Q2 2021 Newell Brands Inc Earnings Call

[music].

Good morning, and welcome to Newell brands second quarter 2021 earnings conference call. At this time, all participants are in a listen only.

The mode. After a brief discussion by management, we will open up the call for questions in order to stay within the time scheduled for this call. Please limit yourself to 1 question during the Q&A session. As a reminder, today's conference is being recorded a live webcast of this call is available and I are talking Newell brands Dot Com I will now turn the call over to Sofia Senate V P of for investors.

Best of relations the Soonest you may begin.

Thank you good morning, everyone welcome to Newell brands second quarter earnings call on the call with me today of Ravi saw the Graham, our president and CEO and Chris Peterson, our CFO and president of business operation.

We begin I'd like to inform you that during the course.

Please call, we will be making forward looking statements, which involve risks and uncertainties actual results and outcomes may differ materially and we undertake no obligation to update forward looking statements I refer you to the cautionary language and risk factors available in our earnings release, our form 10-K, and other SEC filings available on.

On our Investor Relations website for further discussion of the factors affecting forward looking statements.

Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those who refer to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior for the.

Measures presented in accordance with GAAP explanations of these non-GAAP measures and available reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables as all of us and other materials <unk> Investor Relations website. Thank you and now I'll turn the call over to Ravi.

Thank you Sophie and good morning, everybody.

And welcome to our call I'm pleased to announce another outstanding quarter for Newell.

The further built from the strong momentum from the past 3 quarters, we delivered 25% core sales growth, 59% normalized operating income growth.

80.

The body percent normalized EPS growth of the quarter versus prior year rehab.

We have now delivered 4 consecutive quarters of core sales growth and experienced 5 consecutive quarters of domestic consumption growth.

Very strong first half of 2000.

<unk> 21 sales momentum, we are raising our top line outlook for the year.

During the second bar courthouse growth exceeded 25% as we lapped significant disruption from the pandemic importantly, even on a 2 year stacked basis core sales grew low double digits.

And both of the second quarter and during the first half showing the underlying momentum in the business I'm, especially pleased that once again, we saw broad based top line strength across each of our business units and across major channels with every region growing at a double digit rate while the performance in north.

Dramatic of an excellent first quarter sales grew almost 22% international markets. Once again shown registry of nearly 35% core growth in the second quarter and almost 31% in the first half with particular strength in Latin America.

7 of top.

Its beloved brands, including Colman Graco, <unk> Sharpie Yankee candle paper maintenance first of lab grew a strong double digit pace GAAP.

The canvas stood out as its sales nearly doubled versus last year.

We delivered strong top line results, even in businesses, such as food and home of.

<unk> the face tough comparisons versus prior year.

As a result of demand spikes at the same time it is extremely encouraging to see the continued rebound in writing as it has come roaring back folks growing back from a channel perspective E Commerce.

Appliance sales growth moderated to a mid single digit range accounting for about 20% of <unk> global net sales versus peak penetration of around 24% of yet ago. During the quarter. We saw a resurgence in consumption in brick and mortar lets recent progress from the vaccine rollout and the increased mobility brought people.

Back to the stores in fact growth in brick and mortar outpaced digital as the retail industry lapped significant pandemic related store closures and lockdowns from the second quarter for any training.

Given our ongoing investment in omni capabilities, we are well positioned to capitalize on the consumer.

Commerce demand, regardless of which channels consumers choose to shop redo.

We do however believe that overtime digital penetration will continue to move up despite the potential for quarterly fluctuations as channel dynamics settle.

The U S economy has continued to regain its footing.

We generally saw healthy consumption during the second quarter than it has been some normalization in trend across businesses in the U S. Net expended significant spikes in demand of yet ago, such as home appliances and food at the same time consumption accelerated in writing which was the victim of the dependent.

Pandemic last year <unk>.

<unk> consumer behavior of reinforces our belief that home as the hub team will persist relative after the pandemic. The home has become central to People's lives and has truly become a sanctuary of park Prime office of part learning Center of Kids.

The activity zone, and the kitchen of family hub Neil.

Is well positioned to capitalize on the home.

Phenomenon not only due to the composition of our business portfolio, but also because of all of the work we've done to reinvigorate our iconic brands.

Innovation front of homes that enhance life at home and outside.

7 out of our 8 business units grew core sales of double digit rate and we made notable progress on market share across a number of categories, let's talk of at home fragrance, whose sales in.

In the quarter nearly doubled versus last year as the business lapped retail store closures and significant disruption in our manufacturing operations due to the pending net.

Net sales increased at a strong double digit pace relative to 2019 as well overcoming the unfavorable.

The impact from Yankee candle store closures and exit from our fund raising business.

Home fragrance was once again the start of the show.

Delivering the highest level of topline and consumption growth within our portfolio as we continue to gain market share.

Particularly incentive candles and expanded our distribution both in the U S and EMEA.

Although we expect the same to sainted camera category to continue to moderate results from a recent survey among centric capital users showed that use frequency remains high with.

Almost 33% of those surveyed aiming to use the product more often in the next 6 months.

I'm very excited about the long term prospects of home fragrance, which is how most omni channel business hit of strong gross margins.

<unk> growth potential.

The food business remained on a solid footing across all regions.

Core sales increased low double digits against a very difficult base period comparison as anticipated Pos decelerated in the quarter as the category softened, but remains significantly ahead of the 2.

2019 level.

As our strong brands continue to take significant share in food storage fresh preserving and kitchen organization categories.

Delighted to share some of the recognitions of brands of received this year as consumer reports named food sales.

The.

Best of vacuum see that for 2021 and good housekeeping chose rubbermaid brilliance is best food storage for 2020, 1 and counsel as number 1 editors' choice for best non stake in 'twenty 'twenty..1 it is so exciting to see those acts of accolades, especially at the time when the kitchen is.

Is so important for our consumers and our innovation machine has been in full gear.

This was another terrific quarter for home appliances business.

<unk> sales growth exceeded 15%, even as it lapped the high single digit growth comparison, once again Latin America stole.

All of the show as we continue to leverage our e-commerce presence to reach consumers with particularly strong results in Chile, Peru, and Argentina as expected consumption of the U S is moderating against elevated levels from a year ago, but remains significantly ahead of 2019.

<unk> needle mover launch of Mr Coffee.

Rice from fall 2000 training continues to generate demand supported by a social media campaign switch out Youre hashtag <unk> time, we further broadened distribution during the second quarter with new on trend colors. Mr. Coffee also introduced.

Espresso maker to capture consumers' heightened interest in specialty and espresso beverages, Mr. Coffee consistent share gains from the back of innovation and great price value is impressive.

Topline momentum in writing business accelerated nicely on a sequential basis.

Core sales growth for this business exceeded the company's total result, with every region delivering terrific growth against the suppressed base in the year ago period.

The rebound across most driving categories as more schools return for in person learning to finish out of the school year in Columbus.

The station with share gains in key categories, such as payments presentation markets permanent markets on the highlight this.

Translated into terrific consumption. The U S for us consumption was up in other parts of the west of the swap new share of the <unk> segment increased over Sam.

700 basis points to 26% of soft consumption.

Doubled behind on needle mover innovation Sharpie S. Jeff point of I love that pattern, which continues to delight consumers and bring incremental dollars for the category. We also Pos growth.

Growth in other markets such as Australia.

Zealand and in the U K in the second quarter of the office Channel also grew less as last year, but as expected. It has not fully come back to pre pandemic levels due to the prevalence of flexible work arrangements.

We are encouraged by the second.

Executive quarter of strong Pos growth in writing and remain optimistic about the back to school season with robust merchandising plans in place.

Based on the latest available information inputs in the construction, which is the gold standard is.

To make a comeback this year according to the school opening packer by leading industry.

<unk> for the upcoming school year, 96% of K 12 student body in the U S is in school districts that are already announced.

Offer in bus and education.

Of course uncertainty remains for some degree given the recent spread of the delta value.

We are closely monitoring the situation we remain bullish on this back to school season, and believe we are well positioned to win as we continue to growth.

Sales in overall share.

During the second quarter.

The strong double digits.

Sales growth for our baby business was nearly identical to that of writing fueled by broad based momentum across all the regions of double digit increase in consumption.

Growth, which reflected share gains by graco in a rapidly growing category of benefit from stimulus funding as well as an easy comparison all contributed to such a strong result in the U S.

We think that improving mobility and higher appetite by U S consumers to go on overnight trips.

<unk> causes some of bode well for demand and causing the biggest sub segment of the big Baby gear category and our baby business. We continue to innovate in this category earlier this year Graco introduced the snug right not fit our new line of infant car seats with integrated.

The anti rebound bar that provides an extra layer of safety fund families.

We are also excited by a new report from the Institute of family Studies that just came in the.

That suggests the U S.

May be witnessing a surprising right.

Yes.

Potentially at a zone government stimulus checks and flexible work arrangements is there of baby boomers going on folks.

Our commercial business unit delivered its sixth consecutive quarter of core sales growth just shy of double digits.

Strong top line momentum.

Across all regions higher domestic consumption of material handling refuse cleaning outdoor organization in hand protection and scouring products helped to mitigate declines in washroom solutions, which started the cycle against the significant surge in demand late in the second.

Quarter of 2020, we're seeing signs of reopening related demand in verticals, such as food service hospitality as well as travel and entertainment and also of the builder channel and channel is really beginning to set but somewhat offset by softness in walk from solutions and use of Sanitizers.

Core sales for the connected home and security business.

Also accelerating.

Until the strong double digit growth rate lapping significant disruption in the year ago period. The team is navigating through some supply constraints as it relates to chip shortages.

Just like other businesses.

The negatively impact impacted by the pandemic last year, we saw significant acceleration in outdoor recreation as core sales increased 25% with growth in every region. In every major category Coleman the largest brand in this business unit delivered terrific results as 1 of the largest contributor.

The adjusted the Companys top line growth this quarter 1 of the call of the outdoors campaign is already bolstered the outdoor equipment category.

Quarter. We also saw a resurgence in sales growth for on the go beverage and technical apparel businesses driven by robust demand in beverage <unk> newly launched product.

Is that for our after a strong start and are driving share gains in the hydration category.

The.

The power of our strategic vision.

The strength of our branded business portfolio and the focus on the turnaround has been brought to life.

Through strong and resilient.

Agile execution in an ever changing and fluid operating environment.

Excuse me, we delivered outstanding top and bottom line results.

During the second bar and first half of 'twenty, 1 both relative to the year ago period.

Clients as.

As well as 2019.

We've gained considerable momentum on auto.

The industry, we brought together a world class leadership team, who is has unlocked a passionate people invested in omni channel capabilities that have been instrumental in capturing consumer demand.

Across all of the channel.

That actually strengthened the innovation and marketing muscle leveraging consumer insights for sites.

Sharpening brand positioning for many of our top brands established joint business plans with the key strategic retail Partners Institute.

And in the new hybrid organization model.

That brings our domain experts close that to our customers and consumers, while leveraging the same type of scale and efficiencies.

Main productivity of way of life, providing both the fuel for margin enhancement as well as <unk>.

And the business to drive sustainable and profitable topline growth.

The reduced complexity bead consolidation of ERP systems of reduction in websites or skus.

And we have made meaningful progress in taking out overhead improving cash conversion cycle with strengthening the balance sheet and.

And part of it.

<unk> become very skilled at managing our Asia business unit portfolio and assigning clear roles for the individual businesses in some sub businesses for instance, we focus from the food commercial and home appliance business units in 2020 to leverage Covid related consumer trends when at some of these transplant.

We've been rated we're shoring up writing home fragrance and printing for anymore. Our strategy is to ensure that the whole is greater than the sum of the parts.

As the approach the second half we faced the tough macro operating environment with unprecedented.

Net inflationary pressures that we ex that we expect where the top half of $1 billion.

As well as extraordinary externally driven supply chain challenges notwithstanding the situation.

I am proud of our team's resilience.

Execution of promise.

And ingenuity so much so that we've raised our topline guidance for the year and continue to project normalized operating income and EPS growth on a full year basis.

Looking ahead I can confidently state that we're in a much stronger company than before.

And well position to drive sustainable and profitable growth in the yes ahead and add significant shareholder value I'd like to express my sincere and profound gratitude to all of the 31000 employees and frontline share as worldwide for the tenacity and delivering another Greg.

Carter.

Our best days are truly ahead of us with that over to Chris Peterson now. Please go easy on him with the questions. It is part of today happy birthday, Chris.

The words and upwards.

Thanks, Ravi and good morning, everyone.

Second quarter results were.

Standing as the integrated set of strategies, we put in place several years ago continue to drive strong financial results across all key metrics the.

Before getting into the details I want to provide a little color on the current operating environment and proactive choices, we are making.

We delivered better than anticipated results from Q tumors.

The consumer demand across our categories remain robust and our supply chain teams did a heroic job navigating a choppy operating environment.

To give a little perspective on the supply environment, we continue to face a number of externally driven supply challenges as a reminder, in the second quarter of 2020 our.

Our outlet chain was significantly pressured as a result of government mandated closures across many of our facilities due to the pandemic.

That was the low point for the business and we are in a much better position today with our factories distribution centers and retail stores open.

More recently however, our teams have worked tirelessly to over.

<unk> various supply challenges surrounding longer lead times for sourced products trucking capacity in the U S as well as labor shortages raw material and component availability.

Covid related disruptions across ports as well as consumer demand spikes following stimulus payments have exacerbated.

Our suppliers.

Early on we took a number of proactive actions to mitigate the impact from these dynamics, including building inventory on top selling skus, allowing for longer and transit times as part of our planning process.

Accelerating the pace of automation where feasible.

And.

And being creative with increased incentives to attract and retain employees in factories by raising wages further enhancing benefits and working conditions and providing employee development programs amongst other actions.

The complexity reduction work that we executed as part of the turnaround has put us in a much better position to deal with.

These are the challenges.

While we have successfully navigated these dynamics and created more agility within our supply chain. It certainly has not been easy and the challenges are ongoing.

The other changing dynamic has been inflationary pressure, we have seen continued escalation of inflation largely driven by increasing RASM.

Prices Ocean freight costs sourced finished good pricing due to a strengthening of Chinese Yuan and labor wage pressure. These factors are not unique to newell and are affecting everyone in our industry to put it in perspective, we currently expect inflation to amount to nearly $560 million.

In 2021.

This was about $200 million worse than what we expected just 3 months ago and $350 million worse than we expected at the beginning of the year.

We are taking a number of actions to mitigate the significant inflation spike, including a more aggressive push on productivity.

The things continuing.

Continuing to tightly manage cost optum.

Optimizing promotional spend.

Driving operating leverage from stronger topline growth.

And taking additional selective pricing later this year in categories, where we're seeing the greatest impact.

The net result is that we are maintaining.

Gaming, our EPS outlook for the year, which calls for strong operating profit growth. Despite the significant increase in inflationary pressure.

In the U S. We have now announced price increase was across 7 of our 8 business units.

These pricing actions do not fully offset the inflationary cost pressure.

<unk> said, we are using productivity savings and operating leverage as offsets as well.

As we start to think about 2022, we expect this headwind to become a tailwind.

As inflation is largely in the base, we benefit from carryover pricing and we continue to drive productivity savings and manage cost tightly.

Moving onto the second quarter performance, we delivered very strong results as demand exceeded our expectations. The shielding of the better than anticipated outcome on topline that also flow through to the bottom line.

The company's net sales increased 28, 3% year over year to $2.7 billion.

Core.

Sales grew 25, 4% as we lapped a 12, 6% decline from a year ago.

Favorable foreign exchange more than offset the headwind from business and Yankee candle retail store exits.

We saw broad based strength during the quarter with each of our business units in all 4 geographic regions growing.

Core.

For sales in the first half of the year grew 23, 3%.

On a 2 year stacked basis, which helps smooth out the noise from the year ago figures. We grew core sales in the low double digits, both during the quarter and in the first half.

Normalized gross margin expanded the 32, 7% from 31, 6% in the year.

Year ago period, the benefit from fuel productivity savings favorable business mix and pricing more than offset of more than 700 basis point headwind from inflation, primarily related to resin source finished goods transportation and labor costs.

Normalized operating margin expanded.

240 basis points year over year to 12, 6%.

Gross margin improvement in combination with sales leverage and disciplined overhead cost controls more than offset the impact of an increase in advertising and promotion expense.

Normalized operating profit grew 59% year.

<unk> 2 of $341 million.

Net interest expense decreased by $6 million year over year to $65 million, reflecting about a $700 million year over year reduction in outstanding debt.

The normalized tax rate was 15, 2% above the year ago level of 11, 2%.

2 of higher rate impact last year from discrete tax items.

Second quarter normalized diluted earnings per share were <unk> 56, nearly doubling year over year.

Now turning to our segment performance core sales for the commercial solutions segment increased 16, 6% with strong growth in both the commercial.

Over year and connected home and security business units.

Core sales for home appliances increased 15, 3%, primarily driven by Latin America.

The home solutions segment increased core sales of 33, 7% with double digit growth in both of the food and home fragrance businesses.

Core sales for the learning of developed.

<unk> increased 31, 6%, which reflected similar level of strong growth in both the writing and baby business units.

Lastly, the outdoor and Rec segment increased core sales 25, 8%.

Given the meaningful business disruption from the pandemic in the second quarter.

<unk> of 2020, we think of it is informative to compare the Companys current results to the second quarter of 2019 Newell.

<unk> net sales exceeded the 2019 level by 9.2% as the results were higher across every segment other than learning and development, which was only slightly lower.

The second year to date through Q2, Newell generated operating cash flow of $76 million as compared to $132 million a year ago.

While operating income increased substantially versus last year that was more than offset by a temporary increase in working capital to support strong demand in 2021.

The managed through longer lead times, we continued to accelerate our cash conversion cycle in the second quarter, which improved by about 14 days versus the year ago period.

We ended Q2 with the leverage ratio of 3.1 times a meaningful improvement from 4.6 times, a year ago and very.

Close to our target of 3 times.

The year over year step down of Newell as leverage was driven by a combination of the net debt reduction of over $700 million.

As well as in almost 30% increase in trailing 12 months normalized EBITDA.

We have over $2 billion and.

Global short term liquidity, including $637 million of cash on hand, which is the very strong position.

Before sharing our outlook for the third quarter and full year, Let me walk you through our underlying assumptions as they have changed relative to late April the.

Of the macros in the U S are generally healthy and the consumer is.

Still flushed with cash as a result of the stimulus benefits as well as the enhanced child tax credit more recently.

However, with the surge in the Delta varian across various geographies uncertainty around the pandemic remains.

Our outlook for the remainder of 2021 includes a much higher.

Previously contemplated forecast on topline growth.

A significant year over year increase in advertising spending.

Substantial escalation and inflationary pressures with some offset from pricing and continued traction on productivity.

Previously discussed supply chain.

Higher the range.

As well as much more difficult comparisons as we lap a 6% core sales growth comparison from the back half of 2020.

We are still forecasting a much stronger first half relative to the second half of 2021 of.

Our upwardly revised topline forecast.

Can sort of full year 2021 implies the core sales will increase versus 2020 and 2019 in the third quarter as well as for the full year and we will be up versus 2019 in the back half.

Let's discuss the full year outlook in detail.

Our revised net sales.

<unk> guidance for 2021 is 10, 1% to $10.35 billion, an increase from 9.9% to $10.1 billion previously, which implies 8% to 10% year over year growth. We now forecast of core sales growth of 7% to 10%, which compares favorably to our previous outlook of 5.

<unk> for the 7%, reflecting better than anticipated results in Q2, as well as an improved outlook for the balance of the year curve.

Currency is still expected to be of tailwind to top line, helping to more than offset for the year over year headwind from closure of Yankee candle retail stores and other minor business segment.

<unk> now expect of flattish normalized operating margin in 2021 around 11, 1%.

Our forecast implies that normalized operating profit increases in the high single digit to low double digit range, which would be of great outcome, given the magnitude of inflationary pressure we are absorbing.

We continue to plan for higher advertising expense versus 2020 to support new product launches and omni channel investments.

Our outlook continues to assume a high teens normalized effective tax rate and a modest uptick in shares outstanding.

We are maintaining our normalized earnings per.

We forecast at $1.63 to $1.73.

Our operating cash flow guidance for full year 2021 also remains the same at approximately $1 billion driven by improvement in the company's cash conversion cycle.

For the third quarter, we are forecasting net sales of 2.7% to $2.7.

Share from dollars with core sales flat to up 3%.

We expect Q3 to be the peak quarter for inflation pressure, which will significantly weigh on the company's margin performance.

We are forecasting normalized operating margin of 10, 3% to 10, 8% as compared to 14, 9%.

$8 billion to go period, as inflation and a meaningful increase in advertising and promotion spending will more than offset the benefit from volume leverage productivity and pricing.

We expect to realize discrete tax benefits in Q3, so that the normalized effective tax rate will be in the mid single digit range. This translates.

Plates into normalized earnings per share in the 46% of 50 range.

We have made tremendous progress on our turnaround as demonstrated by our strong financial results.

As we look forward, we are pivoting from complexity reduction to driving operational excellence in everything we do we remain laser focused.

<unk> on executing our strategy, which we believe shows a clear path to creating long term shareholder value.

Operator, let's now open the call for questions and answers.

Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone Keypad now Inc.

Using a speakerphone please make sure that your mute function is turned.

And off to allow your signal to reach our equipment.

Again, if you would like to ask a question. Please press star 1 we'll pause for just a moment to allow everyone an opportunity to signal for questions.

The first question comes from Lauren Lieberman with Barclays.

Thank you.

Good morning.

So the.

First of all the decision the proactive decisions that you all made with regard to supply chain are just remarkable and the resilience of the business that you were able to exhibit this quarter and your plans for the full year, but since you brought up <unk> 22.

And some of the.

The cost headwinds net of pricing, becoming tailwind I wanted to also ask about top line in 'twenty 2 not for our guidance not the numbers, but just how youre thinking about some of these very tough comparisons you have versus a very strong and healthy consumer environment with people as you said investing in.

Home is the hub. So as you look forward any help you could offer on how we should think about top line development.

Plans that you have whether it's for innovation or to continue to stimulate category growth.

I think it would be helpful. Thanks.

Thank you.

Let me.

And Ralph.

Clearly, it's a bit premature too.

Offer.

2 on guidance and I know youre not looking for that.

Nevertheless, its still difficult because.

We are now entering into.

We're coming sort of out.

Of the pandemic, but the delta that into sort of lurking around and so the second half will be an important determinant, having said that.

I think as I said in my prepared remarks, the company has some top better shape than we have been in many years.

Star so much stronger.

Lot of focus on innovation, our writing category is very strong in fact, I'd say all of our businesses now are in pretty good shape remember, we just stopped I think of yet ago right I had big questions about home appliances.

Outdoor.

Outdoor and I'm really.

Feeling very good about what the home appliances team has done their real strength is.

And internationally, particularly in Latin America, you look at this quarter, the fact that fit for us up so high.

That is what so we should look at Newell not just as the U S business.

It is the global business given the third of our business or so is international and we are now going to put a lot more focus on international as well and just you've seen how we are growing so I would say look long term, we're still committed to.

Having modest top line of core sales growth.

I can't give you a view on the 22 in particular, but I think the key is and there's the whole issue about the portfolio right, where if we have very strong growth in 1.

Some of the business is not doing as well.

Leverage.

Like I said, Hey, this year.

Writing in the home fragrance, but I think the good news is I'm now seeing innovation across all of our businesses.

The level of baby uptake was encouraging the thing I know youre always interest in the whole of baby business and not only of innovations, but just to see the data the.

For the slightest hope on Blitz rates going up and.

In order to for remains constant so when I look at all of that.

It's tough to give a sense, but look we're very committed to being a growth company.

And that is probably the best I can do for you versus giving numbers.

I would hate for people to just think all of the bumps we have had our just due to COVID-19.

And the ZIP I really want us to show that we are of sustainable and profitable growth company.

Okay. That's really helpful. Thanks, so much.

We'll take our next question from Kevin Grundy with Jefferies.

Hey, good morning, everyone.

1 <unk>.

Question for Chris just on the guidance and not to be too near term with this but I think some of the concern of maybe what's hitting your stock of bit is what's implied for the fourth quarter. When we look at the strong Q2, what you are guiding to in <unk> and then what you have for the full year. It implies that the fourth quarter will be down mid single digits and understand the comp.

It is more difficult.

From what you've had in the past couple of quarters. It still implies that the 2 year stack or to your average decelerates a bit curious maybe just provide a little bit of color on that and then I have a broader follow up thanks.

Sure. So let me let me address the straight away. So as I mentioned in the prepared remarks, we are in a more.

The more uncertain situation because of the Delta variant and so we've chosen to provide a wider guidance range.

On top line than we normally would we did not guide for Q4, specifically, we guided for Q3 and for the and for the full year and obviously you.

You can do the math to get through.

Occasion, but we are very much.

Thinking about our guidance as a prudent guidance range and we are shooting.

For the higher end of our guidance range, but given the external dynamics and the uncertainty we felt like it was prudent to maintain a wide range.

The <unk> in this environment, Chris May I add something there.

The a couple of things recognize in Q4 last year, we had.

Amazon Prime day of that got shifted into Q2, so there's a little bit of that shift but.

Right now our visibility is closer to Q.

And that's why we felt confident and Thats. What you should really look at is that we even for Q3. Despite the very strong comp last year. The fact that we have guided for growth.

And as Chris said, we're hoping to be on the higher side as opposed to the lower side.

And look even when we look at.

At the consumption I mentioned that Q2, we saw healthy consumption growth.

Just had the July numbers and we've continued to see consumption growth. So I'm optimistic I think it's tough for us to give a real handle on the Q4.

So we're just taking the prudent steps so I would not look at.

Q3, Q4 of the arithmetic and say Wow that is some huge kind of change for in Ghana.

Got it that's helpful. Thank you both and then just a quick follow up on the pricing front, maybe just remind us what portion of the portfolio you've taken pricing on and the potential to take additional pricing in the remainder of the portfolio.

I guess as it pertains to the ladder.

Understand the needs to be of cost justification, but it's sort of hard to envision many categories, where there is not the cost justification. Maybe you can just comment on that and then I'll pass it on thank you.

Yes, so we.

We've taken pricing in 7 of our 8 business units were broadly pricing about over 80% of our portfolio were taking price.

<unk>.

And what I will say is that the pricing is not a single event because of the escalation of the inflation as I mentioned when we started the year, we thought that inflation was going to be at $210 million headwind at the end of the first quarter. We thought it was going to be 360, and now were forecasting 560.

And so we've taken sort of a.

Around the pricing that went into effect that.

In late June early July, we've announced or are announcing pricing additional pricing that's going into effect in the fourth quarter.

October November.

And.

The combination of that.

I think as.

Not fully pricing for inflation, because we're also using productivity.

And operating leverage and cost controls to offset but we are pricing for a significant part of inflation.

Which we think is prudent and so far.

Our our discussions with the retailers have gone reasonably well.

But the.

We're managing it day in and day out.

Okay. Thank you both good luck.

Our next question comes from Wendy Nicholson with Citi.

Hi.

Hi, Good morning, My first question I guess I have to but they are interrelated. So first question is on category growth and obviously that Ravi you called out some of the great growth in the.

The outdoor segment and how some of that I think is being fueled by.

Obviously changed.

Changed consumer.

Some of our behavior, but also incentives.

But I'm wondering if you're getting any sense from your retail customers.

Wow.

Everybody, who wanted a new common share our Coleman cooler already has it and so is there any sign of slowing demand in that channel even.

Creatures of God I'm, just interested in category growth. If you will and then second I guess, maybe for you Chris on the pricing front.

Some of your categories.

My jaw dropped when you said you gained I think 700 points of share in gel pens, I mean, that's awesome, but I assume competition is going to react to that so as you put through that price.

And can you talk about kind of what you're modeling or expecting are starting to see from a competitive perspective, maybe of some folks react to your share gains. Thanks.

So let me start with.

The consumption trends and then Chris can address some of the pricing.

So.

If you look we're seeing category growth.

In many of our businesses. So youre seeing really like baby is a good example, where youre seeing double digit category growth, but having said that we're doing even better and thats by gaining share because of the strength of the graco brand in all of the innovations that figure of launching.

And I think the 1 of the factors because we always go through what is the underlying <unk>.

<unk>.

You are seeing a lot more I think people who of cooped up last year.

Getting back to nature of feeding boehner to stop driving into overnight trips. Therefore, when car seats. This this whole grandparents effect.

Where people are trying to.

Sometimes they are now.

Ben.

At the Covid together, so thereby of course seats, so I think youre seeing.

The categories going up and the stimulus certainly helped and with the stimulus there has been a tendency to go.

Some of the premium brands.

For the leaders and great co has really benefited so that's a great example of that and specifically on outdoor we're doing a lot of great work.

And I think we're seeing the benefits of that from even more of this year.

<unk>.

Coleman list in the turnaround I think the team has done a great job on the soft coolers for instance, they will come up with some nice deal of benefit coolers, the whole downturn that they will come.

Come out of the 1 source there've been a lot of innovations that have helped and if we look at category by.

The category mid 70 done well the thing that has really been.

Problem for us on the Goldman brands has been keeping pace with demand we have been chasing demand because we get a lot of stuff from Asia and so this is 1 where we've had a real tough time keeping pace.

So the demand the certainly there.

There.

And it's been so when we think about the second half 2 of the supply thing it's more in our minds rather than any worries about our brands.

It all now some of the consumption on like food and appliances in the U S. There was some slowdown because last year there.

It was up so much but then the good news as we look forward to every 1 of our brands sort of gaining share that just goes to the power of the strength of our brands in 1 of our teams are doing and the innovations Chris over to you and on the pricing side.

We've done a tremendous amount of work looking at the elasticity models.

For pricing looking at the specific cost inflation and the thing that's important here I think is that the cost inflation that we're facing is not unique to us.

That's the entire industry is facing so and we're not fully pricing to recover because we're using the ramp up that we haven't.

And productivity savings were going to generate productivity savings. This year of 3.5% of 4% of cost of goods, which is of very strong result on top of what we did last year and thats, helping to partially mitigate.

So as we take the pricing generally what we're hearing and we're monitoring it day by.

The day is that the whole industry is moving prices up now in any particular category there could be of competitor that price to lag us or maybe the price ahead of us and so that's what we're monitoring sort of on a day to day to make sure that we don't wind up with a.

Sustainable price GAAP, but our strategy is not to gain market share by undercutting people on price our strategy is to gain market share by coming out with very strong product innovation that operate that offers the <unk>.

Superior consumer value and Thats when you hear us talk.

Talk about market share gains, it's not because we're trying to undercut anybody on price, it's because of we're driving innovation, that's compelling for the consumer and for the retailer.

Fair enough makes great sense. Thank you.

We will take our next question from Bill Chappell with true secure.

Yes.

Thanks, Good morning.

Morning, Bill you just wanted to dig a little bit deeper.

On.

Writing and development, especially as we kind of go into the the key third quarter.

In the release you said, obviously consumption of our sales were were still below 2019 level.

And that makes sense April may most of us.

And the even June July so still working from home, but it seems like.

The most businesses are kind of targeting of post labor day return.

The Delta variant of aside schools here in Georgia and elsewhere I mean start for the next few weeks so trying to understand is.

Theyre pent up 1 to 2 questions there 1.

Do you think there's pent up demand just from the past 12 to 18 months, where you could be well above 2019 levels.

Especially on the office side of schools seem like they would just kind of returned to normal and then to everything.

We here throughout the industry as supply sources and supply chain constraints do you have the bandwidth or the supply of.

We're able to meet that need if there is that the kind of surge or could there be out of stocks or issues, where you cant capture of the full demand of these next 3 or 4 months.

Good morning, all of it.

The first of all of them then how Chris deal with the second.

Uh huh.

Look our program of which is to try and get back for 2019 levels.

On writing and the team is really focused on that having said that.

The you pointed out the whole.

That is the office component of this now despite the fact that you're hearing all of the.

The stuff on the medium people going back to September but the data library is also creating already you've seen some companies announce shifts for October we rent of NPD and looked at the survey.

The abdominal very good quantity to 1 price.

Where we saw I think they're forecasting that at least a third of people will continue to be hybrid for a while.

So that does have an impact having said that it's still early days because look the back to school season has just taken off and we are still.

Going into the height of it and the fact that as we said on writing.

The core sales exceeded.

The company's average of of planning 5 it gives us great.

1 of the below 19, Thats just the level it is.

We feel pretty good about the trends Consumptions also.

And then our market share of soft overall riding not just jumped.

So when I look at all of that I feel very bullish about.

Writing and the last thing that you mentioned, which we've seen from the studies there are a lot of schools that of advanced.

By say 5 days to 7.

So thats a positive thing.

And then caller distance of the stool freshman class Thats coming in so I think we feel pretty good about.

What's happening on this business and believe me that team is very focused because they want to show that this is a top.

Cash business.

On the supply chain.

We're very well positioned on the writing business.

The vast majority of what we sell in writing is manufactured in the U S. So we're not in this business dealing with.

Ocean freight port issues.

Availability of raw materials and components.

Not as we are on some of the other businesses and so we believe we're well positioned to respond and capitalize the upside the other thing I would point out is that.

That is a positive as some of our competitors are in writing or not as well positioned where theyre not manufacturing in the U S and they're suffering.

Ponant from some supply issues and so supply could turn out to be a.

The real benefit for us.

On the writing business versus at least 1 of our major competitors.

Got it that's helpful and just a follow up.

A couple of years ago, the plan and part was.

The.

For businesses use the cash do major share repurchase.

And that obviously change I think for the better and holding onto the assets and not really doing a whole lot in share repurchase, but now I mean, the hard to believe youre getting to the almost under Levered compared to your peer group and I know the biggest cash flow.

Some of generating quarters or in the next 2.

So is there of thought from you or the board of rethinking about stepping up share repurchase as we move into this kind of cash flow period.

Yes, I think as we think about capital allocation the way.

We're thinking about it remains the same which is we expect the number 1.

To continue to drive very strong operating cash flow. Our first priority is to reinvest back in the business and we're looking for very strong return projects.

To do that that are well above our cost of capital.

We plan to maintain our current dividend.

We are getting close.

<unk> to the leverage target that we set of 3 times or 3.1 and I think beyond that.

We'll start to look at things like share repurchase as.

As well as tuck in acquisitions to the extent that we think.

They can be significant value accretive to the company.

Company.

And so we're excited to.

Get to our target on the balance sheet, and we think that does open more flexibility as we go into.

The next few years and Bill 1 thing you mentioned dispositions.

Look I think 1 of the things.

I think we have good connections now we are of good portfolio.

And I think we're getting more and more skill of that leveraging different aspects.

We actually feel hey, maybe it's too premature for declines of the turnaround is over but the suddenly I thinking about what do we want to be when we.

We grow up and starting to think about our long term plans and really assigning roles for each businesses. So I don't think I think the decisions. We've made on keeping the business as we have is of good volume and now. It is the question of taking each 1 of these businesses to their full potential of whatever that might be.

Great. Thanks, so much.

Our next question will be taken from Olivia Tong with Raymond James.

Great. Thank you. Good afternoon wanted to talk first about your level of visibility on getting to your top line targets came in obviously the supply chain challenges.

Okay.

So obviously, we're not just hoping for consumer demand, but also the increased difficulty in satisfying that demand because of the externals sort of touch on this with respect of writing, but kind of curious on the rest of your key businesses.

Where you stand with respect to that and I would imagine with respect to supply chain.

That.

2 things.

1 sort of major categories with the competition looks like again, you talked about it with riding the kind of curious on the other categories and then also what youre seeing from them with respect to pricing is it.

Magnitude similar at the tiny similar.

And if not where do they differ.

Yes, so on the supply.

Same.

As I as I mentioned in my prepared remarks, it is a challenging external environment.

The challenges are largely due to.

Ocean freight.

Availability of containers.

The length of time, it takes container ships to move from Asia to the U S.

Supply of trucking capacity in the U S.

Labor availability in the U S.

Some raw material and component availability, depending on the business unit and then you couple that with the consumer demand spike that we're trying to navigate and meat.

I think that we've done.

Our teams have done.

Really a heroic job of meeting.

And navigating through this environment, but our guidance does contemplate the environment remains difficult for.

For the remainder of the year. So we are not expecting an improvement in the external environment, but we do expect us to continue.

To navigate it I think the good news is that this is not in the environment. That's unique to Newell. This is an environment that all of our competitor space.

I mentioned on writing that I think we're better positioned than at least 1 of our major competitors the balance of our categories. I think we're largely similarly positioned.

And so we don't see major gaps in our.

External pressure versus our direct competitors external pressure.

On the whole so that's how I would.

Characterize the supply chain and I think our.

Part of the reason why we've given a wide.

Range is recognizing.

The variability and the uncertainty of that supply environment, including the ramp up of the Delta variant, which can have an impact on that.

As I said, we're we're shooting more for the top half of our guidance range.

But we think it's prudent to maintain the guidance.

Items range, given the variability of the external environment.

Yes, I think 1 thing to add is overall more of it a third of fr.

Products are sourced from a share and that's why we do have.

Some effects I mean the.

Of the external effect is really the bigger issue is.

Guidance, calling for that.

So, yes, it's going to remain a bit of a challenge.

On your question on pricing.

I think it's it's different because we compete against many different competitors its different by category in terms of what we're seeing.

But broadly we are seeing the industry take prices up because the inflation environment is affecting everybody.

And again, it's not not unique to us.

There can be timing differences in any particular category with a particular competitor.

And we're navigating that I think.

Seeing none really well and closely monitoring it as.

As we go forward here.

Got it and then just 1 follow up on margin can you just give us a sense of sort of the order of magnitude with respect to the increasing costs.

Raw material contemplation that sticks around for a while versus some of the supply.

Supply chain disruption that hopefully is relatively transitory, maybe if you could just break that down for the quarter.

And then and then the full year and how you think about the contribution from from improving mix as an offset in addition to obviously the productivity of things that you talked about thank you so much.

Yes, so I think on the inflation side.

The <unk>.

Is there really for factors that are driving inflation increased resin costs.

Sourced finished goods, which is largely a function of the Chinese currency strengthening versus the U S. Dollar.

Transportation cost, which is in our case is largely ocean freight related and then labor pressure.

The interesting thing about that is <unk>.

The resident is probably the biggest impact out of those for.

Out of our $560 million that we're talking about this year.

1 of the services.

Out-front forecast on resin as IHS.

Or at least their forecast is that.

We're at peak resin prices right now and resin prices are likely to come down significantly over the next 6 to 12 months now we're heading into hurricane season, and so I'm never 1 to predict whether there's going to be of hurricane that hit for the Texas or Louisiana coast.

But by all accounts.

It feels like the resin environment.

<unk> is sort of peaking at the moment and is likely to get better as we head over the next 6 to 12 months.

Again on source finished goods, it's hard to predict.

The the Chinese currency strengthened versus the U S dollar, but it's been relatively stable more recently.

And so we will begin to lap that unless.

Another devaluation of the U S dollar.

Think ocean freight is likely to remain a challenge.

For the next.

6 to 12 months because of the capacity constraints.

Carriers and containers.

Have the this is not unique to newell.

Yes, there is.

But again it feels like that is transitory in nature, and then I think labor cost is likely to be of sustaining inflationary pressure, but that probably is the smallest of the for that that I mentioned.

So we think we're navigating.

<unk>.

The peak inflation environment well.

Excited that we're driving.

Low single or I'm, sorry high single digit to low double digit operating income growth is what our guidance implies for this year. Despite this inflation and we think that the productivity savings that we've got.

Got the cost management that we've got and the top line momentum that we have positioned us well as the inflation pressure starts to ease going forward.

Okay.

Thanks, so much for 1 for sale.

The next question from Peter.

Ryan with UBS.

Hey, good morning, or I guess good afternoon at this point. So I just wanted to ask around the kind of Q3 margin range and maybe just a follow up to Olivia's question I mean, what does.

The guidance embed from the segment mix perspective, you've been pretty open about the next challenge from a normal writing years Johnny.

Peter commentary there would be really helpful and then just.

Just the advertising commentary, Chris you mentioned up significantly is that just a significant change versus what you were embedding in after Q1 or is that just kind of a broader comment around year over year and then is there just any way to think about.

<unk> the magnitude.

So any advertising the advertising embedded in your Q3 guidance. Thanks.

Yes, so on the Q3 guidance I'll try to tackle them. So if you recall last year at this time, we were coming out of our supply chain being shut down and so our A&P that was in the third quarter of last year was artificially.

For the.

Of this year, we are in a much better supply situation than we were last year and so we have basically reinstated A&P. We also have much stronger innovation in the market this year.

So advertising costs are up.

Significantly this year versus last year.

Low both in dollar terms and in percentage terms.

On the inflation front in Q3.

As I mentioned, we do expect inflation to be peaking in Q3 of this year. So our of our $560 million. The biggest impact is to the third quarter on inflation.

<unk>.

And that that is for.

Fairly dramatic impact we are mitigating that.

Ed.

2 of significant extent through productivity actions and through cost containment and some volume leverage but.

That's what's driving.

Inflation embedded in the Q3 sort of margin guidance.

Okay, great. Thank you.

This does thank you very much.

I think.

We apologize for that to others, who we can get to but.

And thank you very much indeed.

A replay of today's call will be available later on today on our website at IR Dot Newell brands Dot Com. This concludes today's conference and you may now disconnect.

Okay.

[music].

Yeah.

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Yes.

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[music].

Good morning, and welcome to Newell brands second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After a brief discussion by management, we will open up the call for questions in order to stay within the time scheduled for this call. Please limit.

It yourself to 1 question during the Q&A session. As a reminder, today's conference is being recorded a live webcast of this call is available and I are talking no brands Dot Com I will now turn the call over to Sofia Cenith V. P of Investor Relations. The soon as you may begin.

Thank you good morning, everyone welcome to the old brands second quarter.

Earnings call on the call with me today of Ravi saw the Graham, our president and CEO and Chris Peterson, our CFO and President business operations before we begin I'd like to inform you that during the course of today's call, we will be making forward looking statements, which involve risks and uncertainties actual results and outcomes may differ.

We undertake no obligation to update forward looking statements.

For you to the cautionary language and risk factors are available in our earnings release, our form 10-K, and other SEC filings available on our Investor Relations website for further discussion of the factors affecting forward looking statements.

Please also recognize that.

From a day Mark will refer to certain non-GAAP financial measures, including those who are referred to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP explanations of these non-GAAP measures and available reconciliations between GAAP and non-GAAP.

GAAP measures can be found in today's earnings release and tables as all of us and other materials of <unk> Investor Relations website. Thank you and now I'll turn the call over to Ravi.

Thank you Sophie and good morning, everybody and welcome to our call.

I'm pleased to announce another outstanding quarter for Newell.

Further.

Todays from the strong momentum from the past 3 quarters, we delivered 25% of recall SaaS growth, 59% normalized operating income growth and 87% normalized EPS growth in the quarter versus price.

We have now delivered.

Of that go for consecutive quarters of core sales growth.

<unk> 5 consecutive quarters of domestic consumption growth.

Based on first half 2021 sales momentum we are raising our top line outlook for the year.

During the second.

For courthouse growth exceeded 25% as we lapped significant disruption from the pandemic and partly even on a 2 year stack basis.

Sales grew low double digits, both in the second quarter and during the first half showing the underlying momentum in the business I'm, especially pleased.

Second quarter. Once again, we saw broad based top line strength across each of our business units and across major channels.

Every region growing at a double digit rate while the performance in North America. The excellent core sales grew almost 22% international markets once again share.

Registry of nearly 35% core growth in the second quarter and almost 31% in the first half with particular strength in Latin America.

Our top 10 beloved brands, including Colman, Graco Ost, Sharpie, Yankee candle paper mate and faster growth.

Our strong double digit pace Yankee candle stood out as the sales nearly doubled versus last year.

We delivered strong topline results, even in businesses, such as food and home appliances that faced tough comparisons versus prior year.

As the result of demand spikes.

At the same time it is extremely encouraging to see the continued rebound in writing asset has come roaring back folks Roaring back from a channel perspective e-commerce sales growth moderated to a mid single digit credit okay.

Owning for about 20% of global net sales versus.

The speak penetration of around 24% of yet ago during the quarter, we saw a resurgence in consumption in brick and mortar lets recent progress from the vaccine rollout and the increased mobility brought people back to the stores in fact growth in brick and mortar outpaced digital as the retail industry lapped significant pandemic.

I make related store closures and lockdowns from the second quarter for <unk>.

Given our ongoing investment in omni capabilities, we are well positioned to capitalize on the consumer demand, regardless of which channels consumers choose to shop.

We do however believe that over.

What time digital penetration will continue to move up despite the potential for quarterly fluctuations as channel dynamics.

The U S economy has continued to regain its footing, we generally saw healthy consumption during the second quarter than it has been some normalization in trend across businesses in the.

The U S net expended significant spikes in demand of yet ago, such as home appliances and food at the same time consumption accelerated in writing, which was the victim of the pandemic last year recent consumer behavior of reinforces our belief that home as the hub.

Team will persist relative after the pandemic the homeless becomes tinker to People's lives and has truly become a sanctuary of part time office of pod learning center of Kids' activities zone, and the kitchen of family hub Newell.

<unk> is well positioned to capitalize.

Lies on the home hub phenomenon.

Not only due to the composition of our business portfolio, but also because of all of the work we've done to reinvigorate our iconic brands and innovation funneled that enhance life at home and outside.

7 out of our Ats.

<unk> 8 business units grew core sales of double digit rate and we made notable progress on market share across a number of categories, let's talk of at home fragrance, whose sales in the second quarter nearly doubled versus last year as the business lapped retail store closures and significant.

Disruption in our manufacturing operations due to the pending <unk>.

Net sales increased at a strong double digit pace relative to 2019 as well overcoming the unfavorable impact from Yankee candle store closures and exit from our fundraising business.

Home fragrance.

Once again the start of the show.

Delivering the highest level of topline and consumption growth within our portfolio as we continue to gain market share, particularly incentive candles and expanded our distribution both in the U S and EMEA.

Although we expect the same the sainted camera category to continue to moderate results from a recent survey among central Canada users showed that use frequency remains high with almost 33% of those surveyed aiming to use the product more often in the next 6 months.

I am very excited about the long term prospects of home fragrance, which is how most omni channel business hit of strong gross margins and <unk>.

Volume growth potential.

The food business.

<unk> solid footing across all regions as cost has increased low double digits.

It's against a very difficult base period comparison as anticipated Pos decelerated in the quarter as the category softened, but remain significantly ahead of the 2019 level.

As our strong brands continue to take significant share in food storage.

Fresh preserving and kitchen organization categories I'm delighted to share some of the recognitions of brands have received this year as consumer reports named food sales.

Best of vacuum setup for 2021, and good housekeeping chose rubbermaid brilliance.

Best food storage for training.

2021, and counsel as number 1 editors' choice for best non stake in 'twenty 'twenty..1 it is so exciting to see those acts of accolades, especially at a time when the kitchen is so important of our consumer and innovation machine has been in full GAAP.

This is another.

Terrific quarter for home appliances business.

SaaS growth exceeded 15%, even as it lapped the high single digit growth comparison, once again Latin America stole the show as we continue to leverage our e-commerce presence to reach consumers with particularly strong results.

In Chile, Peru, and Argentina as expected consumption of the U S is moderating against elevated levels from a year ago, but remains significantly ahead of 2019.

Neither of them of our launch of Mr. Coffee.

Rice from fall 2000 training continues to generate demand supported.

<unk> by a social media campaign switch up your hashtag <unk> time, we further broadened distribution during the second quarter with new on trend. The colors. Mr. Coffee also introduce the steam espresso maker the capture consumers' heightened interest in specialty and espresso beverages Mr coffee.

Consistent share gains from the back of innovations in the greater price value is impressive.

Topline momentum and on the writing business et cetera, I did nicely on a sequential basis.

The <unk> SaaS growth for this business exceeded the company's total resolved with every region delivering true.

Rfids growth against of suppressed base in the year ago period, the rebound across most driving categories as more schools for the time frame, but some learning to finish out of the school year in combination with share gains in key categories, such as payments presentation Marcus permanent Marcus on the highlight this.

Translated into terrific consumption. The U S for us consumption was up in other parts of the 1 of the swap new chair of the <unk> segment increased over 700 basis points to 26% of soft consumption.

Doubled behind.

Hi, non needle mover innovation Sharpie S. Jeff point of I love that pattern, which continues to delight consumers and bring incremental dollars for the category. We also Pos growth in other markets such as Australia.

Zealand and in the UK in the second quarter of the office channel also.

Also grew less as last year, but as expected it has not fully come back to pre pandemic levels due to the prevalence of flexible work arrangements.

We are encouraged by the second consecutive quarter of strong Pos growth in writing and remain optimistic about the Baptist.

Back to school season with robust merchandising plans in place.

Based on the latest available information in bus and the instruction, which is the gold standard is expected to make a comeback this year. According to the school opening packer by leading industry.

The source for.

For the upcoming school year, 96% of K through 12 student body in the U S is in school districts that are already announced day will offer in bus in the education.

Of course uncertainty remains for some degree given the recent spread.

Of the depth of value a lot of it.

Closely monitoring the situation we remain bullish on this back to school season, and believe we are well positioned to win as we continue to grow sales in overall share.

During the second quarter strong double.

Digits core sales growth for our baby business was nearly identical to that of writing fueled by broad based momentum across all the regions of double digit increase in consumption, which reflected share gains by graco in a rapidly growing category of benefit from stimulus funding as.

Well, it's an easy comparison all contributed to such a strong result in the U S.

We think that improving mobility and higher appetite by U S. Consumers to go on overnight trips by causes some of bode well for demand and car seats the.

The biggest sub segment of the baby gift category.

And our baby business, we continue to innovate in this category earlier this year, Greg will introduce the snug right not fit our new line of infant car seats with integrated anti rebound bar that provides an extra layer of safety for families.

We're also excited.

Laurie by of New report from the Institute of family Studies that just came in that suggests that the U S may be witnessing a surprising rise.

Potentially resolve of government stimulus checks and flexible work arrangements is that of baby boomers.

Cited buying on folks.

Our commercial business unit delivered its sixth consecutive quarter of core sales growth just shy of double digits.

Strong top line momentum across all regions higher domestic consumption of material handling refuse cleaning outdoor organization.

Alumina and protection and scouring.

Products helped to mitigate declines in washroom solutions, which started the cycle against the significant surge in demand late in the second quarter of printing training, we're seeing signs of reopening related demand in vertical such as food service hospitality as.

And the travel and entertainment and also of the builder channel and channel is really beginning to sense, but somewhat offset by softness in walk from solutions and use of Sanitizers of.

Core sales for the connected home and security business.

Also accelerating.

Until the strong.

Double digit growth rate lapping significant disruption in the year ago period. The team is navigating through some supply constraints as it relates to chip shortages.

Just like other businesses that for negatively impacted by the pandemic last year, we saw significant acceleration in outdoor recreation.

As core sales increased 25% with growth in every region in every major category.

All of them in the largest brand in this business unit delivered terrific results as 1 of the largest contributors to the company's top line growth. This quarter 1 of the call of the outdoors campaign is already bolstered the outdoor equipment category.

This quarter. We also saw a resurgence in sales growth for all of the global beverage and technical apparel businesses driven by robust demand in beverage <unk> newly launched product lines are off to a strong start in the driving share gains from the hydration category.

Okay.

Power of.

<unk> strategic vision.

The strength of our branded business portfolio.

And the focus on the turnaround have been brought to life.

Through strong and resilient and agile execution in an ever changing and fluid operating environment.

Excuse me we do.

Delivered outstanding top and bottom line results.

During the second quarter and first half of trading 1 both relative to the year ago period.

Okay.

As well as 2019.

We have gained considerable momentum on auto.

Let me illustrate we brought together a world class leadership team, who has helped unlock the passion of our people invested in omni channel capabilities that have been instrumental in capturing consumer demand across all of the camera.

That actually strengthened.

Nation, and marketing muscle leveraging consumer.

Human insight for sites.

Sharpen the brand positioning for many of our top brands established joint business plans with the key strategic retail partners.

Instituted in the new hybrid organization model.

That brings our domain experts closer to our customers.

And consumers, while leveraging the same type of scale and efficiencies.

Main productivity of way of life, providing both the fuel for margin enhancement as well as reinvestment in the business to drive sustainable and profitable top line growth.

The reduced complexity bead consolidates.

Holiday season of ERP systems of reduction in websites our skus.

And we have made meaningful progress in taking out overhead improving cash conversion cycle, when strengthening the balance sheet and.

Importantly, we have become very skilled at managing our AIT business unit portfolio and assigning clear roles for the individuals.

Business is in some sub businesses for instance, we focus from the food commercial and home appliance business units in 2020 to leverage Covid related consumer trends when at some of these trends moderated we're shoring up writing and home fragrance and printing for anyone.

Our strategy is to ensure.

For the whole is greater than the sum of the parts.

As the approach the second half we faced the tough macro operating environment with unprecedented inflation pressures that beats that we expect with the top half of $1 billion.

As for Thats extraordinary.

Mary externally driven supply chain challenges notwithstanding the situation.

I am proud of our team's resilience.

Execution of promise and ingenuity. So much so that we've raised our topline guidance for the year and continue to project.

Normalized operating income and EPS growth on a full year basis.

Looking ahead I can confidently state that we are a much stronger company than before and well position to drive sustainable and profitable growth in the yes ahead and add significant shareholder.

Shareholder value.

I'd like to express my sincere and profound gratitude for all of our 31000 employees in frontline care of worldwide for the tenacity and delivering another great quarter.

Our best days are truly ahead of us with that over to Chris Peterson now.

Easy on him with the questions. It is as part of today happy birthday, Chris onwards and upwards.

Thanks, Ravi and good morning, everyone.

Second quarter results were outstanding as the integrated set of strategies, we put in place several years ago continue to drive strong financial results.

<unk> across all key metrics before getting into the details I want to provide a little color on the current operating environment and proactive choices, we are making.

We delivered better than anticipated results from Q2 was consumer demand across our categories remain robust and our supply chain teams did a heroic job navigating.

A choppy operating environment.

To give a little perspective on the supply environment, we continue to pace the number of externally driven supply challenges as a reminder, in the second quarter of 2020, our supply chain was significantly pressured as a result of government mandated closures across many of our facilities due to the pandemic.

That was the low point for the business and we are in a much better position today with our factories distribution centers and retail stores open.

More recently however, our teams have worked tirelessly to overcome various supply challenges surrounding longer lead times for sourced products trucking capacity in the U S.

As well as labor shortages raw material and component availability.

Covid related disruptions across ports as well as consumer demand spikes following stimulus payments have exacerbated these issues.

Early on we took a number of proactive actions to mitigate the impact from these dynamics, including.

Building inventory on top selling skus, allowing for longer and transit times as part of our planning process.

The accelerating the pace of automation where feasible.

And being creative with increased incentives to attract and retain employees in factories by raising wages further enhancing benefits.

And working conditions and providing employee development programs amongst other actions.

The complexity reduction work that we executed as part of the turnaround has put us in a much better position to deal with these challenges.

While we have successfully navigated these dynamics and created more agility within our supply chain. It certainly has not.

Not been easy and the challenges are ongoing.

The other changing dynamic has been inflationary pressure we.

We have seen continued escalation of inflation largely driven by increasing resin prices ocean freight costs sourced finished good pricing due to a strengthening of Chinese yuan and labor wage per.

<unk>.

These factors are not unique to newell and are affecting everyone in our industry to put it in perspective, we currently expect inflation to amount to nearly $560 million in 2021.

This was about $200 million worse than what we expected just 3 months ago and 3.

Pressured $50 million worse than we expected at the beginning of the year.

We are taking a number of actions to mitigate the significant inflation spike, including a more aggressive push on productivity savings.

Continuing to tightly manage cost optimizing.

Optimizing promotional spend.

Driving.

<unk> 3 hundreds from stronger topline growth.

And taking additional selective pricing later this year in categories, where we're seeing the greatest impact.

The net result is that we are maintaining our EPS outlook for the year, which calls for strong operating profit growth. Despite the significant increase.

And inflationary pressure and.

In the U S. We have now announced price increases across 7 of our 8 business units.

These pricing actions do not fully offset the inflationary cost pressure as we are using productivity savings and operating leverage as offsets as well.

As we start to think about 2022.

We expect this headwind to become a tailwind as inflation is largely in the base, we benefit from carryover pricing and we continue to drive productivity savings and manage cost tightly.

Moving onto second quarter performance, we delivered very strong results as demand exceeded our expectation.

What are the better the next anticipated outcome on top line, but also flow through to the bottom line.

The company's net sales increased 28, 3% year over year to $2.7 billion.

Core sales grew 25, 4% as we lapped a 12, 6% decline from a year ago.

Favorable foreign exchange more.

More than offset the headwind from business and Yankee candle retail store exits.

We saw broad based strength during the quarter with each of our business units in all 4 geographic regions growing.

Core sales in the first half of the year grew 23, 3%.

On a 2 year stacked basis, which helps smooth out the noise from the year.

The ago figures, we grew core sales in the low double digits, both during the quarter and in the first half.

Normalized gross margin expanded the 32, 7% from 31, 6% in the year ago period, the benefit from fuel productivity savings favorable business mix and pricing more than offset.

Net of more than 700 basis point headwind from inflation, primarily related to resin source finished goods transportation and labor costs.

Normalized operating margin expanded 240 basis points year over year to 12, 6%.

Gross margin improvement in combination with <unk>.

<unk> leverage and disciplined overhead cost controls more than offset the impact of an increase in advertising and promotion expense.

Normalized operating profit grew 59% year over year to $341 million.

Net interest expense decreased by $6 million year over year to 65 million.

Reflecting about a $700 million year over year reduction in outstanding debt.

The normalized tax rate was 15, 2% above the year ago level of 11, 2% due to a higher rate impact last year from discrete tax items.

Second quarter normalized diluted earnings per share were <unk> 50.

Expense nearly doubling year over year.

Now turning to our segment performance core sales for the commercial solutions segment increased 16, 6% with strong growth in both the commercial and connected home and security business units.

Core sales for home appliances increased 15, 3% primarily driven by.

<unk> America the.

Home solutions segment increased core sales 33, 7% with double digit growth in both of the food and home fragrance businesses.

Core sales for the learning and development segment increased 31, 6%, which reflected similar level of strong growth in both the writing and baby business.

<unk> units.

Lastly, the outdoor and Rec segment increased core sales 25, 8%.

Given the meaningful business disruption from the pandemic in the second quarter of 2020, we think of as informative to compare the Companys current results to the second quarter of 2019.

Team Newell.

<unk> net sales exceeded the 2019 level by 9.2% as the results were higher across every segment other than learning and development, which was the only slightly lower.

Year to date through Q2, Newell generated operating cash flow of $76 million as compared to 130.

$32 million a year ago.

While operating income increased substantially versus last year that was more than offset by a temporary increase in working capital to support strong demand in 2021 and manage through longer lead times, we continued to accelerate our cash conversion cycle in the second quarter.

Which improved by about 14 days versus the year ago period.

We ended Q2 with the leverage ratio of 3.1 times of meaningful improvement from 4.6 times, a year ago, and very close to our target of 3 times.

The year over year step down of Newell's leverage was driven by a combination.

Combination of the net debt reduction of over $700 million.

As well as in almost 30% increase in trailing 12 months normalized EBITDA.

We have over $2 billion in available short term liquidity, including $637 million of cash on hand, which is the very strong position.

Before sharing our outlook for the third quarter and full year, Let me walk you through our underlying assumptions as they have changed relative to late April the.

The macros in the U S are generally healthy and the consumer is still flushed with cash as a result of the stimulus benefits as well as the enhanced child tax credit more recently.

However, with the surge in the Delta varian across various geographies uncertainty around the pandemic remains.

Our outlook for the remainder of 2021 includes a much higher than previously contemplated forecast on top line growth.

A significant year over year increase in advertising.

<unk> spending.

Substantial escalation and inflationary pressures with some offset from pricing and continued traction on productivity.

Previously discussed supply chain constraints as well as much more difficult comparisons as we lap a 6% core sales growth comparison.

Back half of 2020.

We are still forecasting a much stronger first half relative to the second half of 2021.

Our upwardly revised topline forecast for the full year of 2021 implies the core sales will increase versus 2020 and 2009.

From the <unk> in the third quarter as well as for the full year and will be up versus 2019 in the back half.

Let's discuss the full year outlook in detail.

Our revised net sales guidance for 2021 is 10, 1% to 10, $3.5 billion, an increase from 9.9% to $10.

$19 billion, previously, which implies 8% to 10% year over year growth. We now forecast of core sales growth of 7% to 10%, which compares favorably to our previous sales outlook of $5 to 7%, reflecting better than anticipated results in Q2, as well as an improved outlook for the balance of the.

1.

Currency is still expected to be of tailwind to top line, helping to more than offset for the year over year headwind from closure of Yankee candle retail stores and other minor business segment.

We now expect of flattish normalized operating margin in 2021 around 11, 1%.

The year, our forecast implies that normalized operating profit increases in the high single digit to low double digit range, which would be of great outcome, given the magnitude of inflationary pressure we are absorbing.

We continue to plan for higher advertising expense versus 2020 to support new product launches.

As an omni channel investments.

Our outlook continues to assume a high teens normalized effective tax rate and a modest uptick in shares outstanding.

We are maintaining our normalized earnings per share forecast at $1.63 to $1.73.

Our operating cash flow guidance for full year 2000.

On the 1 also remains the same at approximately $1 billion driven by improvement in the company's cash conversion cycle.

For the third quarter, we are forecasting net sales of 2.7% to $2.78 billion with core sales flat to up 3%.

We expect Q3 to be the peak quarter for in.

The pressure, which will significantly weigh on the company's margin performance.

We are forecasting normalized operating margin of 10, 3% to 10, 8% as compared to 14, 9% in the year ago period, as inflation and a meaningful increase in advertising and promotion spending or more.

Inflation offset the benefit from volume leverage productivity and pricing.

We expect to realize discrete tax benefits in Q3, so that the normalized effective tax rate will be in the mid single digit range. This translates into a normalized earnings per share in the <unk> 46 to 50 range.

We have made tremendous progress.

More than our turnaround as demonstrated by our strong financial results.

As we look forward, we are pivoting from complexity reduction to driving operational excellence in everything we do we remain laser focused on executing our strategy, which we believe shows a clear path to creating long term shareholder value.

Operator.

Aggress under let's now open the call for questions and answers.

Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad now if you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again, if you would like to ask a question. Please press star 1 we'll pause for just.

Operator to allow everyone an opportunity to signal for questions.

The first question comes from Lauren Lieberman with Barclays.

Thank you.

So.

First of all the decision of the proactive decisions that you all made with regard.

The moment of supply chain.

Remarkable and the resilience of the business that you were able to exhibit this quarter and your plans for the full year, but since you brought up 22.

And some of the cost headwinds net of pricing, becoming tailwind I wanted to also ask about topline in 2000.

Not for of guidance not the numbers, but just how youre thinking about some of these very tough comparisons you have versus a very strong and healthy consumer environment with people get the who as you said investing in home as the hub. So as you look forward any help you could offer on how we should think about top.

2 of development.

Plans that you have whether it's for innovation or the continued to stimulate category growth.

I think it would be helpful. Thanks.

Thank you Loren let me.

Start off.

Clearly, it's a bit premature too.

Offer of <unk>.

<unk>.

Lines on guidance and I know youre not looking for that.

Nevertheless, its still difficult because.

We are now entering into.

We're coming sort of out of the pandemic, but the delta that into sort of lurking around.

So the second half will.

An important determinant, having said that.

I think as I said in my prepared remarks, the company is in far better shape than we have been in many years of brands so much stronger.

Lot of focus on innovation, our writing category.

It will be very strong in fact, I would say all of our businesses now are in pretty good shape remember, we just stopped I think of yet ago I had big questions about home appliances and outdoor.

Really.

Feeling very good about what the home appliances team has done there.

The real strength is.

And internationally, particularly in Latin America, you look at this quarter. The fact that if this up so high and that of swap. So we should look at Newell not just as the U S business, but as the global business given the third of our business or so is international and we are now going to put a lot.

More focus on international as well.

Just you've seen how we are growing so I would say look long term we're still.

<unk> committed to.

Having modest topline of core sales growth I can't give you a view on the 22 in particular, but I think the key is and Thats the.

Issue about the.

Portfolio right, where if we have a very strong growth in 1 of them.

Some of the business is not doing as well.

Leverage like like I said, Hey, this year of writing in the home fragrance, but I think the good news is I'm now seeing innovation across all our business.

The host.

The level of baby uptake was encouraging the thing I know youre always interest in the baby business and not only the innovations, but just to see the data the slightest hope 1 let's face going up and then the zero to 4 remains constant so when I look at all of that.

It's tough to give a sense.

But look we're very committed to being a growth company and that is probably the best I can do for you versus giving numbers.

I would hate for people to just think all of the bumps. We have had our dispute of Covid I really want us to show that we are of sustainable and profitable growth company.

Okay. That's really helpful. Thanks, so much.

We'll take our next question from Kevin Grundy with Jefferies.

Hey, good morning, everyone.

A question for Chris just on the guidance and not to be too near term with this but I think some of the concern.

Hitting your stock of bit is what's implied for the fourth quarter. When we look at the strong Q2, what youre guiding to in <unk> and then what you have for the full year. It implies that the fourth quarter will be down mid single digits and understand the comp is more difficult.

And then what <unk> had in the past couple of quarters. It still implies that the 2 year stack or to your average decelerates.

Maybe with a bit curious, maybe just provide a little bit of color on that and then I have a broader follow up thanks.

Sure. So let me let me address the straight away so as I mentioned in the prepared remarks.

We are in a more uncertain situation because of the Delta variant and so we've chosen to provide a wider guidance.

Guidance range.

On top line than we normally would we did not guide for Q4, specifically, we guided for Q3 and for the and for the full year and obviously.

You can do the math to get through the implication, but we are very much.

Thinking about our guidance as a prudent guidance range.

And we are shooting.

For the higher end of our guidance range, but given the external dynamics and the uncertainty we felt like it was prudent to maintain a wide range.

In this environment crisp something there.

The a couple of things.

Range recognize in Q4 last year, we had.

Amazon's Prime day of that got shifted to Q2. So then it's a little bit of that shift but.

Right now our visibility is closer to Q3.

And that's why we felt confident and Thats, what you should really look at it that.

Even for Q3, despite the very strong comp last year. The fact that we have guided for growth.

And as Chris said, we're hoping to be on the higher side as opposed to the lower side and rock even when we look at.

Consumption I mentioned that Q2, we saw healthy consumption growth.

Just.

We had the July numbers and we've continued to see consumption growth. So I'm optimistic I think it's tough for us to give a real handle on the Q4. So we're just taking the prudent steps. So I would not look at sort of Q4 of the arithmetic and say Wow. There is some huge kind of change for in Ghana.

Got it that's helpful. Thank you both and then just a quick follow up on the pricing front, maybe just remind us what portion of the portfolio of taken pricing on and the potential to take additional pricing in the remainder of the portfolio and I guess as it pertains to the ladder understand the needs of your cost justification, but it's sort of hard to envision many categories, where there is not a cost justification maybe you can.

Comment on that and then I'll pass it on thank you.

Yes so.

We've taken pricing in 7 of our 8 business units were broadly pricing about over 80% of our portfolio, we're taking pricing on.

And what I will say is that the pricing is not a single event.

Just because of the escalation of the inflation as I mentioned, when we started the year, we thought that inflation was going to be at $210 million headwind at the end of the first quarter. We thought it was going to be 360, and now were forecasting 560, and so we've taken sort of a.

Around the pricing that went into effect.

Sure.

In late June early July, we've announced or are announcing pricing additional pricing that's going into effect in the fourth quarter.

October November and the combination of that I think is.

Not fully pricing for inflation.

Because we're also using productivity.

The operating leverage and cost controls to offset but we are pricing for a significant part of inflation.

Which we think is prudent and so far.

Our discussions with the retailers have gone reasonably well.

But.

We're managing it day.

And the day out.

Okay. Thank you both good luck.

Our next question comes from Wendy Nicholson with Citi.

Hi, Good morning, My first question I guess I have 2 but they're interrelated. So first question is.

Category growth and obviously it Ravi you called out some of the great growth.

The outdoor segment and how some of that I think is being fueled by.

Obviously.

The consumer behavior, but also incentives and whatnot, but I'm wondering if you're getting any sense.

Is.

Your retail customers.

Now everybody, who wanted a new common share of Goldman cooler already has it and so is there any sign of slowing demand in that channel. Even if your market share is a good I'm just interested in category growth of <unk> and then second I guess, maybe for you Chris.

On the pricing front.

Some of your categories I mean, my jaw dropped when you said you gained I think 700 points of share in gel plans I mean, thats awesome, but I assume competition is going to react to that so as you put through that pricing can you talk about kind of what you're modeling or expecting we're starting to see from a competitive perspective, maybe.

For Alex react to your share gains thanks.

So let me start with.

The consumption trends and then Chris can address on the pricing.

So.

Look we're seeing category growth.

In many of our businesses. So you are seeing.

Somebody like Baby is a good example of where youre seeing double digit category growth, but having said that we're doing even better and thats by gaining share because of the strength of the graco brand in all of the innovation that we are launching.

And I think the 1 of the factors because we always go through what is the underlying reason.

Seeing room.

You are seeing a lot more I think people who of cooped up last year.

That's kind of getting vaccinated, feeling boulder to stop driving into overnight trips, therefore bite and car seats. This this whole granted patents effect where people are trying to.

Sometimes they are now.

The reason.

The COVID-19 together, so thereby of course seats. So I think you are seeing.

The categories going up and the stimulus certainly helped and with the stimulus that has been a tendency to go from sort of the premium brands and the leaders and Greco has really benefited.

There are bits of Great example of that and specifically on outdoor we're doing a lot of great work.

And I think we're seeing the benefits of that.

Even more of this year.

Because.

Coleman listing of turnaround I think the team has done a great job on the soft coolers for.

So then.

They will come up with some nice deal of benefit coolers, the whole downturn that they will come out of the <unk>.

Non source there've been a lot of innovations that have helped and if you look at category by category with 70 download the thing that has really been a problem for us on.

The settlement branded has been keeping pace with demand we have been chasing demand because we get a lot of stuff from Asia.

So this is 1 where we've had a real tough time keeping pace.

So the demand the certainly there.

And it's been so when we think about the second half 2 of the supply thing it's more.

In our minds, rather than any worries about our brands.

Now some of the consumption, unlike food and appliances in the U S. There was some slowdown because last year. There was up so much but then the good news assist look food every 1 of our brands sort of gaining share.

More of that just goes to the power of the strength of our brands and 1 of our teams are doing and the innovations Chris over to you and on the pricing side.

We've done a tremendous amount of work looking at elasticity models for.

For pricing looking at the specific cost inflation and the thing.

Sure. It's important here I think is that the cost inflation that we're facing is not unique to us.

That's the entire industry is facing so and we're not fully pricing to recover because we are using the ramp up that we have in productivity savings, we're going to generate productivity savings this year of 3.5% for.

That's the plan of cost of goods, which is of very strong result on top of what we did last year and thats, helping to partially mitigate and so as we take the pricing generally what we're hearing and we're monitoring it day by day is that the whole industry is moving prices up now and any particular.

For for solar category, there could be a competitor of that tries to lag us or maybe the price ahead of us and so that's what we're monitoring sort of on a day to day to make sure that we don't wind up with a.

Sustainable price GAAP, but our strategy is not to gain market share by undercutting people.

Particularly our strategy is to gain market share by coming out with very strong product innovation that operate that offers the <unk>.

<unk> consumer value and Thats when you hear us talk about market share gains, it's not because we're trying to undercut anybody on price, it's because of we're driving.

On probation, that's compelling for the consumer and for the retailer.

Fair enough makes great sense. Thank you.

We'll take our next question from Bill Chappell with true Securities.

Thanks, Good morning.

Good morning, Bill just wanted to dig.

Diving, a little bit deeper on <unk>.

And development, especially as we kind of go into the key third quarter.

In the release you said, obviously consumption of our sales were were still below 2019 levels and that makes sense April may most of us.

And the even June July still working.

Dig alone, but it seems like.

Most businesses are kind of targeting of post labor day return kind of.

The Delta variant of aside schools here in Georgia and elsewhere I mean start for the next few weeks so trying to understand.

Is there pent up 1 to 2 questions there 1 day.

Do you think there's pent up demand.

Working from the just from the past 12 to 18 months, where you could be well above 2019 levels.

Especially on the office side of schools seem like they would just kind of returned to normal and then to everything we hear throughout the industry as supply sources and supply chain constraints do you have the.

We have towards the supply of <unk>.

We're able to meet that need if there is that kind of surge or could there be out of stocks or issues, where you capture of the full demand of these next 3.4 months.

The Bill good morning, I'll take the first of all of them then have Chris deal with the second.

Look our fish is to try and get back for 2019 levels.

Underwriting and the team is really focused on that having said that.

The you pointed out the hole that is the office component of this now despite the fact that you are hearing.

For the.

Stefan the medium people going back to September but the rest of Varian is also creating already you've seen some companies announce shifts for October we went to MPD and looked at the survey the had done a very good quantity to 1.

We saw I think they're forecasting.

Moving on at least a third of people will continue to be hybrid for a while so so that does have an impact having said that it's still early days because look the back to school season has just taken off and we are still going into the height of it and the fact that as we said on writing.

The core sales exceeded.

<unk> that the.

The company's average of credit 5 gives us great and look what it was below 19, Thats just a little it stopped.

We feel pretty good about the trends consumption is also up and then our market share of some overall rising not just <unk>.

So when I look.

Look at all of that I feel very bullish about <unk>.

And the last thing that you mentioned, which we have seen some of the studies there are a lot of schools set of advanced <unk>.

By say 5 days to 7 so thats a positive thing.

And then Collyn. This is sort of this 2 freshman class thats coming.

And so I think we feel pretty good about.

Whats happening on this business and believe me that team is very focused because they want to show that this is a top notch business on the supply chain.

We are very well positioned on the writing business.

The vast majority of what we sell in writing is manufactured in the U S. So we're not in this business dealing with.

Ocean freight port issues avail.

Availability of raw materials and components as we are on some of the other businesses and so we believe we're well positioned to respond and.

Capitalized the upside the other thing I would point out is the.

That is a positive as some of our competitors are in writing or not as well positioned where theyre not manufacturing in the U S and they're suffering.

From some supply issues and so supply could turn out to be a.

A.

The real benefit for us.

On the writing business versus at least 1 of our major competitors.

Got it that's helpful and just a follow up.

A couple of years ago, the plan and part was.

Divest some businesses use the cash to major share repurchase.

And that obviously change I.

I think for the better and holding onto the assets in the not really doing a whole lot of share repurchase, but now I mean, the hard to believe youre getting to the almost under Levered compared to your peer group and I know the biggest cash flow generating quarters or in the next 2 so is there of thought from you or the board.

Third of rethinking about stepping up share repurchase as we move into this kind of cash flow period.

Yes, I think as we think about capital allocation.

The way, we're thinking about it remains the same which is we expect the number 1 to continue to drive very strong operating cash flow. Our first priority is to reinvest back in the business.

And we're looking for very strong return projects.

Do that that are well above our cost of capital.

We plan to maintain our current dividend.

We are getting close to the leverage target that we set of 3 point of other times for $3, 1 and I think beyond that.

We'll start to look at things like share repurchase.

As well as tuck in acquisitions to the extent that we think.

They can be significant value accretive to the company.

And so we're excited to.

GAAP to our target on the balance.

Balance sheet, and we think that does open more flexibility as we go into.

The next few years and Bill 1 thing you mentioned dispositions.

Look I think 1 of the things we've really I think we have good connections now we are of good portfolio.

Net.

And I think we're getting more and more skilled at leveraging different aspects and we actually feel hey, maybe it's too premature for declines of the turnaround is over but the assembly I thinking about what do we want to the when we grow up and starting to think about our long term plans and really assigning roles for each businesses.

So I don't think I think the decisions we've made on keeping the business as we have is a good 1 of them and now it is the question of taking each 1 of these businesses to their full potential of whatever that for oil might be.

Great. Thanks, so much.

Our next question will be taken from Olivia Tong with Raymond James.

Thank you. Good afternoon wanted to talk first about your level of visibility on getting to your top line targets came in obviously the supply chain challenges.

Because obviously, we're not just hoping for consumer demand, but also of the increased difficulty in satisfying that demand.

Because of the externals Im sorry, I touched on this with respect of writing, but kind of curious on the rest of your key businesses.

Where you stand with respect to that and I would imagine with respect of supply chain.

That.

2 things 1 sort of major categories with your competition looks like again.

Can you talk about it with writing, but kind of curious from the other categories and then also what youre seeing from them with respect to pricing is it.

Magnitude similar at the tiny similar.

And if not where do they differ.

Yes, so on the supply chain.

As I mentioned in my prepared remarks, it is a challenging.

<unk> external environment.

The challenges are largely due to <unk>.

Ocean freight.

Availability of containers.

The length of time, it takes container ships to move from Asia to the U S.

<unk> capacity in the U S.

Labor availability in the U S.

Yes.

Some raw material and component availability, depending on the business unit and then you couple that with the consumer demand spike that we're trying to navigate and meat.

I think that we've done that our teams have done.

Really of our heroic job of meeting.

And navigating through this environment.

But our guidance does contemplate the environment remains difficult.

For the remainder of the year. So we are not expecting an improvement in the external environment, but we do expect us to continue to navigate it I think the good news is that this is not an environment that's unique to Newell. This.

This is an environment that all of our competitor space.

I mentioned on writing that I think we're better positioned than at least 1 of our major competitors the balance of our categories. I think we're largely similarly positioned.

And so we don't see major gaps in our.

The external pressure.

So versus our direct competitors external pressure.

<unk>.

On the whole so that's how I would characterize the supply chain and I think our are part of the reason why we've given a wide guidance range is recognizing.

The variability and the uncertainty.

Pressure supply environment, including the ramp up of the Delta variant, which can have an impact on that.

As I said, we're we're shooting more for the top half of our guidance range.

But we think it's prudent to maintain the guidance range given the variability in the external environment.

Yes, I think 1 thing to add.

<unk> of that overall more than a third of fr.

Products are sourced from Asia, and Thats why we do have.

Some effects I mean the.

The extent of the effect is really the bigger issue is because the point to that.

So yes, it's kind.

As of May and a bit of a challenge so and your question on pricing.

I think it's it's different because we compete against many different competitors, it's different by <unk>.

Category in terms of what we're seeing but broadly we're seeing the industry take prices up because of the inflation environment.

Thank everybody.

And again, it's not not unique to us.

There can be timing differences in any particular category with a particular competitor.

And we're navigating that I think reasonably well and closely monitoring it.

As we go forward here.

Got it and then just 1 follow up on margin can you just give us a sense of sort of the order of magnitude with respect to the increasing costs.

Raw material cost inflation that sticks around for a while versus some of the supply chain disruption.

Hopefully, it's relatively transitory maybe if you could just break that down for the quarter and then the full year.

The effect and how you think about the contribution from from improving mix as an offset in addition to obviously the productivity things that you talked about thank you so much.

Yes, so I think on the inflation side.

Is there really for factors that are driving inflation increased resin costs.

Finished goods, which is largely a function of the Chinese currency strengthening versus the U S. Dollar.

Transportation cost, which is in our case is largely ocean freight related and then labor pressure.

The interesting thing about that is.

For resin is probably the biggest impact out of those for.

Source of our $560 million that we're talking about this year and 1 of the sort of services that that doesn't out-front forecast on resin as IHS and at least that our forecast is that that we're at peak resin prices right now and resin prices are likely to come down significantly over the next 6.

Out months now we're heading into hurricane season, and so I never want to predict whether there's going to be of hurricane that hit for the Texas or Louisiana coast.

But by all accounts.

It feels like the resin environment is sort of peaking at the moment and is likely to get better as we head over the next 6 to 12 months.

Again.

The 12 sourced finished goods, it's hard to predict.

The the Chinese currency strengthened versus the U S dollar, but it's been relatively stable more recently.

And so we will begin to lap that unless there is another devaluation of the U S dollar.

I think ocean freight.

Likely to remain a challenge.

Again for the next.

6 to 12 months because of the capacity constraints.

Net.

Carriers and containers.

Have the this is not unique to newell.

But again it feels like that is transitory in nature, and then I think.

For cost is likely to be of sustaining inflationary pressure, but.

It probably is the smallest of the for that that I mentioned.

So we think we're navigating.

The peak inflation environment, well, we're excited that we're driving.

The low single or I'm, sorry high single digit to low double digit operating income growth is what our guidance implies for this year. Despite this inflation and we think that the productivity savings that we've got the cost management that we've got and the topline momentum that we have positioned us well.

Well as the inflation pressure starts to ease going forward.

Okay.

Thanks, so much really appreciate it.

The next question from Peter Grom with UBS.

Hey, good morning, or I guess good afternoon.

Afternoon at this point so.

Just wanted to ask around the kind of Q3 margin range and maybe just a follow up to Olivia's question I mean, what does the day.

Net income beds on the segment mix perspective, you've been pretty open about the mix tailwind from the normal writing year. So any commentary there would be really helpful and then.

Just the advertising commentary, Chris you mentioned up.

Is that just the significant change versus what you were embedding in after Q1 or is that just kind of a broader comment around year over year and then is there just any way to think about.

Quantify the magnitude for advertising the advertising embedded in your Q3 guidance.

Yes, so on.

On the Q3 guidance I'll try to tackle them. So if you recall last year at this time.

We were coming out of our supply chain being shut down and so our A&P that was in the third quarter last year was artificially low.

This year, we are in a much better supply situation than we were last year and so we.

We have basically reinstated A&P, we also have much stronger innovation in the market this year and so advertising costs are up.

Significantly this year versus last year, both in dollar terms and in percentage terms.

On the inflation front.

Q3.

As I mentioned, we do expect inflation to be peaking in Q3 of this year. So our of our $560 million. The biggest impact is to the third quarter on inflation.

And that that is.

Fairly dramatic impact we are mitigating.

Hey, Matt.

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2 of significant extent through productivity actions and through cost containment and some volume leverage but.

That's what's driving the.

And embedded in the Q3 sort of margin guidance.

Okay.

Okay, great. Thank you.

This does thank you very much.

I think we.

We apologize for that to others, who we can get through but.

It's sort of App and thank you very much in day.

A replay of today's call will be.

Again April later on today on our website at IR Dot Newell brands Dot Com. This concludes today's conference and you may now disconnect.