Newell Brands (NASDAQ: NWL) today announced its fourth quarter and full year 2023 financial results.

Chris Peterson, Newell Brands President and Chief Executive Officer, said, "Since our leadership transition in May 2023, we introduced and deployed a comprehensive corporate strategy, which focuses on disproportionately investing in innovation, brand building, and go-to-market excellence in our largest and most profitable countries and brands as part of a clear set of Where to Play and How to Win choices. Behind this clear focus, and amidst a difficult external environment, we drove record productivity across the supply chain, significantly improved cash flow by rightsizing inventory, further reduced Newell's SKU count and took decisive actions to strengthen the company's front-end commercial capabilities, which are critical to returning Newell to sustainable and profitable growth. The tangible progress on our strategy, together with our actions to reduce overhead cost structure, bolster our confidence that we are taking appropriate actions to strengthen the organization, improve its financial performance and create value for our stakeholders."

Mark Erceg, Newell Brands Chief Financial Officer, said, "We dramatically improved the underlying structural economics of the business during the fourth quarter, as both gross margin and operating margin expanded significantly versus last year. In addition, full year operating cash flow was very strong, increasing by $1.2 billion to $930 million, which allowed us to reduce debt by about $500 million. We remain confident that despite a challenging macro-economic backdrop, the significant investments we are making to augment our core capabilities and accelerate our business transformation will allow us to fully operationalize our new corporate strategy and strengthen the company's performance going forward."

Executive Summary

• Fourth quarter net sales were $2.1 billion, a decline of 9.1 percent compared with the prior year period. Core sales declined 9.3 percent compared with the prior year period.

• Fourth quarter reported gross margin increased to 29.9 percent compared with 26.3 percent in the prior year period. Normalized gross margin increased to 32.3 percent compared with 26.6 percent in the prior year period.

• Fourth quarter reported operating margin was negative 0.5 percent compared with negative 11.9 percent in the prior year period, as both periods included the impact of non-cash impairment charges. Normalized operating margin increased to 7.7 percent compared with 4.9 percent in the prior year period.

• Fourth quarter reported diluted loss per share was $0.21 compared with $0.60 in the prior year period. Normalized diluted earnings per share were $0.22 compared with $0.16 per share in the prior year period.

• Full year operating cash flow increased by $1.2 billion to $930 million compared with outflow of $272 million in the prior year.

• The company reduced debt to $4.9 billion at the end of 2023 compared with $5.4 billion at the end of 2022.

• In January 2024, the company announced an organizational realignment, which is expected to strengthen the company's front-end commercial capabilities and result in restructuring and related charges in the range of $75 million to $90 million and annualized pre-tax savings in the range of $65 million to $90 million, net of reinvestment.

• The company initiated its full year 2024 outlook for net sales decline of 8 percent to 5 percent and normalized earnings per share of $0.52 to $0.62.

Fourth Quarter 2023 Operating Results

Net sales were $2.1 billion, a 9.1 percent decline compared to the prior year period, reflecting a core sales decrease of 9.3 percent, as well as the impact of category exits and favorable foreign exchange.

Reported gross margin was 29.9 percent compared with 26.3 percent in the prior year period, as the benefits from FUEL productivity savings and pricing more than offset the impact of fixed cost deleveraging and higher restructuring-related charges. Normalized gross margin was 32.3 percent compared with 26.6 percent in the prior year period, which represents the second consecutive quarter of year-over-year improvement.

Reported operating loss was $10 million compared with $273 million in the prior year period. Non-cash impairment charges of $68 million and $326 million were incurred in the current and prior year periods, respectively, related to goodwill and intangible assets. Reported operating margin was negative 0.5 percent compared with negative 11.9 percent in the prior year period, as the contribution from pricing, FUEL productivity savings and Project Phoenix savings, as well as lower non-cash impairment charges, more than offset the impact of lower net sales and higher restructuring and related costs. Normalized operating income was $159 million, or 7.7 percent of sales, compared with $113 million, or 4.9 percent of sales, in the prior year period.

Net interest expense was $70 million compared with $64 million in the prior year period.

Reported tax benefit was $78 million compared with $81 million in the prior year period. The normalized tax benefit was $10 million compared with $5 million in the prior year period.

Reported net loss was $86 million, or $0.21 diluted loss per share, compared with $249 million, or $0.60 diluted loss per share, in the prior year period.

Normalized net income was $92 million, or $0.22 normalized diluted earnings per share, compared with $65 million, or $0.16 normalized diluted earnings per share, in the prior year period.

An explanation of non-GAAP measures disclosed in this release and a reconciliation of these non-GAAP results to comparable GAAP measures, if available, are included in the tables attached to this release.

Balance Sheet and Cash Flow

Full year operating cash flow increased by $1.2 billion to $930 million compared with outflow of $272 million in the prior year period, with the significant improvement largely driven by working capital and a reduction in incentive compensation payments, which more than offset the impact of lower operating income and higher restructuring payments. The company continued to reduce inventories, which declined nearly $700 million versus the prior year period and nearly $250 million versus the third quarter of 2023.

At the end of 2023, Newell Brands had debt outstanding of $4.9 billion and cash and cash equivalents of $332 million, compared with $5.4 billion and $287 million, respectively, at the end of 2022.

Fourth Quarter 2023 Operating Segment Results

The Home & Commercial Solutions segment generated net sales of $1.3 billion compared with $1.4 billion in the prior year period, reflecting a core sales decline of 8.2 percent and the impact of certain category exits, partially offset by the impact of favorable foreign exchange. Core sales decreased in all three businesses: Kitchen, Home Fragrance and Commercial. Reported operating income was $31 million, or 2.4 percent of sales, compared with operating loss of $300 million, or negative 21.6 percent of sales, in the prior year period. Normalized operating income was $162 million, or 12.7 percent of sales, compared with $58 million, or 4.2 percent of sales, in the prior year period.

The Learning & Development segment generated net sales of $635 million compared with $684 million in the prior year period, as a core sales decline of 7.7 percent was partially offset by the impact of favorable foreign exchange. Core sales decreased in both the Writing and Baby businesses. Reported operating income was $80 million, or 12.6 percent of sales, compared with $88 million, or 12.9 percent of sales, in the prior year period. Normalized operating income was $88 million, or 13.9 percent of sales, compared with $98 million, or 14.3 percent of sales, in the prior year period.

The Outdoor & Recreation segment generated net sales of $165 million compared with $211 million in the prior year period, reflecting a core sales decline of 21.8 percent. Reported operating loss was $45 million, or negative 27.3 percent of sales, compared with $14 million, or negative 6.6 percent of sales, in the prior year period. Normalized operating loss was $25 million, or negative 15.2 percent of sales, compared with $4 million, or negative 1.9 percent of sales, in the prior year period.

Full Year 2023 Operating Results

Net sales for the full year ended December 31, 2023 were $8.1 billion, a decline of 14.0 percent compared to the prior year, reflecting a core sales decrease of 12.1 percent, the impact of the sale of the Connected Home & Security business at the end of the first quarter 2022, as well as the impact of certain category exits and unfavorable foreign exchange.

Reported gross margin was 28.9 percent compared with 30.0 percent in the prior year, as the impact of fixed cost deleveraging, inflation and higher restructuring-related charges more than offset the benefits from FUEL productivity savings and pricing. Normalized gross margin was 30.2 percent, in-line with the prior year.

Reported operating loss was $85 million, or negative 1.0 percent of sales, compared with operating income of $312 million, or positive 3.3 percent of sales in the prior year. Non-cash impairment charges of $342 million and $474 million were incurred in the current and prior year, respectively, primarily related to goodwill and intangible assets. Normalized operating income was $570 million, or 7.0 percent of sales, compared with $956 million, or 10.1 percent of sales, in the prior year.

Net interest expense was $283 million compared with $235 million in the prior year.

Reported tax benefit was $155 million compared with $40 million in the prior year. The normalized tax benefit was $68 million compared with a tax provision of $17 million in the prior year.

Reported net loss was $388 million, or $0.94 diluted loss per share, compared with net income of $197 million, or $0.47 diluted earnings per share, in the prior year. Normalized net income was $330 million, or $0.79 normalized diluted earnings per share, compared with $654 million, or $1.57 normalized diluted earnings per share, in the prior year.

Project Phoenix and Organizational Realignment Update

In January 2023, the company announced a restructuring and savings initiative, Project Phoenix, which was substantially implemented by the end of 2023. It incorporated a variety of initiatives designed to simplify the organizational structure, streamline the company’s real estate, centralize its supply chain functions, which include manufacturing, distribution, transportation and customer service, transition to a unified One Newell go-to-market model in key international geographies, and otherwise reduce overhead costs. The company implemented the new operating model in the first quarter 2023, consolidating its prior five operating segments into three operating segments: Home & Commercial Solutions, Learning & Development and Outdoor & Recreation. The company realized $154 million in pre-tax savings during 2023 and is on track to realize annualized savings in the range of $220 million to $250 million by the end of 2024. The company incurred $97 million in restructuring and related charges associated with Project Phoenix during 2023.

In January 2024, the company announced an organizational realignment, which is expected to strengthen the company’s front-end commercial capabilities, such as consumer understanding and brand communication, in support of the Where to Play / How to Win choices the company unveiled in June of 2023. In addition to improving accountability, Newell’s organizational realignment should further unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment. As part of the organizational realignment, the company is making several organizational design changes, which entail: standing up a cross-functional brand management organization, realigning business unit finance to fully support the new global brand management model, further simplifying and standardizing regional go-to-market organizations, and centralizing domestic retail sales teams, the digital technology team, business-aligned accounting personnel, the Manufacturing Quality team, and the Human Resources functions into the appropriate center-led teams to drive standardization, efficiency and scale with a One Newell approach. The company will also further optimize Newell’s real estate footprint and pursue other cost reduction initiatives. These actions are expected to be substantially implemented by the end of 2024. Once the organizational design changes are fully executed, the company expects to realize annualized pre-tax savings in the range of $65 million to $90 million, net of reinvestment, with $55 million to $70 million expected in 2024. Restructuring and related charges associated with these actions are estimated to be in the range of $75 million to $90 million and are expected to be substantially incurred by the end of 2024.

Outlook for First Quarter and Full Year 2024

The company initiated its outlook for first quarter and full year 2024 as follows:

The company initiated its outlook for full year 2024 operating cash flow of $400 million to $500 million, including approximately $150 million to $200 million in cash payments associated with restructuring and related initiatives.

The company has presented or will present forward-looking statements regarding core sales, normalized operating margin, normalized earnings per share and free cash flow productivity. These non-GAAP financial measures are derived by excluding certain amounts, expenses or income, from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures is a matter of management judgement and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period in reliance on the exception provided by item 10(e)(1)(i)(B) of Regulation S-K. We are unable to present a quantitative reconciliation of forward-looking normalized operating margin, normalized earnings per share or free cash flow productivity to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict all of the necessary components of such GAAP measures without unreasonable effort or expense. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the company's future financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the company's actual results and preliminary financial data set forth above may be material.

Conference Call

Newell Brands’ fourth quarter and full year 2023 earnings conference call will be held today, February 9 at 9:30 a.m. ET. A link to the webcast is provided under Events & Presentations in the Investors section of the company’s website at www.newellbrands.com. A webcast replay will be made available in the Quarterly Earnings section of the company’s website.