Navigating Tariff Turbulence: Assessing Newell Brands' Cost-Cutting and Brand Resilience in a Challenging Market

In the shadow of a high-tariff environment and global supply chain volatility, Newell Brands (NWL) has faced a perfect storm of declining sales, margin pressures, and strategic realignment. Once a household name for its portfolio of brands like Sharpie, Rubbermaid, and Coleman, the company has struggled to maintain its footing as macroeconomic headwinds and shifting consumer preferences test the limits of its cost-cutting initiatives and brand resilience.

The Financial Deterioration: A Tale of Two Margins

Newell's 2024 financial results tell a story of mixed resilience. While the company managed to improve operating margins from a negative 0.5% in 2023 to 0.5% in 2024, its gross margin expansion—from 29.9% to 34.2%—was a bright spot. This improvement, driven by pricing actions and productivity savings, masked a deeper issue: core sales declined by 3.0% year-over-year, with net sales falling 6.1% in Q4 2024. The Learning & Development segment, home to Sharpie and Graco, buckled with a 0.5% core sales decline, while the Home & Commercial Solutions segment saw a steeper 6.0% drop.

The company's debt load remains a concern, with $4.6 billion in debt as of 2024, despite a $1.25 billion refinancing at favorable rates. While this refinancing provided short-term relief, the absence of significant working capital contributions from inventory reductions in 2024 (leading to a 50% drop in operating cash flow to $496 million) raises questions about long-term liquidity.

Cost-Cutting and Supply Chain Shifts: A Double-Edged Sword

Newell's response to tariff pressures has been a strategic pivot toward domestic manufacturing. By 2025, China's share of its cost of goods sold had fallen from 35% in 2017 to 15%, supported by a $2 billion investment in U.S. production. This shift, while reducing exposure to 125% U.S. tariffs on Chinese imports, has introduced new challenges. Domestic manufacturing is capital-intensive and less scalable, limiting the company's ability to respond to sudden demand fluctuations.

The $75 million in annualized savings from 2024 restructuring efforts has helped offset some costs, but these gains are now offset by $155 million in incremental tariff expenses in 2025. Management projects these tariffs could reduce 2025 EPS by $0.20, though sourcing diversification and pricing adjustments may halve this impact. The question remains: Can these cost-cutting measures sustain margin expansion in the face of ongoing sales declines?

Brand Resilience: Innovation vs. Erosion

Newell's brand portfolio remains a critical asset, but its value is unevenly distributed. The Learning & Development segment, which includes Sharpie and Graco, has shown relative resilience, with 4.2% core sales growth in Q1 2025. This segment's 25.6% normalized operating margin underscores its profitability and consumer loyalty.

However, other segments, like Outdoor & Recreation (Coleman, Campingaz), have struggled. Core sales in this segment fell 10.9% in Q2 2025, reflecting weak demand for discretionary products. The company's focus on innovation and digital transformation—such as AI-driven content marketing—has yet to fully reverse these trends. While the “lighting up everyday moments” brand strategy resonates emotionally, it has not translated into consistent top-line growth.

The Outlook: A Cautious Path Forward

Newell's 2025 outlook is a mix of optimism and caution. The company expects core sales to turn positive in the back half of the year and anticipates operating margin improvements. However, the revised EPS guidance of $0.66–$0.70 (down from $0.70–$0.76) and updated operating cash flow forecast of $400–$450 million signal ongoing challenges.

Investors must weigh the company's strategic agility against structural headwinds. The shift to domestic manufacturing and cost-cutting have insulated Newell from the worst of tariff impacts, but these measures alone cannot compensate for declining market share in key segments. The Learning & Development segment's performance suggests that brand innovation and pricing power can drive resilience—but only in high-margin categories.

Investment Implications

For long-term investors, Newell Brands presents a paradox: a company with a strong brand legacy and operational discipline, yet vulnerable to macroeconomic and structural risks. The success of its cost-cutting initiatives and brand rejuvenation efforts will hinge on three factors:
1. Sustaining gross margin expansion through pricing and productivity.
2. Reinvigorating underperforming segments like Outdoor & Recreation with product innovation.
3. Managing debt and liquidity in a high-interest-rate environment.

If Newell can stabilize its core sales and maintain margin discipline, its stock may offer value for patient investors. However, the risks of continued sales declines and tariff-related headwinds cannot be ignored. For now, a cautious approach—monitoring the company's ability to execute its strategic pivot—seems prudent.

In a world where tariffs and consumer behavior shift rapidly, Newell Brands' long-term viability will depend on its ability to balance cost efficiency with brand innovation. The company has taken meaningful steps to adapt, but the path to sustainable growth remains uncertain.