Newell (NWL) Q2 Revenue Falls 4.8%

Newell Brands (NWL -15.60%), a global consumer products company behind names like Rubbermaid and Sharpie, reported results for the quarter ended August 1, 2025. The most notable news from the release was that GAAP revenue came in lower than Wall Street forecasts, while Profit margins (GAAP and non-GAAP) continued to improve, marking the eighth consecutive quarter of year-over-year gross margin expansion, and Non-GAAP earnings per share (EPS) met expectations. In the quarter, GAAP revenue was $1.90 billion, compared to an estimate of $1.95 billion, a 4.8% drop in GAAP net sales from the prior year period. Non-GAAP EPS was $0.24, matching consensus (non-GAAP), but down from $0.35 in normalized diluted EPS for Q2 2024. The quarter showed significant improvement in managing costs and Gross margin (GAAP and non-GAAP) has grown for eight consecutive quarters, yet top-line performance remained soft, and Operating cash flow (GAAP) turned negative to an outflow of $271 million for the first six months of 2025, compared to an inflow of $64 million in the prior year period.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Focus Areas

Newell Brands (NWL -15.60%) operates a range of household and commercial products through brands such as Rubbermaid (food storage and organization), Sharpie (writing instruments), Coleman (outdoor gear), and Yankee Candle (home fragrance). Its products reach customers in over 150 countries and are sold through a network of leading retailers, including Amazon and Walmart.

The company’s recent strategy has centered on margin improvement and cost reduction projects, including supply chain streamlining and product innovation. Key efforts like Project Phoenix and Project Ovid aim to restructure operations, while the Realignment Plan targets simplified organization and improved customer focus. Success for the business depends on continued brand strength, operational efficiency, and agile adaptation to consumer trends and retailer strategies.

Quarter Highlights: Sales, Margins, and Segment Trends

Revenue (GAAP) decreased by 4.8% from the prior year period, falling short of analyst estimates by $48 million (GAAP). Core sales, which remove the effects of acquisitions, divestitures, and currency fluctuations, declined by 4.4%. The decline was driven by mixed performance across business segments. The Home & Commercial Solutions division saw core sales fall 6.0% and net sales drop by 7.3%, with particular weakness in commercial and kitchen products. Learning & Development, which covers writing instruments and baby care, was mostly stable with just a 0.5% core sales decrease. Outdoor & Recreation, offering camping and leisure products like Coleman gear, experienced a 10.9% decline in core sales but improved profitability.

Geographically, North America recorded a 7.3% drop in core sales, while International core sales rose 1.6%. Management noted gains in home fragrance and writing products but declines in the baby and kitchen categories. These trends reflect ongoing shifts in consumer demand and the impact of cautious inventory management by both the company and retailers.

Gross margin (GAAP) rose by a full percentage point to 35.4%. This marks the strongest gross margin level in four years, and the eighth consecutive quarter of year-over-year increases in gross margin. Operating margin (GAAP) improved by 0.8 percentage points, helped by the company’s restructuring actions and disciplined cost control. However, this margin growth was not enough to offset lower sales, leading to non-GAAP net income fell 32% year-over-year.

Cash flow worsened considerably, with operating cash outflow of $271 million for the first six months of 2025 compared with cash inflow of $64 million for the first six months of 2024. Operating activities consumed $271 million (GAAP) in the first half of 2025, reversing a $64 million GAAP operating cash inflow in the first half of 2024. This was caused by increased working capital—mainly inventory purchased ahead of new tariffs—and the timing of bonus payments. Debt stood at $5.1 billion at the end of the quarter, and Cash and cash equivalents (GAAP) were $219 million as of the end of the quarter. During the quarter, Newell Brands refinanced $1.25 billion in debt at 8.5%, gaining some breathing room but keeping the leverage ratio high at 5.3 times normalized EBITDA for Q1 2025.

Execution, Strategy, and Product/Segment Details

Management attributed improved margins to ongoing savings from restructuring, supply chain changes, and reduced reliance on imports from China. For example, only 15% of cost of goods sold were sourced from China in 2024, down from 35% a few years ago (based on total cost of goods sold sourced finished goods imported from China), reinforcing its push for operational resilience amid global tariff shifts.

Automation and advanced manufacturing have played a large part in these gains. The company doubled blender plant capacity in Mexico and reduced supply chain headcount by 3,800 positions over the past three years, all in pursuit of lower costs and better flexibility. These investments are expected to create a competitive edge, particularly as competitors face higher tariffs or supply chain disruptions. New product launches, like the upcoming Rubbermaid Easy Store (a U.S.-made food storage line), are also intended to capture share from private label and imported brands.

Consumer and retailer relationships remain central to strategy. The company actively seeks to convince retail partners to feature its established brands over private labels or tariff-affected imports. Progress has been made in food storage and vacuum sealers, where U.S. and Mexico manufacturing advantages played a role in new distribution wins. Yet, management noted that while several retail discussions remain ongoing, most of these potential gains are not yet reflected in current sales figures or official forecasts.

The quarter presented some one-time and trend-driven impacts. A large working capital outflow was related to building inventory ahead of tariffs and lower prior-year cash bonus payouts. While negative cash flow is partly seasonal, it raises questions about the company. The company maintained its quarterly dividend at $0.07 per share, unchanged from the prior year.

Outlook and What to Watch For

Management cut its full-year revenue and core sales outlook, now expecting declines of 3% to 2% for FY2025. Non-GAAP EPS guidance for full year 2025 was trimmed to $0.66–$0.70, down from $0.70–$0.76 prior. The operating cash flow range for full year 2025 was also narrowed, reflecting higher tariff costs on inventory. Guidance for the next quarter calls for continued sales declines and normalized (non-GAAP) EPS of $0.16–$0.19.

Tariff risk remains a central concern. The company estimates incremental cash tariffs for FY2025 will add $155 million in costs, with an unmitigated impact to profits potentially reaching $0.21 per share after tax for the full year. Management plans to offset about half this impact from the additional 125% China tariff in normalized EPS, but exposure to the baby gear category is a standout risk. If the 125% China tariff on baby gear remains all year, Newell projects a reduction of up to $0.10 in normalized EPS. Company leaders stressed ongoing negotiation and mitigation efforts but said much of the outcome depends on broader trade policy and industry adjustments.

NWL pays a quarterly dividend of $0.07 per share, unchanged from the previous year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.