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Spectrum Brands (SPB) Q1 Earnings Top Estimates, Sales Down

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Spectrum Brands Holdings Inc. (SPB - Free Report) reported first-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Results gained from cost improvements, the exit of non-core unproductive categories, reduced inventory and improved fill rates across all businesses.

Shares of this Zacks Rank #2 (Buy) company have gained 10.7% in the past three months compared with the industry's 4.6% rise.

Q1 Highlights

SPB reported adjusted earnings of 78 cents per share, which surpassed the Zacks Consensus Estimate of 31 cents. The figure also came favorably with the year-ago quarterly loss of 32 cents a share. This upside is mainly attributable to higher adjusted EBITDA and reduced interest expenses.

Spectrum Brands' net sales fell 3% year over year to $692.2 million but surpassed the consensus estimate of $674 million. The decline was due to an organic net sales drop of 4.6%. Also, lower sales of small kitchen appliances in North America, fewer volumes in certain Pet channels and the effect of SKU rationalizations contributed to decline. However, favorable foreign currency impacts of $11.7 million acted as a tailwind.

The gross profit increased 21.3% year over year to $244.9 million, driven by improved pricing and cost improvements, which partly offset currency headwinds and lower volumes. Meanwhile, the gross margin expanded 710 bps year over year to 35.4%.

SG&A expenses inched down 1% to $219.9 million. The company’s operating income was $25 million due to lower spending on restructuring, optimization and strategic transaction activities, fixed-cost containment efforts and reduced factoring charges, offset by higher investments in advertising and marketing. It reported an operating loss of $20.2 million in the year-ago quarter.

Adjusted EBITDA advanced 111.8% year over year to $84.3 million in the fiscal first quarter. The adjusted EBITDA margin expanded 660 bps year over year to 12.2%, driven by better gross margins and interest income, as well as lower operating and interest expenses.

Segmental Performance

Sales in the Home & Personal Care segment decreased 5.8% year over year to $343.3 million due to a category decline from lower demand, particularly in small kitchen appliances and lower sales in North America stemming from soft consumer demand and the exit of certain small Kitchen Appliance SKUs. On the flip side, higher sales in the International markets across Personal Care and small Kitchen Appliances categories somewhat offset the decline. Excluding the $6.7 million impact of favorable currency rates, organic net sales for the segment fell 7.6%.

The segment's adjusted EBITDA soared 102.3% year over year to $26.7 million. Meanwhile, the adjusted EBITDA margin contracted 420 bps year over year to 7.8% due to lower-cost inventory, inventory-associated expenses and cost-improvement efforts.

The Global Pet Care segment's sales moved down 0.2% year over year to $276.9 million, driven by persistent softness in the global aquatics category and the decision to exit multiple non-strategic categories and SKUs, offset by an increase in the companion animals category. North American sales fell on weak demand in aquatics and the SKU exits. Sales in EMEA grew on growth in the Companion Animal category resulting from higher dog and cat food sales. Excluding the $5-million impact of favorable foreign currency, organic sales fell 2%.

The segment's adjusted EBITDA grew 41.7% year over year to $52.7 per share, while the adjusted EBITDA margin expanded 560 bps year over year to 19%, driven by lower cost inventory year over year, positive product and channel mix and savings from cost-reduction efforts.

The Home & Garden segment's sales rose 0.8% year over year to $72 million, mainly backed by increased sales in the Controls business. Sales in the Cleaning category fell, as consumer demand for a few product lines within this category was soft.

The segment's adjusted EBITDA loss of $0.7 million improved from a loss of $2.4 million in the year-ago quarter, driven by increased sales, manufacturing efficiencies and lower operational costs, offset by elevated investments in innovation and advertising.

Other Financials

As of Dec 31, 2023, the company’s cash balance was $445 million, with an outstanding debt of $1.4 billion, including $1.3 billion of senior unsecured notes and $85 million of finance leases. It exited the quarter with a net debt of about $19 million.


Spectrum Brands continues to expect a low-single-digit sales decline. Adjusted EBITDA, excluding the investment income, is likely to grow in the high-single digits.

Other Key Consumer Discretionary Picks

Some other top-ranked companies are G-III Apparel Group (GIII - Free Report) , Royal Caribbean (RCL - Free Report) and lululemon athletica (LULU - Free Report) .

G-III Apparel sports a Zacks Rank #1 (Strong Buy), at present. You can see see the complete list of today’s Zacks #1 Rank stocks here.

GIII Apparel has a trailing four-quarter earnings surprise of 541.8%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 earnings per share (EPS) indicates an increase of 33% from the year-ago period’s reported level.

Royal Caribbean sports a Zacks Rank of 1, at present. RCL has a trailing four-quarter earnings surprise of 28.3%, on average.

The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases of 57.7% and 187.9%, respectively, from the year-ago period’s reported levels.

lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2, at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 18.2% and 22.8%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.

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