Newell Brands said it began the first quarter with strong momentum but the spread of the coronavirus pandemic disrupted its operations both on the supply chain and retail sides of the business.
Net sales in the quarter ended March 31 were $1.9 billion, a 7.6% decline compared to the prior year period, reflecting a 5.1% decline in core sales and the unfavorable impact of foreign exchange. The company reported a net loss of $1.3 billion, or $3.02 diluted loss per share, compared with a net loss of $151 million, or $0.36 diluted loss per share, in the prior year period.
The appliances and cookware segment generated net sales of $291 million compared with $330 million in the prior year period, due to a core sales decline of 8.5% and the impact of unfavorable foreign exchange. Reported operating loss was $308 million compared with an operating loss of $4 million in the prior year period. The year over year change was primarily due to a $299 million impairment charge related to goodwill and intangibles. Normalized operating loss was $7 million, or negative 2.4% of sales, versus a normalized operating loss of $2 million, or negative 0.6% of sales, in the prior year period.
Newell Brands said it began the first quarter with strong momentum. However, beginning in March and extending through April, the company began to experience significant COVID-19 related disruption to its business including its supply chain. While the majority of the company’s factories are considered essential and are operational, the company is experiencing disruption at a number of facilities. Of its 135 manufacturing and distribution facilities, nearly 20 were or are temporarily closed.
While Newell Brands’ largest retail customers are experiencing a surge in sales as their stores remain open, a number of secondary customers, primarily in the specialty and department store channels, have temporarily closed their stores. These dynamics, in combination with some retailers’ prioritization of essential items, have had a meaningful impact on retailer order patterns, said Newell. In addition, Newell Brands temporarily closed its Yankee Candle retail stores in North America as of mid-March.
As the quarantine phase of the pandemic has taken hold, consumer purchasing behavior has strongly shifted to certain focused categories, the company said. While certain of the company’s businesses benefited from this shift in the first quarter, including food and commercial, others have seen significant slowing. As a result of these challenges Newell Brands said it experienced a significant negative impact on sales in March and April and expects this trend to continue through the second quarter. For context, in April, the company estimates it experienced a sales decline of approximately 25%.
The company also furloughed approximately 5,000 employees, primarily related to supply chain and retail operations; tightened discretionary spending; reduced and optimized advertising and promotional expenses and instituted a hiring freeze for non-essential roles.
“The turnaround plan that we have been executing against puts Newell Brands on a stronger footing to confront the significant and unprecedented challenges inherent in the global COVID-19 pandemic,” said Ravi Saligram, Newell Brands president and CEO. “We have established three key priorities in this rapidly changing operating and economic environment. First and foremost is the safety and well-being of our employees. Second, we are taking decisive actions to sustain the company’s financial vitality with a laser focus on maximizing cash flow and ensuring strong liquidity. And finally, we are working diligently to keep our manufacturing facilities and distribution centers operating where possible, so that we can continue to provide critical products to our consumers and customers. Although we delivered performance in line with or ahead of expectations in the first quarter, we expect the second quarter to be a very challenging quarter. We are encouraged, however, by the pockets of strength we are seeing in the food and commercial businesses as well as recent point of sale trends in the appliances and cookware business in the U.S. We remain confident in our liquidity position and our ability to successfully navigate the enterprise during these difficult times.”
In additional news, Mike Hayes joined Newell Brands on April 5, 2020, in the role of chief customer officer. Hayes joins the company from Georgia Pacific, where he served as svp/sales and sales strategy. Previously he led the North American sales organization as chief sales officer for the consumer business comprising brands such as Angel Soft, Quilted Northern, Brawny, Vanity Fair and Sparkle.