Reynolds' Q3 2025 Earnings Call: Contradictions Emerge on Promotional Strategies, Tariff Headwinds, and Pricing Pressures

Date of Call: October 29, 2025

Financials Results

• Revenue: $931M, up more than 2% YOY (vs $910M)
• EPS: $0.42 adjusted, up $0.01 YOY (vs $0.41); excludes $0.04 of strategic investments and CEO transition costs

Guidance:

• Full-year net revenues expected flat to down 1% vs $3.7B in 2024.
• Full-year adjusted EBITDA $655M–$665M; adjusted EPS $1.60–$1.64.
• Q4 net revenues expected down 1%–5% vs Q4 2024 ($1.021B); Q4 adjusted EBITDA $208M–$218M; Q4 adjusted EPS $0.56–$0.60.
• Non-retail revenue to contribute ~1 point; pricing intended to fully recover commodity and tariff cost headwinds.
• Expect ~$30M–$40M incremental CapEx for the year; guidance excludes ~ $40M pretax strategic and CEO transition costs and prior Q1 debt refinancing costs.

Business Commentary:

* Revenue and Profitability: - Reynolds Consumer Products reported net revenues of $931 million for Q3 2025, up 2% from the previous year. - The company's profitability improved, with each business unit showing EBITDA growth in the quarter and consolidated adjusted EBITDA at $168 million. - The growth was driven by increased retail performance, share gains in multiple categories, and effective cost management.

• Share Gains and Market Performance:
• The company achieved strong retail performance, gaining market share overall and in major categories such as Hefty Waste Bags and Reynolds Wrap.

• This was attributed to effective execution and product innovation, including new Reynolds Wrap Fun Foil and Hefty ECOSAVE compostable cutlery.

• Pricing Strategy and Commodity Costs:

• Reynolds Consumer Products implemented pricing increases in aluminum foil, with Reynolds Wrap volume outperforming the category.

• The company's pricing strategy aimed at fully recovering increased commodity and tariff costs, reflecting a 2-4 point full-year cost headwind.

• Operational and Cost Efficiency:

• The company made progress in managing manufacturing, supply chain, and SG&A costs, with a 29 million reduction year-to-date.
• This includes improvements in productivity and the hiring of a Chief Operations Officer to oversee lean principles and automation across operations.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly stated they are "pleased" with results, citing retail share gains, pricing execution and improved profitability. Nathan: revenue "exceeded our expectations" and adjusted EPS was at "the upper end of our guide"; company raised full-year revenue and EPS guidance, signaling confidence.

Q&A:

• Question from Robert Ottenstein (Evercore ISI): How do you see promo intensity for the holiday season, how is the consumer developing into the holidays given affordability pressures, and you flagged a risk retailers could shift store brands to other suppliers — why?
  Response: Promo intensity is elevated mainly in waste and food bags but roughly at pre‑pandemic levels; consumers remain pressured, and RCP is positioned to serve both value and premium shoppers via brands and private‑label; flagged retailer bidding due to economic/tariff pressures but RCP expects to win more than lose given U.S. manufacturing.

• Question from Kaumil Gajrawala (Jefferies LLC): You’re hiring and changing operational capabilities — what is the grand plan and how should that affect the long‑term algorithm (share gains vs category growth)?
  Response: Added a Chief Commercial Officer and Chief Operations Officer to execute three growth levers (prioritized innovation, RGM tools, customer‑level share gap selling) and to drive manufacturing/supply‑chain productivity, aiming to improve both share and margins.

• Question from Lauren Lieberman (Barclays): Tableware was down — how much of the decline is foam, what's the current size of foam, and will foam be less of a drag over the next 12 months?
  Response: About 80% of the tableware decline was due to foam headwinds; profits increased despite volume declines; foam should be a smaller headwind next year as comps (e.g., California impacts) ease.

• Question from Andrea Teixeira (JPMorgan Chase & Co): On Hefty waste/storage — can you detail promo impact, distribution gains, and how to think about lapping those distribution gains going into 2026?
  Response: Hefty growth driven by product resonance and distribution gains with high case fill rates; promotional activity is in line with pre‑pandemic levels and the company will continue investing in durable innovation.

• Question from Andrea Teixeira (JPMorgan Chase & Co): With large private‑label exposure in the segment, how are you positioning for value consumers vs higher‑end shoppers and are you taking pricing actions to protect entry level?
  Response: The brand vs store‑brand mix is broadly stable; Hefty retains brand loyalty while RCP also supplies private‑label effectively — allowing the company to serve both value and premium needs without a major mix shift.

• Question from Peter Grom (UBS): Are you seeing diminishing returns on promotions similar to other large food companies and how are you responding?
  Response: We’ve invested in RGM to reallocate trade dollars to highest‑value products and customers to improve promotional ROI; focus is on optimal deployment rather than commenting on structural industry returns.

• Question from Peter Grom (UBS): Are the 2–4 point commodity/tariff headwinds still the right assumption and what does Q4 gross margin/exit rate look like for 2026 modeling?
  Response: 2–4 points remains a reasonable full‑year estimate for commodity and tariff headwinds; pricing implemented to fully recover those costs and gross profit has improved sequentially, with further continuation expected.

• Question from Brian McNamara (Canaccord Genuity): On Hefty and Presto outperformance — how much is lower price point/value driving volume vs brand strength, and why isn't Reynolds Cooking & Baking seeing stronger volume given more at‑home cooking?
  Response: Success is driven by innovation plus value positioning—Hefty is a performance brand and Presto wins by delivering premium quality at value prices; Reynolds Cooking sees modest at‑home cooking tailwinds offset partly by higher aluminum prices.

• Question from Brian McNamara (Canaccord Genuity): Where are you on the strategic initiatives you outlined in February and what gives investors confidence they'll bear fruit into 2026?
  Response: Initiatives are on track: commercial (RGM, share‑gap selling) and cost productivity programs are progressing as planned, new commercial and operations leaders are executing well, and effects are beginning to flow through the P&L.

Contradiction Point 1

Promotional Intensity and Consumer Behavior

It reflects differing perspectives on promotional intensity and consumer behavior, which are critical for strategic planning and investor expectations.

How do you assess the promotional intensity for the holiday season? How do you assess consumer trends heading into the holidays, considering affordability challenges? - Robert Ottenstein(Evercore ISI Institutional Equities, Research Division)

2025Q3: Promo intensity is generally in line with pre-pandemic levels. The consumer remains under pressure due to inflation and cooling labor market. - Scott Huckins(CEO)

How do consumer purchase patterns and value-seeking behavior affect your confidence in executing price increases? - Robert Ottenstein(Evercore ISI)

2025Q2: Our view of the consumer remains stable, with promotional depth consistent with last year. The consumer is under pressure, seeking value, which is evident in club retail store growth. - Scott Huckins(CEO)

Contradiction Point 2

Tariff Headwinds

It highlights changes in the composition and impact of tariff headwinds, which can affect financial forecasting and operating margins.

How should we expect gross margin in the back half to be affected by the $10 million Q2 shortfall? - Brian McNamara(Canaccord Genuity Corp., Research Division)

2025Q3: The 2- to 4-point tariff headwind remains consistent, though the composition has changed. Aluminum now makes up a larger part, while tariff rates have generally settled at lower levels. - Scott Huckins(CEO)

How are you addressing tariff headwinds due to changing tariff rates? - Jim Abbott(Barclays)

2025Q2: The 2- to 4-point tariff headwind remains consistent, though the composition has changed. Aluminum now makes up a larger part, while tariff rates have generally settled at lower levels. - Scott Huckins(CEO)

Contradiction Point 3

Promotional Intensity and Consumer Behavior

It reflects differing perspectives on promotional strategies and consumer behavior, which are crucial for understanding revenue growth and market positioning.

How do you view the holiday season's promo intensity setup? How do you see consumers behaving during the holidays, considering affordability challenges? - Robert Ottenstein(Evercore ISI Institutional Equities, Research Division)

2025Q3: Promo intensity is generally in line with pre-pandemic levels. - Scott Huckins(CEO)

How does Q1 impact your Q2 forecast, specifically on retail destocking and consumer demand? - Javier Escalante(Evercore ISI)

2025Q1: We've seen a bit more promotional intensity than we'd like to see. - Scott Huckins(CEO)

Contradiction Point 4

Impact of Tariffs on Pricing and Gross Margins

It involves differing assessments of tariff impacts on pricing and gross margins, which are critical for financial forecasting and investor expectations.

Are you seeing a similar return on promotions as larger food companies? - Peter Grom(UBS Investment Bank, Research Division)

2025Q3: We've seen some spikes in tariffs. - Scott Huckins(CEO)

How should we think about the impact of tariff mitigation on gross margins? - Peter Grom(UBS)

2025Q1: We do have pressures. And these are primarily on aluminum. We are, as we've said, pricing cases and products. - Nathan Lowe(CFO)

Contradiction Point 5

Promotional Environment and Strategy

It reflects differing perspectives on the promotional environment and the company's strategic approach to managing promotions, which are critical for maintaining market share and profitability.

How do you assess the holiday season's promotional intensity? How will consumers behave during the holidays considering affordability challenges? Why did you highlight the risk of retailers moving store brands to other suppliers? - Robert Ottenstein(Evercore ISI Institutional Equities, Research Division)

2025Q3: Promo intensity is generally in line with pre-pandemic levels. The consumer remains under pressure due to inflation and cooling labor market. Our strategy caters to both brand shoppers and value-oriented consumers. The risk of retailers shifting store brands to other suppliers is due to uncertainty, but we expect to win more than we lose as a U.S.-centric manufacturer. - Scott Huckins(CEO)

Is the promotional environment in waste management competitive? - Mark Astrachan (Stifel)

2024Q4: Promotional levels in waste bags are in line with the rest of the portfolio. The environment is similar to pre-pandemic levels. We expect to maintain or grow share against private labels. - Nathan Lowe(CFO)