WD-40's Q2 2025: Navigating Tariff Challenges and Contradictory Margin Outlooks

These are the key contradictions discussed in WD-40 Company's latest 2025 Q2 earnings call, specifically including: Tariff Impact and Foreign Exchange Rates, Supply Chain Optimization and Tariff Impacts, and Gross Margin Expectations:



Sales Performance and Currency Impact:
- WD-40 Company reported net sales of $146.1 million for Q2, an increase of 5% from the previous year. Adjusting for estimated translation impacts of foreign currency, net sales would have been $150.9 million, reflecting an increase of 9%.
- The currency headwinds affected sales, particularly due to changes in foreign currency exchange rates. However, the company achieved double-digit volume growth, particularly in EIMEA.

Geographic Sales Performance:
- Sales in the Americas increased by 3% to $65.5 million, with adjustments for currency impact showing a 5% increase. EIMEA sales rose by 10% to $59.6 million, and adjusting for currency impact, sales increased by 15%.
- Growth in Latin America was driven by the transition to a direct market model, especially in Brazil, contributing positively to sales. In EIMEA, continued volume recovery following past price increases and strong sales in direct markets boosted performance.

Premiumization and Specialized Product Growth:
- Year-to-date sales of premium products like WD-40 Smart Straw and EZ-Reach increased by 11% compared to the prior year. Sales of WD-40 Specialist products were $38 million, up 12% year-to-date.
- The focus on premiumization and specialized products is part of WD-40's strategy to achieve more profitable growth, supported by strong growth in these segments across different regions.

Operational and Financial Efficiency:
- Gross margin improved to 54.6%, up from 52.4% last year, with a focus on cost reduction across cans and specialty chemicals. Adjusted EBITDA margin improved slightly to 18%.
- The company achieved a significant increase in employee engagement, with a score of 94%, indicating strong internal alignment and productivity. Supply chain optimization and cost savings are expected to mitigate potential tariff impacts.