WD-40 NASDAQ: WDFC outlined its long-term growth strategy, supply-chain approach and capital-allocation priorities during a Water Tower Research fireside chat, with management emphasizing international expansion, premium product formats, digital capabilities and specialist maintenance products.
President and CEO Steve Brass said the company’s long-term growth algorithm targets mid- to high-single-digit maintenance product sales growth, gross margin above 55%, and EBITDA growth that exceeds sales growth. The strategy is organized around four “must-win battles,” including expanding WD-40 Multi-Use Product geographically, premiumizing its product mix, growing the WD-40 Specialist line and expanding digital capabilities.
International Markets Drive Expansion Opportunity
Brass said the United States provides a stable base for global expansion, representing about 35% of global sales. The company’s U.S. maintenance-products business has posted a compound annual growth rate of roughly 6% to 7% over the past five years, he said, while U.S. sales increased by approximately $55 million over that period.
International markets account for about 65% of the business, and the WD-40 brand is available in 176 countries and territories, according to Brass. The company is focused on its top 20 global growth opportunities.
Latin America has approximately tripled over the past five to six years, Brass said. Meanwhile, the company’s direct European markets—including the U.K., France, Germany, Spain and Italy—generate about 30% of total business and have delivered single-digit to high-single-digit growth, with occasional double-digit gains.
China is WD-40’s largest growth opportunity and its third-largest market globally after the U.S. and France, Brass said. The company operates a direct China business with about 60 employees and is generating double-digit growth there. India is the company’s second-largest opportunity, with sales growth above 20% through its partnership with local company Pidilite. India is already WD-40’s second-largest market by unit volume, Brass said.
Premium Formats and Specialist Products
CFO Sara Hyzer said premiumization centers on improving the end-user experience through formats such as the WD-40 Smart Straw and EZ-REACH products. Smart Straw addresses the issue of users losing the straw included with the classic can, while EZ-REACH includes a flexible straw intended to help users access difficult-to-reach areas.
Sales of the two premium formats combined rose 19% year to date and represented about 50% of WD-40 Multi-Use Product sales, Hyzer said. By unit volume, premium formats accounted for about 40% of global Multi-Use Product sales, leaving what management views as a significant runway for further adoption.
Premium formats account for roughly 80% of sales in developed markets such as the U.S., compared with low-single-digit penetration in some emerging markets. Hyzer said WD-40 is nearing the availability of manufacturing capacity in China that would allow it to introduce Smart Straw products in China and Asian distributor markets.
- Smart Straw sells at about a 30% uplift to the classic can.
- EZ-REACH sells at about a 45% uplift to the classic can.
- The company targets 10% annual growth for the premium formats.
Brass said the WD-40 Specialist line, which includes products such as high-performance penetrants, high-temperature lubricants, silicone sprays and cleaners and degreasers, is the company’s fastest-growing range. The sub-brand has grown at a compound annual rate of about 14%, he said.
The company sees an identified growth opportunity of around $600 million for Specialist products. Brass said about 90% of Specialist sales currently come from 10 countries, creating an opportunity to expand the line into additional markets where the core WD-40 brand is already established.
Digital Growth, Margins and Supply Chain
Hyzer described digital as an accelerant for the company’s broader strategy rather than a standalone channel effort. E-commerce remains less than 10% of sales but is WD-40’s fastest-growing channel, with year-to-date e-commerce sales up 22%, led by the U.S. and China.
The company sells entirely through retail, online pure-play and omnichannel partners rather than directly to consumers. Hyzer said WD-40 is investing in product content, search, availability, ratings and reviews, while also using social media, influencers, video and digital education to explain product uses and premium-format benefits.
On costs, Hyzer said roughly 30% to 35% of the cost of a WD-40 can is subject to monthly spot-price volatility, primarily related to specialty chemicals such as solvents and base oils. Tinplate cans and manufacturing fees are generally governed by longer-term contracts.
The company expects some near-term gross-margin pressure from input costs and included a full-year gross-margin expectation of 54.5% to 55.5% in its recent guidance. WD-40 has taken price actions in Europe and Asia and is evaluating whether further actions are needed, Hyzer said.
Brass said WD-40 uses a decentralized supply chain with approximately 20 external manufacturing partners globally. The company is opening manufacturing in Thailand to add capacity in Asia-Pacific, where it already manufactures in China and Australia. Management said localized production helps provide flexibility and mitigate tariff exposure.
Capital Returns and CFO Transition
Hyzer said the company’s first capital-allocation priority is reinvesting in brands, people, digital capabilities, supply-chain resilience and productivity. Capital expenditures are targeted at approximately 1% to 2% of net sales due to the company’s outsourced manufacturing and distribution model.
WD-40 has paid dividends without interruption for more than 40 years, Hyzer said, and targets annual dividends of about 50% of net income. The company also uses share repurchases, spending $22.5 million on buybacks through the third quarter. Its board recently authorized a new share-repurchase plan of up to $100 million beginning next fiscal year.
Brass also said Hyzer is expected to transition from CFO to president of the Americas, a region representing about 45% of global revenue. The company is conducting an external search for an experienced public-company CFO, with Hyzer expected to leave the CFO role around early November and a successor hoped to begin at that time.
About WD-40 (NASDAQ:WDFC)
WD-40 Company, headquartered in San Diego, California, is best known for its flagship WD-40® Multi-Use Product, a water-displacing spray used for lubrication, rust prevention and cleaning. Since its introduction in 1953 by the Rocket Chemical Company, the WD-40 brand has become a household and industrial staple. Over time, the company has broadened its portfolio to include complementary maintenance and cleaning brands such as 3-IN-ONE® oils, Lava® hand cleaners, Solvol® solvents, Spot Shot® stain removers and X-14® cleaning products.
WD-40 Company distributes its products in more than 176 countries through retail, industrial and automotive channels.
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