Spectrum Brands Holdings, Inc. SPB received a green signal from the Mexico competition authority to sell its Hardware and Home Improvement segment (HHI) to ASSA ABLOY for $4.3 billion in cash. This was the last step to complete the divestiture. With this, the company expects to close this transaction on or before Jun 30, 2023.
SPB estimates net sales proceed of $3.5 billion, which is predicted to repay debt and reduce its gross leverage ratio to 2.5X times in the near term. Any excess money will be invested for organic growth, fund acquisitions and return capital to shareholders.
The sale is part of the company’s strategic transformation plan. This long pending definitive agreement was initially announced in September 2021. The transaction is likely to strengthen its balance sheet. The company already simplified the business into three segments — Global Pet Care, Home & Garden, and Home and Personal Care.
The company will now be able to prioritize innovation to accelerate organic growth and pursue synergistic acquisitions to further drive value creation in Global Pet Care and Home & Garden. Post the conclusion of this deal, SPB will be able to establish itself as a pure-play consumer staples company.
What Else Should You Know?
Spectrum Brands’ Global Productivity Improvement Plan and strategic transformation plans bode well. The company is streamlining its organizational structure and re-energizing its employee base. Also, gains from cost-reduction efforts act as upsides.
SPB is progressing well with its Global Productivity Improvement Plan, which aims at improving the company's operating efficiency and effectiveness, while focusing on consumer insights and growth-enabling functions, including technology, marketing, and research and development.
The majority of savings are expected to be reinvested into growth initiatives and consumer insights, R&D, and marketing across each of its businesses. This plan will also enable the company to deliver value creation and sustainable growth in the long term.
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Driven by these factors, shares of this Zacks Rank #3 (Hold) company have gained 18.3% in the past three months against the industry’s decline of 5%.
However, lower first-half demand and inventory reduction by retailers hurt Spectrum Brands’ second-quarter fiscal 2023 year-over-year performance. The company reported an adjusted loss of 14 cents per share against earnings of 41 cents in the year-ago period. Sales fell 9.7% year over year, while organic net sales declined 10.1%.The downside was mainly due to retailer inventory management strategies and slower category POS, offset by positive pricing.
For fiscal 2023, the company expects a mid-single-digit sales decline, down from the prior stated low-single-digit growth. Adjusted EBITDA is likely to decline in the low to mid-single digits, down from the earlier mentioned low-double-digit growth.
Stocks to Consider
Some better-ranked companies are Bluegreen Vacations BVH, Royal Caribbean RCL and Crocs CROX.
Bluegreen Vacations sports a Zacks Rank #1 (Strong Buy) at present. BVH has a trailing four-quarter earnings surprise of 24.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates increases of 3.6% and 17.6%, respectively, from the year-ago reported levels.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS implies increases of 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.
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