Executive Summary / Key Takeaways

• WD-40 Company (WDFC) demonstrates robust financial health and strategic focus, achieving a record fiscal year 2025 with 5% net sales growth to $620.0 million and a significant 31% increase in net income to $90.99 million.
• The company's "Few things, many places, bigger impact" mantra underpins its strategic shift towards higher-margin maintenance products, evidenced by the divestiture of its UK homecare and cleaning brands and ongoing efforts in the Americas.
• Gross margin recovery has been a standout achievement, reaching 55.1% in fiscal year 2025, surpassing the 55% long-term target a year ahead of schedule, driven by cost optimization and premiumization.
• WDFC is actively expanding its global footprint and product lines, with substantial growth opportunities identified for WD-40 Multi-Use Product ($1.4 billion remaining) and WD-40 Specialist ($583 million remaining).
• Fiscal year 2026 guidance projects continued growth, with net sales between $630 million and $655 million and diluted EPS between $5.75 and $6.15, reflecting confidence in its strategic framework and operational efficiencies.

A Legacy of Problem-Solving: WD-40's Enduring Market Presence

WD-40 Company, founded in 1953, has evolved from a single iconic product into a global marketing powerhouse, dedicated to solving problems in workshops, factories, and homes across more than 176 countries. The company's enduring success is built on a "4x4 strategic framework" that prioritizes profitable growth and sustainable value creation. This framework is anchored by "Must-Win Battles" focused on expanding its core maintenance product lines and "Strategic Enablers" emphasizing operational excellence.

The company operates within a highly competitive landscape, facing off against major national and multinational consumer goods companies like The Clorox Company (CLX), Procter & Gamble (PG), and 3M Company (MMM). These rivals often possess greater financial resources and broader product portfolios. However, WD-40 Company carves out its niche through specialized brand recognition, product performance, and quality. Its products, particularly the WD-40 Multi-Use Product, are often positioned for specific lubrication, rust prevention, and moisture displacement tasks, offering a differentiated value proposition in performance-oriented segments. This specialization allows WDFC to maintain strong customer loyalty and potentially command pricing power, contributing to robust gross margins. While direct quantitative comparisons of market share for all niche competitors are challenging to ascertain, WDFC's consistent growth in its core segments suggests a strong competitive standing.

Technological Edge and Innovation Driving Growth

At the heart of WD-40 Company's competitive moat lies its core differentiated technology, particularly the proprietary formulation of the WD-40 Multi-Use Product, protected as a trade secret. This formulation provides unparalleled versatility, acting as a lubricant, rust preventative, penetrant, and moisture displacer. These tangible benefits translate into high efficacy for end-users across diverse applications, from household repairs to industrial maintenance. The product's reliability and multi-functionality contribute directly to its strong brand loyalty and repeat purchases, which are critical drivers of WDFC's financial performance.

Beyond its foundational product, WDFC is committed to continuous innovation and renovation. Key product innovations like the WD-40 Smart Straw and WD-40 EZ-Reach Flexible Straw enhance user experience and product delivery. These premium formats, which currently account for approximately 50% of WD-40 Multi-Use Product sales and 40% of units sold, are designed with end-user needs at the forefront, fostering brand loyalty and contributing to gross margin expansion. The company targets a compound annual growth rate for net sales of premiumized products of greater than 10%.

A significant area of technological advancement is the WD-40 Specialist product line, which extends the trusted core brand into professional-grade solutions like penetrants, degreasers, and corrosion inhibitors. This line leverages the strength of the WD-40 brand to capture new segments and offer specialized solutions without diluting the iconic core product. In fiscal year 2025, global sales of WD-40 Specialist products were up 11% over the prior year. Looking ahead, WDFC plans to introduce its first bio-based format of a multi-use product under the WD-40 Specialist line in select European markets in fiscal year 2026. This initiative aims to reduce the product's environmental impact and carbon footprint, utilizing ISO standard 14,067, while maintaining the brand's expected performance. This move aligns with the company's broader sustainability targets to achieve a 50% absolute reduction in Scope 1 and Scope 2 emissions, and a 10% to 20% absolute reduction in Scope 3 emissions by 2030. These technological advancements and R&D initiatives are crucial for WDFC's competitive moat, enabling it to command higher average selling prices, optimize costs, and strengthen its market positioning for long-term growth.

Strategic Expansion and Operational Discipline

WDFC's strategic framework is actively driving its global expansion and operational efficiencies. The "Few things, many places, bigger impact" mantra, recently adopted, guides the company in streamlining systems, processes, and fostering global collaboration. This is evident in the ongoing implementation of new enterprise resource planning (ERP) systems, with the U.S. phase completed in fiscal year 2024 and further rollouts planned for other offices.

Geographic expansion remains a primary "Must-Win Battle." The company has successfully transitioned to direct distribution models in key markets like Mexico (quadrupling business to nearly $26 million by FY24) and Brazil (contributing $7 million in growth in FY24, with an expected $7 million to $9 million more in FY25). Brazil is projected to become a $20 million-plus market within three to five years. In Asia-Pacific, WDFC is adopting hybrid models, with dedicated personnel working alongside distributors in high-potential markets like Indonesia, Vietnam, and Japan. India, a strategic partnership market, has more than doubled sales in six years, becoming the second-largest market in unit sales. These efforts aim to unlock a significant $1.4 billion growth opportunity for WD-40 Multi-Use Product and $583 million for WD-40 Specialist in their respective estimated global attainable markets.

Operational excellence in the supply chain is another critical enabler. WDFC outsources finished goods manufacturing globally and formulates concentrate at its own and third-party facilities. The company actively manages its supply chain to mitigate risks like commodity price volatility and tariffs, leveraging global partnerships and cost-saving initiatives. In fiscal year 2025, these efforts delivered several million dollars in economic value through packaging enhancements, logistics efficiencies, and strategic sourcing, largely offsetting the financial impact of tariffs. The company achieved a global on-time delivery rate of 96.4% and reduced inventory levels to 99 days on hand, nearing its 90-day target.

Financial Performance: A Story of Resilient Growth and Margin Expansion

WD-40 Company concluded fiscal year 2025 with strong financial results, demonstrating resilience amidst global complexities. Consolidated net sales increased 5% to $620.0 million, driven by a $25.2 million increase in sales volume and a $5.6 million boost from higher average selling prices. This performance aligns with the company's long-term target of mid to high single-digit growth for its core maintenance products, which accounted for approximately 95% of total net sales.

A significant highlight was the gross margin, which rose to 55.1% for fiscal year 2025, a 170 basis point improvement from 53.4% in the prior year. This achievement surpassed the company's 55% long-term target a year ahead of schedule. The improvement was primarily fueled by lower specialty chemical costs (80 basis points), reduced aerosol can costs (60 basis points), and increases in average selling prices (50 basis points). While higher warehousing, distribution, and freight costs in the Americas (50 basis points) presented a partial offset, the overall trend reflects effective cost management and the benefits of premiumization. Excluding the financial impact of homecare and cleaning products held for sale, the gross margin would have been 55.6%.

Net income for fiscal year 2025 surged 31% to $90.99 million, translating to diluted earnings per common share of $6.69, up from $5.11 in the prior fiscal year. This significant increase was partly due to a one-time, non-cash favorable income tax adjustment of $11.9 million in the second quarter, resulting from the release of an uncertain tax position related to the Tax Cuts and Jobs Act. Excluding this benefit, adjusted diluted EPS was $5.82.

Operating expenses saw an increase, with selling, general, and administrative (SGA) expenses rising 9% to $199.9 million, primarily due to higher employee-related costs ($10.4 million), increased travel and meeting expenses ($1.3 million), and professional service fees ($1.2 million). Advertising and sales promotion expenses also increased 10% to $37.43 million, reflecting strategic investments in brand building across key markets. Despite these investments, the adjusted EBITDA margin for fiscal year 2025 remained stable at 18%, with adjusted EBITDA growing 8% to $114.4 million. The company's return on invested capital, excluding the one-time tax benefit, improved to 26.9%, exceeding its 25% target.

From a liquidity perspective, WDFC maintains a strong financial position. Cash provided by operating activities was $87.9 million in fiscal year 2025. The company's capital allocation strategy prioritizes returning capital to stockholders through dividends and share repurchases. The Board approved a 7% increase in the quarterly cash dividend to $0.94 per share in December 2024. In fiscal year 2025, approximately $62.6 million was returned to stockholders through these channels. The company also repurchased 50,000 shares for $12.3 million and plans to accelerate buyback activity to fully utilize the remaining $30 million authorization under its current plan, which was extended to August 31, 2026. With a debt-to-adjusted EBITDA ratio currently below its target range of one to two times, WDFC retains strategic flexibility for future investments and capital returns.

Outlook and Strategic Trajectory

WD-40 Company's outlook for fiscal year 2026 reflects confidence in its strategic direction and continued operational improvements. The company projects pro forma net sales growth of 5-9%, with net sales expected to range between $630 million and $655 million, adjusted for foreign currency impact. This guidance assumes no major changes to the current economic environment.

Gross margin is anticipated to further strengthen, with a projected range of 55.5-56.5% for fiscal year 2026, building on the strong performance of fiscal year 2025. This sustained margin expansion is expected to be driven by ongoing supply chain cost reductions, cost optimization, and the strategic focus on higher-margin maintenance products. Advertising and promotion investment is projected to remain around 6% of net sales, supporting brand building and market expansion initiatives. Operating income is expected to grow between 5-12% from pro forma 2025 results, reaching $103 million to $110 million. Diluted earnings per share are forecasted to be between $5.75 and $6.15, representing 5-12% growth over pro forma 2025 results, based on an estimated 13.4 million weighted average shares outstanding.

The company's strategic divestiture of homecare and cleaning brands is a key assumption in this guidance. The sale of the UK homecare and cleaning businesses was completed in Q4 FY25, and the company is actively pursuing the sale of its Americas homecare and cleaning brands, expected in fiscal year 2026. If the Americas brands are not divested, the guidance would be positively impacted by approximately $12.5 million in net sales, $3.6 million in operating income, and $0.20 in diluted EPS on a full-year basis. This strategic streamlining is intended to position WDFC as a higher-growth, higher-gross margin company, freeing up resources to focus on its core maintenance product lines.

Risks and Challenges

Despite a strong performance and optimistic outlook, WD-40 Company faces several risks. Global economic conditions, including potential recessions, inflation, and reduced consumer spending, could negatively impact demand for its products. Foreign currency exchange rate fluctuations pose a significant risk, as approximately 51% of fiscal year 2025 revenues were generated in non-U.S. Dollar currencies, impacting reported financial results. Geopolitical instability and trade tariffs, such as those announced by the U.S. government in April 2025, could increase input costs and disrupt supply chains, although WDFC's diversified supply chain and cost-saving initiatives are currently mitigating much of this impact.

Competition remains intense, with larger rivals potentially leveraging greater resources for advertising and product introductions. The company also faces challenges in achieving sales volume growth in mature markets and managing the shift towards online retail channels. Reliance on a limited number of third-party manufacturers and key customers introduces supply chain and revenue concentration risks. Furthermore, the increasing focus on ESG matters and evolving regulations could lead to increased compliance costs and potential reputational damage if not managed effectively. The company's reliance on intellectual property, particularly the trade secret for WD-40 Multi-Use Product, necessitates robust protection against infringement and counterfeiting.

Conclusion

WD-40 Company has demonstrated remarkable resilience and strategic acumen in fiscal year 2025, delivering record sales and surpassing its long-term gross margin target. The company's disciplined focus on its core maintenance products, driven by geographic expansion, premiumization, and the growth of its Specialist line, is clearly yielding results. Supported by a robust capital-light business model and a commitment to operational excellence, WDFC is well-positioned to sustain its growth trajectory and continue generating significant value for stockholders.

The strategic divestiture of its homecare and cleaning brands underscores a clear vision for a higher-growth, higher-margin future, while ongoing investments in technology and sustainability initiatives are future-proofing the business. While global economic uncertainties and competitive pressures persist, WDFC's strong brand equity, innovative product development, and adaptive market strategies, including its unique hybrid distribution models, provide a solid foundation. Investors can look forward to continued progress as the company executes its "Few things, many places, bigger impact" mantra, aiming to unlock substantial remaining market opportunities for its iconic brands.