Q4 2023 Newell Brands Inc Earnings Call

Operator: Good morning, and welcome to Newell Brands' fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Good morning, and welcome to Newell Brands' fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.

Operator: After a brief discussion by management, we will open up the call for questions. In order to stay within the time schedule for the call, please limit yourself to one question during the Q&A session. This conference is being recorded.

After a brief discussion by management, we will open up the call for questions in order to stay within the time scheduled for the call. Please limit yourself to one question during the Q&A session.

Today's conference is being recorded.

Operator: A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Sophia Sinis, VP of Investor Relations. Ms. Sinis, you may begin.

Live webcast of this call is available at IR thought Newell brands' Dot Com I will now turn the call over to Sofia Center V. P of Investor Relations. Mr. <unk> you may begin.

Sophia Sinis: Thank you. Good morning, everyone. Welcome to Newell Brands' year-end earnings call. On the call with me today are Chris Peterson, our President and CEO, and Mark Erceg, our CFO. Before we begin, I'd like to inform you that during the course of today's call, we will be making forward-looking statements that involve risks and uncertainty. Actual results and outcomes may differ materially, and we undertake no obligation to update forward-

Sofia: Thank you and good morning, everyone welcome to Newell Brands' yearend earnings on the call with me today are Chris Peterson, our president and CEO and Mark <unk>, our CFO before we begin I would like to inform you that during the course of today's call, we'll be making forward looking statements, which involve risks and uncertainty actual results and outcomes may differ.

Sofia: Materially and we undertake no obligation to update forward looking statements.

Sophia Sinis: I refer you to the cautionary language and risk factors available in our earnings release, our Form 10-K, Form 10-Q, and other SEC filings available 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 we refer 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 measures can be found in today's earnings release and tables that were furnished to the SEC. Thank you, and now I'll turn the call over to Chris. Thank you, Sophia. Good morning, everyone.

Sofia: Turning to the cautionary language and risk factors are available in our earnings release, our Form 10-K forms 10-Q, and other SEC filings available on our Investor Relations website for a 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 referred.

Sofia: 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 measures can be found in today's earnings release and tables that were furnished to the efficacy. Thank you and now I will.

Sofia: Turn the call over to Chris Thank.

Chris: Thank you Sophie and good morning, everyone and welcome to our year end call I want to start with a brief recap of the significant progress we have made during 2023 on the turnaround agenda.

Christopher H. Peterson: And welcome to our year-end call. I want to start with a brief recap of the significant progress we have made during 2023 on the turnaround agenda. In June, we introduced and deployed a comprehensive new corporate strategy, which focuses on disproportionately investing in innovation, brand building, and go-to-market excellence in our top 25 brands and top 10 markets as part of a clear set of where to play and how to win choices. These choices were informed by a thorough and brutally honest company-wide capability assessment we conducted earlier in 2023, which unveiled gaps in Newell's front-end commercial capability.

Chris: In June we introduced and deployed a comprehensive new corporate strategy, which focuses on disproportionately investing in innovation brand building and go to market excellence and our top 25 brands in top 10 markets as part of a clear set of where to play and how to win choices.

Chris: These choices were informed by a thorough and brutally honest companywide capability assessments, we conducted earlier in 2023, which unveiled gaps in Newell's front and commercial capabilities.

Christopher H. Peterson: Following the deployment of the new corporate strategy, we proceeded to fully cascade and integrate it into business, region, brand, and functional strategies to ensure clarity and consistency of direction across all areas of the company. Last month, we announced additional changes to our operating model designed to accelerate progress in key capability areas, such as innovation, brand building, and go-to-market excellence, while driving even further standardization and scale efficiencies across the supply chain and back-office functions. As part of this evolution, we have now set up a cross-functional brand management organization and, for our top 25 brands, established multifunctional brand teams spanning brand management, consumer and shopper insights, as well as finance, customer strategy and planning, and supply chain function.

Chris: Following deployment of the new corporate strategy, we proceeded to fully Cascade and integrated in the business region brand and functional strategies to ensure clarity and consistency of direction across all areas of the company.

Chris: Last month, we announced additional changes to our operating model designed to accelerate progress and key capability areas, such as innovation brand building and go to market excellence, while driving even further standardization and scale efficiencies across the supply chain and back office functions.

Chris: As part of this evolution, we have now stood up a cross functional brand management organization and for our top 25 brands established multi functional brand teams spanning brand management consumer and shopper insights as well as finance customer strategy and planning and supply chain functions. This move allows holistic.

Christopher H. Peterson: This move allows holistic support for each brand, keeps consumers at the heart of all we do, and ensures appropriate financial and operational rigor is in place to drive our ambition. Building on the success of the One Newell approach, with Newell's top four customers as part of the organizational realignment, we centralized domestic retail sales teams under our chief customer officer, further reinforcing our partnerships, simplifying interactions, and allowing for additional joint business plans. We also created a new business development team focused on driving distribution with new customers and expanding categories with existing customers. We expect these changes will enable our teams to better leverage Newell's portfolio of leading brands and critical selling capabilities to accelerate both category growth and market share while serving as best-in-class partners to our customers. Over an eight-month period, key members of the leadership team and I visited eight of Newell's top ten countries across North America, Europe, and Latin America.

Chris: Port for each brand keeps consumers at the heart of all we do and ensures appropriate financial and operational rigor has an implied in place to drive on our ambitions.

Chris: Building on the success of the one <unk> approach with <unk> top four customers as part of the organizational realignment, we centralized domestic retail sales teams under our chief customer officer further reinforcing our partnerships simplifying interactions and allowing for additional joint business plans.

Chris: We also created a new business development team focused on driving distribution with new customers and expanding categories with existing customers. We expect these changes will enable our teams to better leverage <unk> portfolio of leading brands and critical selling capabilities to accelerate both category growth and market share while serve.

Chris: <unk> has best in class partners to our customers.

Chris: Over an eight month period key members of our leadership team and I visited eight of <unk> top 10 countries across North America, Europe, and Latin America. These.

Christopher H. Peterson: These visits reinforced our view that international markets, which accounted for about 37% of Newell's sales in 2023, represent an attractive growth opportunity, particularly if we fully harness the scale benefits and embrace the one new go-to-market model. As a result, we are further simplifying and standardizing Newell's regional organizations, which will pivot their focus to commercial delivery with the goal of accelerating speed, agility, effectiveness, and ownership. We've made significant progress upgrading talent across the organization to close skill gaps and accelerate capability build out. We have now filled the majority of critical leadership positions across the company. The two latest hires to the executive team include a new chief HR officer, as well as a new CEO of the outdoor and recreation business, who both bring a wealth of relevant experience and knowledge. We are excited to have them on board.

Chris: These visits reinforced our view that international markets, which accounted for about 37% of <unk> sales in 2023 Rep.

Chris: Represent an attractive growth opportunity, particularly if we fully harness the scale benefits and embraced the one will go to market model.

Chris: As a result, we are further simplifying and standardizing Newell's regional organizations, which will pivot our focus to commercial delivery with the goal of accelerating speed agility effectiveness and ownership.

Chris: We've made significant progress upgrading talent across the organization to close skill gaps and accelerate capability build out we have now filled the majority of critical leadership positions across the company.

Chris: The two latest hires to the executive team include a new Chief HR officer, as well as the new CEO of the outdoor <unk> recreation business, who both bring a wealth of relevant experience and knowledge. We are excited to have them onboard.

Christopher H. Peterson: We've made significant progress on each of the 18 breakthrough capability projects we chartered as part of the new corporate strategy. For example, we completely reinvigorated the Consumer Insights function under a new leader that we brought in last year. We believe this will unlock actionable insights as well as a proprietary understanding of consumers and customers so that we can enable superior innovations with stronger claims. We have also overhauled Newell's innovation approach around a biannual review process and put in place a project tiering system that helps identify big bets. Our goal is to launch fewer, bigger, and longer-lasting innovations that are gross margin accretive. While the health of the funnel is not yet where I'd like it to be, we have made considerable progress, not just on cutting the tail, but also identifying Tier 1 and 2 innovations for the coming years. I'll talk more about these as they come to market. To strengthen our market-leading brands with consistent brand building and compelling brand communications, we've put considerable effort into building brand management into a foundational capability for Newell.

Chris: We've made significant progress on each of the 18 breakthrough capability projects, we chartered as part of the new corporate strategy.

Chris: For example, we completely reinvented the consumer insights function under a new leader that we brought in last year. We believe this will unlock actionable insights as well as proprietary understanding of consumers and customers. So that we can enable superior innovations with stronger claims.

Chris: We have also overhauled Newell's innovation approach around the biannual review process and put in place a project peering system that helps identify big bets. Our goal is to launch fewer bigger and longer lasting innovations that our gross margin accretive.

Chris: While the health of the funnel is not yet where we'd like it to be we have made considerable progress not just on cutting the tail, but also identifying tier one and two initial innovations for the coming years.

Chris: I'll talk more about these as they come to market.

Chris: To strengthen our market leading brands with consistent brand building and compelling brand communications, we have put considerable effort into building brand management into a foundational capability for Newell and.

Christopher H. Peterson: In addition to upgrading brand manager talent, we put exceptional performance standards in place with clear KPI-driven expectations for all brand managers. We also rolled out a Pillars of Competitive Advantage framework so that we can evaluate our brands relative to competition on product performance, brand communications, packaging, omni-channel execution, and value. Finally, we implemented a new set of corporate values focused on better serving consumers, increasing accountability, driving a sense of urgency, and returning the company to winning in the marketplace. We have been and will continue to move with speed and agility to execute our strategy while developing and strengthening the capabilities required to win. Turning to financial results, full-year numbers were either in line with or ahead of our latest outlook across all key metrics. Sales came in ahead of our expectations, driven by stronger than expected U.S. demand.

Chris: In addition to upgrading brand manager talent, we put exceptional performance standards in place with clear Kpis driven expectations for all brand managers.

Chris: We also rolled out a pillars of competitive advantage framework. So that we can evaluate our brands relative to competition on product performance brand communications packaging omnichannel execution and value.

Chris: Finally, we implemented a new set of corporate values focused on better serving consumers, increasing accountability driving a sense of urgency and returning the company to winning in the marketplace with <unk>.

Chris: Have been and will continue to move with speed and agility to action our strategy, while developing and strengthening the capabilities required to win.

Chris: Turning to financial results full year numbers were either in line with or ahead of our latest outlook across all key metrics sales came in ahead of our expectations driven by stronger than expected U S demand.

Christopher H. Peterson: Normalized gross margin improved sequentially each quarter and inflected positively in the back half driven by record-setting productivity performance and the July pricing action to proactively address situations where unit economics were untenable. Operating cash flow increased $1.2 billion versus 2022, ahead of our forecast, as we took out about $700 million in inventory. We continue to drive out complexity, ending 2023 with approximately 21,000 SKUs, down about 25% year over year. We unlocked over $150 million of pre-tax savings through Project Phoenix, which helped mitigate inflationary pressure on overheads.

Chris: Normalized gross margin improved sequentially, each quarter and inflected positively in the back half driven by record setting productivity performance and the July pricing action to proactively address situations, where our unit economics were untenable.

Chris: Operating cash flow increased $1 $2 billion versus 2022 ahead of our forecast as we took out about $700 million in inventory.

Chris: We continue to drive out complexity, ending 2023, with approximately 21000, skus down about 25% year over year.

Chris: We unlocked over $150 million of pre tax savings through project, Phoenix, which helped mitigate inflationary pressure on overheads and we reduced net debt by about $500 million driven by strong cash flow.

Christopher H. Peterson: And we reduced net debt by about $500 million, driven by strong cash flow. While we are pleased with the significant progress in 2023, we are not satisfied with a 12% core sales decline for the business, even as we estimate that close to 80% of it stemmed from category contraction and retailer inventory action. We are laser-focused on returning the company to sustainable and profitable growth and more broad-based share gains, and that is precisely why we have been moving at pace in implementing our strategy. Turning to 2024, we expect the macroeconomic backdrop to remain challenging as consumers remain under pressure, and geopolitical uncertainty creates a dynamic operating environment. Our outlook assumes that Newell's categories continue to contract, albeit not as much as last year. We also believe retailers will continue to manage inventory tightly in durable and discretionary categories.

Chris: While we are pleased with the significant progress in 2023, we are not satisfied with a 12% core sales decline for the business, even as we estimate that close to 80% of it stemmed from category contraction in retailer inventory actions.

Chris: We are laser focused on returning the company to sustainable and profitable growth and more broad based share gains and that is precisely why we have been moving at pace and implementing our strategy.

Chris: Turning to 2024, we expect the macro economic backdrop to remain challenging as consumers remain under pressure and geopolitical uncertainty creates a dynamic operating environment.

Chris: Our outlook assumes that Newell's categories continued to contract, albeit not as much as last year. We also believe retailers will continue to manage inventory tightly and durable and discretionary categories.

Christopher H. Peterson: Within this context, we plan to drive continued strong progress on the turnaround agenda and have established five major priorities for 2024. First, we will continue to operationalize our new strategy and operating model, unlocking the full potential of the organization and our portfolio of leading brands. This includes fortifying organizational, talent, and cultural capabilities to better enable meaningful innovation, stronger brand building, and operational excellence.

Chris: Within this context, we plan to drive continued strong progress on the turnaround agenda and have established five major priorities for 2024.

Chris: First continue to operationalize, our new strategy and operating model unlocking the full potential of the organization and our portfolio of leading brands.

Chris: This includes fortifying organization talent and cultural capabilities to better enable meaningful innovation stronger brand building and operational excellence.

Christopher H. Peterson: Second, improve top line and market share performance on a sequential basis as the capability work starts to yield tangible results in the marketplace. Third, drive strong gross margin and operating margin improvement, building on the progress made in the second half of 2023 by realizing benefits from a scaled and advantaged supply chain via productivity and other efficiency projects, while also delivering the anticipated savings from Project Phoenix and organization realignment initiatives. Fourth, continue to de-lever the balance sheet and improve the cash conversion cycle by driving strong operating cash flow. Within this, we are planning to fully fund all the necessary high-return capability improvement and restructuring projects to build a multi-year productivity improvement runway. And lastly, continue to reduce complexity through business process redesign with a focus on simplification and accountability, technology standardization and enablement, and continue to skew count reduction across the organization.

Chris: Second improved top line and market share performance on a sequential basis as the capability work starts to yield tangible results in the marketplace.

Chris: Third drive strong gross margin and operating margin improvement building on the progress made in the second half of 2023 by realizing benefits from our scaled and advantaged supply chain via productivity and other efficiency projects. While also delivering the anticipated savings from project Phoenix and organization realignment.

Chris: Initiatives.

Chris: Fourth continue to Delever, the balance sheet and improve the cash conversion cycle by driving strong operating cash flow within this we are planning to fully fund all the necessary high return capability improvement and restructuring projects to build a multi year productivity improvement runway.

Chris: And lastly continue to reduce complexity through business process redesign with a focus on simplification and accountability technology standardization and enablement and continued SKU count reduction across the organization.

Chris: Amidst a challenging operating environment. During 2023, we drove record productivity across the supply chain significantly improved cash flow by right sizing inventory further reduced Newell's SKU count and took decisive actions to strengthen the companys front end commercial capabilities on behalf of the entire <unk>.

Mark J. Erceg: Amidst the challenging operating environment, during 2023, we drove record productivity across the supply chain, significantly improved cash flow by right-sizing inventory, further reduced Newell's SKU count, and took decisive actions to strengthen the company's front-end commercial capabilities. On behalf of the entire leadership team, I would like to express our gratitude to all of our employees who have embraced the new strategy and have shown tremendous resilience, commitment, and grit despite a bold change agenda. The tangible progress on our strategy and turnaround agenda more broadly bolsters our confidence that we are taking appropriate actions to strengthen the organization, improve its financial performance, and create value for our stakeholders. I'll now turn the call over to Mark. Thanks, Chris. Good morning, everyone.

Speaker Change: Our ship team I would like to express our gratitude to all of our employees, who have embraced the new strategy and have shown tremendous resilience commitment and grid. Despite a bold change agenda.

Speaker Change: The tangible progress on our strategy and turnaround agenda more broadly bolster our confidence that we are taking appropriate actions to strengthen the organization improve its financial performance and create value for our stakeholders.

Speaker Change: I will now turn the call over to Mark. Thanks, Chris Good morning, everyone. While core net sales were better than expected at down 9%. We believe the most important financial story of the fourth quarter as the dramatic improvement achieved in the underlying structural economics of the business as evidenced by a 570 basis point improvement and normalized gross margin versus <unk>.

Mark J. Erceg: While core and net sales were better than expected, down 9%, we believe the most important financial story of the fourth quarter is the dramatic improvement achieved in the underlying structural economics of the business, as evidenced by a 570 basis point improvement in normalized gross margin versus a year ago. Simply put, the targeted interventions we have made to improve the underlying structural economics of the business, such as the July 2023 high single-to-low double-digit pricing action on roughly 30% of our U.S. business, primarily in the home and commercial segment, as well as the reduction in the manufacturing labor force across selected sites, are clearly showing up in the financials. The company's fourth quarter normalized growth margin of 32.3% represented a 100 basis point improvement sequentially and the second consecutive quarter of year-over-year expansion despite sustained pressures on volume.

Speaker Change: <unk> ago.

Mark: Simply put the targeted interventions, we have made to improve the underlying structural economics of the business. So I think the July 2023 high single to low double digit pricing action on roughly 30% of our U S business, primarily in the home and commercial segment as well as the reduction in the manufacturing Labor force across selected sites are clearly showing.

Mark: And the financials.

Mark: The Companys fourth quarter normalized gross margin of 32, 3% represented a 100 basis point improvement sequentially in the second consecutive quarter of year over year expansion despite sustained pressures on volumes.

Mark: Remember as Chris mentioned earlier, approximately 80% of our reduction in core sales. This year was due to retailer inventory actions and category contraction.

Mark: The resulting lower volumes when combined with nearly $700 million of inventory reduction, which we unilaterally removed from the system throughout the course of the year had a significant impact on capacity utilization and makes the over 500 basis points of productivity delivered in the fourth quarter by our exceptionally talented supply chain organization even more.

Mark J. Erceg: Remember, as Chris mentioned earlier, approximately 80% of our reduction in core sales this year was due to retailer inventory actions and category contractions. The resulting lower volumes, when combined with nearly $700 million of inventory reduction, which we unilaterally removed from the system throughout the course of the year, had a significant impact on capacity utilization and made the over 500 basis points of productivity delivered in the fourth quarter by our exceptionally talented supply chain organization even more impressive. On the SG&A front, meaningful savings were also realized, with Project Phoenix providing $53 million of benefit in the fourth quarter, which helped partially offset higher incentive compensation and the deleveraging impact on SG&A from a weaker top line. Fourth quarter normalized operating margin increased 280 basis points to 7.7%. Encouragingly, this is the first time Normalized Operating Margin has expanded since the second quarter of 2022, which we believe is another proof point that the right strategy is now in place. During the fourth quarter, net interest expense increased $6 million versus last year to $70 million due to higher interest rates.

Mark: Presses on.

Mark: On the SG&A front meaningful savings were also realized with project fenix, providing $53 million of benefit in the fourth quarter, which helped partially offset higher incentive compensation and the deleveraging impact on SG&A from a weaker top line.

Mark: Fourth quarter normalized operating margin increased 280 basis points to seven 7% in.

Mark: Encouragingly. This is the first time normalized operating margin has expanded since the second quarter of 2022, which we believe is another proof point that the REIT strategy is now in place.

Mark: During the fourth quarter net interest expense increased $6 million versus last year to $70 million due to higher interest rates and discrete tax benefits yielded a normalized tax benefit of $10 million all of which brought normalized diluted earnings per share in 2002.

Mark: Importantly, this was considerably better than the 15% to 20 outlook. We previously provided.

Mark: Turning to operating cash flow $251 million was generated in the fourth quarter, bringing full year operating cash flow of $930 million, an increase of $1 2 billion versus 2022.

Mark: You will recall that at the start of 2023, improving cash flow was our number one financial priority. So we are very pleased that the team over delivered on this critical metric despite greater than originally anticipated macro headwinds.

Mark: Strong cash flow allowed us to reduce gross debt by about $500 million during the year with over $200 million of that reduction occurring between the third and the fourth quarter, which helped lower our leverage ratio from six one times at the end of Q3 to five six times at the end of Q4.

Mark J. Erceg: And discrete tax benefits yielded a normalized tax benefit of $10 million, all of which brought normalized diluted earnings per share in at 22 cents. Importantly, this was considerably better than the 15 to 20 cent outlook we previously provided. Turning to operating cash flow, $251 million was generated in the fourth quarter, bringing full-year operating cash flow to $930 million, an increase of $1.2 billion versus 2022. You will recall that at the start of 2023, improving cash flow was our number one financial priority. So we are very pleased that the team over-delivered on this critical metric, despite greater than originally anticipated macro headwinds. Strong cash flow allowed us to reduce gross debt by about $500 million during the year, with over $200 million of that reduction occurring between the third and the fourth quarter, which helped lower our leverage ratio from 6.1 times at the end of Q3 to 5.6 times at the end of Q4.

Mark: Turning to 2024 expectations have not changed since our last earnings call. We said fiscal 2024 core sales were expected to be down year over year and below our evergreen target of up low single digits with operating margin expansion ahead of the evergreen target of 50 basis points.

Mark: With this we expect the following for 2024.

Mark: Core sales and net sales are expected to decline, 3% to 6% and 5% to 8% respectively. For two primary reasons first we expect our categories on average the contract low single digits in 2024.

Mark: While we wish this wasn't the case, we nonetheless view this as a source of optimism since this is considerably better than the high single digit contraction experienced in 2023.

Mark: Second we expect distribution losses and product line exits to exceed distribution gains by about two points due to our business decision to exit some structurally unprofitable businesses.

Mark J. Erceg: Turning to 2024, expectations have not changed since our last earnings call. We said fiscal 2024 core sales were expected to be down year over year and below our evergreen target of up low single digits with operating margin expansion ahead of the evergreen target of 50 basis points. Consistent with this, we expect the following for 2024. Core sales and net sales are expected to decline 3 to 6 percent and 5 to 8 percent, respectively, for two primary reasons.

Mark: Finally, please note that the two point difference than expected core versus net sales is driven primarily by unfavorable foreign exchange and to a lesser extent category exits.

Mark: We expect normalized operating margin between seven eight and eight 2%, which at the midpoint represents a 100 basis point improvement, which is two times, our evergreen target, which calls for a 50 basis point improvement each year.

Mark: The increase in normalized operating margin should be driven by strong gross margin improvement as another year of world class productivity gains and the <unk> of July one 2023 pricing actions more than offset an expected low single digit headwind from inflation.

Mark: Having just touched on pricing it bears mentioning that given the degradation of the Companys gross margin level in prior years, we are fully committed to restoring newell's gross margins to provide the necessary fuel for reinvestment behind the business going forward.

Mark J. Erceg: First, we expect our categories, on average, to contract low single digits in 2024. While we wish this wasn't the case, we nonetheless view this as a source of optimism, since this is considerably better than the high single-digit contraction experienced in 2023. Second, we expect distribution losses and product line exits to exceed distribution gains by about two points due to our business decision to exit some structurally unprofitable businesses. Finally, please note that the two-point difference in expected core versus net sales is driven primarily by unfavorable foreign exchange and, to a lesser extent, category exits.

Mark: However, our guidance does not reflect any significant incremental positive pricing actions during 2024.

Mark: Within SG&A, we expect overhead costs will be down meaningfully in absolute dollar terms, but should stay close to flat as a percentage of sales.

Mark: Combined savings from project Phoenix, and our more recent organizational realignment should more than offset professional wage and benefit inflation and a series of incremental investments being made to enhance several critical core capabilities required to support our new corporate segment regional brands and functional strategies.

Mark: Despite robust cost control the anticipated contraction in topline sales, we expect to incur in 2024, we'll keep overhead costs as a percentage of sales elevated in the short term.

Mark J. Erceg: We expect a normalized operating margin between 7.8 and 8.2 percent, which at the midpoint represents a 100 basis point improvement, which is two times our evergreen target, which calls for a 50 basis point improvement each year. The increase in normalized operating margin should be driven by strong gross margin improvement, as another year of world-class productivity gains and the annualization of the July 1, 2023 pricing action more than offsets an expected low single-digit headwind from inflation. Having just touched on pricing, it bears mentioning that given the degradation in the company's gross margin level in prior years, we are fully committed to restoring Newell's gross margins to provide the necessary fuel for reinvestment behind the business going forward. However, our guidance does not reflect any significant incremental positive pricing actions during 2024. Within SG&A, we expect overhead costs to be down meaningfully in absolute dollar terms but should stay close to flat as a percentage of sales.

Mark: Outside of overhead expense advertising and promotion represents the balance of SG&A. We are planning to spend more in both absolute dollar terms and as a percentage of sales as we are beginning to see improvement in our innovation funnel and brand building activity and therefore have more investable opportunities at our disposal.

Mark: For 2024, we are assuming that interest expense steps up by 15% to $20 million and that our tax rate is in the mid teens importantly, this compares to a tax benefit of $68 million in 2023.

Mark: All in we expect normalized diluted earnings per share in the range of 52 to 62.

Mark: Now we will be the first to admit that at first glance. This does not compare favorably to the 79 per share just recorded.

Mark: Once a 26% year over year tax differentials accounted for the midpoint of this range represents high single digit growth versus last year, which we believe represents good progress in our corporate turnaround.

Mark: For the year, we expect to generate operating cash flow of $400 million to $500 million.

Mark: This range assumes another meaningful improvement in our cash conversion cycle, just not at the record level achieved during 2023, when nearly $700 million of excess inventory was removed and newest cash conversion cycle dropped by 24 days.

Mark J. Erceg: The combined savings from Project Phoenix and our more recent organizational realignment should more than offset professional wage and benefit inflation and a series of incremental investments being made to enhance several critical core capabilities required to support our new corporate, segment, regional, brand, and functional strategies. Despite robust cost control, the anticipated contraction in top line sales we expect to incur in 2024 will keep overhead costs as a percentage of sales elevated in the short term. Outside of overhead expense, advertising and promotion represents the balance of SG&A.

Mark: Our operating cash flow range also includes about $150 million to $200 million in cash restructuring and related charges.

Mark: Frankly, we briefly considered slowing down some restructuring efforts, but the rates of return associated with project Phoenix The network optimization project the organizational realignment and other initiatives are also compelling the decision was taken to aggressively but thoughtfully move forward with a multi front and transformation of Newell brands.

Mark: During fiscal 2024, we plan to invest about $300 million in capital expenditures most of which will be spent on high return cost saving projects to further improve the structural economics of the business and accelerate the turnaround.

Mark: While fully funding numerous high return internal projects, we also plan to reduce our leverage ratio and strengthen our balance sheet with an expected return to a more typical seasonal cash flow pattern characterized by a use of cash in the first half of the year, followed by meaningful cash generation in the second half Newell's leverage ratio will likely increase as we move.

Mark J. Erceg: We are planning to spend more in both absolute dollar terms and as a percentage of sales, as we are beginning to see improvement in our innovation funnel and brand building activity and, therefore, have more investable opportunities at our disposal. For 2024, we are assuming that interest expense steps up by 15 to $20 million and that our tax rate is in the mid-teens. Importantly, this compares to a tax benefit of $68 million in 2023.

Mark: Move towards the midpoint of the year before dropping to about five times by the end of Q4.

Mark: Long term, we remain committed to achieving investment grade status and continue to target a leverage ratio of about two five times, but in the meantime, we wanted to create additional financial flexibility. So we proactively amended the terms of new old revolver, even though we were fully compliant with all covenants at the end of the fourth quarter.

Mark J. Erceg: All in, we expect normalized diluted earnings per share in the range of 52 to 62 cents. Now, we'll be the first to admit that, at first glance, this does not compare favorably to the 79 cents per share just recorded. However, once a 26 cent year-over-year tax differential is accounted for, the midpoint of this range represents high single-digit growth versus last year, which we believe represents good progress in our corporate turnaround. For the year, we expect to generate operating cash flow of 400 to 500 million dollars. This range assumes another meaningful improvement in our cash conversion cycle, just not at the record level achieved in 2023 when nearly 700 million dollars of excess inventory was removed and Newell's cash conversion cycle dropped by 24 days. Our operating cash flow range also includes about $150 to $200 million in cash restructuring and related charges.

Mark: As a result of the amendment, which was finalized earlier. This week the revolving facility was converted to a $1 billion secured facility, which we believe provides us with ample liquidity going forward.

Mark: Free cash flow productivity is expected to significantly exceed our 90% evergreen target during 2024.

As it relates to the first quarter of 2024, we expect a core sales decline of 6% to 8% with net sales down 8% to 10% versus last year.

Mark: Please note that the 2% to three point difference between our full year and first quarter core sales assumptions can be largely attributed to a greater impact from net distribution losses due to our decision to exit some structurally unattractive businesses as well as weaker market share performance at the start of the year as the benefits from the capability buildup should improve sequentially.

Mark: Going forward.

Mark: As with the full year, the two point difference than expected core versus net sales is driven primarily by unfavorable foreign exchange and to a lesser extent category exits.

Mark: For the first quarter of 2024, we expect normalized operating margin of two 4% to three 2%, which at the midpoint would represent a 40 basis point improvement versus 2023.

Mark: We expect gross margin to continue to expand versus last year, although not nearly as much as in the fourth quarter, largely due to FX impacts and less favorable capitalized variance adjustments.

Mark J. Erceg: Frankly, we briefly considered slowing down some restructuring efforts, but the rates of return associated with Project Phoenix, the Network Optimization Project, the organizational realignment, and other initiatives are all so compelling, the decision was taken to aggressively but thoughtfully move forward with a multi-front transformation of Newell Brands. During fiscal 2024, we plan to invest about $300 million in capital expenditures, most of which will be spent on high-return, cost-saving projects to further improve the structural economics of the business and accelerate the turnaround. While fully funding numerous high-return internal projects, we also plan to reduce our leverage ratio and strengthen our balance sheet, with an expected return to a more typical seasonal cash flow pattern characterized by a use of cash in the first half of the year, followed by meaningful cash generation in the second half. Newell's leverage ratio will likely increase as we move towards the midpoint of the year before dropping to about five times by the end of Q4.

Mark: Total SG&A dollars should be down versus year ago, despite spending more on A&P, but because of the anticipated sales decline SG&A as a percentage of sales should be up by lessor in the amount of gross margin should expand.

Mark: After incorporating slightly higher interest expense and a modest tax help we were looking for a normalized diluted loss per share in the range of five to nine.

Mark: That said Q1 is typically newell's smallest quarter of the year due to seasonality and as a result, it is not indicative of full year margin trends.

Mark: In closing, we believe a great deal was accomplished during 2023, which has laid the groundwork for a much stronger 2024 as part of our multiyear journey to equip the organization and the business with the right set of core capabilities inclusive of sound business processes, and cultural attributes required to fully operationalize numerals, new corporate strategy.

Mark: And in doing so dramatically strengthened the company's financial performance going forward.

Speaker Change: Operator, if you could please open the call for questions.

Speaker Change: To ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Mark J. Erceg: Long-term, we remain committed to achieving investment-grade status and continue to target a leverage ratio of about 2.5 times. But in the meantime, we wanted to create additional financial flexibility. So we proactively amended the terms of Newell's revolver, even though we were fully compliant with all covenants at the end of the fourth quarter.

Speaker Change: One moment for our first question.

Speaker Change: Your first question comes from Filippo <unk> of Citi.

Filippo: Hey, good morning, everyone.

Filippo: So.

Filippo: Clearly theres been a lot of the external challenges in your business I guess on the topline from can you give us a sense of.

Mark J. Erceg: As a result of the amendment, which was finalized earlier this week, the revolving facility was converted to a $1 billion secured facility, which we believe provides us with ample liquidity going forward. Pre-cash flow productivity is expected to significantly exceed our 90% evergreen target during 2024. As it relates to the first quarter of 2024, we expect a core sales decline of 6 to 8%, with net sales down 8 to 10% versus last year. Please note that the two to three point difference between our full year and first quarter core sales assumptions can be largely attributed to a greater impact from net distribution losses due to our decision to exit some structurally unattractive businesses, as well as weaker market share performance at the start of the year As with the full year, the two-point difference in expected core versus net sales is driven primarily by unfavorable foreign exchange and, to a lesser extent, category exits.

Filippo: What confidence you have on what visibility you have in the top line trajectory.

Filippo: Particularly as you start cycling some of the inventory reduction last year. Thank you.

Speaker Change: Yes, Thanks Filippo.

Speaker Change: Let me take that I think as Mark alluded to in the prepared remarks, we are expecting a sequential improvement in top line performance and 24 versus <unk> 23, and if you look at the.

Speaker Change: The sales guidance Theres really three things that are in the sales guidance we're expecting.

Speaker Change: The market growth rate.

Speaker Change: To be down low single digits, which is an improvement versus 2023, where the market growth was down high single digits.

Speaker Change: We're expecting about two points of headwind from proactive decisions, we've made to exit unprofitable businesses, which we believe is a good business decision and then we've got about two points of headwind from FX and category exits the majority of which was FX related I think if you.

Speaker Change: So underneath that.

Speaker Change: That view.

Mark J. Erceg: For the first quarter of 2024, we expect a normalized operating margin of 2.4 to 3.2 percent, which at the midpoint would represent a 40 basis point improvement versus 2023. We expect gross margin to continue to expand versus last year, although not nearly as much as in the fourth quarter, largely due to FX impacts and less favorable capitalized variance adjustments. Total SG&A dollars should be down versus a year ago, despite spending more on A&P. But because of the anticipated sales decline, SG&A's percentage of sales should be up by less than the amount gross margin should expand. After incorporating slightly higher interest expense and a modest tax help, we were looking for a normalized diluted loss per share in the range of 5 to 9 cents.

Speaker Change: I would say that there are some very positive green shoots that we're expecting next year. So if you look at 2023, we grew market share on about eight of our top 25 brands, we're expecting that number to increase as we go into 2024 into the low teens.

Speaker Change: Driven by the capability improvements that we've put in place if I just take innovation as an example.

Speaker Change: Now that we've established a peering system of tier one tier two initiatives, which are the largest initiative categories. In 2023, we had zero tier one and two initiatives that were launched in the marketplace in 2024, we have eight.

The first one we started shipping a few weeks ago as sharpie creative markers, which we're very excited about it's a new category entry for us.

Speaker Change: Acrylic markers that really pump unlicensed and dark surfaces.

Speaker Change: Go to sharpie dot com and see more about it but this is the first of what will be a series of innovations that are starting to come to the market eight tier one and two and 2024 is much better than zero last year, and we are still working on populating the pipeline.

Operator: That said, Q1 is typically Newell's smallest quarter of the year due to seasonality, and as a result, it is not indicative of full-year margin trends. In closing, we believe a great deal was accomplished during 2023, which has laid the groundwork for a much stronger 2024 as part of our multi-year journey to equip the organization and the business with the right set of core capabilities, inclusive of sound business processes and cultural attributes required to fully operationalize Newell's new corporate strategy and, in doing so, dramatically strengthen the company's financial performance going forward. Operator, if you could, please open the call for questions. To ask a question, please press Star 1 1 on your telephone and wait for your name to be announced.

Speaker Change: And I expect the pipeline to get even stronger as we head into 'twenty. Five we also started to make real progress on the new business development capability that we put in the market focused on topline growth.

Speaker Change: Last year in 2003 part of the reason for the over delivery on the core sales line in Q4, as the new business development team actually secured incremental distribution with new customers already.

Speaker Change: Helped the over delivery and we've got a very strong pipeline as we head into 'twenty four on that front. We also as part of the operating model redesign have simplified the interaction with the international teams and we believe that as we head into next year, our international business is poised.

Filippo Filorni: To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question. Your first question comes from Filippo Filorni of Citi. Hey, good morning, everyone.

Speaker Change: For a significant acceleration in top line growth.

Speaker Change: <unk>.

Speaker Change: Based on the process simplification.

Speaker Change: And the structure change that we've made so we are very excited and optimistic about the capability work that we've been.

Christopher H. Peterson: So, guys, clearly, there have been a lot of external challenges in your business. I guess on the top line front, can you give us a sense of what confidence you have or what visibility you have in the top line trajectory here, particularly as you start cycling some of the inventory reduction last year? Thank you. Yeah, thanks, Filippo. Let me take that.

Speaker Change: Progressing on I think I mentioned previously we had 18 breakthrough capability initiatives that we kicked off as part of the.

Speaker Change: The new strategy that was launched in June of last year.

Speaker Change: Those capability improvement actions are starting to bear fruit and we believe we're going to start to show up increasingly in the in the topline results going forward.

Christopher H. Peterson: I think, as Mark alluded to in the prepared remarks, we are expecting a sequential improvement in top-line performance in 24 versus 23. And if you look at the sales guidance, there are really three things that are in the sales guidance. We're expecting the market growth rate to be down low single digits, which is an improvement versus 2023, where the market growth was down high single digits. We're expecting about two points of headwind from proactive decisions we've made to exit unprofitable businesses, which we believe is a good business decision. And then we've got about two points of headwind from FX and category exits, the majority of which is FX-related.

Speaker Change: Yes, that's super helpful.

Speaker Change: Thank you.

Speaker Change: Next question.

Speaker Change: Your next question comes from Peter Grom of UBS.

Peter K. Grom: Thanks, operator, and good morning, everyone. Maybe two quick ones for me just first on the credit or the amendment to the credit agreement.

Peter K. Grom: Can you maybe provide some background on the changes and the covenant is there anything to read in what the metrics themselves are changing I know you mentioned the margin in.

Peter K. Grom: In Q4, but could they have been an issue as Youre looking ahead, just given the commentary on kind of the cadence of cash flow and then I guess just second turning to the business. Obviously, some good progress exiting the year on the gross margin line, but but can you maybe frame how we should think about the opportunity from here I think you mentioned less robust improvement versus <unk>, but.

Christopher H. Peterson: I think if you go underneath that view, I would say that there are some very positive green shoots that we're expecting next year. So, if you look at 2023, we grew market share on about eight of our top 25 brands. We're expecting that number to increase as we go into 2024 into the low teens, driven by the capability improvements that we put in place. If I just take innovation as an example, now that we've established a tiering system of Tier 1, Tier 2 initiatives, which are the largest initiative categories, in 2023, we had zero Tier 1 and 2 initiatives that were launched in the marketplace. In 2024, we have eight. The first one we started shipping a few weeks ago is Sharpie Creative Markers, which we're very excited about. It's a new category entry for us acrylic markers that really pop on light and dark surfaces. You can go to sharpie.com and see more about it, but this is the first of what will be a series of innovations that are starting to come to the market.

Peter K. Grom: Longer term is that kind of high 30% target still achievable and if so can you maybe provide some guardrails around when you can achieve that.

Peter K. Grom: I'll just say a few words about the about the new facility that we put in place, but I think it's important to take a step back and understand that it's all predicated upon the work that we've been doing with respect to cash generally speaking right. This past year, we increased our cash flow by $1 $2 billion year over year, we paid down $500 million of the debt we feel very good about the way we've been managing the company.

<unk> balance sheet.

Peter K. Grom: As we were looking to.

Peter K. Grom: See what we needed in the way of financial flexibility for fiscal 'twenty four we looked at our current facility and decided that we'd be better served by having a secured facility in place that yes. It did bring with it some additional covenants to replace the existing ones that were out there. If you want to get more specific on that we can let sylvia follow up with you individually on that but.

Peter K. Grom: The bigger message here is that <unk>.

Peter K. Grom: Cash flow was strong exceedingly strong in the year. Just ended we had really great plans in place to continue to extract and drive out our cash conversion cycle. So that our working capital continues to improve year over year and by the end of the year, we will have reduced our leverage ratio even further than where it currently sits.

Christopher H. Peterson: Eight Tier 1 and 2 in 2024 is much better than zero last year, and we are still working on populating the pipeline, and I expect the pipeline to get even stronger as we head into 2025. We also started to make real progress on the new business development capability that we put in the market focused on top-line growth. Last year in 2023, part of the reason for the over-delivery on the core sales line in Q4 was that the new business development team actually secured incremental distribution with new customers already that helped the over-delivery, and we've got a very strong pipeline as we head into 2024 on that front. We also, as part of the operating model redesign, have simplified the interaction with the international teams, and we believe that as we head into next year, our international business is poised for a significant acceleration in top-line growth based on the process simplification and the structure change that we've made.

Peter K. Grom: On the gross margin side, what I would say is we still believe that the right long term target for the company as sort of the high <unk> gross margin I think we had talked previously about a number of 37 or 38%. We ended 2023 with gross margin flat versus two.

Peter K. Grom: 2022 at about 30%.

Peter K. Grom: If you look at the guidance for next year of 100 basis points of improvement in op margin, we're expecting gross margin to be up more than that and the reason is because we've proactively chosen to exit structurally unattractive parts of the business number one number two we continue to drive record productivity.

Savings across the initiative.

Christopher H. Peterson: So we are very excited and optimistic about the capability work that we've been progressing on. I think I mentioned previously that we had 18 breakthrough capability initiatives that we kicked off as part of the new strategy that was launched in June of last year. Those capability improvement actions are starting to bear fruit and we believe are going to start to show up increasingly in the top line results going forward. Bill Gates. Thank you. Thank you. That's super helpful. Pass it on!

Peter K. Grom: Across the portfolio.

Peter K. Grom: And number three.

Peter K. Grom: Our innovating.

Peter K. Grom: In terms of gross margin accretive innovation. So for example, if you look at the eight tier one and two initiatives that we have planned to launch. This year every one of the eight initiatives as a significant improvement to gross margin versus the business that it's in.

Peter K. Grom: And so we expect to start driving mix benefit as the innovation portfolio ramps up as well and we think those three things when you put them together, we will drive gross margin.

Peter K. Grom: Thank you. Next question. Your next question comes from Peter Grom of UBS. Thanks, Operator. Good morning, everyone.

Peter K. Grom: Maybe two quick ones for me, just first on the credit or the amendments to the credit agreement. Can you maybe provide some background on the changes in the covenants? Is there anything to read and why the metrics themselves are changing? I know you mentioned they weren't at risk in Q4, but could they have been an issue as you were looking ahead, just given, you know, the commentary on kind of the cadence of cash flow? And then I guess just second, turning to the business, you know, obviously some good progress, given you're on the gross margin line, but can you maybe frame how we should think about the opportunity from here? I think you mentioned less robust improvement versus 4Q. But just, you know, longer term, is that kind of high 30% target still achievable? And if so, can you maybe provide some guardrails around when we can achieve that?

Peter K. Grom: Fire than the 100 basis points that we're guiding on operating margin, we are choosing to take advertising.

Peter K. Grom: And marketing expense higher as a percent of sales in 'twenty four because we have an <unk>.

Peter K. Grom: And innovation pipeline to actually spend money behind and get a good return on so as we've talked previously as the capability investments and the capability work ramps up youre going to see us try to drive gross margin faster than operating margin and invest some of the money back.

Peter K. Grom: Both in dollar terms and as a percent of sales and increasing our A&P ratio and that that is part of the plan for 'twenty four.

Mark J. Erceg: Thanks. I'll just say a few words about the new facility that we put in place, but I think it's important to take a step back and understand that it's all predicated upon the work that we've been doing with respect to cash, generally speaking, right? This past year, we increased our cash flow by $1.2 billion year over year. We paid down $500 million worth of debt.

Speaker Change: Thank you one moment for my next question.

Speaker Change: Your next question comes from Olivia Tong of Raymond James.

Olivia Tong: Great. Thanks.

Olivia Tong: My first question is just around.

Olivia Tong: If you could just sort of talk a little bit more about the different initiatives.

Christopher H. Peterson: We feel very good about the way we've been managing the company's balance sheet. As we were looking to, you know, see what we needed in the way of financial flexibility for fiscal 24, we looked at our current facility and decided that we'd be better served by having a secured facility in place that, yes, did bring with it some additional covenants to replace the existing ones that were out there. If you want to get more specific on that, we can let Sofia follow up with you, you know, individually on that. But I think the bigger message here is that, you know, cash flow was strong, exceedingly strong, and the year just ended. We have really great plans in place to continue to extract and drive out, you know, our cash convergence cycle so that our working capital continues to improve year over year.

Olivia Tong: You discussed earlier to drive better sales mix in particular.

Olivia Tong: Some higher advertising behind new innovation.

Olivia Tong: Could you talk about when these things hit the P&L to give us a view on sort of the <unk>.

Olivia Tong: And the cadence of the organic sales.

Olivia Tong: Inclusion as the year progresses going from that down into 16, and finishing the year down.

Olivia Tong: Three.

Olivia Tong: Because obviously there are a lot of initiatives.

Speaker Change: The timing would be helpful. Thanks.

Speaker Change: Yes.

Speaker Change: So what I would say is that the eight breakthrough initiatives our tier one tier two initiatives that we're launching this year will build during the year. The other thing that's important to note about these eight tier one and two initiatives as theyre not just a one and done thing. These are multiyear platforms that will begin to bill.

Christopher H. Peterson: And by the end of the year, we'll have reduced our leverage ratio even further than where it currently sits. On the gross margin side, what I would say is that we still believe that the right long-term target for the company is sort of the high 30s. I think we had talked previously about a number of 37 or 38 percent.

Speaker Change: <unk> and drive growth not just this year, but.

Speaker Change: For the next several years and if you look at what we're guiding to in Q1, we're guiding to a 6% to 8% core sales decline.

Christopher H. Peterson: We ended 2023 with gross margin flat versus 2022, at about 30 percent. If you look at the guidance for next year of 100 basis points of improvement and off-margin, we're expecting gross margin to be up more than that. And the reason is because we've proactively chosen to exit structurally unattractive parts of the business, number one. Number two, we continue to drive record productivity savings across the initiative, across the portfolio.

Speaker Change: And we're expecting the year to be three to six so I do think youre going to see Q1 being the weakest quarter during the year and the balance of the year, we expect better core sales performance I mentioned that one of the.

Speaker Change: Top of the tier one two innovations the sharpie creative markers, we started shipping a few weeks ago that will show up in stores in March will turn on advertising and we've got a full marketing campaign behind it that will start in March as well.

Christopher H. Peterson: And number three, we are innovating in terms of gross margin accretive innovation. So, for example, if you look at the eight tier one and two initiatives that we have planned to launch this year, every one of the eight initiatives is a significant improvement to gross margin versus the business that it's in. And so we expect to start driving mixed benefits as the innovation portfolio ramps up as well. And we think those three things, when you put them together, will drive gross margin higher than the 100 basis points that we're guiding on operating margin.

Speaker Change: The balance of the innovation is really sequenced more than Q2 Q3, and so you'll see those start to build as we go through the year Likewise, the new business development, where we've had some significant wins will.

Speaker Change: We will build as we go throughout the year and I think.

Speaker Change: So we're pretty excited about.

Peter K. Grom: We are choosing to take advertising and marketing expense higher as a percent of sales in 24 because we have an innovation pipeline to actually spend money on and get a good return on. So, as we've talked previously, as the capability investments and the capability work ramps up, you're going to see us try to drive gross margin faster than operating margin and invest some of the money back both in dollar terms and as a percent of sales in increasing our A&P ratio. And that is part of the plan for 24. Thank you. One moment for your next question.

The rate of improvement.

Speaker Change: That we're driving on the capability improvements omni innovation funnel and I think youll begin to see that show up in the top line as we move through the year. The other thing I would like to add if I could because I don't think we talked about our international business enough is the fact that our international business has been performing better.

In the U S market over the past year, and we actually are really excited because as we look at our 24 planning process International business is expected to actually be up.

Speaker Change: Year over year.

Speaker Change: So we have at this point about 40% of our business outside the U S and there is a really good story there to tell.

Olivia Tong: Your next question comes from Olivia Tong of Raymond James. Great, thanks. My first question is just around, if you could just sort of talk a little bit more about the different initiatives you discussed earlier to drive better sales, mix, in particular, some higher advertising behind the new innovation. Could you talk about when these things hit the P&L to give us a view on sort of the quarterly cadence of the organic sales improvement as the year progresses, going from that down eight to six to finishing the year down six to three? Because, you know, obviously, there are a lot of initiatives, but the timing would be helpful. Thank you.

Speaker Change: Great. Thank you best of luck.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Bill Chappell of <unk> Securities.

Bill Schmitz: Thanks, Good morning.

Bill Schmitz: Good morning Bill.

Bill Schmitz: Chris help us understand how these businesses get back to growth and I guess allay the fears of that you've done so much cutting or youre doing so much cutting in and exiting and stuff like that.

Speaker Change: It's years before we can really see.

Christopher H. Peterson: Yeah, so what I would say is that the eight breakthrough initiatives, or Tier 1, Tier 2 initiatives that we're launching this year, will build during the year. The other thing that's important to note about these eight Tier 1 and 2 initiatives is they're not just a one-and-done thing. These are multi-year platforms that will begin to build and drive growth, not just this year, but for the next several years. If you look at what we're guiding to in Tier 2 and Tier 1, we're guiding to a six to eight percent core sales decline, and we're expecting the year to be three to six. So I do think you're going to see Tier 1 be the weakest quarter during the year, and the balance of the year we expect better core sales performance. I mentioned that one of the top, or Tier 1-2 innovations, the Sharpie Creative Markers, we started shipping a few weeks ago. That will show up in stores in March.

Speaker Change: Total company growth and I guess first question is what's your outlook for the actual categories to do this year I mean do you expecting the key.

<unk> outdoor be writing baby bid.

Speaker Change: Kitchen.

Speaker Change: To be down as a category this year or is it more just your exits and then the second question is.

Speaker Change: Do you see on the horizon kind of total company growth.

Speaker Change: Or is there any concern that you are going too far.

Speaker Change: Yeah. Thanks Bill.

Speaker Change: I think the thing if you if you sort of parse out what were saying on the guidance.

Speaker Change: We're planning the category growth rate or.

Speaker Change: Or the market growth rate to be down low single digits.

Speaker Change: We've made proactive choices to exit about two points of business and that effectively are the two drivers of the core sales growth guidance. If you back up from that what that means is that from a market share standpoint, excluding.

Christopher H. Peterson: We'll turn on advertising, and we've got a full marketing campaign behind it that will start in March as well. The balance of the innovation is really sequenced more in Q2, Q3, and so you'll see that start to build as we go through the year. Likewise, new business development, where we've had some significant wins, will build as we go throughout the year, and I think we're pretty excited about the rate of improvement that we're driving on the capability improvements in the innovation funnel, and I think you'll begin to see that show up in the top line as we move through the year. The other thing I'd like to add, if I could, because I don't think we talked about our international business enough, is the fact that our international business has been performing better than the U.S. market over the past year, and we are actually really excited because as we look at our 24-month planning process, international business is expected to actually be up year over year. So, we have at this point about 40% of our business outside the U.S., and there's a really good story there to tell. Great, thanks.

Speaker Change: Excluding the choice full exits were effectively guiding that our market share is going to be flat this year.

Speaker Change: Excluding the choice the legs of that we're making and thats because the.

Speaker Change: The capability improvement actions are coming online and we expect that to begin to show up in tangible financial results.

Speaker Change: So we don't like to give guidance beyond beyond a year, but if you. If you look at that trajectory that we're on.

Speaker Change: If you go into 'twenty five.

Speaker Change: The the choice full exits that we're making should be behind us by the time, we get into 'twenty five and so that is unlikely to be a headwind for 25 at the same time.

Speaker Change: Hard to predict what's happening in the categories, but I think a lot of the <unk>.

Speaker Change: Outside experts would suggest that.

The category growth rate.

Olivia Tong: Best of luck. Thank you. Thanks for watching. Bye. Bye

Speaker Change: Turned more positive in 'twenty, five and we expect our capabilities to be even stronger heading into 'twenty five versus where they are today and so I mentioned that.

Bill Schmitz: Your next question comes from Bill Chappell of Truist Securities. Thanks. Good morning. Morning, Bill.

Speaker Change: In 2003, we grew market share on eight of our top 25 brands. We think we've got line of sight to do that on about half of our market.

Christopher H. Peterson: You know, Chris, help us understand how these businesses get back to growth and, I guess, allay the fears of that you've done so much cutting or you're doing so much cutting and exiting and stuff like that. You know, it's years before we can really see total company growth. And I guess the first question is, what's your outlook for the actual categories to do this year? I mean, are you expecting the key, you know, be it outdoor, be it writing, be it baby, be it kitchen, you know, to be down as a category this year? Or is it more just your exits?

Speaker Change: Of our top 25 brands in 'twenty, four and I expect we're going to grow market share on more than half of our.

Speaker Change: Of our top brands in 'twenty five.

Speaker Change: So we see a path for significant financial improvement, we see a path back to sustainable and profitable growth.

Speaker Change: We said when we unveiled the new strategy, but this was going to be a multiyear journey because of the capabilities that needed to be built on the front end.

Christopher H. Peterson: And then the second question is, you know. Do you see any kind of total company growth on the horizon, or is there any concern that you're going too far? Yeah, thanks, Bill. I think the thing is, if you sort of parse out what we're saying in the guidance, you know, we're planning the category growth rate or the market growth rate to be down low single digits. We've made proactive choices to exit about two points of business, and that effectively are the two drivers of the core sales growth guidance. If you back up from that, what that means is that from a market share standpoint, excluding the choiceful exits, we're effectively guiding that our market share is going to be flat this year, excluding the choiceful exits that we're making.

Speaker Change: But I can tell you inside the company that the capabilities. We're building an innovation brand building on new business development on go to market on international the changes that we're making in the operating model.

Speaker Change: Talent upgrade the clarity of the strategy all of those things are in place and starting to starting to contribute.

Speaker Change: And we think we're on that trajectory.

Speaker Change: The thing that is a little bit more uncertain is what happens to the rate of market growth.

Speaker Change: We've tried to be prudent in our forecast.

Speaker Change: And our guidance by saying, it's going to be down low single digits as our assumption for this year I will say.

Speaker Change: It's early days, but just.

Christopher H. Peterson: And that's because the capability improvement actions are coming online, and we expect that to begin to show up in tangible financial results. So, you know, we don't like to give guidance beyond a year, but if you look at that trajectory that we're on, if you go into 25, the choiceful exits that we're making should be behind us by the time we get into 25, and so that is unlikely to be a headwind for 25.

Speaker Change: Looking at the January results were running a little bit ahead of our plan in the month of January but we're not going to get ahead of ourselves based on one month in January as a light month.

Speaker Change: Got it and I guess just to follow up I mean, how do you.

Speaker Change: It takes something like baby that was down double digits, probably as the category last year and Youre kind of forecasting in mid single digits. This year I mean, I don't think the birthrate has changed that much I don't think your market share has changed so much I mean, how do you look at these core categories should they be normalizing and getting back to kind of pre pandemic.

Christopher H. Peterson: At the same time, it's hard to predict what's happening in the categories, but I think a lot of outside experts would suggest that the category growth rate may turn more positive in 25, and we expect our capabilities to be even stronger heading into 25 versus where they are today. And so I mentioned that in 23, we grew market share on eight of our top 25 brands. We think we've got a line of sight to do that on about half of our top 25 brands in 24, and I expect we're going to grow market share on more than half of our top brands in 25, and so we see a path for significant financial improvement. We see a path back to sustainable and profitable growth.

Speaker Change: Trends in 'twenty four or is it just we're taking as we see it and until that happens.

So we're just going to assume it looks more like 2023.

Speaker Change: Yes, I think theyre going to normalize a little bit in 'twenty, four, but but our view from an overall macro standpoint is that the consumer remains under pressure because of inflation and you have to although in the headlines you see a lot of commentary about consumer spending holding up very well.

Christopher H. Peterson: We said when we unveiled the new strategy that this was going to be a multi-year journey because of the capabilities that needed to be built on the front end, but I can tell you inside the company that the capabilities we're building on innovation, on brand building, on new business development, on go-to-market, on international, the changes that we're making in the operating model, the talent upgrade, the clarity of the strategy, all of those things are in You know, the thing that is a little bit more uncertain is what will happen to the rate of market growth. You know, we've tried to be prudent in our forecast and our guidance by saying it's going to be down. Low single digits is our assumption for this year. I will say, you know, it's early days, but just looking at the January results, we're running a little bit ahead of our plan for the month of January, but we're not going to get ahead of ourselves based on one month, and January is a light month. I got it.

Speaker Change: Which is true a lot of that consumer spending is being directed to either services spending or essentials, which is food in a central categories and most of the.

Speaker Change: Forward looking.

Speaker Change: People that we get data from would suggest that durable and discretionary categories. Although.

Speaker Change: Sure.

Speaker Change: The market growth rate is projected to improve versus 'twenty three it's still likely to remain under pressure in 2004, I will say that if you talk to those same external people, which we do a lot most of them are predicting that that's going to change when we get into 'twenty five.

Speaker Change: And even more so into 2006.

Bill Schmitz: Well, and I guess just to follow up, I mean, how do you, or, you know, take something like a baby that was down double digits probably as a category last year, and you're kind of probably forecasting in mid-single digits this year? I mean, I don't think the birth rate has changed that much. I don't think your market share has changed that much. How do you look at these, your core categories? Should they be normalizing and getting back to kind of pre-pandemic, you know, trends in 24?

Speaker Change: Although it's hard to predict that far out.

Speaker Change: And so we're trying to be prudent we're trying to take the things that are in our control you mentioned, the baby category, which was particularly negatively impacted in 'twenty three because of the.

Bed Bath, <unk> beyond and buy buy baby bankruptcy, one of the things that we're doing with our new business development team as we are expanding and opening up new retail customers into that baby channel with Graco as is the lead.

Christopher H. Peterson: Or is it just, we're taking it as we see it and, you know, and until that happens, we're just going to assume it looks more like 2023. Yeah, I think they're going to normalize a little bit in 24, but our view from an overall macro standpoint is that the consumer remains under pressure because of inflation. And you have to, although in the headlines you see a lot of commentary about consumer spending holding up very well, which is true, a lot of that consumer spending is being directed to either services spending or essentials, which are food and essential categories.

Speaker Change: The lead brand and so we're pretty excited about what youre going to see going forward, we can't say too much about it right now, but there are things that we're doing to try to get the category back to growth that I think are going to.

Speaker Change: Help market growth and help Newell's market share at the same time.

Speaker Change: We also have an opportunity in that business to expand a little bit more internationally.

Speaker Change: Because were very U S centric.

Christopher H. Peterson: And most of the forward-looking people that we get data from would suggest that durable and discretionary categories, although the market growth rate is projected to improve versus 23, it's still likely to remain under pressure in 24. I will say that if you talk to those same external people, which we do a lot, most of them are predicting that that's going to change when we get into 25 and even more so into 26, although it's hard to predict that far out. And so we're trying to be prudent. We're trying to take the things that are in our control.

Speaker Change: And there's a lot of babies outside the U S. A lot more outside the U S and our inside the U S and so we have a couple of exciting.

Speaker Change: Country launches planned in that business.

Speaker Change: <unk> for 24.

Speaker Change: Got it thanks, so much for the color.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Lauren Lieberman of Barclays.

Lauren Rae Lieberman: Great. Thanks, good morning, everyone.

Lauren Rae Lieberman: Just curious to talk a little bit about general merchandise trends.

Lauren Lieberman: Ted.

Lauren Rae Lieberman: Carlyle and deflationary trends in the category.

Christopher H. Peterson: You mentioned the baby category, which was particularly negatively impacted in 23 because of the Bed Bath & Beyond and Bye Bye Baby bankruptcy. One of the things that we're doing with our new business development team is expanding and opening up new retail customers into that baby channel with Graco as the lead brand. And so we're pretty excited about what you're going to see going forward. We can't say too much about it right now, but there are things that we are doing to try to get the category back to growth that I think are going to help market growth and help Newell's market share at the same time. We also have an opportunity in that business to expand a little bit more internationally because we're very U.S. centric. And there are a lot of babies outside the U.S., a lot more outside the U.S. than there are inside the U.S. And so we have a couple of exciting country launches planned in that business already for 24. Got it. Thanks so much for the color.

Lauren Rae Lieberman: A broad categories I know, it's difficult to generalize.

Ted: So just curious kind of what youre seeing and how youre thinking about pricing dynamics.

Ted: Whether it's a step up in promotional activity that may be incorrect UK retailers to kind of drive a little bit more activity. This.

Ted: This year anyway.

Speaker Change: Yeah. Thanks, Lauren. So we are we are having active discussions with retailers on this topic as we said in our prepared remarks today.

Speaker Change: Our input costs, we are expecting to go up in 24 not down. So we are not seeing broadly deflation in terms of our input costs that being said, what we have baked into our guidance as a low single digit inflation rate.

Speaker Change: But thats really driven by three things, which is labor cost.

Speaker Change: A little bit of transportation inflation, and a little bit of resin inflation.

Lauren Rae Lieberman: Thank you. Your next question comes from Lauren Lieberman of Barclays. Great, thanks. Good morning, everyone.

Speaker Change: It is a more normalized inflationary input cost inflationary period, and so as we've had discussions with retailers on this topic.

Lauren Rae Lieberman: I was just curious to talk a little bit about general merchandise trends in the US. We've had retailers call out some disillusionary trends in the category, which, of course, is a very broad category, so I know it's difficult to generalize.

Speaker Change: I think they understand that our businesses are not ones that we're seeing.

Christopher H. Peterson: So just curious kind of what you're seeing and how you're thinking about pricing dynamics, whether it's a step up in promotional activity that may be encouraged by retailers to kind of drive a little bit more activity this year in the US. Yeah, thanks, Lauren.

Speaker Change: Deflation and so we're not planning.

Speaker Change: Any significant.

Speaker Change: Price reductions are rollbacks as we go forward.

Speaker Change: We're not seeing that really in the competitive environment of what we compete in either.

Speaker Change: I think there are other parts of general merchandise weather or that may be the case.

Christopher H. Peterson: So we are having active discussions with retailers on this topic. As we said in our prepared remarks today, our input costs are expected to go up in 2024, not down. So we are not seeing broadly deflation in terms of our input costs. That being said, what we have baked into our guidance is a low single-digit inflation rate that's really driven by three things, which are labor costs, a little bit of transportation inflation, and a little bit of resin inflation. It's a more normalized inflationary input cost inflationary period.

Speaker Change: But not in the categories in which we compete.

Speaker Change: Okay, Great and then I know you said.

You mentioned Asia.

Speaker Change: For outdoor.

Speaker Change: Might be a wait and see it might be the answer I guess, but just curious kind of what's been going on.

Speaker Change: The sales have been very weak.

Speaker Change: Yes.

Speaker Change: Just curious.

Speaker Change: Anything you can articulate about steps being taken.

Speaker Change: From a line of sight.

Speaker Change: But again I understand that it's a wait and see we just announced management changes.

Speaker Change: Yeah, so the outdoor and rec business is our.

Speaker Change: Is the business that's the most in need of a turnaround of any of our segments. So when we did the capability assessment.

Christopher H. Peterson: And so, as we've had discussions with retailers on this topic, I think they understand that our businesses are not ones that we're seeing deflation in, and so we're not planning any significant price reductions or rollbacks as we go forward. And we're not really seeing that in the competitive environment of what we compete in either. I think there are other parts of general merchandise where that may be the case, but not in the categories in which we compete. Okay, great.

Speaker Change: It became very clear that.

Speaker Change: Because each of our businesses in the past were not managed consistently.

Speaker Change: And we're putting in those consistent processes now they all started from different starting points.

Speaker Change: And so if you look at where the businesses are on the journey outdoor and Rec has the furthest to go with regard to improving its ability to innovate brand build.

Lauren Rae Lieberman: And then I know you mentioned there's this new leadership for outdoor, but there might be a wait and see. Might be the answer, I guess, but just curious kind of what's been going on. The sales have been very weak, you know, the just curious kind of anything you can articulate about steps being taken to turn the business around on the line of sight there. But again, I understand if it's a wait and see because we just announced a management change too. Yeah, so the outdoor and rec business is our, is the business that's the most in need of a turnaround of any of our segments. So, when we did the capability assessment, it became very clear that because each of our businesses in the past was not managed consistently, and we're putting in those consistent processes now, they all started from different starting points. And so, if you look at where the businesses are on the journey, outdoor and rec has the furthest to go with regard to improving its ability to innovate, brand build, brand communicate, and drive retail excellence.

Speaker Change: <unk> communicated and drive retail excellence.

Speaker Change: Additional thing I would say on that business is that that was the business that had more of their business, particularly in the U S and opening price point categories that we're structurally challenged and so.

Speaker Change: So we have taken significant action in outdoor and Rec I'm very excited about the category and the <unk>.

Speaker Change: The long term because I believe that it is a category that we can drive significant growth, it's responsive to innovation and all of the capabilities. We are building should be applicable in that business.

Speaker Change: In order to drive that we Havent just brought in a new leader of outdoor <unk> recreation, but we've effectively brought in a completely new marketing team.

Speaker Change: New sales leader a new CFO.

Speaker Change: And we've announced we're moving the business from Chicago to Atlanta.

Speaker Change: And so we are making a significant intervention.

Speaker Change: <unk> upgrade that business I do think if you look within the segments and obviously, we don't provide guidance at the segment level I would expect the outdoor and rec turnaround.

Christopher H. Peterson: The additional thing I would say on that business is that that was the business that had more of its business, particularly in the U.S., in opening price point categories that were structurally challenged. And so, we have taken significant action in outdoor and rec. I'm very excited about the category in the long term because I believe that it is a category that we can drive significant growth in. It's responsive to innovation, and all of the capabilities we are building should be applicable to that business. In order to drive that, we haven't just brought in a new leader for Outdoor and Recreation, but we've effectively brought in a completely new marketing team, a new sales leader, a new CFO, and we've announced we're moving the business from Chicago to Atlanta.

Speaker Change: Core sales declined to core sales growth to take longer than what youre going to see in learning and development or in home and commercial and so.

Speaker Change: But I do expect already some improvement in 'twenty four relative to the growth rate versus 'twenty, three in outdoor and rec, but it will likely be a laggard relative to the other two segments because of the amount of capability improvement work that we have going on in that segment.

Speaker Change: Okay, great. Thanks, so much.

And our next question comes from Andrea Teixeira of JP Morgan.

Andrea Teixeira: Thank you. Good morning, I was hoping if you can comment in terms of how conservative you have Dan I understand as you set up this guide right and how.

Christopher H. Peterson: And so we are making a significant intervention to upgrade that business. But I do think if you look within the segments, and obviously we don't provide guidance at the segment level, I would expect the outdoor and rec turnaround from core sales decline to core sales growth to take longer than what you're going to see in learning and development or in home and commercial. But I do expect some improvement in 24 relative to the growth rate versus 23 in outdoor and rec, but it will likely be a laggard relative to the other two segments because of the amount of capability improvement work that we have going on in that segment. Okay, great. Thanks so much. Thank you for watching. And I'll see you next time.

Andrea Teixeira: Understandably what has happened every quarter last year, you had to reduce guidance.

Andrea Teixeira: But also thinking about the category you just spoke about some of the outdoor but maybe what are your expectations.

Andrea Teixeira: <unk> of the core categories going forward.

Andrea Teixeira: Obviously, writing and appliances.

Andrea Teixeira: Some of that and also some of the commercial segments, where there's some resilience there I understand anything that you can share.

Andrea Teixeira: As far.

Andrea Teixeira: As you look through more of that top line I'll now thats kind of the cost section of it seems to be more.

Andrea Teixeira: And our next question comes from Andrea Teixeira of J.P. Morgan. Thank you. Good morning.

Andrea Teixeira: I was hoping you could comment in terms of how conservative you've been. I understand as you set up this guide, right, and how understandably, what happened every quarter last year, you had to reduce guidance. But also thinking about the category, you just spoke about some of the outdoor, but maybe what are your expectations of the core categories going forward, be it obviously writing and appliances, some of that. And also some of the commercial segments, where there's some resilience there, I understand. Anything that you can share as far as you look through more of the top line now that the cost section of it seems to be more under control? In particular, as you were saying, we're benchmarking market share performance and new leadership in terms of getting this category sorted out and market share. If you can kind of give us the state of the union for these other key categories, that would be wonderful. Thank you.

Andrea Teixeira: On the control.

Andrea Teixeira: In particular as you were saying we are benchmarking market share performance and new leadership in terms of getting this category sought it out in market share if you can.

Andrea Teixeira: Kind of give us a state of the union for those are the key categories that would be wonderful. Thank you okay.

Speaker Change: Yeah. Thanks, Andrea I think we're trying to be prudent in the guidance.

Speaker Change: Is the way I would describe it.

Speaker Change: It is a volatile time period, it's hard to predict exactly what's going to happen in the macro economic environment and we certainly don't have a crystal ball that as that is unique or better than anybody else.

Speaker Change: I think probably the biggest assumption that we're making is that the markets are going to be down low single digits.

Speaker Change: Sure.

Speaker Change: <unk> is an improvement in <unk> 24 versus.

Speaker Change: What we saw in 'twenty, three where it was high single digits.

Christopher H. Peterson: Yeah, thanks, Andrea. I think we're trying to be prudent in the guidance is the way I would describe it. You know, it is a volatile time period. It's hard to predict exactly what's going to happen in the macroeconomic environment, and we certainly don't have a crystal ball that is unique or better than anybody else.

Speaker Change: As I said so far.

Speaker Change: In the month of January we're running slightly ahead of plan, but it's too early to declare victory after one month.

Speaker Change: If you look at the business units.

Speaker Change: Feel very good about our writing plan heading into this year.

Speaker Change: We have strong innovation I mentioned the.

Speaker Change: The first of the eight tier one and tier two and innovations the sharpie creative markers that are launching this year, which is a new category for sharpie that.

Christopher H. Peterson: You know, I think probably the biggest assumption that we're making is that the markets are going to be down low single digits, which is an improvement in 24 versus what we saw in 23, where it was high single digits. As I said, so far, in the month of January, we're running slightly ahead of plan, but it's too early to declare victory after one month. If you look at the business units, I feel very good about our writing plan heading into this year. We have strong innovation. I mentioned the first of the eight tier one and tier two innovations, the Sharpie Creative Markers that are launching this year, which is a new category for Sharpie that we have high hopes for. I also have high hopes for Baby this year.

Speaker Change: We have high hopes for.

Speaker Change: I also have high hopes for for baby. This year I think we have a <unk>.

Speaker Change: <unk> back plan in place.

Speaker Change: And that category and I think that category.

Speaker Change: Has normalized significantly last year.

Speaker Change: Bye Bye baby bankruptcy.

Speaker Change: On the home and commercial business, we've done which would include kitchen home fragrance in commercial.

Speaker Change: We've done a lot of work to reset the.

Speaker Change: The margin structure in that business, particularly in the kitchen.

Speaker Change: And you can see that coming through in the gross margin and operating margin results in the back half of last year.

Christopher H. Peterson: I think we have a bounce-back plan in place in that category, and I think that category has normalized significantly last year from the Bye Bye Baby bankruptcy. On the home and commercial business, we've done, which would include kitchen, home fragrance, and commercial, we've done a lot of work to reset the margin structure in that business, particularly in the kitchen. You can see that coming through in the gross margin and operating margin results in the back half of last year. I think that business, particularly the kitchen business, has some exciting innovation that's coming this year. The commercial business is a more stable business that we are going from strength to strength. We expect that business to be more flattish this year versus last year.

Speaker Change: And I think that business, particularly the kitchen business has some exciting innovation thats coming this year the commercial businesses.

Speaker Change: A more stable business.

Speaker Change: We are going sort of from strength to strength, we expect that business too.

Speaker Change: <unk> be more.

Speaker Change: Flattish this year versus versus last year, and then I mentioned, the outdoor and Rec business is probably the business that is going to be the most challenged this year because of.

Speaker Change: The time, it's going to take us to fully get the capability build in place and have that show through in terms of financial results. The other thing I would add if I could because we recognize the need to have better forecasting capabilities is this is part of the capabilities that we've brought to bear. So for example, the sales force is now using and a plan.

Christopher H. Peterson: Then I mentioned the outdoor and rec business is probably the business that is going to be the most challenged this year because of the time it's going to take us to fully get the capability build in place and have that show through in terms of financial results. The other thing I would add, if I could, because we recognize the need to have better forecasting capabilities, is that this is part of the capability set that we've brought to bear. For example, the sales force is now using Anaplan in order to discreetly have sales walks that build up on discrete building blocks, quarter to quarter, brand by brand.

Speaker Change: Order to really discretely have sales walks that buildup on discrete building blocks quarter to quarter brand by brand. We've taken the best in class product practices from different business units and applied those broadly so the capability set that we're putting in place leverages scale, but it also allows us to get much more granular on our build.

Speaker Change: Yes.

Christopher H. Peterson: We've taken the best in class practices from different business units and applied those broadly. The capability set that we're putting in place leverages scale, but it also allows us to get much more granular on our build out. That is super helpful.

Speaker Change: That is super helpful and how about R&D is that any.

Speaker Change: Indications of putting more money behind.

Speaker Change: R&D this year.

Speaker Change: And getting I understanding kitchen, please you mentioned.

Speaker Change: Our innovation, but across the board.

Christopher H. Peterson: And how about R&D? Is there any indication of putting more money behind R&D this year and getting, I understand in the kitchen, Chris, you mentioned more innovation, but across the board, given that, you know, you're coming off of a moment where you were focusing on improving profitability? Is there any indication of that? Yes.

Speaker Change: Given that.

Speaker Change: Youre coming off of the Ah moment, where you are focusing on improving profitability.

Speaker Change: Is that any.

Speaker Change: Indication of that.

Speaker Change: Yes.

That is baked into our plan so so.

Christopher H. Peterson: That is baked into our plan. And perhaps I should have spent a little more time on that, but the organizational realignment that we announced in January, where we announced that we were changing the operating model to better enable brand management, U.S. selling, new business development, international, et cetera, also R&D, is part of that effort. So as part of that realignment, we announced a net headcount reduction of 7%. But if you look within that, we actually reduced headcount by more than that and invested back resources in areas where we needed to invest back from a capability standpoint. And one of those areas was R&D and is still R&D.

Perhaps I should spend a little more time on that but the the organization realignment that we announced in January where we announced that we were.

Changing the operating model.

Speaker Change: To better enable brand management.

Speaker Change: Selling new business development International.

Speaker Change: Et cetera.

Speaker Change: Also R&D as part of that effort so.

Speaker Change: As part of that realignment we.

We announced a net head count reduction of 7%, but if you look within that we actually reduced head count by more than that and invested back resources in areas, where we needed to invest back from a capability standpoint, and one of those areas was R&D and his R&D and so within R&D.

Christopher H. Peterson: And so within R&D, we are investing more resources in terms of headcount. We are focusing that headcount on platform technologies that can span across Newell. And these are things like material technology that spans across multiple business units. We're not going to disclose all of them here because some of them are competitively sensitive.

Speaker Change: We are investing more resources in terms of head count we are focusing that head count on platform technologies that can span across Newell and these are things like.

Speaker Change: The old technology that spans across multiple business units.

Speaker Change: We're not going to disclose all of them here because some of them are competitively sensitive, but we do have a plan to upgrade the.

Christopher H. Peterson: But we do have a plan to increase the contribution and the investment in R&D specifically, and that is part and parcel to improving the innovation pipeline. And it's baked into our guidance and our operating model change that we announced earlier this month or earlier this year. Very helpful, Chris. Thank you both. Our next question comes from Brian McNamara of Canaccord Genuity. Hey, good morning. Thanks for taking our question. Maybe one for Chris.

Speaker Change: Contribution and the investment in R&D specifically.

Speaker Change: And that is part and parcel to improving the innovation pipeline and it's baked into our guidance and our operating model change that we announced earlier this month earlier this year.

Speaker Change: Very helpful. Chris Thank you both.

Speaker Change: Our next question comes from Brian Mcnamara of Canaccord Genuity.

Brian McNamara: Hey, good morning, Thanks for taking our question maybe one for Chris we're about eight months into this new strategy in these turnarounds typically take more time investors want.

Brian McNamara: We're about eight months into this new strategy, and these turnarounds typically take more time than investors want. I'm curious about your view on the progress made so far relative to your initial expectations. What's been better than expected or easier? And what's been more challenging?

Brian McNamara: I'm curious your view on the progress made so far relative to your initial expectations, what's been better than expected or easier than what's been more challenging.

Yes. Thanks.

Christopher H. Peterson: Yeah, thanks, Brian. I think, you know, we're very excited about the progress made. We've moved at an incredibly rapid pace to do the capability assessment, launch the strategy, cascade the strategy. We've changed the operating model. We've upgraded talent. All of those things have gone, frankly, incredibly well and incredibly fast.

Chris: Brian I think.

Chris: We're very excited about the progress made.

Chris: We've moved at incredibly rapid pace to do the capability assessment to launch the strategy to Cascade. The strategy. We've changed the operating model, we upgraded talent all of those things have gone frankly.

Chris: Incredibly well and incredibly quick.

Brian McNamara: I think the piece that is still ahead of us that, you know, I wake up every morning thinking about is, how do we operationalize this and build it into the culture of the company. Because, and that's the work that I referenced when I talked about the top priority heading into 24 of operationalizing the new strategy and the operating model because I think we now have an outstanding executive committee, which is my set of direct reports, that is driving the change, driving urgency, and implementing the strategy. What we need to do now is embed that throughout the entire 25,000 people that work at Newell so that we are all operating in a consistent direction, and we make the culture change to a performance-oriented, outcome-based organization structure. We're seeing good signs of that. I just want to see it rolled out more broadly across the company, and I think that's what we're trying to do as we head into this year. Just a quick follow up.

Chris: I think the piece that is still ahead of us.

Chris: I wake up every every morning thinking about is how do we operationalize this and build it into the culture of the company.

Chris: Because.

And that's the work that I referenced when I talked about the.

Chris: The top priority heading into 'twenty four of operationalize, the new strategy and the operating model because I think we now have a.

Chris: An outstanding Executive Committee, which was mindset of direct reports.

Chris: That is driving the change driving urgency and implementing the strategy we need to do now is in bad debt throughout the entire 25000 people that are working at normal. So that we are all operating.

Chris: In a consistent direction and we make the culture change to a performance oriented outcome based.

Chris: Organization structure.

Chris: Seeing good signs of that I, just wanted to see it more broadly across the company and I think that's what we're trying to do as we head into this year.

And just a quick follow up are there any categories youre seeing shelf space increase at retail and if not what are you guys, bringing to the table today relative to the competitors you'll have to displace.

Christopher H. Peterson: Are there any categories you're seeing shelf space increase at retail? And if not, what are you guys bringing to the table today relative to the competitors you'll have to display? Yeah, we are seeing shelf space increases in a number of our businesses, and we, you know, because the line reviews for 2024 have largely been completed, we have pretty good visibility into that. So, as an example, and I keep coming back to the Sharpie Creative Marker example, but the retailer acceptance behind that initiative has been very strong.

Speaker Change: Yes, we are seeing shelf space increases in a number of our businesses and we.

Speaker Change: Because the line reviews for 2024 have largely been completed.

Speaker Change: Have pretty good visibility to that so as an example.

And I keep coming back to the sharp be created a marker example, but the retailer acceptance behind that initiative has been very strong we expect to gain incremental shelf space as a result of that initiative.

Christopher H. Peterson: We expect to gain incremental shelf space as a result of that initiative. We're also working with a number of retailers on category reinvention that we believe can trigger not only market growth but market share growth for Newell at the same time. The new business development program I mentioned is coming online, and we've got some good examples of gaining incremental distribution. You know, one that comes to mind, for example, is we have a terrific product on Rubbermaid Brilliance, which is a food storage product.

Speaker Change: We're also working with a number of retailers on.

Speaker Change: Category reinvention.

Speaker Change: That we believe can trigger not only market growth market share growth for Newell at the same time.

Speaker Change: The new business development.

Speaker Change: Program.

Speaker Change: <unk> is coming online and we've got some good examples of gaining incremental distribution. One that comes to mind. For example is we have a terrific product on rubbermaid brilliance, which is a food storage product well the new business development team went and sold that product into the container store. So we are now listed at the container store.

Christopher H. Peterson: Well, the new business development team went and sold that product into the container store. So, we're now listed at the container store. We were not doing business with a container store previously, as an example, and I could go through, you know, 15 or 20 of those types of examples where we're starting to get on the field with a broader set of retailers and gaining shelf space. And we think that trend is going to accelerate as our new business development capability improves, as our category management capability improves, as our innovation pipeline improves, and as our brand building capabilities continue to accelerate. Thanks very much; I appreciate the details, www.larryweaver.com. Our last question today comes from Steve Powers of Deutsche Bank. Oh, hey, thanks. Good morning, everybody.

Speaker Change: We were not doing business with the container store previously as an example, and I could go through 15 or 20 of those types of examples.

Speaker Change: Where we're starting to get on the field with a broader set of retailers and gaining shelf space.

Speaker Change: And we think that trend is going to accelerate as our new business development capability improves as our category management capability improves as our innovation pipeline.

Speaker Change: Improves.

Speaker Change: And as our brand building capabilities.

Speaker Change: Continue to accelerate so that's the goal.

Speaker Change: And I think we'll talk more about those examples as we go forward here.

Speaker Change: Thanks, very much I appreciate the detail.

Speaker Change: Our last question today comes from Steve powers of Deutsche Bank.

Steve Powers: Oh, Hey, thanks, good morning, everybody.

Steve Powers: Two questions Mark.

Steve Powers: Two questions. Mark, just one for you, just to clarify. You mentioned international; the expectation is that international will be up this year. I guess, was that just a core sales comment, or is it? You know, is there a prospect of U.S. dollar growth being positive to kind of offsetting FX, number one? And then, you know, Chris, maybe for you, just, you know, you talked about the sequential improvements relative to the starting point in the first quarter of the year. I guess I'm trying to figure out how steep that curve is and what you contemplate as an exit rate for the year.

Steve Powers: One for you just to clarify you mentioned international.

Steve Powers: The expectation that international will be up this year I guess it was that just a core sales comment or is it.

Steve Powers: Is there a prospect of U S dollar growth being being positive offsetting FX number one.

Steve Powers: And then Chris maybe for you.

Chris: You talked about the sequential improvements.

Chris: Relative to the starting point in the first quarter through the year I guess.

Chris: I'm trying to figure out how steep that curve is and what you contemplate that as an exit rate of the year.

Steve Powers: You know, at least at the high end of guidance, is there a prospect of you exiting in positive territory, leaving the year? Or are we more, you know, expecting declines all the way through the year? and therefore exiting at a lower rate as we go into 2025? Thank you.

Chris: At least at the high end of guidance is there a prospect of you exiting.

Chris: In positive territory exiting the year or are we more.

Chris: Expecting declines all the way through the year.

Chris: Therefore exiting at a lower rate as we go into 'twenty five thank you.

Chris: So real quickly as it relates to the international business for fiscal 'twenty four yes, we expect core sales to be up mid single digits.

Mark J. Erceg: So, real quickly, as it relates to the international business for fiscal 24, yes, we expect core sales to be up mid-single digits, and we would expect net sales to also be up when all is said and done. One quick thing before Chris takes the back half of your question that I think is important, because we are as impatient for progress as the investment community is, but we really believe that meaningful progress was made during the course of 23. If you go back and look at our gross margin and our operating margin in 22, they were both down 180 and 160 basis points, respectively. During 23, our gross margin inflected in the third quarter, and during 23, our operating margin inflected in the fourth quarter.

Speaker Change: And we would expect net sales to also be up when all is said and done one quick thing before Chris take the back half of your question that I think is important because we are as impatient for progress as the investment community is but we really believe that meaningful progress was made during the course of 'twenty three if you go.

Speaker Change: And look at our gross margin or op margin in 'twenty two there about down 180 to 160 basis points, respectively. During 'twenty three our gross margin inflected in the third quarter and during 'twenty three our op margin reflected in the fourth quarter.

Mark J. Erceg: And during 24, both gross margin and operating margin are going to be up strong, despite the fact that there remains sales compression on the top lines. So, we are working through this process deliberately, as we indicated we would, with fiscal year 23 just being a year in which we had to put some basic fundamental stuff in place. We have now put those capabilities in place.

Speaker Change: During 'twenty for both gross margin and op margin is going to be up strong despite.

Speaker Change: Despite the fact that the remaining sales compression on the top lines. So we are we are working through this process deliberately as we indicated we would with fiscal year 'twenty three just being a year in which we had to put some basic fundamental stuff in place. We have now put those capabilities in place we've upgraded the talent across the organization and changed.

Mark J. Erceg: We've upgraded the talent across the organization and changed the ways of working. And you're going to start seeing real signs of that, because the growth rate, while still down in 24, is going to be appreciably better than it was in the prior period, and the financials are going to continue to improve structurally. And so, by the time we get out to 25, we should be hitting on all cylinders, and we're actually quite excited about it.

Speaker Change: As a working and youre going to start seeing real signs of that because the growth rate, while still down in 'twenty forward can be appreciably better than it was in the prior period and the financials are going to continue to improve structurally and so by the time, we get out to 'twenty five.

Speaker Change: Should be hitting on all cylinders and we're actually quite excited about it.

Christopher H. Peterson: Yeah, I think relative to the guidance question, the base periods remain a little bit choppy because of retailer inventory, destocking timing, shipment timing, et cetera. And so what I would say relative to the guidance is that we expect core sales growth to be better after Q1 in the balance of the year than we expect in Q1, as we've said. I think it's premature for us to talk about guidance by quarter between Q2, Q3, and Q4 at this point. And it will be a little bit choppy, but we certainly expect Q1 to be the weakest quarter of the year from a core sales growth perspective, with core sales improving after Q1. And I think we'll stop there, and we'll continue our normal guidance pace of updating the quarterly guidance at the beginning of the quarter.

Speaker Change: I think relative to the to the guidance question.

Speaker Change: The base periods remain a little bit choppy because of retailer inventory destocking timing shipment timing et cetera, and so what I would say relative to the guidance is that we expect core sales growth to be better.

Speaker Change: After Q1 and the balance of the year than we expected in Q1 as we've said I think it's premature for us to talk about guidance by quarter between Q2, Q3 and Q4 at this point.

Speaker Change: And it will be a little bit choppy, but we certainly expect Q1 to be the weakest quarter of the year from a core sales growth perspective core sales to improve after Q1.

Speaker Change: And.

Speaker Change: And I think we will we'll stop there and we'll continue our normal guidance pace of.

Speaker Change: Updating on a quarterly guidance at the beginning of the quarter.

Speaker Change: But because our focus is really on <unk>.

Christopher H. Peterson: But because our focus is really on driving, as Mark said, the sequential improvement in core sales growth from negative 12 and 23 to down three to six. And remember, within that three to six, there's two points of stuff we've proactively chosen to exit. And so if you were to exclude that, which we have not done from core, we're really guiding sort of down one to four on the areas that we're focused on for 24.

Speaker Change: Driving as Mark said, the sequential improvement in core sales growth.

Speaker Change: From negative, 12% and 23% down three to six and remember within that three to six there's two points of stuff, we've proactively chosen to exit and so if you were to exclude that which we haven't not done from core we're really guiding sort of down 1% to four on the areas that we're focused on for.

Christopher H. Peterson: And I think that's what gets us excited about the trajectory as we move through the year and think about where we're going to be over the course of the year as we head into 25. So... Thanks, everybody. And yep, and we'll follow up with anybody, as always, after the call. This concludes today's conference call. Thank you for your participation. A replay of today's call will be available later today on the company's website at ir.newellbrands.com. You may now disconnect. Have a great day. The phone is ringing.

Speaker Change: <unk>.

Speaker Change: For 24.

Speaker Change: And I think Thats what gets us excited.

Speaker Change: About the trajectory as we move through the year end.

Speaker Change: And had.

Speaker Change: And think about where we're going to be.

Speaker Change: Over the course of it.

Speaker Change: For the year as we head into 'twenty five so.

Speaker Change: Thanks, everybody. Thank you.

Speaker Change: Yep, and we'll follow up with anybody.

As always after the call.

Speaker Change: This concludes today's conference call. Thank you for your participation a replay of today's call will be available later today on the company's website at IR Dot Newell brands Scott Hahn you may now disconnect.

Speaker Change: Late day.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].