Candle retail stores maintained their positive growth momentum, benefiting from consumers increased mobility. As we continue to expand our omni capabilities, we rolled out buy online and pick up in stores as well as ship from store options across our Yankee Candle retail stores, which drove a favorable response from consumers and helped us to fulfill consumer demand. As anticipated, consumption moderated relative to the elevated base period but was significantly ahead of the 2019 level.
Home Fragrance, along with Writing and Food are our growth and value accelerator businesses, and I see tremendous run rate for growth ahead. The team is gearing up for the holidays as Q4 is a crucial period for the business.
In the third quarter, the Food business lapped its toughest double-digit core sales growth comparison of 2020 and was exacerbated by supply challenges, including a COVID-related lockdown of our Sistema plant in New Zealand, resulting in core sales decline. However, both top line and domestic consumption were meaningfully ahead of the 2019 base, which highlights the stickiness of the habits that consumers developed throughout the pandemic. We expect the category to continue to normalize, and that's been most evident on the cookware side.
We drove strong share momentum in Food Storage and Food Preserving. Recent innovations such as Rubbermaid TakeAlongs meal prep, the updated Rubbermaid beverage line as well as Brilliance Glass have been instrumental in driving market share improvement for Rubbermaid as they elevate the consumer experience. In Fresh Preserving, Ball pantry storage latch and Ball nesting jars have contributed to share gains for Ball.
In Home Appliances, core sales increased for the sixth consecutive quarter, even as we lapped the toughest double-digit comparison of the year. Latin America once again led the charge. In this market, our beloved Oster brand is spearheading the trend for multicooking functions and recently launched Oster toaster oven with air fry as well as Oster rice cooker with air fry. Throughout 2021, Oster blenders are celebrating the 75th anniversary in the U.S. and Latin America with brand activation and new product launches in each region.
Domestic POS remained significantly ahead of 2019 levels and only modestly below last year's level, although the category continues to normalize relative to the outsized growth levels seen throughout the pandemic. Despite the fact that people have come back to dine-in restaurants, consumers continue to show interest in cooking at home post the pandemic.
In our commercial business, core sales declined versus the elevated base as the business cycled against a significant surge in washroom solutions. On a two-year stack basis, gross sales increased nicely during the third quarter. The team has done a great job in landing new wins, both on the B2B and retail sides, across a wide swap of categories ranging from cleaning and refuse to material handling and others. We saw healthy POS and tracked channels but have been significantly challenged on the supply side. The team is diligently addressing these constraints as well as inflationary pressures.
During the third quarter, core sales for Connected Home & Security business were under pressure despite very strong consumption in the U.S. Core sales softness reflects both a challenging year ago comparison as we were restocking inventory at retail last year as well as component availability challenges in the current year mostly due to the well-publicized chip shortage.
Our Outdoor & Recreation business delivered its third straight quarter of core sales growth at nearly 2% against a difficult year ago comparison of 8%. Core sales improvement was fueled by the strength in the outdoor equipment and on-the-go beverage categories with the latter continuing to rebound during improved consumer mobility. We are encouraged by the momentum in the outdoor and equipment unit with POS exceeding 2019 levels.
The consumer continues to show interest in outdoors, a trend we think will endure and one we will continue to leverage throughout our innovation. Coleman turned another quarter growth benefiting from enhanced product lineup in 2021 with strong plans in place for next year as well. Many of our Coleman products such as the Skydome tent, cooler bag and two-burner stove are featured by USA today as perfect gifts for people who love to travel. So keep them in mind for the holidays.
Strong results thus far gave us confidence to improve our outlook on both top line and normalized earnings per share in 2021 despite significant inflationary and supply chain-related pressures that continue to plague the industry. Our updated guidance for 2021 implies that normalized operating profit is expected to grow high single digits, a great outcome, particularly in the context of a difficult operating environment.
Although we are certainly not immune to the external forces the strategic decisions we have actioned over the past several years have substantially strengthened the company and have made our portfolio much more resilient.
First, we invested in omnichannel capabilities that have been instrumental in capturing consumer demand across all channels and, on the direct-to-consumer side, recently completed migration of our sites in North America to one consolidated platform with a dedicated team focused on continuous improvement on consumer experience. We substantially strengthened our innovation and marketing muscle, leveraging consumer insights and foresights.
And we've sharpened brand positioning for many of our top brands. We have established joint business plans and enhanced relationships with key strategic retail partners. We've instituted a new hybrid organizational model that brings our domain experts closer to our customers and consumers while leveraging the center for scale and efficiencies.
We have made productivity a way of life. We've reduced complexity and overheads, improved cash conversion cycle and strengthened the balance sheet.
2021 has been a turning point for Newell despite challenges posed by supply and inflation. Our teams have done an incredible job executing in this environment. And we are poised to deliver 10-plus percentage core sales growth this year, a first for our company in recent history. We recognize that 2021 has been a tale of two cities, a first half and second half story. We delivered 23% core sales growth in the first half. And in the second half, we are lapping strong growth from 2020. The fact that we grew 3.2% in Q3 on top of last year's growth is an indication that our brands are resilient, are being rejuvenated, and we have the ability to grow even in this context of strong comps. The power of our diverse portfolio is coming through.
The macro issues in the pandemic have taught us that we just cannot be reactive. We're laser focused on continuing to strengthen the fundamentals and reducing complexity, including lowering SKU count, improving forecast accuracy, simplifying our IT infrastructure and making it easier for customers to do business with us. We are creating an integrated one Newell distribution network through the consolidation of over 20 supply chains under the banner of Project Ovid.
Looking forward, we expect supply challenges and inflation to persist. Therefore, our stance is one of preparedness and realism and taking proactive actions to successfully navigate the macro environment. If 2021 was a year of turbocharging the top line, 2022 will be focused on improving margins, improving margins through five primary levers.
First, an intense focus on pricing and optimizing promotional spending. We have now taken price increases in 2021 across all of our eight businesses in most geographies. Our posture will be to maximize the impact of carryover pricing from '21 into '22. And we will be prepared to take further increases in '22 based on inflationary trends to protect gross margin. Of course, we'll do this in consultation with our customers and ensure that our brands remain a great value for consumers. Second, we'll accelerate our efforts to improve the profitability of our international business. by reducing duplication, consolidating operations and adopting a one new approach. Third, we will price innovations to be margin accretive. Fourth, we will continue to be more efficient with our overheads. And finally, we'll continue to be -- strive to be best-in-class in our productivity efforts and drive about 3% to 4% improvement in COGS as we have done over the last few years.
I'm extremely thankful to our 31,000 hard-working employees for their unwavering commitment, tenacity and perseverance. I remain optimistic that Newell can create tremendous shareholder value, and our best days are ahead of us, onwards and upwards. And now over to Chris.