Pet Care Gains Momentum as Home & Personal Care Struggles

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Organic net sales decreased 6% YOY
• EPS: Adjusted diluted EPS increased to $1.40, driven by a one-time tax benefit and share reduction, partially offset by lower adjusted EBITDA
• Gross Margin: 35.7%, decreased 110 basis points YOY

Guidance:

• Full year net sales expected flat to up single digits YOY, with growth in Global Pet Care and Home & Garden, and decline in Home & Personal Care.
• Adjusted EBITDA expected to grow low single digits YOY.
• Adjusted free cash flow as a percentage of adjusted EBITDA expected around 50%.
• Q2 expected to be challenging YOY due to softness in Home & Personal Care; Home & Garden growth expected in second half.
• Depreciation and amortization expected $115M-$125M; CapEx expected $50M-$60M; cash taxes $40M-$50M.
• Strategic focus on M&A in Pet and Home & Garden, with low leverage enabling disciplined pursuit.

Business Commentary:

Financial Performance and Strategic Recovery:

• Spectrum Brands Holdings reported a decrease in net sales by 3.3% excluding foreign exchange impacts, and a decline in adjusted EBITDA by 15.2 million.
• The company's Global Pet Care business returned to growth, with adjusted EBITDA of $49 million, despite higher tariff costs.
• The results reflect the positive impact of strategic actions taken to address external challenges such as tariffs and macroeconomic volatility.

Home & Personal Care Challenges:

• The Home & Personal Care segment experienced a significant decline in organic net sales by 11.1%, with both Personal Care and Home Appliances categories down.
• Sales were impacted by tariff-related pricing actions and increased product costs, with a particular challenge in North America due to consumer softness.
• The segment continues to navigate through category softness and a reduced product portfolio, with expectations of continued pressure in the near term.

Home & Garden Business Outlook:

• Home & Garden net sales decreased by 19.8%, influenced by an accelerated seasonal inventory build by customers in the prior year.
• Despite the decline, brand performance in the market was strong, with significant POS trends showing momentum over the last two months.
• The business is expected to see growth in the second half of the fiscal year with a normal weather pattern anticipated to support sales.

Global Pet Care Growth and Innovation:

• The Global Pet Care business achieved an 8.3% increase in reported net sales, with Companion Animal and Aquatics segments showing growth.
• Key brands like Good n Fun and FURminator gained market share, driven by brand-building investments and innovation.
• The company is focused on strategic initiatives to enhance market position and expand product offerings.

Balance Sheet Strength and Capital Returns:

• The company maintained a strong balance sheet with nearly $127 million in cash and a net leverage ratio of 1.65 turns.
• Spectrum Brands generated $60 million in adjusted free cash flow and repurchased approximately 800,000 shares year-to-date.
• This financial strength provides flexibility for strategic investments and capital returns to shareholders.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Our financial results for the first quarter demonstrate that our strategy is working' and 'I'm pleased that our first quarter net sales and adjusted EBITDA exceeded expectations.' CFO highlighted 'Early indications are strong as POS over the last 2 months has gained significant momentum.' Company reiterated full-year earnings framework and expressed optimism on strategic priorities.

Q&A:

• Question from Madison Callinan (Canaccord Genuity): One of your competitors stated their belief that we've reached a bottom in Pet. I'm curious if you would agree with that assessment and provide any color around your view?
  Response: CEO declined to call a bottom but expressed confidence in Pet's recovery, noting market share gains and positive momentum, while acknowledging lingering softness.

• Question from Madison Callinan (Canaccord Genuity): You mentioned that retailers should be disciplined in inventory, but how committed are your retailers to the Garden category this upcoming season? And are you in a position to chase if the weather cooperates and demand is better than we've seen in the last few years?
  Response: CEO is very bullish on Home & Garden, citing strong POS trends, successful new product launches, and retailer support, expecting a normal season with growth weighted to the second half.

• Question from Olivia Tong Cheang (Raymond James): The comps get a fair bit easier after Q1. So can you talk about your views in terms of the arc of anticipated improvement as you get from the flat to plus low single digits that you're looking for, for the year?
  Response: CFO outlined cadence: Pet growth continues; Home & Garden growth weighted to second half due to normal inventory phasing; Home & Personal Care pressure stabilizes in second half, with full-year decline expected.

• Question from Unknown Analyst (CJS Securities): Just broadly speaking, are the levels of investment in brands where you want them? Might they increase or decrease? And same question at the corporate level.
  Response: CFO stated investment levels are appropriate for Pet and Home & Garden; for Home & Personal Care, investments will be pulled back currently but can be increased if recovery strengthens; overall focus is on reallocating for productivity.

• Question from Unknown Analyst (CJS Securities): And can you talk about the innovation and your pipeline for FY '26 and beyond? Are you at the level of new product introduction you want to be at?
  Response: CFO highlighted a strong pipeline, with plans to expand distribution for successful last-year launches in Home & Garden and more new products in Pet over coming quarters.

• Question from Christopher Carey (Wells Fargo Securities): When you think about the process with the HPC business, how would you characterize the progress that you think has been made towards your objectives or how things have evolved and are evolving? Maybe what has gone against you, obviously, from the external environment? And what gives you confidence that you can still execute on these plans that you have for the business?
  Response: CEO attributed strong Q1 EBITDA ($20M) to managing tariff volatility, maintaining an unlevered balance sheet, and competitive positioning; expects improved profitability in fiscal '26, driving potential consolidation in the appliance category.

• Question from Christopher Carey (Wells Fargo Securities): Yes. Yes. A lot has certainly come at you guys. That's helpful. When it comes to EBITDA for the year, as we think about cadence, I think you gave some good perspective, which I interpreted as more top line. The outlook is more back half weighted from a profitability perspective as well. Just remind us of the anomalies in Q1 and the confidence as you get toward that full year objective.
  Response: CEO acknowledged Q1 and Q2 challenges in Home & Personal Care due to tariff headwinds and market disruption but expressed confidence in achieving full-year EBITDA growth through Q3 and Q4 as pricing takes effect and strategies improve.

• Question from Ian Zaffino (Oppenheimer): I just want to drill down a little bit more on GPC here. When we think about kind of the growth for the year, is there an opportunity to maybe grow faster than low single digits? And help us understand the demand in Aquatics. Is that just kind of a comp thing? Or do you actually see like underlying demand improving?
  Response: CEO and CFO emphasized growth in Companion Animal driven by brand performance and strategic initiatives; Aquatics is a smaller segment with stabilizing category demand, with recovery efforts focused on price architecture and distribution.

• Question from Carla Casella (JPMorgan): You talked a bit about some wins in terms of shelf space. Can you quantify at all your kind of net wins or -- net wins and losses and how they should impact the coming quarter?
  Response: CFO declined to quantify specific shelf space wins but stated growth is expected from new product launches in Pet and Home & Garden, with more innovations planned.

• Question from Carla Casella (JPMorgan): Okay. That's great. And then just I guess, given the -- as the tariff costs flow through, should we expect any unusual changes in working capital this year? Or kind of do you expect working capital to be a source or use of cash for the full year?
  Response: CFO stated working capital management has been strong, and working capital is expected to remain stable for the year, not a significant source or use of cash.

Contradiction Point 1

Characterization of Progress and Strategic Approach for the HPC Business

Inconsistent portrayal of strategic process status and business performance.

How would you characterize the progress and evolution of the HPC business toward its objectives, the challenges faced from the external environment, and what gives confidence in executing the plans? - Christopher Carey (Wells Fargo Securities)

2026Q1: Acknowledged severe challenges from $500M+ in tariffs... added $20M in EBITDA in the last 90 days. Expressed confidence in strong balance sheet... positioning as the consolidator of choice. - David Maura(CEO)

What's the updated assessment of the strategic and fundamental options for the HPC business, and how do tariffs impact potential outcomes? - Christopher Carey (Wells Fargo Securities)

2025Q4: Previously, a strategic process was derailed by trade policy/tariffs. The focus has shifted to running the business... As trade volatility decreases, the company is excited to resume strategic discussions to find a solution... - David Maura(CEO)

Contradiction Point 2

Growth Expectations and Market Assessment for the Pet Category

Contradiction on whether the Pet market has bottomed and the company's readiness to comment on it.

Do you agree with the assessment that the pet industry has hit a bottom, and what's your perspective? - Madison Callinan (Canaccord Genuity)

2026Q1: The CEO declined to comment on calling market tops/bottoms but expressed focus on internal efforts... - David Maura(CEO)

What's the current status of the pet business and the outlook for the next 12 months considering competitors? - Christopher Carey (Wells Fargo Securities)

2025Q4: Q4 results showed signs of stabilization in the Global Pet Care business. The company feels this business can return to growth faster, supported by recent product performance... - Faisal Qadir(CFO)

Contradiction Point 3

Pet Category Outlook and Market Position

The assessment of the pet category's bottom and the company's market position shifts between calls.

Do you agree with the competitor's belief that we've reached a bottom in the pet market, and can you elaborate on your view? - Madison Callinan (Canaccord Genuity)

2026Q1: The CEO declined to comment on calling market tops/bottoms but... acknowledged lingering softness. - David Maura(CEO)

Could you provide details on the pet category's channel mix, consumer preferences, and market share gains, as well as supply constraints? - Carla Marie Casella Hodulik (JPMorgan Chase & Co)

2025Q3: ...the category may have bottomed. The company has regained share versus private label in the U.S. and... is optimistic about 2026. - Jeremy W. Smeltser(CFO)

Contradiction Point 4

Impact and Recovery from Tariffs

Contradiction on the severity of tariff impact and the associated sales recovery timeline.

How would you characterize the progress and evolution of the HPC business toward its objectives, what external challenges have been encountered, and what gives confidence in executing the plans? - Christopher Carey (Wells Fargo Securities, LLC, Research Division)

2026Q1: The CEO acknowledged the severe challenges from $500M+ in tariffs... which led to elasticity issues. - David Maura(CEO)

How much sales were left on the table due to shipping halts and internal actions in Q3, and what lingering impact, if any, carries into Q4? - Madison Callinan (Unidentified Company)

2025Q3: The sales loss was due to tariff-related pricing negotiations and supply constraints. July sales showed improvement, indicating a rebound. - David M. Maura and Jeremy W. Smeltser(CEO and CFO)

Contradiction Point 5

EBITDA Growth Cadence

Contradiction on the timing of EBITDA recovery and growth.

How would you characterize the progress and evolution of the HPC business toward its objectives, the challenges from the external environment, and your confidence in executing the plans? - Christopher Carey (Wells Fargo Securities, LLC, Research Division)

2026Q1: With pricing in place, supply chains fixed, and a new strategic go-to-market plan, EBITDA growth is expected in Q3 and Q4 for the fiscal year. - David Maura(CEO)

Given Project Alpha, will margin improvement be lower this year and recover in 2019 and beyond? - Karru Martinson (Jefferies LLC)

Earnings Call Transcript: The impact of Project Alpha investments should be factored into margin expectations for the year. - Douglas L. Martin(CFO)