Q2 2022 WD-40 Co Earnings Call
Ladies and gentlemen, thank you for standing by.
Good day and welcome to the WD 40 company second quarter fiscal year 2022 earnings Conference call.
Today's call is being recorded.
At this time all participants are in a listen only mode.
At the end of the prepared remarks, we will conduct a question and answer session.
You bet just sort of ask a question at any time during this call. Please press star one on your telephone keypad.
These make sure your mute function is turned off to allow your signal to reach our equipment.
I would now like to turn the presentation over to the host for todays call Ms. Wendy Kelley, Vice President of stakeholder and Investor engagement. Please go ahead.
Thank you good afternoon, and thanks to everyone for joining us today on our call today are WD 40, company's chairman and Chief Executive Officer, Garry Ridge, Vice President and Chief Financial Officer, Jay Remo, and President Chief operating officer, and incoming Chief Executive Officer, Steve Brass.
In addition to the financial information presented on today's call. We encourage investors to review our earnings presentation earnings press release and Form 10-Q for the period ending February 28, 2022. These documents are available on our Investor Relations website at Investor WD 40 company Dot com.
A replay and transcript of today's call will also be made available at that location. Shortly after this call.
On today's call, we will discuss certain non-GAAP measures the descriptions and reconciliations of these non-GAAP measures are available at SEC filings as well as our earnings presentation.
As a reminder, today's call includes forward looking statements about our expectations for the Companys future performance of course actual results could differ materially.
The companys expectations beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished please refer to the risk factors detailed in our SEC filings for further discussion.
Finally for anyone listening to a webcast replay or reviewing a written transcript of this call. Please note that all information presented is current only as of today's date April seven 2022, the company disclaims any duty or obligation to update any forward looking information, whether as a result of new information future events.
Or otherwise with that I would now like to turn the call over to Gary.
Thank you Wendy.
Hi, and thanks for joining us for today's conference call. We have a lot to cover today, but I'd like to start with the Big news since last quarter's call we share.
Last month that effective September one 2020.
You too steep for us is going to be the next CEO of 70 40 company.
We are also excited to Steve and the reception so far from our investors and our tribe has been very positive.
Steve is going to be the fifth CEO in our company's 69 year history.
No Steve it's someone I have worked very closely with for over three decades, and I feel extremely fortunate to hand, the reins over to this capable leader I know, we're going to accomplish great things and I'm looking forward to watching this happen.
We remain in the CEO seat until the end of this fiscal year and I will continue to be with you on the earnings call until our fourth quarter earnings call for now, let's talk about the second quarter of fiscal 2022.
Today, we reported net sales of $130 million for the second quarter fiscal year, 2022, which was an increase of 16% compared to the same quarter last year. We are pleased with these top line results. However, we continue to face a challenging inflationary environment and second quarter gross margin.
At 50%, reflecting a significant increase to our cost of goods related products sold.
Jay will talk in greater detail in a few moments about what has impacted our margin in what we're doing to restore.
While we have work to do to restore our margins back to our target of 65% I am happy to share with investors today that we reported net income of $19 5 million in the second quarter compared to $17 2 million in the same quarter last year, reflecting an increase of 30%.
Let's start with a discussion about our strategic initiatives. Our strategic initiatives is continuing plan, we have in place to achieve the company's long term explorations, Steve and I worked closely with our senior leadership team last summer to refresh our strategic initiatives are they more accurately and holistically.
Reflects the top priorities of our organization.
Our strategic initiatives support our long term revenue growth aspiration, which is to drive net sales to between $660 700 billion by the end of fiscal year 2025, we strive to do this while following our $55 $30 25 business model.
Strategic initiative number one is to build a business for the future.
Under this initiative is to build an enduring business that we will be proud to pass on to the next generation the desired outcome for this strategic initiative is to fully integrate ESG initiatives into the heart of our strategic planning process, we believe that taking an integrated approach to ESG enhancers.
The sustainability of our business and protect long term interest of our stakeholders.
We have started to take an outside in look at our business diving into what we believe are the key trends that will shape the future.
G and its demands continue to come to the surface and our discussion.
I can share with you that this is an area that Steve is particularly passionate about and committed to moving forward.
Making great progress in setting our ESG priorities and expect to file our next ESG report in early fiscal year 2023.
<unk> report will contain an in depth review of what we have accomplished since our last ESG report as well as both short and long term targets to drive improvements in this important area.
Strategic initiative number two is to attract develop and engage outstanding tribe members.
We believe that by building and nurturing an inclusive and diverse purpose driven learning and teaching organization AD fraud members will succeed together wallach selling as individuals during the second quarter. We asked our tribe members to participate in FY annual employee engagement survey I am happy to Rip.
Paul that our global employee engagement index score remained industry, leading and increased 50 basis points from two years ago to 93, 5%.
98% of our tribe members members answered they love to tell people. They work at WD 40 company and 94% of our tribe members told US they are excited about the company's future direction.
We cultivate high employee engagement by creating a culture based on care, Canada accountability and responsibility guided by our values and nurtured by learning our employee engagement score reflects that way of life.
Strategic initiative number three is to strive for operational excellence.
Under this initiative is to foster a culture of continuous improvement in which operational excellence is the responsibility of every tried remember the world is full of volatility.
Complexity and acuity will also now than <unk> seen in our lifetime, our commitment to operational excellence continues to be an enormous asset for us as we navigate the challenges associated with the pandemic using a $55 30 25 business model as a framework, we measure ourselves against this opportunity.
<unk> initiatives.
Strategic driver number four is to grow WD 40, multi use product.
Our goal under this initiative is to make the blue and yellow can with little Red top of hours in more places to more people, who will find more uses more often we will grow the WD 40, multi use product line through continued geographic and digital expansion increased market penetration educating end users about new uses and through the development of new.
And unique delivery systems that make the product easier to use in the second quarter sales of WD 40, multi use product increased 18% globally to $101 7 million the desired outcome for this strategic initiative is to grow sales of WD 40, multi use product to approximately $525 million by <unk>.
2025.
Strategic initiative number five is to grow the WD 40 specialist product line.
Our goal under this initiative is to leverage the WD 40 brand by developing new products and categories, which build and reinforce the core brand positioning and create growth through continued geographic and digital expansion.
In the second quarter sales of WD 40 specialist increased 40% globally to $14 6 million, Steve will speak in a few moments of the improvements we've made to our supply chain. This improvement paved the way for 125% year over year growth of WD 40 specialist in the United States in the second quarter.
In addition, beyond the lookout for an exciting new WD 40 specialist product that will be viewing later this calendar year.
This new product is one of the first sustainable product in its category.
Juices single use plastic waste is packaging recyclable packaging and helps to reduce our carbon footprint to.
The desired outcome for this strategic initiative is to grow sales of WD 40 specialist to approximately $125 million by 2025.
Strategic initiative number six is to expand and support portfolio opportunities that help us grow.
Under this initiative is to expand and support brands that provide us protection and help us growth brands. Under this initiative include three in one <unk> five as well as our homecare and cleaning brands in the second quarter sales of products included under this initiative decreased 9% globally to $13 7 million.
Our homecare and cleaning products were up against very strong comparable period as they benefited from increased demand as a result of the pandemic last year. The desired outcome for this strategic initiative will be the category of approximately $50 million by 2025.
We reached that number we expect sales growth of brands like three in one <unk> 511, and Novak many of our other howden care and cleaning products brands will likely decline in sales, but they will continue to contribute to healthy returns.
Supporting our strategic initiatives, our must win battles laser focused action plans that support our strategic initiatives.
Now pass the call on to our soon to be CEO , Steve Brass, who will share an overview of our sales results and an update on our must win battles.
Thanks, Gary and good afternoon.
To begin I just wanted to share with you all that I am humbled and excited to have been asked to serve as the next CEO of this amazing trial.
To be able to serve all our stakeholders.
I also wanted to take this opportunity to thank Gary for his mentorship over the last three decades and in planning for this transition. He has set up for success by ensuring I inherited a solid strategy for the company and an excellent team of senior leaders many of whom I have worked with for many years.
Now, let's take a closer look at what's happening in our trade blocks, starting with the Americas.
Sales in the Americas, which includes the United States Latin America, and Canada were up 18% in the second quarter to $54 5 million compared to last year.
Sales of maintenance products increased 22% in the Americas due to increased sales.
It States in Latin America, which increased 26% and 18% respectively.
In the United States, we experienced strong sales of both to be 40, multi use product and WD 40, specialist, which increased 19% and 125% respectively. We.
We have continued to experience a high demand for our maintenance products in the U S. Since the onset of the COVID-19 pandemic.
In the comparable period of last year, we began experiencing significant supply chain disruptions and constraints and our U S supply chain.
Happy to share with you today that we have made adjustments to our supply chain to increase the production capacity of our highest volume products from these changes have resulted in our ability to deliver a higher volume of products to our customers in the second quarter.
<unk> sales are also attributed to the price increases that went into effect beginning in the first quarter of this fiscal year.
In Latin America, we experienced strong sales of WD 40, multi use product, which increased 22%.
And America distributed markets, such strong sales growth due to successful promotional programs that increase productivity and ability.
The increase in sales is also attributable to the favorable impact of price increases and the timing of customer orders.
We also continued to see positive momentum in Mexico from the shift we made in fiscal year 2020 from a distributor model to a direct market.
Canada sales of maintenance products remain constant period over period.
As a reminder, our maintenance products exclude our homecare and cleaning brands.
Unfair and cleaning products in the Americas decreased 16% compared to last year.
Due to lower sales in 2000 pushes spot shot and lava Chan.
<unk> not Americas supply chain, primarily in the United States resulted in decreased parts availability and lower sales for most homecare and cleaning brands.
While we have seen improvements to our supply chain recently, we have made strategic decisions to prioritize increased production capacity of our maintenance products.
In total our Americas segment made up 42% of our global business in the second quarter over the long term, we anticipate sales within this segment will grow between 5% to 8% annually.
Now on to EMEA.
Sales in EMEA, which includes Europe , the Middle East Africa, and India Rose, 9% in the second quarter to $54 1 million compared to last year.
Sales of maintenance products increased by 9% in EMEA due to increased sales in both our direct and our EMEA distributor markets, which increased 6% and 13% respectively.
In our EMEA direct markets, we experienced a 7% increase in sales of WD 40, multi use product.
The 9% increase in sales activity for the specialist.
The increase in sales is partially attributable to the favorable impact of price increases and the timing of customer orders.
In the second quarter sales in our EMEA direct markets accounted for 65% of the region sales.
In our EMEA distributor markets, we experienced a 13% increase in sales of maintenance products, primarily due to increased sales in eastern and southern Europe .
The increase in sales is partially attributable to the favorable impact of price increases and the timing of customer orders in the second quarter sales in our EMEA distributor markets accounted for 35% of the region sales.
In early March we made the values guided decision to suspend sales of our products to our marketing distributor customers in Russia, and Belarus, and this will have an unfavorable impact on ourselves in this region in future periods. In addition, we're currently not able to sell our products in Ukraine due to.
The disruption in the country.
Our sales to the regions that are directly impacted or approximately 3% of global sales in fiscal year 2021.
We do not have significant operations in these regions other than the distribution and sale of our products through a third party distributor.
Russia has been a market that we had identified as a significant opportunity for us in the context of a global must win battles. However, we spend with those being subjected to violence.
Yes.
In total our EMEA segment made up 42% above global business in the second quarter over the long term, we anticipate sales within this segment will grow between 8% to 11% annually.
Now on to Asia Pacific.
Sales in Asia Pacific, which includes Australia, China and other countries in Asia region were up 34% in the second quarter to $21 4 million.
In our Asia distributor markets sales were $9 8 million in the second quarter up 64% compared to last year.
Sales increases were primarily driven by the timing of customer orders and successful promotional programs increasing sales is also attributable to certain customers buying product in advance of future price increases.
In China sales of $6 7 million in the second quarter up 42% compared to last year, driven primarily by successful promotional programs as well as the timing of customer orders related to price increases that went into effect in the second quarter.
We remain optimistic about the long term opportunity in China, we expect volatility along the way due to the economic and health related impacts of COVID-19, the timing of promotional programs the building of distribution shifting economic patterns and varying industrial activities.
In Australia sales with $5 million in the second quarter down 5% compared to last year due primarily to decreased sales of homecare and cleaning products, which were down 10% compared to last year.
In total our Asia Pacific segment made up 16% of our global business in the second quarter over the long term, we anticipate sales within this segment to grow between 10% to 13% annually.
Many of you may be wondering what the impact of our recent price increases has been on total global revenue for the first half of our fiscal year.
Our best estimate is that this sales increase was attributed roughly two thirds volume and one third price.
Now a brief update on our must win battles.
I must win battles are the primary areas of action that will enable us to deliver against our revenue growth aspiration to drive sales to between $650 to $700 million by the end of fiscal year 2020 client. These hyper focused actions support our overall strategy and other key drivers of revenue growth.
Our largest growth opportunity in first must win battle is the geographic expansion of the blue and yellow can with little Red top we continue to experience impressive growth of our flagship brand with global sales of <unk> 40, multi use product up 16% year to date. We've recently completed some research to evaluate our largest.
Market opportunities and we estimated the potential global growth opportunity for WD 40, multi use product continues to be greater than $1 billion.
A significant portion of that opportunity is presence in just 20 markets year to date, we have experienced significant growth opportunity and priority markets like Mexico, India, and China sales increased by 31%, 16% in key markets around the world.
A second.
The 40 multi use product.
The revenue growth gross margin expansion and most importantly, deadlines are end users and year to date sales of WD 40, smart straw and EZ reach when combined represented 45% of global sales activity 40, multi use product I'm also excited to share.
With you that smart straw next generation is now appearing on many store shelves across the Americas, and we expect to see it in many more countries around the world in the coming quarters.
<unk> strong next generation supports our objective to grow premium delivery system penetration to greater than 60% of activity 40, multi use product sales by 2025.
Our third must win battle is to grow WD 40 specialist the year to date sales of Zigbee 40 specialists were up 15% compared to last year. We saw solid sales growth at <unk> 40 specialist across all three trade blocks of year to date and are very pleased.
Please to turn the corner on the capacity constraints, we've been experiencing in our U S supply chain we.
We expect strong growth from <unk> 40 specialists as we optimize our supply chain and reap the benefits of our E Commerce <unk>.
<unk> for digital government assistant to engage with end users at scale, making easy to access to learn about and purchase all brands in the first half of E. Commerce sales were down 16% partially due.
Due to the continued rebalancing of sales towards brick and mortar locations.
For the full fiscal year, we expect growth in the E Commerce channel.
We are.
Gnostic whether end users.
Hello, I know in physical stores, we aim to provide a seamless online and offline experience.
We believe that over the long.
Long term, 70% to 80% of all transactions will involve the digital touch point somewhere along the path to purchase that is why it's very important that we continue to focus.
On leveraging digital engagement to educate end users and create better experiences across digital marketing platforms.
Thats It for me I'll now turn the call over to Jay who will provide.
Thanks, Steve this.
This quarter, we delivered solid financial results. Despite the fact that we start with a discussion about our $55 30 25 business model.
The long term targets, we use to guide our business as you may recall, the 55 represents gross margin, which we target at or above 55% of <unk>.
Since our cost of doing business.
Which is our total operating expenses, excluding depreciation and amortization.
Our goal is to drive our cost of doing it.
Ah represents our long term target.
For EBITDA.
First the 55, our gross margin.
In the second quarter, our gross margin was 54% compared to 55.
The same period last year. This represents a decline of 500 basis fairly to the challenging inflationary.
Environment we're in.
Due to continuing challenges in the global supply chain.
We are.
The continued declines in our gross margin.
Inflationary headwinds.
All aspects of our cost of goods our opportunity. This year is to start to reverse this trend and begin to drive gross margin back toward our targeted levels.
In the second quarter changes in specialty chemicals, and aerosol cans were the primary drivers of this decline.
When combined negatively impacted our gross margin by 410 basis points.
Our petroleum based specialty chemical costs negatively points and the remaining 40 basis points came from higher costs associated with aerosol cans stocks of our specialty chemicals.
We've seen a steady.
Last 12 months has accelerated.
So in recent weeks.
Higher warehousing distribution and freight cost primarily due.
Okay.
And supply chain.
Strength in the Americas, and EMEA negatively impacted our gross margin.
By 110 basis points.
Gross margin was also negatively impacted by 80 basis points from higher filling fees paid to our theory.
Third party contract manufacturers, primarily in the Americas, and 60 basis points due to foreign currency exchange rates.
The impact to gross margin linked to foreign exchange rates is due to fluctuations in exchange rates for the euro and the dollar against the pound Sterling area.
This is because in EMEA. The majority of our finished goods are sourced in pound sterling, while approximately 70% of our revenue.
Revenues are generated in currencies other than pound sterling.
Gross margin was also negatively impacted by 60 basis points due to higher miscellaneous costs and implemented over the last 12 months.
We expect the operating environment to remain challenging and volatile over the near term.
As necessary.
As much as I don't like.
<unk> oil prices.
Currency, we have experienced managing our business with crude oil over a wide range of cost.
We really don't like is the commodity volatility we're seeing in present.
Regardless, we plan to rebuild our gross margin or.
To offset these higher input costs.
And then use our margin accretive must win battles to further enhance growth.
We are focused and committed to managing.
Dr business, so that we can restore gross margin back to.
Percent now I'll address the 30 or our cost of doing business.
In the second quarter, our cost of doing business was approximately 30% of net sales.
Compared to <unk>.
For the second quarter.
Percent of our cost of doing business came from three areas people costs or the investments we make in our tribe.
The investments we make in marketing.
As a percentage of sales our A&P investment was four 3%.
And then finally, the freight costs to get our products to our customers SG&A expense decreased by approximately 700.
Primarily due to lower incentive compensation accruals as our current estimate is projecting that there'll be a lower level of achievement when compared to the prior year.
These lower employee related costs were offset by higher freight costs, primarily associated with the current inflationary environment and the limited capacity in the global distribution network.
The last of our 50 530 25 measures EBIT.
EBIT was 21% of net sales this quarter, which is slightly up as a percentage of revenue compared to the last year.
Some of you may be.
Wondering how we were able to maintain EBITDA, while gross margin.
Is down 500 basis points.
This was the result of a variety of factors, but the primary driver was the decrease in earned incentive accruals.
Our employee incentive program is designed.
And to reward our tribe members in good years and protect EBITDA when we encountered headwinds.
Well that completes the discussion of our business model now lets discuss some of the other items that fall below the EBIT line.
But we're very soon for income taxes was 21% this quarter compared to 15% last year.
The increase in the effective income tax rate was primarily due to a nonrecurring benefit received in the prior year from the settlement of stock based equity awards.
<unk> will be approximately 20% to 21% for the full fiscal year 2022.
Net income for this quarter was $19 5 million compared to 17.
For $1 41.
Compared to a $1 24.
For the same period last year.
Now about our balance sheet and capital allocation strategy.
The company's financial condition and liquidity remained strong our capital allocation strategy includes a comprehensive approach to balance investing in long term growth, while providing strong returns to our shareholders.
We continue to return capital to shareholders through regular dividends and share repurchases on March 15th our board of directors approved a quarterly cash dividend of <unk> 78 per share payable.
Thanks to shareholders of record at the close of business on April 15.
And during the second.
47000 shares of our stock at a total cost of approximately $10 8 million.
In fiscal year 2022, we expect.
And capital projects.
We used to complete the procurement of the Max scenery in equipment, we are using to manufacture.
Delivery system.
One other item I'd like to call to your attention is the recent increases in our inventory levels.
Of our U S supply chain.
We have increased the number of raw materials.
We have an inventory to improve our ability to meet market.
Demand.
2022 guidance.
Our revenue guidance remains unchanged and we have lowered our gross margin and net income guidance to reflect the impact of the inflationary environment. We're currently experiencing.
With that net sales growth is projected to be between seven and 12% with net sales.
Between $522 million and $547 million.
Gross margin for the full fiscal year is expected to be between 50% and 51%.
Advertising and promotion investment is projected to be between five and 6% of net sales.
And the provision for income taxes is expected to be between 20 and 21%.
Is projected to be between $77 million and $72 5 million.
Diluted earnings.
For sure.
<unk>.
For 2014.
And $5 27.
Based on an estimated $13 7 million weighted shares.
I want to remind everyone.
But there are dynamics outside of our control that may impact our fiscal 2022 results. This guidance does not include any future acquisitions or divestitures or the impact of fluctuating currency foreign currency exchange rates and assumes crude oil cost will be between 100 and 102.
$101 a barrel.
Unanticipated inflationary headwinds and other unforeseen events may further impact the companies.
Financial results.
Now that completes the financial overview I'll turn it now back to Gary.
Thanks, Jay in summary, what did you hear from us on this call.
CEO of WD 40 company.
Plenty effective September one 2022.
You heard that we have seen significant improvements in our supply chain, particularly in the United States.
The total net sales were up 16% in the second quarter, you heard that sales of WD 40, multi use product were up 18% in the second quarter. You had the sales of WD 40 specialist were up 40% in the second quarter and that will be launching an E.
Thank you.
You heard that we've made.
The values guided decision to suspend sales of our products to our marketing distributor customers in Russia and Belarus.
Is that all that we have been experiencing pressure on gross margin from the challenging inflationary environment. We have a solid restoration plan in place and you heard that we have adjusted our guidance for fiscal year by approximately 2% and believe that earnings per share will be between $5 14 and $5 27.
Closing today I'd like to share with you a quote from my friend Simon sending the.
We can choose the guy we can choose the rules, we can only choose how we fly.
Thank you for joining us today, and we would be pleased to take your questions.
Ladies and gentlemen, if you would like to register a question. Please press star one on your telephone keypad.
Please make sure your mute function is turned off to allow your signal to reach our equipment.
If your question has been answered and you would like to Vishal. Your registration. Please press star one again.
One moment please for the first question.
Our first question comes from the line of.
Please proceed with your question.
Hi, guys. Thank you.
Taking taking my questions.
So you had a pretty strong sales quarter and it looks like you're raising prices.
But remained unchanged I was wondering.
How we should think about it.
Okay.
I would've thought you would have raised it a little.
Right.
Any color on that.
Yeah. Thanks, Daniel this is Gary.
While we didn't totally.
Okay.
At this time.
Files of Russia, which were about 3%.
The factor that is all about.
Our full guidance path.
They were offset by.
Further growth in some of the pricing.
Okay that actually makes sense. Thanks.
And then.
So you mentioned expanding into different Martin about differently.
Mexico I was wondering.
If when you go into a new region now do you lead with.
With smartphone to point out.
Wondering if the dynamics change or how are you.
When you think about that now given that you have this higher margin.
I mean better project product.
I don't know just any color on how the strategy works.
Thank you Daniel this is Dave.
Steve.
Yes, so I mean, it's an interesting question you pose it typically in new emerging markets, we would lead with the classic Ken.
However, in certain markets, India being a great example, more recently, we've been trials, particularly.
In digital we are leveraging this new small store system and the results are very very positive. So we're kind of learning as we go.
Smart Sterle became very quickly one of our top selling skus. So I think our opinion is changing of that normally would lead with plastic can in these emerging markets, but we are finding increasing evidence of acceptance in emerging markets or the small store deliveries.
Okay. Thanks, and then final question.
You mentioned, having higher inventory to meet customer needs or customer demand.
Which makes sense and I don't know if I asked this on the last call, but I was wondering if you are changing the way you think about holding inventory going forward just given.
Everything is happening worldwide to everybody for last year, if you will be holding more inventory going forward or if it goes back to more of a just in time thing.
Daniel This is Jay and certainly for the near term and probably to the through to the medium term, we would expect to have higher levels of inventory for some period of time to ensure the robustness of our supply chain and the availability of our products to our customer.
So it's really about serving our customers' needs.
Alright, Thank you very much.
Our next question comes from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.
Hi, everyone how are you.
And Linda we're great.
Well, congratulations again on transition plans with them.
This is Phil.
But certainly prepared investors and analysts.
All ahead of time for the transition Paul Thank you for that.
So I guess.
Sorry, I got cut off a little but I missed what you said the pricing effect on gross margin can you just repeat that.
So the overall global impact on revenues was about.
One third.
Pricing and about two thirds volume.
Of total growth.
Well when you normally give like a powerful effect on gross margin.
Not too bad or are you able to quantify that.
Yes that was about 200 basis points.
Okay.
And then.
Yes.
Looked at the year that I have in my model.
Sure.
Yes.
All things equal then pricing to offset inflationary pressures with FY <unk>.
<unk> got as high as a 200 basis point effect on gross margin positive.
So do you think this cycle around that youre going to have like can you tell us where.
Where it's going to peak out or do you think.
That's going to require more to offset that inflation cost pressures.
Yes, it will definitely require more as we said that we've had we've had a number of price increases already anticipate more price increases through the throughout part of efforts throughout the remainder of the year.
We'll see what happens next year.
Okay.
Gross margin.
Yes, it was.
Lower than expected in the quarter and.
Further down sequentially.
Are you able to kind of I guess.
NASA, a little bit but is that the trough in the second quarter or will it still good.
According to your guidance kind of go down a little bit more sequentially in the third quarter.
We were expecting this to be the trough I think it's probably pushed out a little bit to the third quarter.
Could we could flatten out in the third quarter, but there is a chance it will continue a little bit more erosion.
But we do see is.
Some.
The beginning of the uptick starting in Q4.
Okay, that's very helpful.
Hum.
Yes.
Yes.
On what you said on Asia.
Can you just repeat that in the quarter and did you experience any impacts of Lockdowns and things like that in China in the quarter.
So China is doing extremely well.
For the quarter was.
<unk>.
Very nice growth for the quarter growth overall in China was 42% for.
For the quarter revenues, and then 53% year to date.
Very strong and we have major industrial same thing campaigns going on in China, and so on a net working absolutely fantastic for us and we're doing really well the lockdowns have been more about really March going into April . So, yes, we are seeing lockdowns impacting availability of factory production.
Shipping so that is going to impact us in the short term over a couple of week period is expected at the moment.
Okay and then.
No of course.
Stock market action.
<unk>.
Antelope deep.
Depot allows theyre talking about.
People get worried about potential impact of like housing Piper question on those.
Home Center retailers.
Are you I mean, obviously you're not fully.
Yeah, but.
Can you just kind of remind us like in the last recession.
What kind of decline in.
Total revenue I think it was a modest decline, but can you just kind of remind us of what kind of happened back then.
Yes, Linda.
I was around then so I'll speak on that and so it was Jay apart from currency, we actually went sideways already actually in their multi use product we grew.
So again, one of the things that we've learned over the past years and also in Covid is that our diversification across geographies and trade channels is really a true moat in strength for our company. We've never said, we were recession proof, but we're somewhat recession resistant.
In what we do whether that plays out or not but the past is the past is a reflection of the future again, we're probably stronger we are now stronger than we've ever been as far as the spread of our business across geographies and trade channels right.
If you look at what's happening already it has already been a shift challenges from E. Commerce, our industrial sales globally are doing extremely well were up over 30% globally and industry are hardware channels picking up and doing very very well of 24% year to date. So.
That's the WD 40 distribution system, when one channel down we make it up in other channels or geographies.
Okay. Thank you and then one final one just on modeling I seem to recall here in my model last year fiscal fourth quarter.
Kind of what a big profit decline and it was because you were waiting to invest pretty heavily in advertising and promo in the quarter overall big ratio.
<unk>.
I can't quite remember what that was all about but are you expecting some kind of a similar investment this year or is that going to represent kind of an easy comparison in the fourth quarter.
Yes. Thank you we don't expect to repeat that level of incremental investment that was a significant investment we made in our top 20 in growth markets I think it was a one off in nature.
Yes.
Quite frankly, a great investment because it's that investment that created the momentum that youre seeing in our topline revenue now so.
We are very very happy that we made that decision and it is certainly showing us benefit now as we continue through the year.
Okay.
Thank you very much I appreciate it.
Okay. Thanks Linda.
Ladies and gentlemen that does conclude our allotted time for questions. We thank you for your participation on today's conference call and ask that you. Please disconnect your lines.
Okay.
Okay.
Okay.
Okay.
Yes.