WD-40 Company (NASDAQ:WDFC) is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories, and homes around the world. With a history spanning over seven decades, this iconic brand has established itself as a household name, synonymous with reliable and effective maintenance solutions.
Company History and Evolution
The company’s origins trace back to 1953 when the Rocket Chemical Company was formed to develop a line of rust-prevention solvents and corrosion inhibitors for the aerospace industry. After 39 attempts, they successfully formulated the WD-40 product, which stood for “Water Displacement, 40th attempt.” The product was first sold to the public in San Diego in 1958 and quickly gained popularity for its ability to protect against rust and penetrate stubborn surfaces. From these humble beginnings, WD-40 Company has evolved into a diversified consumer products conglomerate, offering a wide range of maintenance, homecare, and cleaning solutions.
Throughout its history, WD-40 has faced various challenges, including early struggles to establish the brand and later complexities in managing a global supply chain. However, the company’s commitment to innovation, quality, and customer satisfaction has allowed it to overcome these obstacles and continue growing its business worldwide. In the 1970s, WD-40 introduced the 3-IN-ONE brand of multi-purpose lubricants, expanding its product offerings. The 1980s saw international expansion with the opening of its first foreign subsidiary in the United Kingdom. The 1990s marked the launch of the WD-40 Specialist line of more targeted maintenance products.
Recent Performance and Strategy
Despite its long-standing presence in the market, WD-40 Company has maintained a keen focus on innovation, constantly adapting to changing consumer preferences and market dynamics. In fiscal year 2024, the company reported net sales of $590.56 million, a 10% increase compared to the previous year. This impressive performance was driven by strong demand for its core maintenance products, particularly the WD-40 Multi-Use Product, which reached a new annual sales record of $453 million, an 11% increase year-over-year.
The company’s success can be attributed to its strategic Four-by-Four framework, which outlines its four Must-Win Battles and four Strategic Enablers. The Must-Win Battles focus on driving geographic expansion, accelerating premiumization, growing the WD-40 Specialist product line, and enhancing digital commerce. Meanwhile, the Strategic Enablers ensure operational excellence, sustainability, and productivity through enhanced systems.
Key Achievements
One of the standout achievements in fiscal year 2024 was the company’s success in expanding its direct distribution model in key markets. In Brazil, for example, the acquisition of the local distributor and the shift to a direct-to-retail approach resulted in an incremental $7 million in sales for the year. This strategic move not only strengthened the company’s presence in the region but also demonstrated its ability to capitalize on growth opportunities in emerging markets.
Furthermore, WD-40 Company has made significant strides in its sustainability initiatives, recognizing the importance of operating its business in a manner that creates positive environmental and societal impacts. The company has taken steps to embed sustainability into its core strategy, including adding dedicated ESG positions, conducting environmental assessments of its suppliers, and developing a science-based environmental impact roadmap.
Future Outlook
Looking ahead, WD-40 Company is well-positioned to continue its growth trajectory. For fiscal year 2025, the company is guiding for net sales growth between 6% and 11%, with net sales expected to fall within the range of $600 million to $630 million on a constant currency basis. Gross margin is anticipated to be between 54% and 55%, reflecting the company’s focus on operational efficiency and cost management.
However, it’s worth noting that the company is in the process of divesting its home care and cleaning brands in the Americas and the U.K. This strategic decision is expected to have a temporary impact on the company’s financial performance, but management believes it will unlock significant long-term benefits by allowing WD-40 Company to concentrate on its higher-growth, higher-margin maintenance products.
Financials
WD-40 Company’s financial performance has been robust, with net sales reaching $590.56 million in fiscal year 2024, representing a 10% increase from the previous year. The company’s core product, WD-40 Multi-Use Product, achieved a record $453 million in annual sales, growing 11% year-over-year.
For the most recent fiscal year (2024), the company reported net income of $69.64 million, operating cash flow of $92.03 million, and free cash flow of $87.83 million. In the most recent quarter (Q4 2024), revenue was $156.0 million, with net income of $16.8 million. Q4 revenue increased 11% compared to the prior year fiscal quarter, both on a reported basis and excluding the impact of foreign currency exchange rates.
Geographic performance has been strong across all regions. In the Americas (including the U.S., Latin America, and Canada), Q4 sales were $79 million, up 6% year-over-year. For the full fiscal year, maintenance product sales in the Americas totaled $267 million, a 7% increase compared to the prior year. In the EIMEA region (Europe, India, Middle East, Africa), Q4 sales were $59 million, up 16% year-over-year, or 15% on a constant currency basis. Full fiscal year maintenance product sales in EIMEA reached $212 million, a 17% increase from the previous year. The Asia Pacific region saw Q4 sales of $18 million, up 21% year-over-year, with full fiscal year maintenance product sales totaling $79 million, a 10% increase compared to the prior year.
Segment Performance
WD-40 Company operates through two main segments: Maintenance Products and Homecare and Cleaning Products (HCCP). The Maintenance Products segment, which includes the WD-40 Multi-Use Product, WD-40 Specialist, 3-IN-ONE, and GT85 brands, accounted for 94.5% of total net sales for the nine months ended May 31, 2024. This segment saw a 10.0% increase in net sales to $410.55 million for the same period, with gross margin improving to 53.1% from 50.9% in the prior year period.
The HCCP segment, which includes brands such as X-14, 2000 Flushes, Carpet Fresh, no vac, Spot Shot, 1001, Lava, and Solvol, accounted for 5.5% of total net sales. This segment experienced a 4.0% decrease in net sales to $24.02 million for the nine months ended May 31, 2024, primarily due to reduced demand in the U.S. market as the company focused on increasing sales of its higher-margin maintenance products.
Liquidity and Capital Structure
WD-40 Company maintains a strong financial position with a debt-to-equity ratio of 0.41 as of fiscal year-end 2024. The company held $46.70 million in cash and cash equivalents and had access to a $125 million revolving credit facility, of which $40.99 million was outstanding as of May 31, 2024. The company’s current ratio stood at 2.47, and its quick ratio was 1.70, indicating a healthy liquidity position.
Growth and Industry Trends
Over the last five years, WD-40 has achieved a compound annual growth rate (CAGR) of 10.7% for net sales of premium products and is targeting a CAGR greater than 10% going forward. For WD-40 Specialist products, the company has achieved a 5-year CAGR of 14% and is targeting a CAGR greater than 15% in the future.
Guidance and Future Expectations
For fiscal year 2025, WD-40 Company has provided guidance on a pro forma basis, excluding the impact of the home care and cleaning brands divestiture. The company expects net sales growth between 6% and 11%, with net sales between $600 million and $630 million in constant currency. Gross margin is projected to be between 54% and 55%, with advertising and promotion investment around 6% of net sales. Operating income is expected to be between $95 million and $100 million, with diluted earnings per share between $5.20 and $5.45.
This guidance builds on the company’s strong performance in fiscal year 2024, where it met or exceeded its previous guidance across all key metrics. The company’s focus on its core maintenance products, geographic expansion, and operational efficiency positions it well for continued growth and success in the coming years.
Despite the upcoming divestiture, WD-40 Company remains committed to delivering long-term value to its stakeholders. The company’s strong brand recognition, innovative product pipeline, and disciplined execution of its strategic framework position it well to navigate the evolving market landscape and continue its legacy of success.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.