What WD-40 (WDFC) Said on Its Q4 Earnings Call

Key Points

• WD-40 delivered strong fiscal 2026 growth: Net sales rose 11% to $688 million, led by a 13% increase in maintenance product sales. Fourth-quarter growth was driven particularly by EIMEA and Asia-Pacific, while premiumized products, WD-40 Specialist and e-commerce also posted significant gains.
• Margins faced near-term pressure: Fourth-quarter gross margin fell 190 basis points to 52.8% because of higher chemical and raw-material costs, though management expects gradual improvement in fiscal 2027 through pricing, cost savings and mix benefits.
• Fiscal 2027 guidance calls for continued moderate growth: WD-40 projects constant-currency sales of $715 million to $735 million, earnings per share of $6.40 to $6.70, and gross margin of 54% to 55.5%. Europe, Asia-Pacific, China and the newly direct Japanese market are expected to provide key growth contributions.

WD-40 NASDAQ: WDFC reported fiscal 2026 net sales of $688 million, up 11% from the prior year, as maintenance product sales increased 13% to $665.9 million. On a constant-currency basis, maintenance product sales rose 9% for the year, at the high end of the company’s long-term target of 5% to 9% growth.

Fourth-quarter net sales increased 8% to $176.8 million, while maintenance product sales rose 9% to $170.5 million. President and Chief Executive Officer Steve Brass said the company continued to execute its growth strategy despite geopolitical and economic uncertainty, supported by its global brand, decentralized supply chain and asset-light operating model.

Regional Growth Led by EIMEA and Asia-Pacific

In the Americas, fourth-quarter sales rose 5% to $81.3 million, with maintenance product sales also up 5% to $77.8 million. Growth was driven by WD-40 Multi-Use Product sales in Latin America, including stronger performance in distributor markets such as Argentina and Ecuador. WD-40 Specialist sales in the region increased 7%, supported by U.S. distribution gains, large-retailer placements and online sales growth.

For the full year, Americas maintenance product sales increased 13% to $313.7 million, or 12% in constant currency.

Fourth-quarter EIMEA sales rose 10% to $69.2 million, driven by a 14% increase in maintenance product sales. Southern Europe benefited from commercial execution, promotions and merchandising, while India and the Middle East were major contributors in distributor markets. WD-40 Specialist sales in EIMEA increased 27%, led by growth in France, Italy and Iberia.

EIMEA fourth-quarter comparisons were affected by the prior-year divestiture of the company’s U.K. homecare and cleaning portfolio, which reduced reported sales by $2 million. Brass said the divestiture sharpened the company’s focus on faster-growing, higher-margin maintenance products. Full-year EIMEA maintenance product sales increased 13% to $259.3 million, or 6% in constant currency.

Asia-Pacific sales climbed 13% in the fourth quarter to $26.3 million, or 9% in constant currency. China sales increased $1.8 million, reflecting promotional activity and expanded distribution in traditional and e-commerce channels. Some customers also made purchases ahead of a planned price increase. Australia sales rose by just under $1 million. Full-year Asia-Pacific maintenance product sales increased 11% to $92.9 million, or 8% in constant currency.

Margins Pressured in Fourth Quarter

Fourth-quarter gross margin declined 190 basis points year over year to 52.8%. Chief Financial Officer Sara Hyzer said approximately 370 basis points of pressure from higher specialty chemical and raw-material costs was partly offset by about 170 basis points of benefits from lower aerosol can costs and lower fill fees.

Full-year gross margin increased 20 basis points to 55.3%, remaining above the company’s long-term target of 55% or more. Management said it believes the fourth quarter represented the low point for margins and expects sequential improvement beginning in the first quarter of fiscal 2027.

Hyzer said pricing actions, cost optimization, premiumization and a more favorable geographic mix are expected to support margin recovery. Incoming CFO Keith Stauffer said the company expects gross margin improvement to be gradual during the year, with margins potentially moving above 55% in the second half if its assumptions about oil-related input costs hold.

Fourth-quarter selling, general and administrative expenses increased $9.4 million to $58.2 million. The increase included higher incentive compensation accruals, freight costs related to Middle East supply chain disruptions, employee investments, software expenses and bad-debt expense. Advertising and promotion spending rose 26% to $15.8 million, or 8.9% of sales, largely reflecting U.S. promotional activity including the company’s “King of the Hill” campaign.

For the full year, non-GAAP operating income increased 6% to $110.3 million and non-GAAP diluted earnings per share rose 6% to $6.18. Adjusted EBITDA increased 6% to $120.8 million. Free cash flow totaled $97.6 million, representing 117% of non-GAAP adjusted net income.

Strategic Initiatives and Leadership Transition

Brass highlighted continued growth in premiumized products and WD-40 Specialist. Combined sales of Smart Straw and EZ Reach products rose 17% to $277.1 million, accounting for 52% of WD-40 Multi-Use Product sales. Global WD-40 Specialist sales increased 21% to $99 million, or 17% in constant currency.

The company also reported a 19% increase in pure-play e-commerce sales to $66.7 million. Digital commerce accounted for 13% of global direct-market maintenance product sales.

WD-40 recently transitioned Japan to a direct market, its first such move in Asia-Pacific since taking China direct in 2006. Brass said Japan is expected to develop more gradually than prior direct-market transitions in Mexico and Brazil, though the company expects first-year sales to be between two and four times its relatively modest fiscal 2026 sales level. The company has a five-person team in Tokyo.

The company said supply-chain initiatives delivered more than $7 million in cost reductions during fiscal 2026 through packaging enhancements, logistics efficiencies and strategic sourcing. Global on-time delivery exceeded 96%, while inventory declined to 95 days on hand, closer to its 90-day target.

Hyzer will move from CFO to division president of the Americas on Nov. 2. Stauffer, who joined the company in September, will become CFO on that date.

Fiscal 2027 Outlook

For fiscal 2027, WD-40 expects constant-currency net sales of $715 million to $735 million, representing growth of 4% to 7%. The company forecast gross margin of 54% to 55.5%, advertising and promotion investment of about 6% of net sales, operating income of $114 million to $120 million, and diluted earnings per share of $6.40 to $6.70.

The outlook assumes no material change in the economic environment and assumes crude oil prices remain near current levels during the first half before moderating in the second half. Stauffer said the company expects elevated oil-related inputs and freight costs to remain its principal cost pressures.

The company expects sales growth to be stronger in the first half of fiscal 2027, given comparisons against a particularly strong second half in fiscal 2026. Brass said the U.S. is expected to post modest single-digit growth following a strong prior year, while Europe and Asia-Pacific are expected to contribute more significantly. He also cited continued double-digit growth expectations in China, contributions from Japan and a potential recovery in the Middle East.

About WD-40 (NASDAQ:WDFC)

WD-40 Company develops and markets maintenance, cleaning and homecare products for consumers, professional tradespeople and industrial users. Its best-known product is WD-40 Multi-Use Product, a spray designed to displace moisture, protect metal, loosen rusted parts and lubricate equipment. The company also offers WD-40 Specialist products for specific maintenance applications and the 3-IN-ONE line of lubricants.

The company's homecare and cleaning portfolio has included brands such as X-14, 2000 Flushes and Carpet Fresh.

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