Newell Brands Battles Sales Slump in Q1, Eyes Turnaround with Q2 Outlook
14min read Newell Brands (NWL) reported a mixed Q1 2025 performance, marked by a normalized operating loss and declining sales, but also delivered a modest EPS beat and unveiled its Q2 guidance. The results underscore the company’s struggle to stabilize its core business amid macroeconomic headwinds, while hinting at potential opportunities through strategic initiatives and product innovation.
Q1 2025: A Tale of Contrasts
Newell’s Q1 net sales fell 5.3% year-over-year to $1.57 billion, slightly outperforming expectations but reflecting broader consumer spending weakness. While the Learning & Development segment (Sharpie, EXPO) delivered a 2.3% sales rise to $572 million—its strongest performance—the Home & Commercial Solutions division, which accounts for over half of revenue, saw sales slump 9.1% to $812 million. This segment’s normalized operating income also missed estimates, dropping to $20 million from $34.78 million.
The corporate segment’s normalized operating loss narrowed to $52 million from $62.76 million in Q1 2024, signaling progress in cost discipline. However, the company reported an overall EPS of -$0.01, narrowly better than the -$0.07 estimate, despite a net loss of $37 million due to restructuring costs and one-time items.
The stock closed at $5.17 on April 29, down 16.3% from March 2025, reflecting investor skepticism. Pre-market trading on April 30 dropped another 2.3%, as traders weighed mixed signals from the report.
Q2 Outlook: Navigating Tariffs and Trade-offs
Newell issued Q2 2025 normalized EPS guidance of $0.21–$0.24, aligning with its full-year target of $0.70–$0.76. Management emphasized resilience amid ongoing tariffs, noting that existing measures—such as domestic manufacturing shifts—would mitigate most of the impact from the U.S. China tariffs. However, a 125% tariff on Chinese imports (if imposed) could shave up to $0.10 off the full-year EPS, though mitigations would halve that risk.
The company also reaffirmed its 2025 core sales decline of 3–4%, with Q2 sales expected to drop 3–5% year-over-year. Gross margin improvements (up 350 basis points in Q4 2024) and a projected normalized operating margin of 10.4–10.8% in Q2 highlight margin expansion efforts.
Key Drivers and Risks
Positive Signs:
- Turnaround Progress: Newell has reduced SKUs by 80% (to under 20,000) and cut headcount by 20% (to 24,000), improving operational efficiency.
- Innovation Pipeline: Launches like Sharpie’s Earth Tones and Graco’s EasyTurn™ car seat aim to rejuvenate brand relevance and drive premium pricing.
- Supply Chain Gains: Global fill rates rose to 95% in 2024, reducing stockouts and boosting customer satisfaction.
Headwinds:
- Sales Declines Persist: The 5.3% Q1 sales drop aligns with Newell’s 2025 full-year guidance, but investors demand evidence of stabilization.
- Tariff Uncertainty: The looming 125% China tariff remains a wildcard, as Newell sources 40% of its products from Asia.
- Structural Challenges: The Corporate segment’s $52 million loss reflects ongoing overhead inefficiencies, despite improvements.
Valuation and Analyst Take
Zacks Investment Research’s “Sell” rating (Zacks Rank #4) reflects skepticism over Newell’s ability to reverse sales trends. At $5.17, the stock trades at just 7.1x its 2025 EPS midpoint of $0.73, suggesting a deep discount to peers like Rubbermaid’s parent company, Newell Brands’ valuation may already factor in worst-case scenarios.
Conclusion
Newell Brands’ Q1 results are a reminder of the retail sector’s fragility, yet the company’s operational improvements—margin gains, SKU rationalization, and new product launches—provide a foundation for recovery. The Q2 guidance offers cautious hope, but investors must weigh near-term risks (tariffs, inflation) against long-term strategic execution.
If Newell can stabilize core sales and leverage its innovation pipeline, its current valuation could prove attractive. However, the stock’s performance hinges on whether management can turn the Learning & Development segment’s resilience into a broader turnaround. For now, the path forward remains narrow: cautious investors may consider a small position, but the company must deliver consistent execution to justify optimism.
The data shows a trajectory of margin improvements, but sales declines persist. Watch for Q2’s normalized EPS to land near the midpoint of $0.225, which could ease investor concerns—if achieved.
