Despite some effects from the coronavirus pandemic on the marketplace, Spectrum Brands posted solid results in its second quarter with its personal care and small appliances division showing strong net sales growth.
Overall net sales increased 3.4% in the second quarter ended March 29, 2020, to $937.8 million. Excluding the impact of $7.3 million of unfavorable foreign exchange and acquisition sales of $0.8 million, organic net sales increased 4.1%, with growth in global pet care, home and personal care and home and garden, offset by a slight decline in hardware and home improvement. In total, the company estimates that the net COVID 19 impact to revenue in the quarter was a negative $7.5 million.
Net loss in the second quarter was $59.2 million and diluted loss per share was $1.29, driven by a loss on the company’s Energizer common stock holding despite an increase in operating income, lower interest expense and lower shares outstanding.
In the home and personal care division, net sales of $232.7 million were driven by growth throughout the quarter, across all regions and by increases in both personal care and small appliances. Strong net sales growth in the U.S. was driven by mass and online channels despite declines from the impact of temporary store closures of many department store and specialty channels during the last few days of the quarter. Excluding unfavorable foreign exchange impacts of $5.6 million, organic net sales grew 7.5%. Reduced operating loss, and higher adjusted EBITDA and EBITDA margins were driven by higher volumes, lower operating expenses and productivity improvements, partially offset by foreign exchange headwinds and tariff costs.
David Maura, chairman and CEO of Spectrum Brands Holdings, stated, “First and foremost, I want to say thank you to our Spectrum Brands family. With over 11,000 employees worldwide, I am proud of the amazing way in which we responded, collaborated and took proactive steps to protect our people and our company and to serve our retail customers and consumers all around the world. What we have learned during these unprecedented times, is that Spectrum Brands is a company whose products are essential and whose retail customers are essential and have so far predominantly remained open around the world. I have never seen our people come together the way they have over the last six weeks and demonstrate so clearly our vision of having a team that is empowered and inspired. I believe that what has motivated our people during these challenging times is the realization that we are not just making goods and providing services, we are coming alongside our fellow citizens through this crisis by helping them cook meals in their kitchen, take care of and enjoy their pets, secure their homes and businesses, rid their yards of weeds and protect their families and homes from insects. This is no more evident than our team in Blacksburg, VA, pivoting to produce Cutter-branded hand sanitizer in a few short weeks. This accomplishment affirms that our people are our greatest asset.”
Maura continued, “Our second quarter results reflected strong top and bottom-line results, with net sales growth of 3%, organic growth of 4%, operating income growth of 62.7% and adjusted EBITDA growth of 21.5%. It is important to recognize that this growth was driven by strong results throughout the quarter. From a balance sheet perspective, we moved quickly to increase the amount of cash on hand to strengthen liquidity by drawing down on our $800 million revolver and ended the quarter with $458 million of cash on hand. Since the end of the quarter, we added a new $90 million tranche to our revolving credit facility. During the quarter, we also finalized the sale of the European dog and cat food manufacturing operations for cash proceeds of over $30 million, closed our Cambodia rawhide manufacturing facility and acquired Omega Sea to add to the global pet care portfolio of aquatics brands. All of these accomplishments further demonstrate the importance of strong, consistent execution.”