Executive Summary / Key Takeaways

• Newell Brands is executing a multi-year turnaround strategy focused on operational excellence, portfolio optimization, and front-end capability building, yielding tangible results despite a challenging macroeconomic backdrop.
• The company has demonstrated significant financial improvement, including six consecutive quarters of year-over-year gross margin expansion (Q1 2025 gross margin 32.1%, up from 30.5% in Q1 2024) and substantial debt reduction, lowering the leverage ratio from 6.3x in June 2023 to 4.9x at year-end 2024.
• Newell's extensive North American manufacturing footprint and proactive supply chain diversification away from China (U.S. imports from China reduced from ~35-40% of COGS previously to 15% in 2024, targeting <10% by end of 2025) position it competitively, particularly amidst evolving tariff policies.
• While Q1 2025 saw a net sales decline of 5.3% year-over-year, core sales trends have shown sequential improvement, and the company anticipates a return to profitable top-line growth in 2025 driven by a rebuilt innovation pipeline and distribution gains.
• Full-year 2025 guidance forecasts normalized operating margin between 9% and 9.5% (a significant improvement from 2024) and normalized diluted EPS between $0.70 and $0.76, though potential impacts from incremental China tariffs on baby gear remain a key sensitivity.

A Turnaround Story Takes Shape

Newell Brands Inc. is a global consumer goods company with a portfolio of well-known brands spanning Home and Commercial Solutions (HCS), Learning and Development (LD), and Outdoor and Recreation (OR). The company's history, marked by significant acquisitions like Jarden in 2016, has evolved from one of expansion and complexity to a focused strategy centered on simplification, operational efficiency, and building core capabilities. Facing a dynamic market characterized by inflationary pressures, soft global demand, and cautious retailer inventory management, Newell Brands embarked on a multi-year turnaround plan in June 2023, followed by the implementation of a new operating model in January 2024. This strategic pivot aims to revitalize top-line growth, expand margins, and strengthen the balance sheet.

The broader consumer goods landscape continues to reflect a bifurcation in consumer behavior, with lower-income households prioritizing essentials due to cumulative inflation, while higher-income consumers, benefiting from asset appreciation, show demand for more premium, value-driven products. Retailers, meanwhile, maintain tight control over inventory levels, influencing order patterns. Against this backdrop, Newell's strategy is designed to leverage its scale and brand equity by focusing investments on its largest and most profitable brands and markets, enhancing front-end commercial capabilities, and driving efficiency through a "One Newell" approach to supply chain and back-office functions.

Competitive Positioning and Manufacturing Advantage

Newell operates in competitive markets alongside major players like Procter & Gamble (PG), Clorox (CLX), Stanley Black & Decker (SWK), and Energizer Holdings (ENR), as well as numerous smaller and private label competitors. While Newell's scale and brand portfolio provide a foundation, historical financial performance, particularly in profitability metrics like gross and operating margins, has often lagged larger, more focused peers like PG and CLX. For instance, Newell's TTM gross profit margin stands at 34.08%, compared to PG's 51% and CLX's 43%. Similarly, Newell's TTM operating margin is 1.31%, significantly lower than PG's 22% and CLX's 13%. However, Newell's turnaround strategy is directly addressing these gaps through aggressive cost reduction and mix improvement initiatives.

A key competitive differentiator for Newell, particularly relevant in the current geopolitical and trade environment, is its extensive North American manufacturing footprint. With 15 production facilities in the U.S. and two USMCA-compliant facilities in Mexico, employing approximately 7,300 individuals, Newell manufactures over half of its U.S. revenues domestically. This contrasts with many competitors who rely heavily on sourcing from Asia, particularly China. Newell has proactively reduced its dependence on U.S. imports from China from approximately 35-40% of its cost of goods sold previously to 15% in 2024, with plans to lower this to less than 10% by the end of 2025.

This strategic positioning provides a significant advantage amidst recently announced tariffs. Categories like Writing, Coolers, Food Storage, Candles, and Blenders, where Newell has substantial U.S. or Mexican manufacturing, compete directly against China-sourced brands. Newell believes the number of categories where it is strategically advantaged by tariff-free production significantly exceeds those where it is disadvantaged. The company is actively leveraging this by engaging strategic retailers to shift shelf space and distribution towards Newell's North America-made branded products, replacing competitor or private label products now subject to higher tariffs. This includes securing notable wins in food storage and vacuum sealing bags and engaging in dialogue across 19 other categories. This manufacturing base also offers untapped capacity due to prior automation investments, allowing Newell to potentially ramp up production quickly to fill supply gaps created by tariff disruptions impacting competitors.

Operational Excellence and Innovation as Technological Levers

Newell's turnaround is underpinned by a focus on operational excellence and innovation, which serve as its primary technological differentiators in the consumer goods space. The company has invested nearly $2 billion in U.S. manufacturing since 2017, focusing on high-return automation projects and improving distribution and transportation systems. This has not only enhanced efficiency but also reduced supply chain staffing needs by 3,800 positions over the past three years, contributing to lower operating costs and enabling the absorption of fixed overhead for highly accretive unit economics as volume increases.

The "Peak" program, a frontline engagement initiative focused on continuous improvement across manufacturing plants and distribution centers, is a key driver of productivity. While still in early phases across many facilities (none have reached the highest levels of attainment yet), it represents a multi-year runway for further cost efficiencies.

Innovation is central to Newell's strategy to return to top-line growth and improve mix. The company has rebuilt its multi-year innovation funnel, focusing on consumer-led, proprietary products targeting the mid and high price points (MPP/HPP) that resonate with higher-income consumers. Recent and upcoming launches include:

• Graco SmartSense Soothing Bassinet and Swing: Detects and responds to baby's cries with soothing sound and motion.
• Graco Easy Turn 360 Car Seat: Features a 360-degree rotating design for easier child access.
• Sharpie Creative Markers: Expanded line with new colors and tips, driving market share gains (e.g., 35 points in paint markers in six months).
• Expo Proprietary Ink: Enhances vibrancy and usability on various surfaces.
• Oster Extreme Mix Professional Blender: Features patented titanium-coated blades and reversible motor technology for powerful blending (sold out year's volume in 2 months in Latin America).
• Rubbermaid EasyStore Food Storage: Designed for durability, ease of use, and efficient stacking.
• Yankee Candle Relaunch and Premium Line: Revitalizing the core with a soy wax blend and introducing a new line with custom vessels and fragrances targeting a younger demographic.
• FoodSaver Handheld Plus: A cordless handheld and countertop vacuum sealer with a marination function.

These innovations aim to drive price per unit up, gain distribution leverage, attract new consumers, and contribute to category growth. The strategic shift towards MPP/HPP products is expected to drive mix benefits, complementing the productivity gains from operational improvements and contributing to gross margin expansion.

Financial Performance and Outlook

Newell's recent financial results demonstrate progress on its turnaround. In Q1 2025, net sales decreased 5.3% year-over-year to $1.57 billion, primarily due to soft global demand and distribution losses, partially offset by innovation and pricing. Foreign currency was a 3% headwind. Despite lower sales volume, gross margin improved significantly to 32.1% from 30.5% in Q1 2024, driven by gross productivity, pricing, and lower restructuring charges, partially offset by inflation and volume impact. Operating income increased to $21 million from $16 million, benefiting from productivity and lower restructuring costs, despite higher A&P spend. The net loss was $37 million ($0.09 per share) compared to a net loss of $9 million ($0.02 per share) in Q1 2024, influenced by a lower income tax benefit in the current period.

Over the past year, Newell has shown sequential improvement in core sales trends, moving from double-digit declines in 2023 to a 2.1% decline in Q1 2025. Normalized gross margin has expanded for six consecutive quarters, and normalized operating margin has also shown consistent improvement. Full-year 2024 saw normalized gross margin expand by 460 basis points to 34.1% and normalized operating margin improve by 210 basis points to 8.2%.

Liquidity remains a focus, particularly with the $1.20 billion of 4.20% senior notes maturing in April 2026. The company plans to refinance these notes prior to maturity, citing a successful, oversubscribed refinancing in November 2024 as a positive indicator, though acknowledging no assurance of favorable terms or availability. Moody's recent downgrade to B1 adds pressure, triggering a 25 basis point interest rate increase on approximately $2.3 billion of debt effective in Q4 2025, increasing annualized interest expense by about $6 million. At March 31, 2025, Newell had $233 million in cash and $485 million in net availability under its $1 billion revolving credit facility.

Operating cash flow was $213 million in Q1 2025, a significant improvement from Q1 2024, though Q1 is typically the weakest cash flow quarter due to seasonality.

The company generated $496 million in operating cash flow in 2024, contributing to a reduction in net debt and a lower leverage ratio of 4.9x at year-end 2024.

For the full year 2025, Newell Brands is affirming its guidance, expecting net sales between -4% and -2% (including a 1% headwind from category exits) and core sales between -3% and -1%. This core sales adjustment reflects a slightly more cautious view on category growth (now expected down 1-2% vs. previously flat). Normalized operating margin is projected between 9% and 9.5%, representing a significant year-over-year improvement and more than double the evergreen target of 50 basis points. Normalized diluted EPS is guided between $0.70 and $0.76. Operating cash flow is expected between $400 million and $500 million, widened slightly due to potential tariff-induced inventory valuations. The company anticipates ending 2025 with a leverage ratio of approximately 4.5 times, moving closer to its long-term investment-grade ambition.

Risks and Challenges Ahead

Despite the positive momentum, significant risks persist. The macroeconomic environment remains uncertain, with potential impacts on consumer spending and retailer behavior. Fluctuating interest rates could increase borrowing costs, impacting profitability and refinancing efforts. Geopolitical conflicts and evolving trade policies, particularly tariffs, pose a material risk. While Newell is strategically positioned to benefit from tariffs in many categories due to its North American manufacturing, the incremental 125% China tariff, if sustained, could negatively impact normalized EPS by up to $0.10 after planned mitigation efforts, with baby gear being the most challenging category due to industry-wide reliance on China sourcing. Litigation and environmental liabilities, while currently not expected to be material based on existing reserves, carry inherent uncertainties, particularly the Lower Passaic River matter. The ability to successfully refinance the 2026 notes on favorable terms is critical for liquidity management.

Conclusion

Newell Brands is undergoing a significant transformation, moving from a period of complexity and declining performance to one focused on operational rigor, strategic portfolio management, and building core capabilities. The company's recent financial results, marked by consistent margin expansion and substantial debt reduction, demonstrate tangible progress on this turnaround agenda. Leveraging its extensive North American manufacturing footprint provides a distinct competitive advantage in the current tariff environment, creating opportunities for market share gains. While macroeconomic headwinds and tariff uncertainties, particularly concerning baby gear, present challenges, Newell's rebuilt innovation pipeline and focus on operational excellence are expected to drive sequential improvement in top-line trends and continued profitability gains. The investment thesis hinges on Newell's ability to sustain its operational momentum, effectively execute its refinancing plans, and capitalize on its strategic positioning to return to sustainable, profitable growth, ultimately enhancing shareholder value.