10.30.23
Net sales for Newell Brands were $2 billion in the third quarter 2023, a 9% decline compared to the prior-year period.
Gross margin improved over 100 basis points versus prior year.
Year-to-date operating cash flow increased over $1.2 billion versus the prior year, and the company reduced net debt by nearly $400 million.
"Since introducing a new strategy in June, we have been laser focused on implementing the organizational, operational and cultural changes required to strengthen the company's front-end consumer facing capabilities, while harnessing the scale and power of One Newell,” said Chris Peterson, Newell brands president and CEO. “We have improved gross margin and strengthened operating cash flow, which were the top two financial priorities we established at the start of the year. The substantial progress we are making gives me great confidence that our new strategy, which focuses on our leading brands in top markets and puts consumer understanding and insights at the center of everything we do, will accelerate the company's performance and drive significant value creation over time, despite a challenging macroeconomic backdrop."
The Home & Commercial Solutions segment generated net sales of $1.1 billion compared with $1.2 billion in the prior year period, reflecting a core sales decline of 7.1% 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 $64 million, or 5.7% of sales, compared with operating loss of $75 million, or negative 6.2% of sales, in the prior year period. Normalized operating income was $95 million, or 8.5% of sales, versus $63 million, or 5.2% of sales, in the prior year period.
Restructuring and Savings Initiatives
In January 2023, the company announced a restructuring and savings initiative, Project Phoenix, that aims to strengthen the company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies.
Project Phoenix is expected to be substantially implemented by the end of 2023. It incorporates 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, consolidating its prior five operating segments into three operating segments: Home & Commercial Solutions, Learning & Development and Outdoor & Recreation.
The company's expectations for savings and charges in connection with Project Phoenix remain unchanged. The company expects to realize annualized pre-tax savings in the range of $220 million to $250 million when fully implemented, with $140 million to $160 million expected to be realized in 2023. Restructuring and related charges associated with these actions are estimated to be in the range of $100 million to $130 million and are expected to be substantially incurred by the end of 2023. Year-to-date through the third quarter 2023, the company incurred restructuring and related charges of $78 million and realized savings of $101 million related to Project Phoenix. The restructuring plan is expected to result in the elimination of approximately 13 percent of office positions. The company began reducing headcount in the first quarter 2023, with most of these actions still expected to be completed by the end of 2023, subject to local law and consultation requirements.
Following the successful completion of the first phase of Project Ovid, the multi-year initiative to transform the company's go-to-market capabilities in the US, in May 2023, the company announced the Network Optimization Project, which aims to simplify and streamline its North American distribution network. The Network Optimization Project incorporates a variety of initiatives, including a reduction in the overall number of distribution centers, an optimization of distribution by location, and completion of select automation investments intended to further streamline the company’s cost structure and to maximize operating performance. The company commenced this initiative during the second quarter 2023 and expects it to be substantially implemented by the end of 2024. The company continues to expect to realize annual pre-tax savings of $25 million to $35 million when fully implemented. Restructuring and related charges associated with the Network Optimization Project are estimated to be in the range of approximately $37 million to $49 million and are expected to be substantially incurred by the end of 2024. The company also expects to incur $30 million to $40 million in capital expenditures in connection with this project. Year-to-date through the third quarter 2023, the company incurred restructuring and related charges of $17 million related to the Network Optimization Project.