Spectrum Brands Misses on Q2 Earnings, Suspends View on Tariffs Woes

Spectrum Brands Holdings Inc. SPB reported dismal second-quarter fiscal 2025 results, wherein the top and bottom lines missed the Zacks Consensus Estimate and declined year over year.The company’s fiscal second-quarter results highlight the ongoing challenges from a difficult macroeconomic environment and global trade pressures. Sales declined across key segments due to softer consumer demand, particularly in North America and the unfavorable impact of retailer inventory timing.Profitability was affected by lower volumes, a less favorable product mix, increased investments in trade and brand-building, inflation and the expiration of tariff exemptions. While the Global Pet Care and Home and Personal Care businesses faced sales declines, the Home and Garden segment also saw pressure from the earlier pull-forward of retailer orders.SPB’s Q2 HighlightsSPB reported adjusted earnings of 68 cents per share, which missed the Zacks Consensus Estimate of $1.35 per share. The figure fell 51.4% from the year-ago quarter’s adjusted earnings of $1.40 per share, mainly attributable to lower adjusted EBITDA offset by lower interest expense and a reduction in outstanding shares. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise  Spectrum Brands Holdings Inc. price-consensus-eps-surprise-chart | Spectrum Brands Holdings Inc. QuoteSpectrum Brands' net sales fell 6% year over year to $675.7 million and missed the Zacks Consensus Estimate of $695 million. Organic sales also declined 4.6%, excluding the $10.1 million impact from unfavorable foreign exchange rates. The decline was primarily due to continued category softness in the North American market across both the Global Pet Care and Home & Personal Care businesses. Additionally, sales were impacted by the timing of retailer inventory builds in the Home & Garden segment, where significant purchases were pulled forward into the first quarter, creating an unfavorable comparison for the current period.The gross profit declined 7.3% year over year to $253.4 million, primarily due to lower sales volume, increased trade promotions, an unfavorable product mix, inflationary pressures and the impact of higher tariffs following the expiration of exemptions on certain product lines last year. These headwinds were partially offset by benefits from ongoing cost-improvement initiatives and operational efficiencies. Meanwhile, the gross margin contracted 60 bps year over year to 37.5%.Adjusted EBITDA from continuing operations decreased 36.5% year over year to $71.3 million due to lower operating income and reduced investment income. The adjusted EBITDA margin contracted 500 bps year over year to 10.6%.Spectrum Brands’ Segmental PerformanceSales in the Home & Personal Care segment fell 5.1% year over year to $254.2 million due to Excluding unfavorable foreign currency impacts, organic net sales declined 2.2%. Sales in both the Personal Care and Home Appliance categories were down by mid-single digits. Regionally, EMEA organic net sales were relatively flat, with mid-single-digit growth in Personal Care offset by mid-single-digit declines in Home Appliances. In North America, sales declined by high-single digits, as both businesses were impacted by softer category demand and retailer reorder patterns. LATAM organic sales increased in the low double digits, with growth across both categories.The segment's adjusted EBITDA of $7.3 million was down compared to last year due to lower volumes, increased trade spending, unfavorable mix, incremental tariffs following the expiration of exemptions last year and inflationary pressures, somewhat offset by ongoing cost improvement initiatives, reduced brand-focused investments and favorable foreign exchange impacts. Meanwhile, the adjusted EBITDA margin contracted 370 bps to 2.9%.The Global Pet Care segment's sales declined 7.1% year over year, with organic net sales down 6.3% after excluding unfavorable foreign currency impacts. In the Global Pet Care segment, Companion Animal sales declined by mid-single digits, while Aquatics sales fell by high-single digits. In North America, Companion Animal sales were impacted by a low double-digit decrease due to overall category declines and softness across all sales channels. In EMEA, organic sales in Companion Animal grew by mid-single digits. However, soft sales in global Aquatics affected sales across all regions.The segment's adjusted EBITDA of $50 million dropped 19.7% from the year-ago quarter. The decline was due to reduced sales volume, inflation and higher brand-focused investments, trade spend and unfavorable mix, somewhat offset by cost improvements and other favorable variances. However, the adjusted EBITDA margin contracted 290 bps to 18.6%.The Home & Garden segment's sales declined 5.2% year over year to $152.3 million, primarily due to the phasing of seasonal inventory builds at certain retailers, which accelerated sales into the first quarter, and the pull-forward of sales related to Home & Garden's Q2 go-live on the S/4Hana platform. Sales declined by mid-double digits in the Controls category and by mid-single digits in Cleaning. Conversely, Repellents posted mid-double-digit growth, while Household Pest saw low-single-digit growth.The segment's adjusted EBITDA fell year over year to $26.7 million, while the adjusted EBITDA margin contracted 70 bps to 17.5%. Adjusted EBITDA decreased due to lower sales volumes, increased brand-building investments, negative product mix and inflationary pressures. These impacts were partially offset by cost-improvement initiatives.Spectrum Brands’ Other FinancialsAs of March 30, 2025, Spectrum Brands had a cash balance of $96 million. It had an outstanding debt of $656.9 million, including $83 million of borrowings on the revolver, $496.1 million of senior unsecured notes and $77.8 million of finance leases. The company had a total liquidity of $504.6 million, comprising the undrawn capacity on its cash flow revolver of $408.6 million. It exited the quarter with a net debt of about $560.9 million.In the second quarter of fiscal 2025, SPB repurchased 2 million shares for $159.9 million. The company repurchased $16.3 million in shares since the close of HHI, totaling $1.28 billion, resulting in 24.9 million shares outstanding.SPB’s OutlookSpectrum Brands has suspended its fiscal 2025 earnings framework due to heightened uncertainty stemming from global trade conditions, evolving tariff policies and the resulting softening in global consumer demand. Despite the near-term challenges, the company remains committed to its long-term financial strategy and continues to target a net leverage ratio of 2.0 to 2.5 times.Shares of this Zacks Rank #5 (Strong Sell) company have lost 15.8% in the past three months compared with the industry’s decline of 7.9%.SPB Stock's Price Performance in the Past 3 Months Image Source: Zacks Investment Research Key PicksWe have highlighted three better-ranked stocks, namely, G-III Apparel Group GIII, Kontoor Brands, Inc. KTB and Duluth Holdings DLTH.G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands, and private label brands. It has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.GIII has a trailing four-quarter earnings surprise of 117.8%, on average. The Zacks Consensus Estimate for G-III Apparel’s current financial-year sales and EPS indicates declines of 1.2% and 4.5%, respectively, from the year-ago reported figures.Kontoor Brands, a lifestyle apparel company that designs, produces, procures, markets, distributes and licenses denim, apparel, footwear and accessories, primarily under the Wrangler and Lee brands, currently carries a Zacks Rank #2. KTB delivered a trailing four-quarter average earnings surprise of 8.09%.The Zacks Consensus Estimate for Kontoor Brands’ current fiscal year’s earnings indicates growth of 6.54% from the year-ago actuals.Duluth Holdings, a provider of casual wear, workwear and accessories for men and women, carries a Zacks Rank of 2 at present. DLTH has a trailing four-quarter negative earnings surprise of 37.2%, on average.The Zacks Consensus Estimate for DLTH’s current financial-year EPS indicates an increase of 5.6% from the year-ago reported level.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report Spectrum Brands Holdings Inc. (SPB): Free Stock Analysis Report Duluth Holdings Inc. (DLTH): Free Stock Analysis Report Kontoor Brands, Inc. (KTB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks