Executive Summary / Key Takeaways

• Newell Brands is executing a multi-year turnaround strategy focused on driving top-line growth through innovation and distribution expansion, expanding margins via operational efficiencies, and strengthening its balance sheet through debt reduction and improved cash flow. This strategy has already yielded significant improvements in gross and operating margins.
• The company's extensive North American manufacturing base provides a critical competitive advantage, particularly in the current environment of evolving tariffs. Newell is leveraging this domestic strength to gain market share and distribution from competitors reliant on foreign sourcing.
• Despite recent macroeconomic headwinds, including soft global demand, retailer inventory adjustments, and increased tariffs, Newell Brands anticipates a return to positive core sales growth in the back half of 2025, driven by a robust pipeline of new product innovations and net distribution gains.
• Newell Brands is projecting full-year 2025 normalized diluted EPS between $0.56 and $0.60 and operating cash flow of $250 million to $300 million, while aiming to end the year with a net leverage ratio of approximately 5x.
• Strategic investments in technology, including ERP harmonization and the adoption of AI, are enhancing operational excellence and are expected to further drive efficiency and overhead cost reductions in the coming quarters.

A Foundation for Growth: Strategy, History, and Competitive Edge

Newell Brands Inc. (NASDAQ:NWL) stands as a leading global consumer goods company, boasting a robust portfolio of well-known brands such as Rubbermaid, Sharpie, Graco, Coleman, and Yankee Candle. The company's strategic journey has been significantly shaped by its history, particularly the 2016 acquisition of Jarden, which, while expanding its market reach, introduced considerable operational complexity, including managing 42 disparate ERP systems. This period also saw a decline in normalized gross margins, prompting a fundamental re-evaluation of its operational model.

In response, Newell Brands initiated a multi-year turnaround plan in June 2023, centered on improving top-line performance, expanding margins, and enhancing cash flow. This strategy marked a crucial pivot from a period of consistent market share losses. A key component of this transformation has been a substantial investment of nearly $2 billion in its U.S. manufacturing capabilities since 2017, establishing an extensive North American supply base with significant untapped capacity. This domestic manufacturing footprint is proving to be a critical competitive differentiator in a dynamic global trade landscape.

The broader industry currently faces a challenging macroeconomic environment, characterized by persistent inflationary pressures, soft global consumer demand, and retailers' focus on tight inventory control. Fluctuating interest rates, indirect impacts from geopolitical conflicts, and new tariffs further complicate the operating landscape. Newell Brands, however, views these challenges as opportunities to leverage its strategic advantages.

Technological Differentiation and Operational Excellence

Newell Brands is actively enhancing its operational capabilities through significant technological and process improvements. The company's "peak" program, a continuous improvement initiative, is being systematically rolled out across its 42 global manufacturing plants and 7 North American service centers. This multi-phase program, which includes stages like "foundations," "base camp," and "climb," indicates a substantial runway for future gross margin improvements, as none of its manufacturing plants have yet reached the highest Phases (4 through 6). Similarly, only 14 out of approximately 70 distribution centers are currently in Phase 1 or 2, underscoring the long-term potential for efficiency gains.

Automation efforts have already yielded tangible benefits, with Newell Brands reducing its supply chain staffing needs by 3,800 positions over the past three years. This not only drives cost efficiencies but also enhances the company's ability to capture highly accretive unit economics by leveraging its strong domestic manufacturing base. Furthermore, the company is on track to complete its ERP harmonization by fall 2026, a remarkable achievement given the 42 different ERP systems inherited post-Jarden acquisition.

Newell Brands is also embracing advanced technologies, with nearly 100 use cases of artificial intelligence (AI) being implemented across the company, and a full transition into agentic AI underway. These AI-based tools are expected to drive further productivity enhancements and contribute to declining overheads as a percentage of sales in the coming quarters. For investors, these technological and operational advancements are foundational to Newell's competitive moat, contributing directly to lower costs, better margins, and a more agile supply chain, which are crucial for sustained financial performance and market positioning.

Competitive Landscape and Strategic Positioning

Newell Brands operates within a highly competitive consumer goods market, contending with diversified giants like Procter & Gamble (PG), specialized players such as Clorox (CLX) and Colgate-Palmolive (CL), and product-focused companies like Stanley Black & Decker (SWK) and Helen of Troy (HELE). Newell's strategic positioning is characterized by its broad brand portfolio and extensive distribution channels, which foster customer loyalty and provide recurring revenue streams, particularly in stable segments.

Compared to a competitor like Procter & Gamble, Newell's offerings are more diversified across price points, appealing to a wider consumer base, while PG often focuses on premium, higher-margin items. While PG may lead in global reach and innovation speed, Newell's strength lies in its value-driven solutions and integrated product ecosystems (e.g., in Home Solutions). Against Clorox, Newell's comprehensive home organization solutions provide a convenience edge, though Clorox excels in targeted, health-focused innovation. Newell's writing instruments and baby care brands (Sharpie, Graco) compete with Colgate-Palmolive's personal care focus, with Newell emphasizing family-oriented products.

A significant competitive advantage for Newell Brands in the current environment is its substantial U.S. manufacturing presence. Over half of its U.S. sales are manufactured through 15 U.S. production facilities and two Mexico-based USMCA-compliant facilities, making these products exempt from many recently imposed tariffs. This contrasts sharply with many competitors who are heavily reliant on China-sourced goods. For instance, in the writing category, Newell benefits from domestic manufacturing, allowing it to maintain competitive pricing while rivals, subject to tariffs, are forced to raise prices. This is expected to accelerate unit velocity and secure incremental business wins.

The company is actively leveraging this tariff advantage, engaging in discussions with strategic retailers to shift shelf space and promotions towards its "Made in America" products. This proactive approach is expected to lead to market share gains, particularly in categories where competitors are facing significant import tariffs. Management believes that the number of categories where Newell is strategically advantaged with North American tariff-free production significantly exceeds those where it is disadvantaged, potentially leading to market consolidation as smaller, China-reliant players face unsustainable cost pressures.

Financial Performance and Operational Momentum

Newell Brands has demonstrated a notable turnaround in its financial performance, particularly in profitability metrics. For the three months ended September 30, 2025, net sales decreased by 7.2% to $1.81 billion, primarily due to soft global demand in the Home and Commercial Solutions (HCS) segment and reduced retailer inventory levels in both HCS and Learning and Development (LD) segments. Despite this, product innovation launches in HCS and LD provided a partial offset.

Gross profit for Q3 2025 decreased by 9.3%, with gross margin declining to 34.1% from 34.9% in the prior year. This was impacted by lower sales volume, $55 million in additional tariffs, inflation, and a $6 million reserve for an Oster product recall. However, gross productivity, pricing actions, and lower restructuring charges of approximately $13 million partially mitigated these headwinds. Operating income saw a significant improvement, reaching $119 million in Q3 2025, compared to an operating loss of $121 million in the prior-year period. This turnaround was largely driven by the absence of $260 million in non-cash impairment charges in Q3 2024, savings from restructuring efforts (Realignment Plan), and lower incentive compensation expenses.

For the nine months ended September 30, 2025, net sales declined by 5.8% to $5.31 billion. Gross profit decreased by 4.1%, but gross margin improved to 34% from 33.4% in the prior year, reflecting the impact of gross productivity and pricing actions. Operating income for the nine-month period was $311 million, a substantial increase from $58 million in the prior year, benefiting from the absence of prior-year impairment charges and ongoing cost reduction initiatives.

Net interest expense increased by $8 million in Q3 2025 to $83 million, driven by higher interest rates, with the weighted average interest rate rising to 6.60% from 5.80% in Q3 2024. The company also recorded a $13 million loss on extinguishment and modification of debt related to the redemption of its 4.20% senior notes due 2026 in June 2025.

Segment Performance Highlights

• Home and Commercial Solutions (HCS): Q3 2025 net sales decreased 10% to $942 million. The segment's operating income improved significantly to $40 million from a $94 million loss in the prior year, largely due to the absence of a $190 million impairment charge. The Yankee Candle brand restage, while causing temporary destocking in Q3, is showing strong consumer demand where new assortments are in place, with a return to growth expected in Q4 2025 and full year 2026.
• Learning and Development (LD): Q3 2025 net sales declined 5% to $681 million. Operating income increased to $124 million from $75 million, benefiting from the absence of a $70 million impairment charge. The Writing business saw competitive price increases in October, which Newell expects to leverage due to its domestic manufacturing advantage. The Baby business, despite a temporary Q3 impact from a retailer's shift from direct import to domestic fulfillment, continues to gain market share through strong innovation and proactive pricing.
• Outdoor and Recreation (OR): Q3 2025 net sales remained flat at $183 million. The operating loss improved to $8 million from $23 million, driven by higher gross profit from productivity and pricing. This segment is showing signs of a turnaround, with a strong innovation lineup anticipated for 2026 to drive future growth.

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Liquidity and Capital Structure

Newell Brands is actively managing its liquidity and capital resources amidst a dynamic environment. Net cash provided by operating activities for the nine months ended September 30, 2025, was $103 million, a decrease from $346 million in the prior year, primarily due to higher working capital requirements, tariff impacts, and increased incentive compensation payments.

The company maintains a $1 billion senior secured revolving credit facility, with $707 million of net availability as of September 30, 2025. In May 2025, Newell issued $1.25 billion of 8.50% senior notes due 2028, using the proceeds to redeem its 4.20% senior notes due 2026. Despite debt rating downgrades in Q2 2025, which led to a 50 basis point interest rate adjustment on certain senior notes effective Q4 2025, the company remains in compliance with all debt covenants.

Newell Brands utilizes factoring agreements for receivables and participates in a Supplier Finance Program, demonstrating proactive working capital management. The company's net leverage ratio was 4.9x at year-end 2024, with a target of approximately 5x by year-end 2025.

Outlook and Forward Momentum

Newell Brands' outlook reflects a blend of cautious optimism and strategic execution. For the fourth quarter of 2025, the company expects net sales to decline between 4% and 1%, with core sales declining 5% to 3%. Normalized operating margin is projected to be between 9% and 9.5%, leading to normalized diluted EPS in the range of $0.16 to $0.20. This EPS guidance includes an anticipated $50 million, or $0.10 per share, in negative tariff impacts before any offsetting actions.

For the full year 2025, Newell Brands anticipates net sales to decline between 5% and 4.5%, and core sales to decline between 5% and 4%. Normalized operating margin is expected to be in the range of 8.4% to 8.6%, representing a significant improvement from 2024. Normalized EPS is projected to be between $0.56 and $0.60, factoring in a total net P&L impact of $115 million, or approximately $0.23 per share, from tariffs. The company has updated its operating cash flow guidance to $250 million to $300 million.

Management's confidence in a sequential improvement in Q4 core sales is driven by several factors: the belief that one-time retailer inventory adjustments are largely behind them, an expected return to growth in international markets (including Brazil and Argentina), strengthened Q4 promotion plans, and anticipated competitive price movements. The company also expects more incremental tariff-advantaged business wins in Q4 and a strong innovation and marketing program, the strongest since the Jarden acquisition.

Looking ahead to 2026, Newell Brands expects operating cash flow to strengthen significantly due to declining cash taxes and incentive compensation. Capital expenditures are projected to be meaningfully lower as major IT and supply chain initiatives conclude. The cash conversion cycle is expected to drop, and working capital is anticipated to improve as tariff inventory effects normalize. The company's innovation pipeline is robust, with over 20 Tier 1 and Tier 2 initiatives planned for 2026, a substantial increase from previous years, and net distribution gains are expected to exceed losses, accelerating into 2026.

Risks and Challenges

Despite the positive momentum, Newell Brands faces several risks. The macroeconomic environment remains fluid, with persistent inflationary pressures and fluctuating interest rates potentially impacting consumer discretionary spending. The ongoing uncertainty surrounding tariffs, particularly the magnitude and duration of new tariffs, poses a significant risk, as evidenced by the $180 million in incremental cash tariff costs anticipated in 2025.

The company is also exposed to potential non-cash impairment charges for goodwill and intangible assets if market conditions or its financial performance decline further. Legal proceedings, such as the Lower Passaic River matter and an IRS tax dispute, could result in material liabilities. Product recalls, like the recent Oster French Door Countertop Ovens recall, also present financial and reputational risks.

Conclusion

Newell Brands is actively transforming its business, leveraging a robust portfolio of iconic brands and a strategically advantageous domestic manufacturing footprint to navigate a complex global market. The company's multi-year turnaround plan, marked by significant investments in operational excellence, technological differentiation, and a revitalized innovation pipeline, is yielding tangible results in margin expansion and balance sheet deleveraging. While macroeconomic headwinds and tariff uncertainties present ongoing challenges, Newell's proactive strategies to mitigate these impacts and capitalize on competitive advantages position it for a return to sustainable top-line growth. The anticipated acceleration of innovation, coupled with expected distribution gains and the unique benefits of its North American manufacturing base, underscores a compelling investment thesis. As Newell Brands continues to execute its strategic initiatives and realize the full potential of its operational and technological advancements, it is poised to emerge stronger, delivering enhanced value for shareholders in the medium to long term.