WD-40 Company's FY 2025 Outlook: Regional Momentum and Margin Gains Fuel Growth

The WD-40 Company has delivered a robust update to its FY 2025 sales guidance, signaling confidence in its ability to navigate macroeconomic headwinds while capitalizing on strategic regional growth and margin expansion opportunities. Let's dissect the numbers to uncover why this industrial staple could be a compelling investment play.

Regional Growth Strategies: Where WD-40 Is Winning

The company's regional performance reveals a clear focus on high-growth markets, with Latin America, EIMEA (Europe, Middle East, and Africa), and Asia-Pacific each playing distinct roles in driving top-line momentum.

1. Americas: Latin America's Engine
2. The Americas segment (45% of sales) grew 3%, fueled by a 47% surge in Brazil due to direct market penetration. The U.S. saw a 7% dip in WD-40 Multi-Use sales due to “order timing,” but WD-40 Specialist products—targeted at professional and consumer maintenance needs—leapt 9%.

3. Key Takeaway: The shift toward higher-margin Specialist products is a strategic win, reducing reliance on the commoditized Multi-Use line.

4. EIMEA: The Star Performer

5. EIMEA (41% of sales) delivered a 10% sales jump, driven by double-digit gains in Italy (+28%), Benelux (+27%), and France (+13%). The region's WD-40 Specialist sales rose 12%, indicating strong brand relevance across diverse markets.

6. Image Insight:

7. Asia-Pacific: Challenges and Opportunities

8. Despite a 1% sales decline in Asia-Pacific (14% of sales), China posted a 5% increase, and management expects recovery post-March 2025. The region's weakness stemmed from distributor market softness, particularly in Australia's HCCP category.

Margin Expansion: Operational Efficiency Meets Strategic Divestiture

WD-40's revised guidance highlights a 55–56% gross margin target, up from 52.4% in 2024, driven by two key factors:
- Operational Leverage: The company is benefiting from cost controls and supply chain optimization, particularly in high-volume regions like EIMEA.
- Strategic Divestiture: The planned sale of its homecare and cleaning products (HCCP)—which are underperforming and dilutive to margins—will free capital and focus resources on core maintenance products.

The HCCP divestiture alone could add $23 million to net sales and $6 million to operating income if the assets are sold. Even if unsuccessful, the non-core drag is now quantified, reducing uncertainty.

Investment Catalysts and Risks

Catalysts to Watch:
- Dividend and Buybacks: A $0.94 quarterly dividend (yield ~1.2% at current prices) and a $50 million share repurchase program signal shareholder-friendly policies.
- Currency Neutral Growth: The 6–11% sales guidance excludes currency headwinds, suggesting organic strength.

Risks:
- Currency Volatility: Foreign exchange impacts cost the company $4.9 million in Q2.
- Divestiture Timing: If HCCP sales stall, EPS could miss by $0.33, though management has stress-tested this scenario.
- Supply Chain Inflation: Rising material or logistics costs could squeeze margins despite current efficiencies.

Investment Thesis

WD-40's FY 2025 outlook paints a picture of a company de-risking its portfolio while leaning into high-margin regions and product lines. The stock's valuation—trading at ~22x 2025E EPS—appears reasonable given its stable cash flows and low debt (net leverage <0.5x).

Recommendation:
- Hold/Initiate Buy: For investors seeking a defensive, dividend-paying stock with mid-single-digit growth, WD-40 fits. The HCCP exit and margin improvements justify a cautious bullish stance.
- Watch for: Finalization of the HCCP sale and EIMEA's sustained momentum in Q3.

In a world of macroeconomic uncertainty, WD-40's focus on its maintenance product core—backed by disciplined capital allocation—positions it as a resilient player in the industrials sector. This is a stock to keep on your radar for long-term capital appreciation and steady income.