Q4 2024 Newell Brands Inc Earnings Call
Good morning, and a box with newer brands fourth quarter and full year 2024 earnings conference call. At this time all participants are in a listen only mode. After a brief discussion by management will open 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.
Speaker Change: Today's conference call is being recorded a live webcast of this call is available at IR got newer brands Dot Com I will now turn the call over to Joanne Freiberger, SVP Investor Relations and Chief Communications Officer, MS. Freiberger, you may begin.
Speaker Change: Thank you good morning, everyone and welcome to Newell Brands' fourth quarter and full year 2024 earnings call on the call with me today are Chris Peterson, our president and CEO and Mark <unk>, our CFO before we begin I'd like to inform you that during today's call, we will be making forward looking state.
Speaker Change: <unk>, which involve risks and uncertainties actual results and outcomes may differ materially and we undertake no obligation to update forward looking statements I refer you to the cautionary language and risk factors are available in our earnings release, our Form 10-K Form 10-Q, and other SEC filings.
Speaker Change: 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 refer to as normalized measures. We believe that these non-GAAP measures are useful to investors.
Speaker Change: Although they should not be considered superior to the measures presented in accordance with GAAP explanations of these non-GAAP measures are available and reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables that were furnished to the SEC.
Chris Peterson: Thank you and with that I'll turn the call over to Chris.
Chris Peterson: Thank you Joanne and good morning, everyone.
Chris Peterson: During our call. This morning, we would like to do several things.
Chris Peterson: First we will walk you through the substantial and impressive progress we made against our 2020 for business and financial priorities, which was driven by the disciplined implementation of our new corporate strategy operating model and culture transformation.
Chris Peterson: We will provide some additional perspective on tariffs and how we're approaching both the challenges and opportunities they present us what.
Chris Peterson: Third we will share our business and financial priorities for 2025.
Chris Peterson: Finally, after my prepared remarks, Mark will provide additional perspective on our 2020 for fourth quarter and full year results and share our preliminary financial guidance for 2025.
Chris Peterson: Let's start with an update on how we performed against the five key business and financial priorities. We established at the start of 2024.
Chris Peterson: As we look back on the year. We believe we have successfully delivered against our top priority, which was to fully operationalize, our new strategy and operating model, while strengthening our culture.
At this point our strategy has been rolled out to all business segments regions brands and functions. We have fully implemented our new operating model with brand management in place for our top 25 brands. One all geographic go to market organizations in place and all supply chain and back office functions centralized and largely integrated.
Chris Peterson: We have upgraded talent in key roles and strengthened our culture, which is focused on high performance innovation and inclusion.
Chris Peterson: Doing so has allowed us to make significant progress towards unlocking the full potential of the organization and our portfolio of leading brands. Although we still have work to do the new strategy operating model changes and cultural transformation are clearly yielding positive results as evidenced by the fact that we reported another strong quarter.
Chris Peterson: <unk> with all key financial metrics in line or above our guidance range and.
Chris Peterson: Improving topline performance was a key objective for 2024 and against that goal we made noteworthy progress.
Chris Peterson: <unk> fourth quarter and full year core sales growth was in line with our expectations with sequential improvement in the second half versus the first half of 2024 and.
Chris Peterson: Importantly, core sales trends improved across all six business units with three turning positive for the year as innovation drove annual core sales growth in the baby, writing and commercial businesses in fact, both the learning and development segment and our international business as a whole have positive <unk>.
Chris Peterson: Core sales growth in all four quarters of 2024, which we believe are solid evidence that our one <unk> operating model is working.
Chris Peterson: While we are pleased with the strong progress in 2024, we are not satisfied with a three 4% core sales decline for the company even as we continued to experience category contraction. We remain laser focused on returning the company to sustainable and profitable growth and more broad based share gains and that is precisely.
Chris Peterson: Why we have been moving swiftly in implementing our strategy.
Chris Peterson: Dramatically improving the structural economics of our business was our third top priority and they are we drove an exceptionally strong gross and operating margin improvement.
Chris Peterson: Normalized gross margin improved sequentially, each quarter and increased 460 basis points to 34, 1% for the full year compared with 2023.
Chris Peterson: Outstanding productivity pricing and product mix delivered the highest full year normalized gross margin reported since 2018.
Chris Peterson: Normalized operating margin of eight 2% improved by 210 basis points, which was driven by improved gross margin and was partially offset by higher A&P spend incentive compensation and wage inflation.
Chris Peterson: Since introducing our new corporate strategy in June 2023, we have reported six consecutive quarters of year over year gross margin improvement and five consecutive quarters of year over year operating margin improvement.
Chris Peterson: <unk> strong margin performance helped drive substantial progress across our fourth key priority for 2024, which was improving cash flow and strengthening our balance sheet.
Strong double digit normalized EBITDA growth and an eight day improvement in our cash conversion cycle generated nearly $500 million of operating cash flow, which in turn allowed us to reduce debt and delever the balance sheet by nearly one full turn allowing us to end the year with a leverage ratio of four nine times.
Chris Peterson: Our last stated goal for 2024 was to reduce complexity through business process redesign with a focus on simplification and accountability technology standardization and enablement and continued SKU count reduction.
Chris Peterson: Consistent with this objective we further consolidated our ERP environment eliminated 35 legal entities reduced brands from 80 to about 55 rationalized almost 2000 additional skus, bringing us below 20000 versus over 100000 in 2018.
Chris Peterson: And we reduced the supply base by 25% over the past two years.
Chris Peterson: Notably we also reduced the number of distributors across Latin America, Europe, and Asia by 33% last year, and finally, we dramatically exceeded our weighted forecast accuracy target, which helped us achieve a 95% global fell right the highest in <unk> history.
Chris Peterson: Now, let's shift to the elephant in the room, which of course is tariffs.
Chris Peterson: As we've discussed previously <unk> has been actively pursuing a tariff mitigation strategy for some time, which we discussed at length during our second quarter earnings call and which we believe leaves us better positioned than most to navigate both the challenges and opportunities being presented by our recent announcements.
Chris Peterson: As a reminder, we manufacture about half of our products and source the remainder for the last few years, we have been primarily working to reduce our dependence on China sourcing we began accelerating our efforts about a year ago and we are continuing to pursue the following actions first where economically feasible we in sourced production from China.
Chris Peterson: And invested in Newell's existing manufacturing network, we've already completed multiple in sourcing projects, including both finished goods and raw materials components, and the writing baby and home businesses.
Chris Peterson: Second we have been shifting production out of China and into alternate geographies through both existing and new suppliers, which we have been proactively qualifying for major purchase pools. At this point, we have evaluated country of origin for all Chinese suppliers and are not signing on any new suppliers that do not have existing or defer.
Chris Peterson: Find plans already in place to establish manufacturing capabilities outside of China.
Chris Peterson: As a result sourced finished goods that newell imports from China to the United States now only account for about 15% of the company's total cost of goods sold including a large portion of baby products that are currently exempt from 301 tariffs to provide relief for young families.
Chris Peterson: Importantly, based on the work already in progress we're on track for this exposure to imports from China to be less than 10% by the end of this year.
Chris Peterson: With respect to Mexico, and Canada, we are monitoring the situation closely imports from Mexico to the U S represent about 5% of Newell's total cost of goods sold while imports from Canada are negligible.
Chris Peterson: We recognize this will likely be an area of ongoing uncertainty. We also believe it can be a potential source of competitive advantage. For example, there are several categories, where competitors continue to source from China, while new will have significant U S manufacturing capability, including writing coolers crude storage and.
Chris Peterson: Handles to name a few.
Chris Peterson: Our strategic shift in 2023 to a one normal supply chain model and continued investment in Newell's expanded U S manufacturing footprint positions us to be competitively advantaged in certain product categories and we are currently having active dialogue with several strategic retailers to ensure they are.
Chris Peterson: Where are our strong U S manufacturing footprint, which has some additional capacity, which can be quickly brought online on a first come first serve basis.
Chris Peterson: Turning to 2025, we expect the macroeconomic back for crop to be dynamic lower income consumers remain under pressure from the cumulative impact of inflation over the last several years the recent.
Chris Peterson: Substantial appreciation of the U S dollar along with evolving tax policies and potential tariffs and trade regulations in the U S contributed to a fluid and complex operating environment.
Chris Peterson: Within this context, we plan to drive continued strong progress on the turnaround agenda and have established five major priorities for 2025.
Chris Peterson: First and foremost our goal is to return the company to topline growth through continued execution of the corporate strategy with emphasis on product and commercial innovation distribution expansion and international growth.
Chris Peterson: On the innovation front, we are launching and investing behind an increasing number of tier one and tier two mid and high priced new products across the business.
Chris Peterson: There are a few examples of these with you today.
Chris Peterson: In the baby business, we launched the Graco, smart soothing, bassinet, and swing, which detect and respond to baby's cries and seconds with Susan soothing sound and motion and the second half of 2020 for Prada.
Chris Peterson: Product is off to a strong start and we plan to expand distribution and fully support it throughout 2025.
Chris Peterson: Just last month <unk> launched the new easy turn $3 62, and one rotating convertible car seat that will help parents easily get there a little one in and out of the car.
Chris Peterson: <unk> features a 360 degree one hand turn and has a slim designed to save precious space in the car.
Chris Peterson: In our writing business building on the successful first year of Sharpie creative markers. We are excited to expand the line with 12, new Earth tone colors, and a new fine tip for enhanced precision and outlining these.
Chris Peterson: These new products also provide the vibrant paint like ink and the control of a marker that consumers love. Our research confirms that creative enthusiasts are eager for even more color variety and this expansion delivers exactly that offering new ways to blend layer and express creativity.
Chris Peterson: Another important writing business innovation launch will be with Expo. The leader in presentation markers, we developed a proprietary ink designed to enhance vibrancy and color on Expo dry erase markers. This new ink improves readability from across classrooms in conference rooms, while expanding usability beyond traditional.
Chris Peterson: On a whiteboard to glass plastic and other clear service surfaces. In addition, we are launching a new wet erase liner under the <unk> brand that creates a whole new segment of semi permanent markers.
Chris Peterson: Rubbermaid commercial products, we'll be launching the first of several new group farm products align of animal theaters that are extremely durable and easy to clean.
Chris Peterson: Importantly, this product line is based on significant front end consumer research as our team spent time talking to and visiting hundreds of farmers over 18 months and incorporated this insight into the product development. These animal theaters have a market, leading 10 year warranty and are made in the USA.
Chris Peterson: Our kitchen business launched the booster extreme mixed professional blender with first to market patented titanium coated blades.
Chris Peterson: This lab tested powerful <unk> hundred Watt high performance motor and reversible motor technology unique to the <unk> brand processes, even the toughest ingredients in a matter of seconds.
Chris Peterson: Extreme mix will be available in both the U S and Mexico.
Chris Peterson: Later this year, the kitchen business will launch rubbermaid easy store food storage.
Chris Peterson: <unk> builds on years of consumer feedback to deliver a durable and easy.
Chris Peterson: To use solution that stacks simply and is built to store your way.
Chris Peterson: This product will offer a secured grip led that opens with these yet seal securely and it comes in several shapes and sizes to efficiently store all of your leftovers.
Speaker Change: And our home fragrance business. This is an exciting year for Yankee candle as we continue to innovate and elevate our brand first rare revitalizing our core portfolio with the Yankee candle relaunch, introducing a soy wax blend for a cleaner burn in an even better fragrance experience for our consumers.
Speaker Change: These year round favorite fragrances are still housed in our iconic apothecary jar vessel now enhanced with beautiful new label designs that further reinforce our fragrance first strategy and home fragrance.
Speaker Change: We are also introducing Yankee candle premium a sophisticated new line designed to attract a younger consumer and our aesthetic admirer segment. We know this consumer is willing to pay more for high quality products and this collection delivers featuring custom glass vessels with our artisanal watercolor graphics proprietary soy.
Speaker Change: <unk> blend in seven new fragrances designed by Master <unk>.
Speaker Change: Within the outdoor and recreation segments name.
Speaker Change: Product innovations are targeted for 2026.
Speaker Change: We have some 2025 commercial initiatives with exciting influencers, namely Ali love renowned fitness expert for <unk> brands and country music sensation came brown for colon brands.
Speaker Change: These are just a few examples of the increased innovative product launches for 2025 that we expect to drive our first priority of returning the company to top line growth during the back half of this year.
Speaker Change: The second 2025 priorities to drive operating margin improvement well ahead of our evergreen financial model, which calls for a 50 basis point improvement each year.
Speaker Change: By building on the meaningful gains achieved in 2024, we expect the continuation of our fuel cost savings program and other cost savings initiatives to more than offset the impact of inflation and the increase in A&P, we have planned to support our innovation program.
Speaker Change: Third continue to Delever, the balance sheet and improve the cash conversion cycle. Within this we are planning to fully fund all the necessary high return capability improvement and restructuring projects.
Speaker Change: A multi year productivity improvement runway.
Speaker Change: Fourth drive operational excellence via complexity reduction technology, standardization and enablement and continued SKU count optimization.
Speaker Change: And lastly, advance our transformation into a high performance innovative and inclusive culture by exemplifying our values leadership passion for winning integrity ownership and teamwork.
Speaker Change: In summary, during 2024 amidst a challenging operating environment with contracting categories Foreign exchange headwinds and continued inflation, we delivered significant year over year sales performance improvement as we strengthen the companys front and selling and marketing capabilities drove very strong gross and operating.
Speaker Change: <unk> improvement, while purposely increasing our level of A&P investment and we meaningfully delever the balance sheet through both debt reduction and EBITDA growth.
Speaker Change: While much work remains in the macroeconomic backdrop is still uncertain. We are laser focused on returning the company to sustainable top line growth continuing to drive above algorithm operating margin improvement and strengthening the balance sheet.
Speaker Change: Finally.
I want to recognize and thank our incredible team for their hard work and dedication in delivering our 2024 goals their contributions have been pivotal to our success and we deeply appreciate the commitment and passion they bring to Newell brands every day.
Speaker Change: <unk> progress on our strategy and turnaround agenda enhances our confidence that we are taking the right actions to strengthen the organization improve its financial performance and create value for our shareholders with that I'll now hand, the call over to Mark. Thanks, Chris Good morning, everyone as Chris indicated we believe that noodles <unk>.
Mark: New corporate strategy is driving positive momentum and laying a strong foundation for continued growth.
Mark: Consistent with this fourth quarter core sales were minus 3% with pricing in international markets being a meaningful contributor to Q4 core sales performance.
Mark: While we will not be satisfied until we are consistently growing core sales. We were still encouraged by this result for two reasons beyond the ones Chris already cited in his prepared remarks.
Mark: First it was comfortably within our guidance range, which shows our ability to accurately forecast the business continues to improve.
This brought newest 'twenty 'twenty four back half core sales rate of minus two 3%, which represents another half year sequential improvement in top line core sales trends.
Mark: Recall that during the first half of 2023, which immediately preceded the development and adoption of our new corporate strategy Newell's core sales run rate was minus 14, 7% and the three halves since that time, mainly in the second half of 2023, the first half of 2024 and now the second half of 2024 core.
Mark: Sales have been minus nine three minus four 5% and minus two 3%, respectively, which we believe represents good progress in Newell's turnaround story.
Mark: Net sales in the fourth quarter included a two 6% currency headwind about half a point of category exits divestitures and store closures.
Mark: Turning to gross margin Q4 represented another quarter of significant expansion normalized gross margin expanded 350 basis points to 34, 6%, which represented our sixth consecutive quarter of year over year improvement.
Mark: Productivity savings and positive pricing more than offset headwinds from lower sales volume inflation and foreign exchange.
Mark: Importantly on a two year stacked basis fourth quarter normalized gross margin was up 800 basis points, which we believe is clear evidence that the transformation of Newell structural economics and vision six quarters ago, what our corporate turnaround was initiated is proceeding at pace.
During the fourth quarter Newell's normalized operating margin rose 70 basis points compared to the previous year, reaching seven 1%.
Mark: The increase versus last year was due to higher gross margin and ongoing organizational restructuring related savings, which were partially offset by nearly 20% increase in year over year A&P investments in dollar terms and higher incentive compensation costs.
Mark: Net interest expense of $72 million, representing an increase of $2 million from the prior year period, and a normalized tax benefit of $4 million was recorded in Q4.
Mark: Q4 normalized diluted earnings per share came in at 16, which was above our guidance range of 11% to 14.
Mark: Before moving to the 2025 preliminary outlook.
Mark: There are just a few things in our full year 2024 financial results, we'd like to comment on the first of which is gross margin.
Mark: Since the Jarden acquisition in 2016 Newell brands normalized gross margin has declined every year up to and including last year when normalized gross margin dropped from 32% in 2022 to 29, 5% in 2023. However, during 2020 for normalized gross margin positively inflected in a dramatic way.
Mark: Expanding by 460 basis points to 34, 1%, allowing newell brands to quickly regain multiple years of gross margin boss.
Mark: The sharp reversal in normalized gross margin was made possible by the development and implementation of a highly focused and compelling corporate strategy that was underpinned by a comprehensive capability assessment with clearly delineated where to play and how to win choices, which among other things call. It the prioritization of top brands in top countries targeted pricing actions.
Mark: Active base business mix management, and the development of consumer driven MPP in HPT product innovations.
Mark: These actions when coupled with another year of World class productivity efforts by our supply chain and procurement experts with the catalyst that sparked newell's gross margin recovery and provides a clear roadmap for continued margin expansion.
Mark: Another area that warrants mentioning it's 2020 for full year operating cash flow results Newell generated $496 million of operating cash flow in 2024, which was driven in part by an eight day improvement in our year over year cash conversion cycle.
Mark: The nearly $500 million of operating cash flow was fractionally below the guidance range provided during the third quarter earnings call due to a proactive decision to temporarily increased inventory levels in anticipation of a potential port strike, which Fortunately was averted.
Mark: Strong operating cash flow provided the funds necessary to reduce net debt by $175 million.
Mark: This reduction in net debt in conjunction with a 15% increase in our full year normalized EBITDA dropped newell's leverage ratio by nearly one full turn to four nine times at year end.
Mark: The last thing that touch on prior to discussing 2020 fives preliminary outlook is the debt refinancing transacted during the fourth quarter specifically.
Mark: Specifically <unk> two 5 billion of upcoming maturities were refinanced into two new tranches $750 million due in 2030 and $500 million due in 2030 to.
Mark: The offering was six times oversubscribed, which allowed us to capture an attractive all in blended rate below six 5%.
Mark: Out of the original $2 billion of debt, which was maturing in April 2026, 125 billion is still outstanding our.
Mark: Our intention is to refinance that balance at some point during 2025 likely into new roughly equally sized tranches maturing in 2031 and 2033, respectively.
Mark: This would take advantage of to open rungs on our debt maturity ladder and leave us with a very logical and we believe manageable debt horizon.
Mark: Typically during our fourth quarter earnings call, we provided 2020 outlook, which we will once again do today, but this time with an important caveat, namely the discussion which follows is best characterized as being a preliminary 2025 outlook.
Mark: This is because newell brands with a large global geographic footprint across which we purchased manufacturing cell billions of dollars' worth of raw materials component parts and finished goods.
Mark: As such we are subject to direct impacts from changes in global trade policy and tariffs and any associated second or third derivative effects, such as currency movements or shifts in consumer purchasing behavior, which would be exceedingly difficult if not impossible to accurately predict.
Mark: Therefore, we have chosen to provide preliminary 2025 guidance without including any impact from the recently announced 25% tariffs against Mexico, and Canada, which were postponed for 30 days to allow for further negotiations or the 10% tariff enacted against China earlier this week.
Mark: S trade policy decisions come into view and solidify throughout the year updates will be provided as appropriate.
Mark: With that understanding we expect the following for 2025.
Mark: Core sales are expected to be between minus 2% and plus 1%.
Mark: Since we continue to measure our progress in halves instead of quarters, we expect sequential improvement with the first half being down low single digits in the back half turning slightly positive.
Mark: Within this core sales range of approximately one point of low margin business or residual tales of nonstrategic brands, we've chosen to proactively walk away from.
Net sales are expected to decline between 4% and 2% with an anticipated 2% to 4% headwind from unfavorable foreign exchange and business exits.
Mark: Importantly, we expect both learning and development and international had a second consecutive year of core sales growth and home and commercial to return to core sales growth in the back half of the year, we expect outdoor <unk> recreation to improve in 2025, but returned to core sales growth is unlikely until 2026, when several key innovations are expected to launch.
Mark: This outlook assumes that newell's categories improved from a low single digit decline in 2024 to essentially flat in 2025.
Mark: We also believe retailers will continue to manage inventory tightly and durable and discretionary categories, but that said this should not cause any meaningful destocking or restocking during the year.
Mark: We expect normalized operating margin between nine to nine 5%, which at the midpoint represents roughly a 110 basis point improvement from 2024 and is more than double our evergreen target of a 50 basis point improvement each year the.
Mark: The increase in normalized operating margin should be driven by higher gross margin and lower SG&A costs.
Mark: Within SG&A overhead cost to be down in 2025, both in dollar terms and as a percentage of sales, but we are once again planning to invest more A&P, both absolute dollar terms and as a percentage of sales the.
Mark: The intention to support higher levels of A&P in 2025 versus 2024 should be interpreted as confidence that more investable opportunities are now at our disposal because the structural economics of the base business are considerably better and a stronger innovation funnel is starting to come online.
Mark: Interest expense in 2025 is projected to step up by somewhere between five and $10 million and Newell's effective tax rate is being planned in the low to mid teens. Please.
Mark: Please note that this compares to a normalized tax provision of $21 million in 2024.
Mark: All in we expect normalized diluted earnings per share in the range of 70 to 76.
Mark: At the midpoint of this range and a tax equivalent basis. This represents an 18% increase versus 2024.
Mark: For the year, we expect to generate operating cash flow of $450 to $500 million, which assumes a high single digit days reduction in duals cash conversion cycle.
Mark: During fiscal 2025, we plan to invest between 250 and $270 million in capital expenditures most of which we spent on either high return cost savings projects or to support upcoming consumer product innovations, the preponderance of which will be an MTP our HPT propositions.
Mark: Putting all this together and combining projected cash flow and EBITDA growth should translate into a year end 2025 leverage ratio of about four five times, which is roughly one half turn better than where it sits today and moves us closer to our longer term ambition of being in investment grade debt issuer.
Mark: As it relates to the first quarter of 2025, we expect a store core sales decline of 42% with net sales down 8% to 5%.
Mark: Please note that foreign exchange into a lesser extent category exits and divestitures accounts for the relatively large difference between core net sales in the first quarter.
Mark: Normalized operating margin in Q1 of 2025, which is typically newell smallest quarter of the year due to seasonality and as a result is generally not indicative of full year margin trends is expected to be between two and 4%.
Mark: Gross margin productivity should remain strong, but the recent material strengthening of the U S. Dollar has created a significant foreign exchange transaction headwind.
Mark: We are in the process of taking appropriate pricing actions to offset this impact which had more than counteracted headwind over the remaining three quarters of the year, but first quarter operating margins will be negatively impacted.
Mark: Finally, we expect a small year over year increase in interest expense, a slight normalized tax benefit and a normalized loss of 96 per share in Q1.
Mark: In closing we are excited by the results Newell brands highly dedicated and skilled employees delivered in 2024 and are eager to build upon the strong foundation of our new strategy and subsequent results have established we will also stay agile and connected as U S. Economic policy unfolds to take advantage of opportunities for growth, while minimizing potential negative impacts.
Operator, if you could please open the call for questions.
Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered you assume with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Bill: Our first question comes from Bill <unk> with <unk> Securities. Your line is open.
Bill: Thanks, Good morning.
Speaker Change: Good morning Bill.
Bill: I guess.
Bill: <unk> focus on.
Bill: Organic or core sales growth for 25, and just trying to understand.
Speaker Change: Your assumptions of the category growth.
Speaker Change: And across the board would you expect them to be growing and youre growing with them or is this where you think you can actually get market share gain and kind of the same question for outdoor and rec.
Speaker Change: I mean, I understand that there are new products and innovation not coming till 'twenty six but is this just you can't mainly.
Speaker Change: It maintain share.
Speaker Change: Until you those products come or is there any way that that business could actually be flat. This year. Just after two three years of declines you would think it flattens out at some point.
Speaker Change: Yes, So let me let me try thanks, Bill let me try to take those in turn so I think.
Speaker Change: From a from a core sales guidance, we guided the year minus two to plus one.
Speaker Change: Core sales for 25, which is a significant sequential improvement from from this year and I think as we said in the prepared remarks.
Speaker Change: We expect the first half of the year to be down low single digits, and we expect the company to return to positive core sales growth in the back half of the year if.
Speaker Change: If you look within that.
Speaker Change: We're sort of projecting the categories from everything we can see to be about flat.
Speaker Change: The other important point that Mark mentioned is there is still about a point of business.
Speaker Change: Headwind that our businesses that we proactively chosen to walk away from that are a headwind within core sales that we have not excluded. So if you were to exclude that point of headwind.
Speaker Change: Businesses that are sort of tail businesses that we discontinued our core sales guidance, excluding that would be minus one to plus two for the year.
Speaker Change: As I think another important point because that one point headwind is sort of onetime in nature. We don't expect that as we go into 'twenty six relative.
Speaker Change: Relative to the business units.
Speaker Change: Learning and development.
Speaker Change: <unk> returned to core sales growth that's important because it's our largest most probably our largest profit segment.
Speaker Change: We've delivered core sales growth in that segment, all four quarters of this year and we expect that segment to deliver core sales growth in 2005. The international business also has delivered core sales growth every quarter of 24, and we expect that to continue in 'twenty five I think the big thing is with the innovation pipeline ramping up and I mentioned.
Speaker Change: The number of the initiatives in my prepared remarks, we're expecting home and commercial to move into positive territory as a segment in the back half of the year and then I think on <unk> to your point <unk> is our smallest segment. It represents only about 10% of the company's revenue.
Speaker Change: And less than that of the company's profit.
Speaker Change: On that business, we expect core sales trends to improve sequentially and 25 versus 24, but because the innovation pipeline as we've said for several quarters now it doesn't really hit until the 26th season. We're in active discussions right now with all of the major retailers selling in those pre.
Speaker Change: <unk> for the 2006 season, we think that that business is unlikely to turn positive on core sales. This year, although we do think it is going to sequentially improve.
Speaker Change: But we do think that we are lined up to have that business turn positive in 2006.
Speaker Change: Okay. Thanks for that color and then Mark just.
Mark: Looking at interest expense.
Speaker Change: I guess.
Speaker Change: Trying to understand what's factored in for this year, you said $5 million to $10 million increase but that's before the next refinancing so is that partially baked into that guidance or would that be incremental interest expense.
Speaker Change: Okay.
Speaker Change: What I would tell you is a couple of things. So if you look at our year over year interest expense, while we had a very successful refinancing endeavor. Some of that debt that we were pulling down the $2 billion that was sitting out in April of 2006 was initially coupons at four 2%, but because of step ups. It was actually effectively yielding five.
Speaker Change: Seven so when we refinanced obviously you saw a bit of step up on that and that's going to carryover for the full year. Now we are actually very excited because the 2000 <unk> in the 2030 twos that we issued at 637, 5% and $6 65, respectively. If you take the midpoint of the bid ask on both of those the.
Speaker Change: A short duration is actually actually trading 35 bps better than the longer duration is actually trading 25 bps better.
Speaker Change: So obviously I think people are looking through the business results and seeing the turnaround that's underway and feel very good that the credit metrics are improving at Newell and so obviously when we reenter the market to dispose of the remaining $1 5 billion of the April 'twenty six notes, we expect that you will do that at attractive rates.
Speaker Change: As far as the.
Speaker Change: The other piece of your question, Yes, I think they.
Speaker Change: Our guidance incorporates.
Speaker Change: The projected refinancing about midyear. So we've already factored that into the guidance, that's not an incremental headwind that would that we would expect.
Speaker Change: Perfect. Thanks, so much.
Speaker Change: One moment for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Lauren Lieberman with Barclays. Your line is open.
Speaker Change: Great. Thanks, good morning.
Speaker Change: I was curious as I know.
Speaker Change: On tariffs you guys were proactive in offering and kind of framing exposures or lack thereof.
Speaker Change: It was nothing inconsistent with what you guys have shared before but thanks for just.
Speaker Change: Laying it all out.
Speaker Change: Curious if and.
Speaker Change: Maybe hard to say, but would you think that ultimately over 12 months to 24 months period. If tariffs go in is it a net positive or net negative for you because I think the competitive dynamic.
Speaker Change: Situation in the U S and where this would favor you with something Thats, probably pretty underappreciated I was just wondering if you could comment on.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: Florida is a good question and it's one that we spend a lot of time as a leadership team talking about there is there is and.
Speaker Change: And it's hard to predict what I will say is there is reason to believe that it could be a net positive for us over the midterm.
Speaker Change: We have a very significant U S manufacturing base that we believe is competitively advantaged and many of the categories that we're competing against.
Speaker Change: If you think about half of our business is manufactured and the biggest part of our U S business, we manufacture in the U S and.
Speaker Change: And we compete against a number of players that are not manufacturing in the U S.
Speaker Change: <unk> already.
Speaker Change: Started to get a little bit of traction in the back half of the year, we havent really fully baked this isn't yet.
Speaker Change: Around.
Speaker Change: Going out and talking to retailers about shifting their promotions slots to made in the USA product as to way to insulate the retailer assortments.
Speaker Change: From tariff potential we've also talk to retailers about changing their shelf sets to favor made in the USA product.
Speaker Change: And discontinuing some of their particularly on some of the categories, where they are bringing private label and from China, We think they should shift and discontinue that product and put our brands and in place.
Speaker Change: Im selling a little bit on that.
Speaker Change: As we have those discussions, but we're getting some traction and that traction is increasing and so that will be a tailwind for us on the flip side.
Speaker Change: As we've mentioned there is some headwind there.
Speaker Change: That we can face from China tariffs from Mexico and.
Speaker Change: Canada potentially retaliatory tariffs.
Speaker Change: And so how that fully mapped out.
Speaker Change: Just very difficult to predict which is why we.
Speaker Change: When we gave our guidance we said it was preliminary but I do think we've got a lot of opportunity in this environment because of the U S manufacturing base.
Speaker Change: And.
One of the things that we went back and looked at was.
Speaker Change: If you look at what's happened.
Speaker Change: In the Europe, and the normal U S manufacturing base.
Speaker Change: 2017 since the.
Speaker Change: 2017 tax cut.
Speaker Change: The initiative was put into place <unk> invested close to $2 billion in U S manufacturing.
Speaker Change: And we think that that is sort of unique.
Speaker Change: Relative to our competitive set and so we're trying to figure out how do we leverage how do we scale up we can hire more workers and as we scale up that is U S manufacturing plants that comes at a very high incremental profit rate as well because it carries fixed overhead so it's a long way of saying.
Speaker Change: We don't really know because it's hard to predict what the outcome is but we do have an underappreciated to your point positive tailwind from our U S manufacturing and the question will be how does that compare to the.
Speaker Change: The headwind potential from tariffs on the <unk> business.
Speaker Change: That we may be facing.
Speaker Change: Okay, Great and let me just one more thing and I apologize if I missed this in the prepared remarks from Mark but.
Speaker Change: Q1 core sales just why we knew wed expect it to be down just a bit more than I had anticipated I know, it's a really small quarter. So I just wanted to know if there was more clarity on the driver of that one Q <unk>.
Speaker Change: Core sales.
Speaker Change: I think on Q1.
Speaker Change: They pointed out Q1 is always our smallest quarter of the year because we.
Speaker Change: We have a number of seasonal businesses.
Speaker Change: It's the smallest season on every single one of our businesses.
Speaker Change: So.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: I don't read too much into Q1, as an indicator of where we're headed for the year.
Speaker Change: If you look at Q1 this year versus Q1 last year.
Speaker Change: We're our guidance.
Speaker Change: Though it's minus two to minus four this year would be an improvement versus even at the low end versus how we started last year.
Speaker Change: So.
Speaker Change: That's what I would tell you about Q1, yes, the only other thing I wanted to offer on Q1.
Speaker Change: Is the fact that there is very little innovation that typically across our categories gets launched in the quarter.
Speaker Change: We feel really good that our innovation funnel is continuing to build out and in fact, our 2025 tier one and two innovation funnel in terms of something we call <unk>, which is gross revenue. After cannibalization is actually three times the size of our 2024 funnel.
Speaker Change: So we've been building that front end capability that will be coming online and the other thing I'll say about Q1 is obviously, the normalized EPS guidance and minus nine to minus 6%.
Speaker Change: As a copy boy, a little bit by surprise, but theres, a big currency dislocation taking effect as we sit here now based on the tariff discussions that have been obviously very public and if you look into our Q1 theres probably about almost nearly a nickel of transaction impact on EPS.
Speaker Change: In the quarter, which we are taking actions now to remediate over the balance of the year and are very confident that we will do so and if you look at our full year EPS guidance at the midpoint, we are projecting to be up 18%. So we feel really very good about the plan. We think the company is continuing to put strength after strength.
Speaker Change: And so this is just a tip oral thing.
Speaker Change: Okay, and then maybe one other thought on that just Mark makes a good point. If you. If you go through that list of innovation that I went through in my prepared remarks, the vast majority not all but the vast majority of that innovation is launching sort of in the season. So this summer and that innovation.
Speaker Change: We think based on the feedback we've heard from retailers is going to be very well received in the market. So.
Speaker Change: It's a it's what gives us confidence that we're going to return to core sales growth in the back half of the year and we continue to make difficult choices on low margin business, Chris said that for the full year. There was about a point in there I would contend that that's much more heavily weighted towards the front end of the year than the back end of the year and.
Speaker Change: And if you look at the tradeoff that we've been making there I think it's a fair trade right because our two year stack on a normalized gross margin in the fourth quarter was up 790 basis points and second half two year stack was up 700 or.
Speaker Change: So thats a trade that I think.
Speaker Change: More than reasonable for us to be making them at our 2024 net sales were $550 million less in 2023, but our trailing 12 month adjusted EBITDA was up $120 million.
Speaker Change: Okay.
Speaker Change: Alright, great. Thanks, so much.
Speaker Change: One moment for our next question.
Speaker Change: Okay.
Chris Carey: Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.
Speaker Change: Hey, good morning, everyone.
Chris Carey: Just wanted to follow up on that line of thinking actually.
Chris Carey: <unk> been divesting and shedding businesses for some time, even before the Jarden acquisition, but obviously it accelerated since then.
Chris Carey: And it continues to do today.
Chris Carey: Obviously, there are gross margin benefit is this just going to be something that.
Chris Carey: Is this going to be a part of the story on an annual basis and there is going to constantly be.
Chris Carey: Some some revenue headwind in gross margin offset how close do we.
Chris Carey: Row two.
Chris Carey: The portfolio that we'll probably see over the longer term I realize there's always going to be decisions here and there.
Chris Carey: So just as the durability of it number one.
Chris Carey: Or should we be thinking about this as to your point about.
Chris Carey: You can see better margin benefits and perhaps earnings.
Chris Carey: Any thoughts on.
Chris Carey: They have a cadence of this durability.
Chris Carey: Yes, I think I think.
Chris Carey: I think that that dynamic that you are talking about 25 is likely to be the end of that dynamic and we will not have that dynamic in the same way as we head into 'twenty six and the reason why I say that is.
Chris Carey: Recall that when we started this strategy 18 months ago, we had 80 brands.
Chris Carey: We ended the year.
Chris Carey: In 2004 with 55 brands, so we've already gotten 25 out.
Chris Carey: Of those 55 brands, there's maybe five or so that we still.
Chris Carey: Are likely to exit that are relatively small but we.
Chris Carey: We expect to do that kind of in the first half of this year and so we think we're going to be a portfolio of 50, we think that portfolio 50 is now the right portfolio going forward and recall that our strategy is to focus on the top 25, which represent 90% of the sales and profits of the company.
But I don't think the clean up is going to be as pronounced going forward. We have had that as a headwind to your point, but I think.
Chris Carey: When we get into 2026 that point of headwind that we talked about that's what embedded in our core sales guidance for 25, I don't expect us to be talking about that being a headwind for 2006 as we go into 'twenty six.
Chris Carey: Yeah.
Chris Carey: Okay Alright.
Chris Carey: The other question would be from a category growth perspective.
Chris Carey: How would you assess your visibility.
Chris Carey: Across your major categories.
Chris Carey: There are a number of categories.
Chris Carey: Across consumer that are seeing sluggish growth right now.
Speaker Change: Like what's the what's the rank order were.
Speaker Change: Pretty good visibility here, but the.
You can be you can be exposed a little bit on the tail and then how are you thinking about.
Speaker Change: Ring fencing exposure, just given the volatility that we've seen in category growth in recent times.
Speaker Change: Yes category growth is always a little bit more of an art than a science to predict.
Speaker Change: What I would say is as we as we started 2024, we said that we were expecting in 2004 category categories to be down low single digits and they did turn out to be down low single digits. So.
Speaker Change: We hit the forecast.
Speaker Change: In 2000 and for that we were expecting as we head into 'twenty five.
Our forecast is for the category growth rate to be about flat.
Speaker Change: And when we talk about the category growth rate, we're talking about the global category growth rate not just the U S category growth rate and so we used a number of different sources to try to make that projection I think we've gotten better at.
Speaker Change: <unk>.
Speaker Change: Looking at data sources, whether it would be.
Speaker Change: From companies like <unk>.
Speaker Change: The issue of forecast largely for the U S.
Speaker Change: Euro monitor we look at what retailers around the world are saying we look at.
Speaker Change: Macroeconomic forecasts and then we and then we look at history of these categories as well and we sort of triangulate to try to get to what we think the forecast is likely to be.
Speaker Change: <unk>.
Speaker Change: There are likely going to be some puts and takes.
Speaker Change: And that forecast there'll be some geographies that that that we expect will grow in some categories that we expect will grow and there'll be others, where we will see a bit of a headwind but.
Speaker Change: So far there is no.
Speaker Change: And our and our.
Speaker Change: And our forward looking lens that would cause us to come off of that forecast up categories improving.
Speaker Change: Improving in 'twenty, five versus 24 and being about flat in total.
Speaker Change: Okay. Thanks, Chris.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Brian <unk> with Canaccord Genuity. Your line is open.
Brian: Hey, good morning, guys. Thanks for taking the questions.
Brian: First I was hoping you could comment on I guess, what I'll call. Your practical tariff exposure to China I know a good portion of it as you mentioned is graco, where you've had kind of waivers in the past so assuming those waivers continue where do you kind of see those percentages landing that the 15% current in the 10% by year end.
Brian: Yes, So let me start with that as you rightly pointed out 15% is where we are today, we expect to be a 10 by year end.
Brian: By year end of that 10 by year end.
Brian: The majority of that is related to the baby business. So certainly more than half of it maybe 60% 70% of it is baby related that is currently exempt from 301 tariffs now I will say this.
Brian: The most recent tariff pronouncement that the government has announced a 10% applies to all China goods irrespective.
Brian: Of exemptions or not.
Brian: We'll see whether that sticks and how that applies.
Brian: But that would be the exposure on China in most cases.
Brian: Where we have China exposure, we are not competitively disadvantaged in a significant way because the industry.
Brian: Is dependent on China for those categories.
Brian: As the first point the second point is we are not exposed at all for retaliatory tariffs from China and so we there.
Brian: There is nothing that we manufacture in the U S that we import to China, we do have a China business, that's the fine writing business.
Brian: <unk> Parker and Waterman, but those products are made in Europe and sold into China. So.
Brian: We have sort of a one way exposure on China.
Brian: As from China into the U S.
Brian: Got it and then quickly a second question when we get often from investors is what drives the return to core sales growth is it simply lapping easy comps lack of headwinds from kind of SKU reductions and brand exits innovation, which we've seen as a template in learning and development or maybe something else. If you can kind of rank order those in buckets I think that would be very helpful.
Brian: Thanks.
Speaker Change: Yeah. So if you talk about what gets us back to core sales growth number one we expect the category as I mentioned two improved from down low single digits. This year to about flat next year and so category improvement is sort of one piece relative to the things that are in our control.
Speaker Change: We have significantly improved ramped up our new product innovation pipeline I mentioned, a number of them that we're launching but if you look at just as a headline in 2023, we had.
Speaker Change: By our estimates one tier one initiative that we launched a recall that as part of our new strategy, we put a <unk> system in place that's based on size and importance of the initiative.
Speaker Change: You looked at heading into 'twenty four we had eight tier one initiatives that we were that we launched in 2004 and next year, we're going to be in the mid teens and so we're seeing that ramp up next.
Speaker Change: Next year being 25.
Speaker Change: We're seeing that ramp up and new product innovation, Marc mentioned it as well.
Speaker Change: The gross revenue after cannibalization is significantly higher today from the new product innovation than what we had going into 'twenty four or 'twenty. Three that's the second component. There is a third component which is distribution expansion.
Speaker Change: No.
Speaker Change: Our net distribution as best we can measure it.
Speaker Change: In 2004 was negative in terms of retail distribution in physical retail stores as best we can measure the plan that we've got in the retail commitments for 25% our net contribution in 'twenty five is going to turn positive and so we will go from distribution beer.
Speaker Change: A headwind to being a tailwind as we move into 'twenty five is the third piece and our sales teams are very focused on that because we have a significant opportunity because many of our brands, which are market leading brands have a share of shelf that is below their market share and so we think there is an opportunity for retailers.
Speaker Change: To drive category growth by giving us more shelf space and we think our brands are deserving of more shelf space and as the innovation ramps up it gives us the leverage to go and ask for more shelf space and then.
Speaker Change: And then I think the.
Speaker Change: The next piece is we're getting sharper on mix.
Speaker Change: And pricing and so we've talked about in our strategy the move from opening price point to medium and high price point.
Speaker Change: All of the innovations that we're launching our medium and high price point products and so we believe that we're going to start to drive.
Speaker Change: Price per unit up in these categories.
Speaker Change: Through our new product innovation and through our mixed management process. Those are the biggest elements that get us from what has been a core sales declined to core sales positive if I could add just a couple of other pieces of perspective I think the other part of it was we just weren't spending enough money in A&P to be Frank If you go back to 2022, our A&P level was 4% morphing.
Speaker Change: This year at $5 five we think we'll finish 25 closer to six now that varies by brands and brands at nearly 10% of their sales being spent some have very low percentages like the rubbermaid commercial business, where it's not necessarily appropriate, but we haven't been investing enough in our brands and our leading brands and we didn't do enough work upfront with the consumer qualification.
Speaker Change: Work, we didn't have a lot of qualified propositions, we are bringing forward that at 360 marketing strong claims full influencer and social media program, and that's where all the things that Chris talked about when he came on and did the capability assessment, we had a lot of outages in our front end capabilities and branding and marketing was one of those things I mean, it's only been 60.
Speaker Change: Seven months since we actually put full brand management in place over here at Newell brands.
Speaker Change: Really helpful color. Thanks, guys.
Speaker Change: One moment for our next question.
Andrew: Our next question comes from Andrew <unk> with Jpmorgan. Your line is open.
Speaker Change: Hi, good morning, everyone and thank you for the questions. So Chris Mark how much pricing contributed to core sales in Q4, you mentioned in the release that price in international markets to offset FX was a meaningful contributor which is natural of course, but to the total cost saves, which as we all know declined 2%.
Speaker Change: So therefore, it implies that volumes were negative in the mid single digits I'm, assuming not to say that obviously this is what has been the case.
Speaker Change: But as we progress and obviously, we saw what do you.
Speaker Change: When you guided for the first quarter, how should number one.
Speaker Change: Thinking about about pricing and then two of course like the offset to that in <unk>.
Speaker Change: <unk> and then a second question is on Mexico, which is an important pillar of <unk> International expansion as you pointed out there is the five <unk>.
Speaker Change: There is all of your growth going forward.
Speaker Change: Can you expand a little bit on how the recent development of course.
Speaker Change: Initially like having a recession in Mexico.
Speaker Change: Can influence.
Speaker Change: Look thank you.
Speaker Change: Yes, so just a couple of thoughts I would say pricing was about a point and Q4. So it was it was not.
Speaker Change: Huge and most of that pricing that was about a point in Q4 was in markets, where we saw a significant devaluation of currency as.
Speaker Change: As we mentioned in Mark's prepared remarks, as we head into Q1.
Speaker Change: We are seeing.
Speaker Change: Significantly higher FX pressure and so we are planning more pricing largely in international markets that pricing is going into effect sort of toward the February March timeline. So it will have a bigger impact on Q2 than it will on Q1, but that's sort of the pricing dynamic.
Speaker Change: <unk> with regard to Mexico.
Speaker Change: Mexico is one of our top international markets.
Speaker Change: And we are growing in Mexico, we have.
Speaker Change: Two manufacturing plants in Mexico that are supporting Mexico.
Speaker Change: Blender plant in <unk> and <unk>.
Speaker Change: Writing plant.
Speaker Change: In Mexicali.
Speaker Change: Which are basically the 5% of cost of goods sold that I mentioned that are coming from Mexico into the U S. In my prepared remarks with regard to the Mexican business from a business sold in Mexico, I would say Mexico roughly is about four 5% of the total.
Speaker Change: Company's revenue.
Speaker Change: And we think we've got still a significant opportunity because our market share positions in Mexico, while strong are still not as strong as they are in the U S market and so we.
Speaker Change: <unk> got a plan, we think in Mexico. Despite the macroeconomic environment, where we think we can grow in Mexico and gained significant market share a.
Speaker Change: Couple other things I'll just throw out just for your benefit is if you think about the net pricing that we expect in 'twenty five.
Speaker Change: And almost all of it is driven by currency movements, we think thats, probably going to fall out maybe one third in the first half of two thirds in the second half, but the FX impact is roughly 60 40, the other way.
Speaker Change: So again, we think the first quarter is a bit of a temp oral thing obviously the currency pairs broke meaningfully.
Speaker Change: Very recently, a very suddenly because of our work with our trade customers. We don't go in necessarily the next day and put through a pricing action. It takes time, so were admittedly getting scraped a little bit.
Speaker Change: But we werent caught unaware we were very proactive and we have plans in place and those are being implemented.
Speaker Change: So we're not overly concerned about it and as I said in the prepared remarks, we have.
Speaker Change: A good plan that were confident will at the end of the day drive over 100 basis points of op margin improvement through the full year, which is our evergreen target.
Speaker Change: Thank you I'll pass it on.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Operator: Our last question comes from Peter Grom with UBS. Your line is open.
Peter Grom: Thanks, operator, good morning, everyone. So first mark.
Peter Grom: Both outlined various uncertainties. This is a preliminary guidance.
Speaker Change: I totally appreciate that it's hard to predict these things, but if we were to put that aside for a second I mean, how would you characterize it.
Peter Grom: Degree of flexibility in the Sky.
Peter Grom: Ask that in the context of what we've seen over the past year, particularly on the operating margin framework.
Peter Grom: The degree of expansion you delivered this year came in at about twice as strong as you expected at the start.
Peter Grom: Yes, I think look we're trying to be prudent in the guidance one of the things that.
Peter Grom: Sure.
Mark: As Mark and I.
Mark: Initiated the turnaround plan.
Mark: 18 months ago.
Mark: We want to develop.
Mark: Focus on delivering what we say it doesn't mean that we're trying to be sandbaggers, we're not trying to do that but at the same time, we're trying to tell you to provide what we think.
Mark: As is reasonably we are reasonably confident we can deliver.
Mark: And in some cases, we're going to try to run very fast.
Mark: To over deliver.
Mark: And so the work doesn't stop when the.
Mark: When the budget is done or when the guidance was given.
Mark: <unk>.
Mark: We've got internal targets that are higher than what's in our guidance.
Mark: And you would expect us to have internal targets that are higher than what's in our guidance.
Mark: And so but we also are not immune from macro impacts I will say if you look at the flexibility that's in the P&L I feel better today than I did.
Mark: A year or two ago, Mark mentioned, we're going into the year with a much higher A&P budget.
Mark: <unk>, which we intend to spend behind our innovations, but if we wind up through the year.
Mark: <unk>.
Mark: Seeing something happened that that causes.
Mark: Some of those innovations to be.
Mark: Disrupted by macro forces.
Mark: We do have discretionary spend is built into the budget that can allow us to still deliver.
Mark: Likewise, we have upside plans that we're working on to say if things are going better than we than we expect.
Mark: We're going to double down and invest more.
Mark: So.
Mark: That's sort of how we approach it I know it's not a.
Mark: Ed.
Mark: A hard and fast answer but.
Mark: But we want to continue to.
Mark: To deliver what we say in.
Mark: And have our teams focused on over delivering what we're what we're promising externally.
Okay. That's really helpful. Chris and then Mark just maybe quickly how do you see operating margin expansion phasing through the year.
Mark: Smaller <unk>.
Mark: As you alluded to but do you anticipate <unk> expansion or is this more of a back half weighting improvement and I guess, what I'm trying to get out here is if it's more of the latter that would imply some very nice margin expansion exiting the year.
Mark: And so I know, we're still a ways away from 2006 2020, thanks, not asking for guidance here, but does that give you confidence that getting back to the long term target of low double digit operating margins can kind of sooner rather than later.
Mark: Yes, I guess this is what I would say look we're not going to provide quarter by quarter guidance on op margin.
Mark: What I would say is that we feel really good about the margin work that has been done right. The second half.
Mark: This past year of <unk> 24 versus 'twenty, three and 'twenty two shows market improvement we've made up for years of gross margin decay and decline in very very short order and thats because frankly, all the work that's been done on gross margin is structural versus cyclical and what I mean by that is our top line is still compressing we've been driving inventory down in <unk>.
Mark: The capacity utilization hits that come along with that in the short term, but the underlying fuel productivity program and the automation work that we've done that the gross margin accretive innovation is still largely coming.
Mark: Positive mix management pricing and promotion management all of those things are systemic in endemic to what were now doing routinely across the business and there is absolutely no reason why when Chris and I sat out at Deutsche Bank, roughly two years ago and laid out our our mid term goal of of saying look we want to get gross margin of 37% to 38% and we can do that and have A&P.
Mark: And we're in the 6% 7% range.
Mark: And get our overheads back down where they need to go.
Mark: Let's say in the 17% range that we could have an op margin of 13% to 15% versus this year, we ended up at eight.
Mark: I think we feel really good about what we've been able to deliver.
Mark: Year over year over year, I mean, we just had a $900 million of trailing 12 months adjusted EBITDA on this business and as we talked earlier sales were down but.
Mark: Profit was up significantly and that was a trade we knew we had to make based on the portfolio that we had we made it we said that we're going to work towards the Barking dogs to make quick Swift decisions under Chris's leadership, that's exactly what we've done.
Mark: So I think we feel really good that we're we're piecing the turnaround together one piece at a time and my confidence has never been better.
Speaker Change: Thanks, So much I'll pass it on.
Speaker Change: Thank you. This concludes today's conference call. Thank you for your participation and replay of today's call will be available later today on the company's website at IR Dot Newell brands' Dot Com you may now disconnect and have a wonderful day.
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