Spectrum Brands (SPB) Q1 Earnings Lag on Cost Inflation
Zacks Investment Research | Feb 06, 2022 10:30PM ET
Spectrum Brands Holdings (NYSE:SPB) Inc. industry 's decline of 55.7%.
Q1 Highlights/h3
The company reported an adjusted loss of 6 cents per share against adjusted earnings of 83 cents in the year-ago period due to dismal gross margin, lower operating income and elevated SG&A expenses. The figure also lagged the Zacks Consensus Estimate of earnings of 5 cents.
Spectrum Brands' net sales grew 2.9% year over year to $757.2 million and beat the Zacks Consensus Estimate of $750 million. Acquisition-related gains of $16.5 million aided the top line, while adverse foreign currency impacts of $7.3 million remained a drag. Excluding the adverse impacts of currency and sales from buyouts, organic net sales rose 1.6%. The pandemic-led disruptions and supply-chain headwinds hurt organic sales to some extent.
The gross profit decreased 13.3% year over year to $219.3 million, while the gross margin contracted 530 basis points (bps) year over year to 29% due to elevated freight and raw-material costs. These were somewhat offset by better productivity related to the Global Productivity Improvement Program.
SG&A expenses rose 5.7% to $203.5 million. As a percentage of sales, SG&A expenses expanded 70 bps to 26.9%.
The company reported an operating loss of $23.8 million against an operating income of $25.8 million in the year-ago quarter. The downside was mainly due to dismal margins stemming from a rise in distribution costs, higher marketing investment and product innovation.
Adjusted EBITDA from continuing operation plunged 53.4% to $49.3 million in the fiscal first quarter, driven by weak operating income. The adjusted EBITDA margin contracted 790 bps to 6.5%.
/h3 Segmental Performance/h3
Sales in the Home & Personal Care segment increased 0.3% to $379.7 million. This was mainly due to strength in the Latin America region, owing to robust holiday season sales and expanded distribution, partly offset by a decline in sales stemming from the lack of availability and supply-chain constraints. Excluding the adverse impacts of foreign currency, organic net sales for the segment increased 1.7%. The segment's adjusted EBITDA of $27.4 million advanced 46.2% due to higher freight and input costs as well as the rise in marketing and advertising investments, and product innovation, which somewhat offset better productivity.
Get The News You Want
The Global Pet Care segment's sales grew 9.7% year over year to $302.2 million, primarily driven by double-digit growth in aquatics and continued growth in the companion animals category. Excluding the unfavorable impacts of foreign currency and sales from acquisitions, organic sales rose 7.3%. The segment's adjusted EBITDA slumped 27.8% to $38.7 million due to higher freight and input costs as well as the rise in marketing and advertising investments, and product innovation, which somewhat offset improved productivity.
The Home & Garden segment's sales decreased 8.5% to $75.3 million primarily on dismal sales across all product categories as well as supply-chain issues. On the flip side, gains from the acquisition of Rejuvenate provided some cushion to the stock. Organic sales declined 17.9% year over year in the quarter under review. The segment's adjusted EBITDA was a loss of $7.3 million against earnings of $10.4 million in the prior-year quarter.
Other Financials/h3
As of Jan 2, 2022, Spectrum Brands’ cash and cash equivalents were $205 million, with an outstanding debt of $2,994 million. Management repurchased shares worth $110 million in the quarter under review. It has roughly $116 million available under its $600-million cash flow revolver. It earlier entered a $150-million 10b5-1 share repurchase deal, out of which $125.9 million has been used as of Jan 2.
Guidance/h3
Management retained the fiscal 2022 view. The company anticipates sales growth in the mid to high-single digits. Adjusted EBITDA is likely to rise in the low-single digits. Inflation is expected to be $310-$330 million, up from the earlier mentioned $240-$260 million. However, Spectrum Brands is undertaking pricing actions to overcome the hurdle.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.