0000814453-26-000017
SEC filingNet sales declined 1.1% YoY, but gross margin expanded 100 bps to 33.1% on productivity and pricing; operating income rose 62%.
For the three months ended March 31, 2026, Newell Brands reported net sales of $1.549 billion, a decrease of 1.1% compared to $1.566 billion in the prior-year period. The decline was primarily driven by soft demand in the Home and Commercial Solutions (H&CS) and Outdoor and Recreation (O&R) segments, along with unfavorable order timing as customers accelerated purchases in Q1 2025 ahead of anticipated tariffs and price increases, and retailers shifted orders into Q2 2026 for key reset events. These headwinds were partially offset by product innovation launches, favorable net pricing including a $25 million contribution from a refinement of customer program estimates, and a $42 million favorable foreign exchange impact.
Gross profit increased 2.0% to $513 million, and gross margin expanded 100 basis points to 33.1% from 32.1%. The margin improvement was driven by gross productivity and net pricing actions (including the customer program refinement), partially offset by lower volume, higher tariffs, and inflation. Operating income surged 61.9% to $34 million from $21 million, reflecting the gross profit increase and lower restructuring costs ($8 million vs. $25 million), partially offset by a $5 million increase in advertising and promotion spending. Operating margin improved to 2.2% from 1.3%.
Interest expense rose $12 million to $84 million due to higher weighted average interest rates (6.9% vs. 6.0%). Other expense increased to $11 million from $4 million, driven by foreign exchange losses. Net loss improved to $33 million from $37 million, with diluted loss per share of $0.08 compared to $0.09. The income tax benefit increased to $28 million from $18 million, resulting in an effective tax rate benefit of 45.9% vs. 32.7%.
Home and Commercial Solutions: Net sales decreased 3.9% to $780 million, reflecting soft demand and unfavorable order timing. Operating loss widened to $3 million from $2 million, primarily due to a $5 million decline in gross profit from lower volume and inflation, partially offset by productivity and pricing actions including a $17 million customer program refinement.
Learning and Development: Net sales grew 3.8% to $594 million, driven by improved replenishment orders in the Baby business, pricing actions, innovation, and distribution gains in Writing. Operating income increased 10.2% to $108 million, with operating margin expanding to 18.2% from 17.1%. Higher gross profit of $11 million from productivity and pricing more than offset inflation and increased advertising.
Outdoor and Recreation: Net sales decreased 3.8% to $175 million due to soft demand, partially offset by favorable pricing and innovation. Operating loss deepened to $7 million from $5 million, driven by higher advertising and promotion spending, partly offset by a $4 million improvement in gross profit from pricing and productivity.
Management continues to execute a multi-year transformation focused on top-line improvement, margin protection, debt reduction, and cash flow enhancement. The December 2025 Productivity Plan is progressing, with U.S. employee separations mostly completed and international actions expected in 2026. The company closed approximately 20 Yankee Candle stores in January 2026. The operating environment remains uncertain due to shifting consumer preferences, retailer behavior, tariffs, and geopolitical conflicts. The company is pursuing mitigation actions including pricing, productivity, and manufacturing footprint optimization. No specific numerical guidance was provided, but management expects benefits from restructuring and strategic initiatives to phase in over time.
Cash and cash equivalents decreased slightly to $201M from $203M at year-end. Total debt increased to $4,965M from $4,673M, driven by a $295M increase in revolving credit facility borrowings. Shareholders' equity declined to $2,342M from $2,391M, reflecting the net loss and dividends. Inventory rose to $1,493M from $1,281M, partly due to seasonal buildup.
No explicit purchase commitments were disclosed in the Notes. The environmental remediation reserve is $32M. The Company has a supplier finance program with $10M outstanding obligations. Restructuring plans anticipate $75M to $90M in future charges.
Dividends: $0.07 per share quarterly, totaling $31M declared in Q1. No share repurchases occurred or were authorized. Capital expenditures were $37M, down from $59M in the prior year quarter.
Home and Commercial Solutions (H&CS) posted a slight operating loss of $3M on $780M revenue. Learning and Development (L&D) contributed $108M operating income on $594M revenue. Outdoor and Recreation (O&R) had an operating loss of $7M on $175M revenue. Geographically, North America accounted for $995M (64%) and International $554M (36%) of total net sales.
Net loss of $33M generated negative operating cash flow of $233M, a significant divergence due to large working capital outflows. Inventory increased $213M and accrued liabilities decreased $249M, offsetting modest improvements in receivables and payables. Capex of $37M was down 37% year-over-year, reducing investment intensity. Dividends of $36M were not covered by CFO, requiring external financing. Overall, cash flow quality is weak with heavy working capital drag, though capex discipline and financing activities provided liquidity.