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Spectrum Brands' (SPB) Strategic Efforts Aid Amid Currency Woes

Spectrum Brands SPB has been riding on its Global Productivity Improvement Plan and strategic transformation plans. Also, gains from cost-reduction efforts act as an upside.

Notably, the company has been streamlining its organizational structure and re-energizing its employee base. The company is committed to improving operational efficiencies throughout and limiting risk.

It is focused on transforming the company into a pure-play global Pet, and Home & Garden business. As part of its strategic transformation, the company anticipates concluding the HHI transaction and collecting $4.3 billion in cash by June 2023.

The company is also focused on its Global Productivity Improvement Plan (GPIP), which aims at improving its 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 the businesses. The plan will also enable the company to deliver value creation and sustainable growth in the long term.

As a result, first-quarter fiscal 2023 operating expenses of $222.1 million declined 8.6% year over year. Prior to this, the metric fell 15% year over year in the fourth quarter of fiscal 2022.

 

Zacks Investment Research
Zacks Investment Research


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We note that shares of this Zacks Rank #3 (Hold) company have gained 5.3% in the past three months against the industry’s decline of 2%.

However, Spectrum Brands continues to reel under high retail inventory that weighed on the volume of products sold in the fiscal first quarter. This, along with a difficult economic environment and dismal demand, acts as deterrents.

Consequently, earnings and sales missed in first-quarter fiscal 2023 for the third straight quarter. The company reported an adjusted loss of 32 cents per share, wider than a loss of 6 cents in the year-ago period. This was mainly due to weak adjusted EBITDA stemming from adverse currency.

Net sales fell 5.8% year over year to $713.3 million. Excluding the currency headwinds and sales gains from buyouts, organic net sales declined 9.5%. The downside was mainly due to lower replenishment orders, stemming from higher retail inventory and slower holiday POS. Going into 2023, the company expects flat year-over-year sales, including the adverse impacts of foreign currency.

Also, unfavorable currency remains worrisome. Negative currency impacted revenues by $39.6 million in the fiscal first quarter. The Home & Personal Care, and Global Pet Care segments were hurt by adverse currency to the tune of $25.7 million and $13.9 million, respectively.

Stocks to Consider

Some better-ranked companies are Ralph Lauren RL, H&R Block HRB and Deckers Outdoor DECK.

Ralph Lauren, a footwear and accessories dealer, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ralph Lauren’s next-financial-year sales and EPS suggests growth of 5% and 12.8%, respectively, from the year-ago reported figures. RL has a trailing four-quarter earnings surprise of 23.6%, on average.

Deckers Outdoor currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 31%, on average.

The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 12% and 13.5% from the year-ago period’s reported numbers, respectively.

H&R Block provides assisted income tax return preparation and do-it-yourself tax return preparation services. HRB currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for H&R Block’s current financial year’s EPS suggests growth of 9.4% from the year-ago reported figure. H&R Block has a trailing four-quarter earnings surprise of 10.7%, on average.

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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Ralph Lauren Corporation (RL) : Free Stock Analysis Report

H&R Block, Inc. (HRB) : Free Stock Analysis Report

Spectrum Brands Holdings Inc. (SPB) : Free Stock Analysis Report

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Zacks Investment Research