Fortune Brands Innovations (FBIN) Q2 Earnings call transcript Jul 25, 2024

Fortune Brands Innovations delivered a robust second quarter earnings report, showcasing solid sales and strong margin results amidst an uneven market backdrop. The company's strategic focus on digital innovation and organizational realignment has positioned it as a growth-focused company, poised for long-term success in the competitive landscape.

Strong Sales and Margin Performance

Fortune Brands Innovations reported net sales of $1.2 billion in the second quarter, up 7% year-over-year, with organic sales reaching $1.1 billion, down 3% compared to the same period in 2023. Despite a challenging market environment, the company's core North American market saw positive organic sales growth, particularly in its Outdoor segment and Moen North America, which continued to outperform the market and capture market share.

The company's strategic realignment efforts have been instrumental in driving this success, with market-beating sales and margin performance. Operating income increased by 9%, and operating margins were 40 basis points higher than the second quarter of 2023, demonstrating the company's ability to navigate market challenges and maintain profitability.

Digital Strategy and Partnerships

Fortune Brands Innovations' digital portfolio has emerged as a key growth driver, with approximately 200,000 device activations in the second quarter and overall digital business accelerating. The company's strategic partnerships, such as the nationwide agreement with Farmers Insurance for smart water monitoring devices, have proven crucial in driving revenue growth and positioning the company as a leader in digital solutions for the home.

The agreement with Farmers Insurance is expected to add over 150 basis points of organic sales growth to the second half of 2024 and accelerate in 2025, demonstrating the company's commitment to digital innovation and market leadership. Fortune Brands Innovations' digital strategy is expected to contribute significantly to the company's growth, with a path to over $1 billion in digital sales by 2030.

Market Outlook and Strategic Focus

Looking ahead, Fortune Brands Innovations expects continued outperformance in its Moen North America and Outdoors business, as well as accelerated growth in its digital portfolio. The company's strategic focus on key growth areas and digital innovation has positioned it for long-term success, with a strong portfolio of leading brands, innovation, and channel management capabilities.

Despite challenges in the market, Fortune Brands Innovations remains confident in its ability to deliver growth and sustain value creation through the cycle. The company's strategic priorities, including its digital strategy and organizational realignment, are expected to drive continued success and differentiate Fortune Brands Innovations from its competitors.

Conclusion

Fortune Brands Innovations' second quarter earnings report highlights the company's strategic focus on digital innovation, organizational realignment, and market leadership. With a strong portfolio of leading brands and a commitment to digital growth, Fortune Brands Innovations is well-positioned to navigate market challenges and drive long-term success in the competitive landscape.