Avery Dennison Q1 Earnings Call Highlights

Key Points

• Q1 results: Organic sales rose ~1% and adjusted EPS was $2.47 (up 7%); the Materials Group drove performance with stronger volumes and improved margins while the Solutions Group faced weakness.
• Intelligent labels mixed but second-half ramp expected: The platform declined low single-digits with apparel up and logistics down sharply, but management expects growth to resume in H2 driven by major program ramps—notably a Walmart food rollout.
• Inflation, pricing and Q2 guide: Raw materials shifted from deflation to inflation (expecting high-single-digit sequential inflation in Q2), Avery Dennison is implementing low- to mid-single-digit price increases, and guided Q2 organic sales of 0–2% with adjusted EPS of $2.43–$2.53.

Avery Dennison NYSE: AVY opened 2026 with what executives described as a “strong start,” posting first-quarter organic sales growth of 1% and adjusted earnings per share of $2.47, up 7% from the prior year. Management pointed to mid single-digit volume and mix gains, productivity, and currency benefits, partially offset by higher employee-related costs and continued investment spending.

Quarter performance driven by materials strength and productivity

President and CEO Deon Stander said the quarter underscored the company’s “resilience,” with stronger results in the Materials Group offsetting softer performance in the Solutions Group. “Growth in our base label materials business more than compensated for temporary softness in certain high-value categories,” Stander said.

Stander also highlighted a shift in raw material trends. He said “geopolitical uncertainty has triggered a significant shift in raw material inflation,” adding that the company is responding with price increases and “material reengineering” to protect profitability.

Chief Financial Officer Greg Lovins said first-quarter reported sales rose 7% year over year, including about five points of growth from foreign currency translation and one point from the Taylor Adhesives acquisition, with the remainder driven by organic growth and partially offset by deflation-related price reductions. Lovins added that the quarter benefited from customer pre-buying ahead of price increases, particularly late in March, which the company estimated as an approximate $0.05 tailwind to earnings.

Segment results: Materials grew; Solutions pressured by base categories and costs

In the Materials Group, Stander reported sales increased 11% and organic sales grew about 2%, driven by mid single-digit volume and mix growth, partially offset by deflation-related price reductions. Base categories grew mid single-digits, while high-value categories fell low single-digits.

Stander said high-value platforms were affected by “difficult year-over-year comparisons, customer order timing, and softer auto end market sales,” with graphics and reflectives down mid single-digits and performance materials down low single-digits. He added the company expects these categories to return to growth during the year.

Lovins provided regional detail for Materials Group volume and mix, citing mid single-digit growth in North America, about 10% growth in Europe and Asia Pacific, and high single-digit growth in Latin America. He also said the Taylor Adhesives acquisition “continues to perform in line with our expectations.”

Profitability in Materials improved, with Lovins reporting adjusted EBITDA up 12% and margins up 10 basis points, supported by productivity and a net benefit of pricing versus raw materials, including material reengineering, and strong label volumes. Stander said the margin improvement came despite “a less favorable product mix and high employee-related costs.”

In the Solutions Group, reported sales declined 3% and organic sales fell 1%. Stander said high-value categories grew low single-digits, but base categories were down mid single-digits and “slightly worse than expected.” Within high-value categories, Vestcom and Embelex delivered mid single-digit growth, partially offset by intelligent labels, which were down low single-digits.

Solutions profitability contracted. Stander said adjusted EBITDA margin was 16.4%, down 80 basis points year over year, as operational efficiencies and pricing/raw material benefits were outweighed by employee-related costs, lower base category volumes, and growth investments. Lovins echoed that dynamic and tied base category weakness to “continued softness in apparel demand” as the company lapped a strong pre-tariff baseline in the first quarter of 2025 and customers continued inventory management.

Intelligent labels: apparel grew, logistics declined; second-half ramp remains the focus

Avery Dennison’s enterprise-wide intelligent labels platform declined low single-digits year over year and came in “slightly below our growth expectation,” Stander said. He described “a tale of two different dynamics,” with apparel and general retail sales up low single-digits despite a tough comparison, while logistics was down low double-digits.

Stander attributed the logistics decline largely to softer customer demand and inventory management tied to a chip transition. In Q&A, he said the first-quarter intelligent labels result was “slightly lower than we’d anticipated, mostly on kind of the logistics volume that we saw.” He added that while the company has not provided a specific outlook for the business, he still expects intelligent labels growth in 2026 relative to 2025, driven by major program ramps in the back half of the year—particularly in food.

Asked about the logistics decline, Stander said “the majority” of the softness was due to end-customer demand, with some impact from chip timing that he expects to be “largely resolved by the time we get through the second quarter.” He also noted the company is lapping outsized logistics volume and share from 2025, when competitors struggled to service the account, and said the company is expanding pilots with other logistics providers during 2026.

On cadence, Stander told analysts the company expects “a significant ramp in the second half of the year,” with growth improving as the year progresses and finishing 2026 above 2025 levels for the platform. He said the food category is set for an “inflection” as the rollout with the largest U.S. grocery retailer—later referenced as Walmart—ramps across bakery, meat, and deli in the second half.

Inflation, pricing actions, and second-quarter outlook

Lovins said raw material costs were deflationary in the first quarter but “shifted to inflation as we went through March,” with commodities tied to petrochemical prices. He said the company is anticipating “high single-digit sequential inflation in the second quarter.”

On pricing, Lovins said Avery Dennison is implementing price increases “pretty much across the globe” and expects low- to mid single-digit sequential price impacts from the first quarter to the second quarter to offset inflation pressures. However, he said there is still some year-over-year “carryover deflation” affecting comparisons, and the company expects “a slight overall net price increase in Q2 versus prior year.” Stander added the company does not anticipate a meaningful timing gap between inflation and pricing, saying pricing execution has improved over recent cycles.

For the second quarter, management guided to organic sales growth of 0% to 2%. Lovins said reported sales growth is expected to be 2% to 4%, including about 1% from currency and about 1% from the Taylor Adhesives acquisition. Adjusted EPS is expected to be $2.43 to $2.53.

Lovins also addressed expected seasonality, noting that the first quarter included a $0.05 benefit from customer pre-buying that would reverse in the second quarter, creating a “$0.10 swing” from Q1 to Q2. He said the usual seasonal benefit typically offsets much of that, and reiterated expectations for sequential earnings improvement through the year, supported by productivity, improving high-value category growth, buyback impacts, and continued execution.

Capital allocation, cash flow, and investments including Wiliot

The company generated adjusted free cash flow of $104 million in the quarter, which Lovins attributed primarily to improved working capital and disciplined capital expenditures. Avery Dennison ended the quarter with a net debt to adjusted EBITDA ratio of 2.4.

Lovins said the company returned $133 million to shareholders in the first quarter through $72 million in dividends and $61 million in share repurchases, with the majority of repurchases completed in March. He said buybacks will continue to follow a return-based approach, with pacing influenced by share price movements, while maintaining flexibility for organic investment, M&A, and other uses of capital.

Stander also highlighted an agreement to invest an incremental $75 million in Wiliot, describing it as deepening a long-standing partnership and strengthening Avery Dennison’s intelligent labels platform. In Q&A, he said Wiliot’s Bluetooth-based technology is particularly relevant for condition monitoring, such as temperature, humidity, and light sensing, in use cases including food, pharmaceuticals, and certain logistics applications. Stander said the partnership expands the total addressable market for the intelligent labels platform and positions Avery Dennison as a scaled design and manufacturing partner to help bring Wiliot’s technology to commercial scale.

About Avery Dennison NYSE: AVY

Avery Dennison NYSE: AVY is a global materials science and manufacturing company specializing in labeling and packaging solutions. The company develops pressure-sensitive materials, tags and labels, and adhesive technologies that help brands and businesses enhance product identification, branding and supply-chain performance. Avery Dennison's offerings range from industrial and retail labeling to high-performance tapes, films and graphics materials used across multiple end markets.

The company operates through several key segments, including Label and Graphic Materials, which supplies pressure-sensitive materials for consumer goods; Retail Branding and Information Solutions, offering apparel tags, RFID inlays and digital product identification; Pressure-Sensitive Materials, providing specialty tapes and adhesives; and RF Technologies, focused on advanced RFID and IoT labeling solutions.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.