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Spectrum Brands (SPB) Q4 Earnings Miss Estimates, Sales Beat

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Spectrum Brands Holdings Inc. (SPB - Free Report) reported fourth-quarter fiscal 2021, wherein the bottom line missed the Zacks Consensus Estimate, while sales beat the same. Results were affected by global supply chain disruptions and fewer shipping days in the quarter under review. However, elevated inflation pressure remains concerning.

The company undertook many strategic initiatives in fiscal 2021, including acquisitions in Global Pet Care and Home & Garden businesses as well as ongoing divestiture of the Hardware & Home Improvement unit to ASSA ABLOY. That said, management expects strong growth momentum in fiscal 2022.

In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 29.9% against the industry's decline of 0.3%. Also, SPB's stock jumped more than 9% on Nov 12.

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Q4 Highlights

Adjusted earnings from continuing operations of 38 cents per share lagged the Zacks Consensus Estimate of 53 cents. The bottom line fell 2.6% from 39 cents in the prior-year quarter due to weak operating income.

Spectrum Brands' net sales grew 2.8% year over year to $747.8 million and beat the Zacks Consensus Estimate of $730 million. Excluding the positive impacts of currency and sales from buyouts, organic net sales fell 3.4% due to lesser shipping days and higher sales in the Global Pet Care and Home & Garden segments in the prior-year quarter. However, recovery from COVID-led disruptions, the favorable currency of $5.1 million and acquisition-related gains of $41.2 million aided the top line to some extent.

The gross profit increased 1.6% year over year to $258.2 million, while the gross margin contracted 40 basis points (bps) year over year to 34.1% due to elevated freight and raw-material costs. These were somewhat offset by positive mix and price as well as better productivity related to the Global Productivity Improvement Program.

SG&A expenses rose 8.8% to $218.2 million. As a percentage of sales, SG&A expenses expanded 160 bps to 28.8%.

The company reported an operating loss of $4 million against an operating income of $30.5 million reported in the year-ago quarter. The downside was mainly due to higher restructuring and transaction-related expenses.

Adjusted EBITDA from continuing operations rose 8.5% to $79.1 million in the fiscal fourth quarter, driven by gains from acquisitions, better productivity and positive price, which somewhat offset drab margins stemming from higher commodity and freight costs. The adjusted EBITDA margin expanded 55 bps to 10.4%.

Segmental Performance

Sales in the Home & Personal Care segment increased 2.3% to $309.3 million, backed by the recovery in hair and garment appliances, which offset the sluggish performance in small kitchen appliances stemming from global supply-chain delays. Excluding the positive impacts of foreign currency, organic net sales for the segment increased 1.1%. The segment's adjusted EBITDA of $14.5 million plunged 36.1% due to higher freight and input costs as well as the rise in marketing and advertising investments, which somewhat offset higher volumes, better productivity and pricing gains.

The Global Pet Care segment's sales grew 9.1% year over year to $303.6 million, primarily driven by gains from acquisitions and growth in the animal category stemming from strong demand across all channels. Excluding the favorable impacts of foreign currency and sales from acquisitions, organic sales fell 0.8%. The segment's adjusted EBITDA rose 7.4% to $53.6 million, driven by robust volume from acquisition, better productivity and pricing gains, which somewhat offset higher freight and commodity inflation.

The Home & Garden segment's sales decreased 7.3% to $144.9 million primarily on dismal sales in controls, household insecticides and repellents and fewer shipping days. On the flip side, gains from the acquisition of Rejuvenate provided some cushion to the stock. Organic sales declined 17% year over year in the quarter under review. The segment's adjusted EBITDA was $25.4 million, down 19.4% from $31.5 million in the prior-year quarter.

Other Financials

Spectrum Brands ended the quarter with cash and cash equivalents of $187.9 million, with an outstanding debt of $2,542.8 million. Management repurchased shares worth $70.2 million in the quarter under review. It has roughly $575 million available under its $600-million cash flow revolver as of Sep 30, 2021. The company recently announced quarterly dividend of 42 cents per share to be paid on Dec 14, 2021.

Management also entered a $150-million 10b5-1 share repurchase deal, out of which $16 million has been used in the reported quarter. The company boasts liquidity of more than $760 million.


Management issued the fiscal 2022 view. The company anticipates sales growth in the mid to high-single digits, driven by favorable impacts of foreign currency. Adjusted EBITDA is likely to rise in the low-single digits, with inflation of $230-$250 million. It also highlighted that inflation pressure is expected to be more pronounced in the first half of 2022.

However, Spectrum Brands is undertaking pricing actions to overcome this hurdle. As a result, it expects the second half of fiscal 2022 to witness improved year-over-year results from the first half. Savings from the Global Productivity Improvement Program are predicted to be $200 million by the end of fiscal 2022.

Here's How Other Stocks Fared

Here are the recent earnings highlights of some other stocks from the broader Consumer Discretionary space.

Crocs (CROX - Free Report) continued with its stellar performance in third-quarter fiscal 2021. Both top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Sturdy consumer demand and brand strength contributed to the upbeat performance.

Better-than-expected results prompted Crocs to raise the fiscal 2021 view. The Zacks Rank #1 (Strong Buy) company's shares have gained 23.3% in the past three months. You can see the complete list of today's Zacks #1 Rank stocks here.

Whirlpool (WHR - Free Report) posted mixed third-quarter 2021 results, with the top line missing the Zacks Consensus Estimate and earnings beating the same. Sales increased year over year, while earnings took a dive. The quarterly performance gained from strong demand and efficient cost-based pricing efforts. However, supply-chain constraints and raw material inflation affected the performance across most regions.

Management is on track with efforts to navigate the industry's challenges and deliver strong performance in the forthcoming periods. Whirlpool raised its bottom-line expectation for 2021 and increased the long-term value creation targets. The Zacks Rank #3 company's shares have gained 0.3% in the past three months.

Carter's (CRI - Free Report) reported third-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate, while the top line missed the same due to supply-chain headwinds. Nonetheless, price realization, productivity improvements, and cost management helped mitigate higher transportation expenses and enhance profit margins.

Driven by brand strength and robust marketing strategies, Carter's lifted the 2021 view. The Zacks Rank #3 company's shares have gained 3.8% in the past three months.