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Spectrum Brands (SPB) Q4 Earnings and Sales Miss on Inflation
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Shares of Spectrum Brands Holdings Inc. (SPB - Free Report) have declined nearly 4% after the trading session on Nov 18, following the drab fourth-quarter fiscal 2022, wherein the top and bottom lines lagged the Zacks Consensus Estimate. Results have been hurt by high input cost inflation, supply-chain disruptions and currency headwinds.
Also, the company’s efforts to lower high inventory levels led to reduced replenishment orders. Management also expects the tough macroeconomic environment to continue in fiscal 2023. However, it has been undertaking cost-reduction and price actions to mitigate the above-mentioned hurdles.
Shares of the Zacks Rank #5 (Strong Sell) company have lost 28.1% in the past three months compared with the industry's decline of 2%.
Image Source: Zacks Investment Research
Q4 Highlights
The company reported adjusted earnings of 48 cents per share, up 26.3% from 38 cents in the year-ago period, driven by operating income growth and a lower number of outstanding shares. However, the figure missed the Zacks Consensus Estimate of $1.04.
Spectrum Brands' net sales fell 1.1% year over year to $749.5 million and lagged the Zacks Consensus Estimate of $784 million. Acquisition-related gains of $88.1 million aided the top line, while adverse foreign currency impacts of $41.1 million remained a drag. Excluding the currency headwinds and sales gains from buyouts, organic net sales declined 7.3%. The downside was mainly due to lower replenishment orders stemming from higher retail inventory, muted demand, unfavorable currency and adverse weather conditions.
The gross profit decreased 7.2% year over year to $239.5 million, while the gross margin contracted 210 basis points (bps) year over year to 32% due to a decline in sales volume, elevated supply-chain costs and currency headwinds, which more than offset pricing actions.
SG&A expenses fell 13% to $221.9 million. As a percentage of sales, SG&A expenses contracted 400 bps to 29.6%.
The company’s operating income was $16.4 million against the prior-year quarter’s loss of $4 million, driven by cost-reduction initiatives, reduced project expenses, and lower variable incentives and stock compensation.
Adjusted EBITDA plunged 5.6% to $74.7 million in the fiscal fourth quarter. The adjusted EBITDA margin contracted 44 bps to 10% due to reduced volume and currency headwinds.
Segmental Performance
Sales in the Home & Personal Care segment increased 11.5% to $344.9 million. This was mainly due to an $88.1-million contribution from the recently acquired Tristar business.
Excluding the gains from the acquisition and the $24.8-million impact of adverse currency rates, organic net sales for the segment fell 9% due to lower replenishment orders from higher inventory and continued weakness in POS for kitchen appliances and personal care. On the flip side, robust growth in the garment care category gained from a strong category performance and market share gains.
The segment's adjusted EBITDA of $28 million surged 93.1%, whereas adjusted EBITDA margins expanded 340 bps year over year to 8.1%, driven by improved pricing, better product mix and cost-reduction initiatives, which offset current inflationary costs and unfavorable foreign currency.
The Global Pet Care segment's sales fell 5.2% year over year to $287.8 million due to adverse currency impact in EMEA, high inventory across retail and pet specialty channels, and slower aquatic equipment POS. Excluding the $16.3-million impact of unfavorable foreign currency, organic sales rose 0.2%.
The segment's adjusted EBITDA slumped 9.7% to $48.4, while the adjusted EBITDA margin contracted 90 bps year over year to 16.8% due to unfavorable currency and lower sales volume.
The Home & Garden segment's sales declined 19.4% to $116.8 million due to weakness in category POS leading to higher retailer inventory and lower replenishment orders. Excessive heat and drought led to reduced demand for repellent products. Also, the segment witnessed lower foot traffic in home centers, which hurt sales across all categories.
The segment's adjusted EBITDA of $13.1 million decreased 48.4% from $25.4 million in the prior-year quarter due to lower volumes and fixed cost absorption losses somewhat offset by cost-saving actions.
Other Financials
As of Sep 30, 2022, the company’s cash balance was $244 million, with an outstanding debt of $3,194 million.
Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise
Spectrum Brands has issued its guidance for fiscal 2023. The company expects low-single-digit sales growth, including the adverse impacts of foreign currency. Adjusted EBITDA is likely to increase year over year in the low-double digits.
As part of its strategic transformation, the company anticipates concluding the HHI transaction and collecting $4.3 billion in cash by June 2023.
lululemon presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 10.4%, on average. LULU has an expected long-term earnings growth rate of 20%.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 26.7% and 26.8% from the year-ago period’s reported numbers, respectively.
Boyd Gaming currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 11.2%, on average. BYD has a long-term earnings growth rate of 12.8%.
The Zacks Consensus Estimate for BYD’s current financial year sales and EPS indicates growth of 4.4% and 11.7%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. The company has a trailing four-quarter earnings surprise of 18.2%, on average.
The Zacks Consensus Estimate for CROX’s current financial-year sales and earnings suggests growth of 51.5% and 23.7% from the year-ago period’s reported numbers, respectively.
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Spectrum Brands (SPB) Q4 Earnings and Sales Miss on Inflation
Shares of Spectrum Brands Holdings Inc. (SPB - Free Report) have declined nearly 4% after the trading session on Nov 18, following the drab fourth-quarter fiscal 2022, wherein the top and bottom lines lagged the Zacks Consensus Estimate. Results have been hurt by high input cost inflation, supply-chain disruptions and currency headwinds.
Also, the company’s efforts to lower high inventory levels led to reduced replenishment orders. Management also expects the tough macroeconomic environment to continue in fiscal 2023. However, it has been undertaking cost-reduction and price actions to mitigate the above-mentioned hurdles.
Shares of the Zacks Rank #5 (Strong Sell) company have lost 28.1% in the past three months compared with the industry's decline of 2%.
Image Source: Zacks Investment Research
Q4 Highlights
The company reported adjusted earnings of 48 cents per share, up 26.3% from 38 cents in the year-ago period, driven by operating income growth and a lower number of outstanding shares. However, the figure missed the Zacks Consensus Estimate of $1.04.
Spectrum Brands' net sales fell 1.1% year over year to $749.5 million and lagged the Zacks Consensus Estimate of $784 million. Acquisition-related gains of $88.1 million aided the top line, while adverse foreign currency impacts of $41.1 million remained a drag. Excluding the currency headwinds and sales gains from buyouts, organic net sales declined 7.3%. The downside was mainly due to lower replenishment orders stemming from higher retail inventory, muted demand, unfavorable currency and adverse weather conditions.
The gross profit decreased 7.2% year over year to $239.5 million, while the gross margin contracted 210 basis points (bps) year over year to 32% due to a decline in sales volume, elevated supply-chain costs and currency headwinds, which more than offset pricing actions.
SG&A expenses fell 13% to $221.9 million. As a percentage of sales, SG&A expenses contracted 400 bps to 29.6%.
The company’s operating income was $16.4 million against the prior-year quarter’s loss of $4 million, driven by cost-reduction initiatives, reduced project expenses, and lower variable incentives and stock compensation.
Adjusted EBITDA plunged 5.6% to $74.7 million in the fiscal fourth quarter. The adjusted EBITDA margin contracted 44 bps to 10% due to reduced volume and currency headwinds.
Segmental Performance
Sales in the Home & Personal Care segment increased 11.5% to $344.9 million. This was mainly due to an $88.1-million contribution from the recently acquired Tristar business.
Excluding the gains from the acquisition and the $24.8-million impact of adverse currency rates, organic net sales for the segment fell 9% due to lower replenishment orders from higher inventory and continued weakness in POS for kitchen appliances and personal care. On the flip side, robust growth in the garment care category gained from a strong category performance and market share gains.
The segment's adjusted EBITDA of $28 million surged 93.1%, whereas adjusted EBITDA margins expanded 340 bps year over year to 8.1%, driven by improved pricing, better product mix and cost-reduction initiatives, which offset current inflationary costs and unfavorable foreign currency.
The Global Pet Care segment's sales fell 5.2% year over year to $287.8 million due to adverse currency impact in EMEA, high inventory across retail and pet specialty channels, and slower aquatic equipment POS. Excluding the $16.3-million impact of unfavorable foreign currency, organic sales rose 0.2%.
The segment's adjusted EBITDA slumped 9.7% to $48.4, while the adjusted EBITDA margin contracted 90 bps year over year to 16.8% due to unfavorable currency and lower sales volume.
The Home & Garden segment's sales declined 19.4% to $116.8 million due to weakness in category POS leading to higher retailer inventory and lower replenishment orders. Excessive heat and drought led to reduced demand for repellent products. Also, the segment witnessed lower foot traffic in home centers, which hurt sales across all categories.
The segment's adjusted EBITDA of $13.1 million decreased 48.4% from $25.4 million in the prior-year quarter due to lower volumes and fixed cost absorption losses somewhat offset by cost-saving actions.
Other Financials
As of Sep 30, 2022, the company’s cash balance was $244 million, with an outstanding debt of $3,194 million.
Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise
Spectrum Brands Holdings Inc. price-consensus-eps-surprise-chart | Spectrum Brands Holdings Inc. Quote
Guidance
Spectrum Brands has issued its guidance for fiscal 2023. The company expects low-single-digit sales growth, including the adverse impacts of foreign currency. Adjusted EBITDA is likely to increase year over year in the low-double digits.
As part of its strategic transformation, the company anticipates concluding the HHI transaction and collecting $4.3 billion in cash by June 2023.
Stocks to Consider
Some better-ranked companies from the Consumer Discretionary sector are lululemon athletica (LULU - Free Report) , Boyd Gaming (BYD - Free Report) and Crocs (CROX - Free Report) .
lululemon presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 10.4%, on average. LULU has an expected long-term earnings growth rate of 20%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 26.7% and 26.8% from the year-ago period’s reported numbers, respectively.
Boyd Gaming currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 11.2%, on average. BYD has a long-term earnings growth rate of 12.8%.
The Zacks Consensus Estimate for BYD’s current financial year sales and EPS indicates growth of 4.4% and 11.7%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. The company has a trailing four-quarter earnings surprise of 18.2%, on average.
The Zacks Consensus Estimate for CROX’s current financial-year sales and earnings suggests growth of 51.5% and 23.7% from the year-ago period’s reported numbers, respectively.