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Growth Endeavors to Aid Spectrum Brands (SPB) Amid Inflation
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Spectrum Brands Holdings, Inc. (SPB - Free Report) has been gaining from productivity actions and gains from cost-reduction actions. Also, the continued momentum in the Home & Personal care segment bodes well.
In fourth-quarter fiscal 2022, sales in Spectrum Brands’ Home & Personal Care segment increased 11.5% to $344.9 million. The upside can be attributed to an $88.1-million contribution from the recently acquired Tristar business. This marked the 13th successive quarter of sales growth in the Home & Personal care segment.
SPB is progressing well with the integration of its recently acquired Tristar into its Home and Personal Care Appliances business, and renamed it Empower Brands. Tristar’s direct-to-consumer capabilities and innovation pipeline are likely to aid the segment’s top line in the near term.
The company is progressing well with its Global Productivity Improvement Plan (GPIP), which aims at improving its operating efficiency and effectiveness, while focusing on consumer insights, and growth-enabling functions, including technology, marketing, and research and development. The majority of the savings are expected to be reinvested into growth initiatives and consumer insights, R&D, and marketing across each business. The plan will enable the company to deliver value creation and sustainable growth in the long term.
Spectrum Brands is on track with its four core pillars to drive growth. In this regard, the company is streamlining its organizational structure and re-energizing the employee base. Management is protecting and deleveraging its balance sheet, while solidifying liquidity. It is focused on transforming the company into a pure-play global Pet and Home & Garden business. As part of its strategic transformation, the company anticipates concluding the HHI transaction and collecting $4.3 billion in cash by June 2023.
Driven by these factors, management issued upbeat 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 despite inflation headwinds, offset by the annualization of pricing efforts and further planned price rise, along with added productivity actions and gains from cost-reduction actions.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 45.1% in the past three months compared with the industry’s growth of 14.7%.
Hurdles on the Way
Spectrum Brands is grappling with 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 expects the tough macroeconomic environment to continue in fiscal 2023.
The downsides led to a drab fourth-quarter fiscal 2022, wherein the top and bottom lines lagged the Zacks Consensus Estimate. Net sales fell 1.1% year over year to $749.5 million. Excluding the currency headwinds and sales gains from buyouts, organic net sales declined 7.3%. 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. The adjusted EBITDA margin contracted 44 bps to 10% due to reduced volume and currency headwinds.
Wrapping Up
We believe that Spectrum Brands will sustain its momentum, driven by the robust demand in the Home & Personal Care segment, contributions from the GPIP and a positive fiscal 2023 view. Topping it, a VGM Score of B reflects its inherent strength.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates increases of 4.7% and 24.6%, respectively, from the year-ago period’s reported levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates improvements of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.
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Growth Endeavors to Aid Spectrum Brands (SPB) Amid Inflation
Spectrum Brands Holdings, Inc. (SPB - Free Report) has been gaining from productivity actions and gains from cost-reduction actions. Also, the continued momentum in the Home & Personal care segment bodes well.
In fourth-quarter fiscal 2022, sales in Spectrum Brands’ Home & Personal Care segment increased 11.5% to $344.9 million. The upside can be attributed to an $88.1-million contribution from the recently acquired Tristar business. This marked the 13th successive quarter of sales growth in the Home & Personal care segment.
SPB is progressing well with the integration of its recently acquired Tristar into its Home and Personal Care Appliances business, and renamed it Empower Brands. Tristar’s direct-to-consumer capabilities and innovation pipeline are likely to aid the segment’s top line in the near term.
The company is progressing well with its Global Productivity Improvement Plan (GPIP), which aims at improving its operating efficiency and effectiveness, while focusing on consumer insights, and growth-enabling functions, including technology, marketing, and research and development. The majority of the savings are expected to be reinvested into growth initiatives and consumer insights, R&D, and marketing across each business. The plan will enable the company to deliver value creation and sustainable growth in the long term.
Spectrum Brands is on track with its four core pillars to drive growth. In this regard, the company is streamlining its organizational structure and re-energizing the employee base. Management is protecting and deleveraging its balance sheet, while solidifying liquidity. It is focused on transforming the company into a pure-play global Pet and Home & Garden business. As part of its strategic transformation, the company anticipates concluding the HHI transaction and collecting $4.3 billion in cash by June 2023.
Driven by these factors, management issued upbeat 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 despite inflation headwinds, offset by the annualization of pricing efforts and further planned price rise, along with added productivity actions and gains from cost-reduction actions.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 45.1% in the past three months compared with the industry’s growth of 14.7%.
Hurdles on the Way
Spectrum Brands is grappling with 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 expects the tough macroeconomic environment to continue in fiscal 2023.
The downsides led to a drab fourth-quarter fiscal 2022, wherein the top and bottom lines lagged the Zacks Consensus Estimate. Net sales fell 1.1% year over year to $749.5 million. Excluding the currency headwinds and sales gains from buyouts, organic net sales declined 7.3%. 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. The adjusted EBITDA margin contracted 44 bps to 10% due to reduced volume and currency headwinds.
Wrapping Up
We believe that Spectrum Brands will sustain its momentum, driven by the robust demand in the Home & Personal Care segment, contributions from the GPIP and a positive fiscal 2023 view. Topping it, a VGM Score of B reflects its inherent strength.
Stocks to Consider
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hilton Grand Vacations (HGV - Free Report) , RCI Hospitality Holdings (RICK - Free Report) and Hyatt Hotels Corporation (H - Free Report) .
Hilton Grand Vacations currently sports a Zacks Rank #1 (Strong Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates increases of 4.7% and 24.6%, respectively, from the year-ago period’s reported levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates improvements of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.