Newell Brands Q1 Earnings Call Highlights

Key Points

• Q1 beat expectations: Management said results were ahead across key metrics as improving point-of-sale trends and market-share gains (six of the top 10 brands) plus a ≈$25M customer-program pricing benefit drove a 70 bps expansion in normalized gross margin, even as core sales fell 3.5% and normalized EPS was a loss of $0.05 (better than prior guidance).
• Guidance raised: Full-year outlook was nudged higher with net sales now expected to be flat to +2%, core sales -1% to +1%, and normalized diluted EPS raised to $0.56–$0.60 while normalized operating margin guidance remains at 8.6%–9.2%.
• Cost and tariff headwinds but partial offsets: Management now expects about $50M of incremental commodity/transport inflation (resin costs assumed ~40% higher YoY and diesel ~ $5/gal), offset roughly half by tariff relief with estimated 2026 tariff P&L costs of ~$120M (the company is pursuing ~$120M of IEEPA tariff refunds not included in guidance); operating cash flow was an outflow of $233M and net leverage stood near 5.4x.

Newell Brands NASDAQ: NWL opened fiscal 2026 with first-quarter results that management said came in ahead of expectations across key metrics, supported by improving point-of-sale trends, market share gains in several major brands, and a customer-program pricing benefit that aided both sales and margins.

Quarterly performance beats internal expectations

President and CEO Chris Peterson said the company delivered “a strong start to the year,” with results “ahead of expectations across all key financial metrics.” Core sales declined 3.5% in the quarter, but Peterson said the trajectory improved sequentially and versus the prior year, citing better-than-expected consumer demand and a net pricing benefit tied to customer programs.

Peterson attributed improved demand to strengthening point-of-sale (POS) and market share trends that he linked to “our focus on innovation and higher levels of advertising and promotion support.” He said the improvement was most pronounced in the U.S. brand portfolio, where six of the company’s top 10 brands gained market share in the first quarter. For the first time in more than four years, Peterson added, six of Newell’s top 10 brands posted year-over-year POS growth, and seven of the top 10 improved sequentially versus the fourth quarter.

Chief Financial Officer Mark Erceg reported first-quarter net sales declined 1.1% year over year, while core sales fell 3.5%. The difference between net and core results reflected 2.7 points of favorable foreign exchange and 0.3 points from exits and other impacts, he said.

Erceg said normalized gross margin expanded 70 basis points to 33.2%, as productivity and favorable net pricing actions more than offset cost inflation, tariff costs, and lower volume. Normalized operating margin was 4.8%, up 30 basis points from a year ago and “ahead of our expectations,” he said.

Erceg also highlighted a “refinement of estimates related to customer programs,” reflecting better claims experience and improved deduction management, which produced an approximately $25 million net pricing benefit. He said the benefit contributed about 160 basis points to core sales growth and about 110 basis points to the quarterly gross margin rate. On earnings, the company posted a normalized loss of $0.05 per diluted share, which Erceg said was ahead of the guidance provided on the prior call, helped by the sales and margin performance and a lower-than-expected effective tax rate. Erceg noted the quarter’s normalized effective tax rate was 0%.

Segment commentary and innovation pipeline

Peterson said all three segments delivered core sales growth above plan, with Learning and Development returning to core sales growth and described as “the strongest part of the portfolio” in the quarter. He said the segment’s performance was led by Baby, which grew 4.9% in the first quarter on strong consumer demand, positive POS trends, innovation, and share gains.

Peterson reiterated that 2026 is the first year of the company’s turnaround effort with what he called a “robust, consumer-relevant innovation pipeline” supported by “competitive A&P levels and strong retail activation plans.” He said Newell plans to launch 25 Tier 1 and Tier 2 innovations in 2026, up from 18 last year, spanning all businesses.

In the Q&A session, Peterson pointed to specific innovation examples, including the Graco 360 EasyTurn 2-in-1 rotating car seat and SmartSense swing and bassinet. He also cited strong demand for the Coleman Snap ‘N Go Cooler, saying the company raised its forecast for the product “five times in the last three months.”

Erceg said advertising and promotion (A&P) spending was “just north of 5%” of sales, about 30 basis points higher than a year ago, as the company invests behind what he described as the strongest innovation program Newell has had since at least the Jarden acquisition.

Commodity inflation and a shifting tariff landscape

Management devoted significant time to cost pressures tied to oil and trade policy changes. Peterson said the company now expects approximately $50 million of incremental commodity and transportation inflation versus the original plan, with higher resin costs representing about 60% of that increase. He added that direct resin purchases are roughly 5% of 2025 total cost of goods sold, down materially from historical levels, and said Newell uses contract structures that provide visibility and reduce spot-market volatility.

Erceg provided additional detail, tying higher expected resin and diesel costs to oil prices. He said that for the balance of the year Newell is assuming resin costs per pound will be up about 40% versus year ago and about 40% higher than what the company paid in the first quarter. He also said the company now expects diesel to average about $5 per gallon for the remainder of the year, with prices peaking in the second quarter before tapering in the second half. Erceg said the P&L impact of resin inflation should be weighted more to the back half due to inventory timing, while fuel costs affect the P&L more immediately.

On tariffs, Peterson said the framework had “shifted materially” since the last call, noting IEEPA tariffs were invalidated, a temporary 10% tariff was implemented under Section 122, and new Section 301 investigations are underway. Despite the uncertainty, he said the current regime is a help versus Newell’s initial outlook, and the company expects tariff relief to offset about 50% of the incremental commodity headwind, with the remainder offset by productivity savings and targeted pricing and promotion adjustments.

Erceg said that, based on current assumptions—including that expiring Section 122 tariffs are replaced by a mix averaging a 15% effective rate—the company now expects 2026 tariff-related P&L costs of $120 million, or $0.24 per share, which is $26 million, or $0.06 per share, better than the company’s original expectation. He also provided an estimated quarterly cadence of tariff impacts for 2026 of $0.10 in Q1, $0.07 in Q2, $0.05 in Q3, and $0.03 in Q4.

Both Peterson and Erceg said Newell intends to pursue refunds tied to approximately $120 million of IEEPA tariffs paid in 2025, but emphasized that neither first-quarter results nor guidance include any benefit from potential refunds. Erceg said no receivable was recorded as of March 31 because recovery was not yet deemed both probable and reasonably estimatable.

Guidance raised on sales and EPS; margin outlook maintained

Given the first-quarter performance and expectations for improved sales trends, management raised full-year guidance for net sales, core sales, and the bottom end of normalized EPS while maintaining the normalized operating margin outlook.

• Net sales: now expected to be flat to up 2% year over year (previously -1% to +1%).
• Core sales: now expected to be down 1% to up 1% (previously -2% to flat).
• Normalized operating margin: unchanged at 8.6% to 9.2%.
• Normalized diluted EPS: raised to $0.56 to $0.60 from $0.54 to $0.60.

For the second quarter, Erceg said the company expects net and core sales to be flat to up 2%, normalized operating margin of 9.6% to 10.2%, and normalized diluted EPS of $0.16 to $0.19. He noted that second-quarter margin and EPS expectations include approximately $25 million of incremental year-over-year tariff costs, higher diesel costs, and increased A&P spending.

Cash flow, leverage, and manufacturing flexibility

On cash, Erceg reported operating cash flow was an outflow of $233 million compared with an outflow of $213 million in the prior-year period, which he said was consistent with typical seasonality. Net leverage was approximately 5.4x, based on net debt of $4.8 billion and trailing twelve-month normalized EBITDA of $881 million, compared to 5.3x a year earlier.

Erceg said Newell expects to generate an incremental $60 million of cash by year-end from investing activities related to terminating U.S. non-qualified defined benefit plans and liquidating associated life insurance assets. He added that the company has been “leaning in on inventory purchases” to bring in more inventory at what it believes will ultimately be lower tariff rates and to ensure supply as business trends improve. The company maintained its full-year operating cash flow range of $350 million to $400 million, but Erceg said it now expects to land toward the lower end of that range. Capital expenditures remain planned at $200 million for 2026.

In response to an analyst question about domestic manufacturing, Peterson said Newell has spent the past six or seven years automating much of its U.S. manufacturing footprint, which he said has created excess capacity. He said the company could generally ramp up production within about three months if it receives a material upside order due to competitor supply disruptions, though he noted that scenario is not included in guidance.

About Newell Brands NASDAQ: NWL

Newell Brands Inc, trading on NASDAQ under the ticker NWL, is a global consumer goods company known for its diverse portfolio of household, commercial, and specialty products. Formed through the merger of Newell Rubbermaid and Jarden Corporation in 2016, the company traces its roots back to Newell Manufacturing, which was founded in 1903. Headquartered in Atlanta, Georgia, Newell Brands has built a reputation for widely recognized brands spanning multiple consumer categories.

The company's business activities are organized across several segments, including writing and creative expression, home solutions, commercial products, and outdoor recreation.

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