Spectrum Brands Holdings, Inc. (NYSE:SPB) Q3 2025 Earnings Call Transcript

Spectrum Brands Holdings, Inc. (NYSE:SPB) Q3 2025 Earnings Call Transcript August 7, 2025

Spectrum Brands Holdings, Inc. misses on earnings expectations. Reported EPS is $1.24 EPS, expectations were $1.25.

Operator: Good day and thank you for standing by. Welcome to the Third Quarter 2025 Spectrum Brands Holdings earnings conference call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Joanne Chomiak.

Joanne Chomiak: Thank you, and welcome to Spectrum Brands Holdings Q3 2025 Earnings Conference Call and Webcast. I’m Joanne Chomiak, Senior Vice President of Tax and Treasury, and I will moderate today’s call. To help you follow our comments, we have placed a slide presentation on the Event Calendar page in the Investor Relations section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with Slide 2 of the presentation. Our call will be led by David Maura, our Chairman and Chief Executive Officer; and Jeremy Smeltser, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to Slides 3 and 4. Our comments today include forward-looking statements, which are based upon management’s current expectations projections and assumptions and are by nature uncertain.

Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated August 7, 2025, our most recent SEC filings and Spectrum Brands Holdings’ most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statements. Our statement reflects our expectations regarding tariffs, which are based upon currently known and effective tariffs and do not reflect tariffs that have been announced and delayed or other additional tariffs, which could result in additional costs. Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today’s press release and 8-K filing, which are both available on our website in the Investor Relations section.

Now I’ll turn the call over to David Maura. David?

David M. Maura: Thanks, Joanne. Good morning, everybody. Welcome to our third quarter earnings update. I want to thank everyone for joining us today. I’ll start the call as usual with an update on kind of the global economic markets and their impact on our company. We’ll then talk about Spectrum’s operating performance and then our strategic initiatives. Jeremy, as usual, will then provide a more detailed financial and operational update, including a discussion on the more specific results of each business unit. If I could get you guys to turn to Slide 6 now. When we spoke last quarter, the company had been hit with what I’m now calling the tariff torpedo. That really disrupted practically every aspect of how we do business around here, operating when the cost of your products can more than double overnight, is something we never really thought we’d experience.

Frankly, about 20% of our global cost of goods sold at the time was sourced from China for the U.S. market and the cost of importing that product for sales to the U.S. consumer was suddenly so high, we had to take very swift and quite frankly, draconian actions to protect the company. I told you last quarter that we would control, we would be nimble and we would protect the house. We were resolute in our conviction that we would not sacrifice the long-term health of our business for any sort of short-term gain I was confident that we would get through the near- term volatility and emerge a stronger and more focused competitor in our space. We knew that there would be short-term consequences to these decisions but we also believe that doing the right thing for the long term would outweigh any sort of short-term gain.

As I sit here today, 90 days later, I’m confident that we’ve made the right decisions. We took the challenges head on. We felt the impacts on our results this quarter, but we’re now already starting to see the benefits of making these difficult but correct decisions. Doing the difficult but right thing meant we had material supply issues in the third quarter. You’ll recall that when you have tariff — U.S. tariff rates on Chinese-sourced products went to 145% and in some cases, up to 170%. Earlier this year, we paused virtually all finished good purchases from China until such time the tariff levels declined to a place where we believe we could maintain profitability and margins. In mid-May, when the U.S. tariff rate on Chinese imports dropped to 30%, only then did our businesses begin to strategically place orders again, and we only bought product where we knew we could price them for tariffs.

Turning to the supply chain took time because we completely shut it off. We were negotiating supplier pricing concessions, we were prioritizing production runs, and we were making arrangement with ocean freight carriers. We genuinely have 1 of the best supply chain teams in the industry today. But even with them at the helm, we went up to 8 weeks without any importation of product, and that left us out of stock on some of our main SKUs. Regular supply is now back on. But in this case, doing the right thing, we had orders we simply couldn’t fill in our Global Pet Care and Home & Personal Care businesses during the third quarter. Some of that will continue into Q4 as well. Doing the difficult but right thing meant that we stop shipping to some customers.

When we faced material inflationary headwinds, our playbook is to cover our margin structure through a combination of supplier concessions, internal cost reductions and yes, unfortunately, pricing. So with each round of tariffs, we had to notify our customers that we will be increasing prices. No pricing negotiation with a retail customer is easy. But generally, we seek to be in a mutually agreeable place to arrive at a logical point given the inflationary headwinds. But when these negotiations stall, we simply have no choice but to stop shipping to the customer and allow the negotiation to play out. We know that our products matter not only to our retailers but to our ultimate consumers. And we need to protect our bottom line in part through pricing.

With all the tariff headwinds this year, and even with that the lower Chinese tariff levels, it simply wasn’t practical for us to absorb all the cost of tariffs without increasing some prices. Unfortunately, some of our negotiations lasted much longer than others, which meant we had to stop shipping to certain customers while those negotiations were ongoing. In fact, in some of these cases, the customers were quite large, and they were our key customers and the stop shipment lasted weeks. The good news is that we have now — we now have tariff-related pricing in place with practically all of our customers and our sales levels are already improving. Again, doing the right thing to avoid massive long-term P&L hits, we had to lose a significant amount of revenue in the third quarter.

Doing the difficult but right thing also meant we had to look internally, unfortunately, and we had to reduce our own costs. During the quarter, we executed a number of reduction in force activities that spanned across all the businesses and our corporate functions. We have either eliminated open positions or delayed their backfill. We had to adjust our investment spend to reflect the state of the business and the consumer environment. We’ve had to prioritize investments that would be the most impactful to both this year and into the future given softer consumer demand in some of our categories. We also reduced discretionary and external spend and we’ve been shrinking the real estate footprint of our company by rightsizing office spaces, warehouses and distribution centers.

I’m very pleased that despite these tough decisions, these cost reduction activities that we engaged in and then we’ve implemented literally in the last 90 days, we now expect to reduce our costs by over $50 million in the fiscal year, fiscal ’25. That’s a lot of work in a 90-day period of time. We also have been working hard to diversify the supplier base across the board. The teams are continuing to create diversified sourcing footprints for our global products developing and activating non-Chinese sourcing alternatives. Our goal is to have the lowest all-in cost of supply for each of our markets. We expect that China will likely be the low-cost supply base for our international markets because of its cost advantages and its manufacturing efficiencies.

Now for the U.S. market, sourcing outside of China even there may not always be the lowest cost option due to tariffs on other Asian countries. However, with the recently announced reciprocal tariffs and the trade agreement between the U.S. and China not finalized, it is possible that Chinese sourcing can still be a low-cost option. We have to be nimble. We’re doing the work that provides us the highest level of flexibility to react to whatever the volatility there may be in the marketplace going forward. We are still working toward the targets we discussed during our last call, with GPC or our Global Pet Care company, having non- Chinese sourcing alternatives for the predominance of its purchases by this calendar year-end, and HPC continuing to build out its non-Chinese sourcing footprint throughout the remainder of fiscal ’25 and growing it in ’26.

However, the drop in Chinese tariff levels has provided some relief to these diversification efforts, and they’re giving us a slightly longer time frame in which to address it. If the relative tariff rates change, we will return to an accelerated path to exit China, ensuring we have quality product finding the right long-term solution for the company is the priority. With our initial rounds of pricing and supplier concessions, we have essentially eliminated our tariff exposure at the end of Q3. I’m very proud to make that statement. Based on the current known trade agreements between the U.S., the European Union and other relevant countries that we source from, we are now targeting an incremental $20 million to $25 million worth of pricing and supplier concessions across the 3 businesses to fully cover what we believe will be the incremental exposure heading into fiscal 2026.

Our ability to do the difficult but right thing is enabled by our balance sheet, which is exceptionally strong. Our strong free cash flow generation, the low leverage of the business and our ample liquidity and extended debt maturities. These things are all enabling us to be not only sustain ourselves, but to enable us to strengthen our position in a volatile environment with quarterly sales that quite frankly were materially disrupted given the tariff activities in the last 90 days. But these things — we continually do the right thing for this company to set us up to enter ’26 on strong footing. It’s really made us the partner of choice too for suppliers that are trying to build out new Southeast Asian factories. They know we’re going to be here.

They know they’re going to give them orders, they know they can count on us to pay them in time, on time, every time. We’re going to continue to strive to do the right thing when it comes to protecting our balance sheets and our cash flows always. If I can now everyone turn your attention to Slide 7. I’ll take you through the Q3 numbers. And again, these numbers are materially distorted because of shutting off inputs from suppliers and then quite frankly, shutting off sales to customers during pricing negotiations. But our net sales in Q3 did decline 10.2%. If we exclude some foreign currency benefit, organic sales decreased 11.1%. The U.S. and European customers have been feeling macroeconomic pressure, quite frankly, from the global trade and stability around the world.

Customers have been stressed and that’s led to kind of overall category decline in both pet and the appliance businesses. Quarterly sales were also negatively impacted by the temporary but difficult decisions we made to stop shipments to major retailers when tariff-related pricing negotiations stalled as well as some inventory shortages from the period when we paused all imports from China. In our Home & Garden business, we actually had a cold and wet start to the season, and that did negatively impact POS and retail reorder patterns during Q3. The adjusted EBITDA generated by the business was $76.6 million. That’s a decline of $17 million compared to last year’s results, which excludes the investment income we had from the large cash balance at the time.

Our gross margins did suffer a contraction of 110 basis points during the third quarter, and that’s mainly driven by negative mix, tariffs and inflation. We reacted, as I’ve described very quickly to offset these tariff headwinds and consumer softness by taking out our fixed costs and limiting external spend. It’s imperative every dollar of our spend has to be purposed and to be focused on driving the top line of our companies. Our teams have and will continue to step up to the challenge of doing things better, leaner and more efficiently. The third quarter was all about making the tough but right decisions to protect our house to protect our balance sheet and to protect the long-term success of this company. We have now put Q3 in the rearview mirror.

We are excited to be focusing on the future, and we are already seeing the results with a very strong start to the fourth quarter from a big rebound in sales in July. We have had a strong start to Q4. In July, both our Global Pet Care company and our Home & Garden division delivered growth over the prior year. For Home & Garden, the weather started to improve in the final weeks of Q3 and that momentum is carried through into July when we had very strong POS and retailer reorder rates. The new products we introduced this year, including Spectracide Wasp, Hornet & Yellowjacket Trap and the Hotshot Flying Insect Trap are driving category growth. And in spite of a lot of new competition entering the category, Spectracide is taking share. GPC and HPC’s results continue to be impacted by supply constraints from our pause in Chinese imports but each business is now shipping to all customers.

In Global Pet Care, we gained new points of distribution and regained premium shelf placement for some of our chews at a large retailer who had moved them to prioritize their private label product in the past. Our new GPC President has quickly elevated the level of engagement of our business and is bringing excitement to the team rallying around new innovations in health and wellness, niche treats and food and cat. HPC performed well during Amazon’s Prime days and is now shipping new innovation to retailers that have been impacted by our pause on Chinese purchases. We are continuing to make top line brand-building investments to support our new innovation and to drive category growth. If I could have everyone now go to Slide 8, and I’ll give you guys an update of the strategic priorities for the remainder of fiscal ’25.

After updating our priorities last quarter to reflect the tariff — the new tariff landscape and softening consumer demand environment, our strategic priorities remain unchanged this quarter to reflect our continued focus on making the right long-term decisions for the business and maintaining a nimble stance during these times of volatility. We are focused on protecting the balance sheet, and we remain on track to deliver approximately $160 million in free cash flow this fiscal year, which is nearly $7 per share in free cash flow. On our last call, I told you we were running the business for cash flow generation for the rest of the year due to the high tariff environment and the volatile situation we found ourselves in. The reduction in Chinese tariff rates has shifted our focus back to a more normalized approach while we remain laser-focused on cash flow, liquidity and net leverage, we continue to identify working capital improvements throughout our operations.

We are leaning into our supply chain strength to diversify our supplier footprint and our supply chain team is uniquely situated to strategically anticipate and to quickly and proactively respond to macroeconomic developments. In the third quarter, they handled not only turning off Chinese imports to the U.S. literally overnight, but also turning that back on in a way that ensured we would maintain our profitability. Our quarterly average global fill rates were over 95% in spite of having tariff-related shortages. I’m very proud of the team for that accomplishment. Thank you all. Having high fill rates and service levels are critical when you’re negotiating terms and trying to get pricing with your retail partners, thanks everyone and supply team for making that a reality for us.

We are reducing our cost profile to adapt to consumer demand and, quite frankly, the tariff headwinds, and we’ll continue to adapt to these new macroeconomic conditions swiftly and decisively, just like we did this past quarter. The teams are focused on fewer, bigger and better initiatives to maximize the impact of our investments. We are preparing to take advantage of the opportunities that the times of economic uncertainty bring and emerge as a growing stronger company that will be the partner of choice for M&A activity. Our businesses and our advisers are actively looking for acquisition targets for both our Pet and Home & Garden businesses. We believe that when we make the right acquisitions, both our businesses and the target accelerate sales growth and profitability, which makes our strong capital structure to fund M&A the right move.

We will remain disciplined, however, and we will not overpay. We will make sure we have the right assets. Our strategic transaction for our Home & Personal Care business continued to be delayed given the current tariff landscape and geopolitical factors that are frankly out of our control. While we are disappointed in the delay of the transaction, Spectrum Brands and spectrum becoming a pure-play platform and Garden Company, we believe in the HPC business, and we’re going to continue to be great stewards of it. We have not called off a transaction permanently. And as always, we will seek ways and opportunities to maximize its value. If I can now turn your attention to Slide 9, and give you an update on share repurchases. During the third quarter, we repurchased just under 1 million shares.

We, in fact, bought back 900,000 shares, and we continue to buy during our pre-earnings quiet period through a $50 million 10b5-1 plan put in place in June. Year-to-date through today, we have repurchased approximately 4 million shares for roughly $300 million and in total, since we closed the HHI transaction, we have returned approximately $1.32 billion of capital to shareholders through various share repurchase programs, and we’ve repurchased 42% of our share count since the closing of that deal. We have been more conservative lately in share repurchases to preserve the strong balance sheet and liquidity to manage through the volatility of Q3 and we’ll monitor and be opportunistic in share repurchases going forward. Turning to Slide 10. Given the continued unpredictable nature of global tariffs and global trade negotiations, particularly between the U.S. and China and some softening in the U.S. and Europe of consumer demand, at this time, we don’t have sufficient visibility to give you an earnings framework for ’25.

However, we are reiterating our expectation to deliver the $160 million of free cash flow, and as I noted earlier, that is approaching $7 per share in free cash flow in fiscal ’25. Now before I turn the call over to Jeremy, I want to sincerely thank each and every one of the members of the Spectrum Brands team. The last 90 days was no fun for any of us. You guys all worked hard and tirelessly. I’m proud of how you faced into the turmoil that was delivered to us through tariffs. And I’m really proud of how we’ve handled that. I think we took our medicine and better days are already happening. So I hope we never get hit with this tariff torpedo again, but I’m confident this team will do the right thing, make the tough decisions, work together to ensure the long-term success of this company.

I’m going to turn the call now over to Jeremy, and he’s going to give you some updates, more specifics on the financials, a lot more business unit insights, and then I’ll come back to you guys for closing remarks. Turning it over to you now, Jeremy.

Jeremy W. Smeltser: Thanks, David. Good morning, everyone. Let’s turn to Slide 12 for a review of Q3 results from continuing operations. We’ll start with net sales, which declined 10.2%. Excluding the impact of $6.8 million of favorable foreign exchange, organic net sales decreased 11.1% primarily driven by targeted stop shipments to certain retailers, supply constraints and category softness in our Global Pet Care and Home & Personal Care businesses as well as unfavorable weather in our home and garden business, with the cold and wet start to the season, impacting the timing of replenishment orders. Gross profit decreased $38.7 million and gross margins of 37.8%, decreased 110 basis points, largely driven by lower volume, unfavorable mix, inflation and higher tariffs, partially offset by pricing, impacts from cost improvement actions and operational efficiencies as well as favorable FX.

Operating expenses of $232.8 million decreased 8.7% due to lower investment spend in advertising and marketing and general expense management in light of the category softness and lower restructuring-related projects, partially offset by higher impairment charges in the quarter. Operating income of $31.3 million decreased by $16.4 million, driven by the gross margin decline partially offset by the lower operating expenses I mentioned. GAAP net income and diluted earnings per share both increased primarily driven by lower interest expense, reduced income tax expense and lower share count partially offset by lower operating income and lower investment income. Adjusted EBITDA was $76.6 million, a decrease of $29.7 million, driven by investment income of $12.7 million last year, lower volume and reduced gross margins partially offset by continued general expense management and lower investments in light of category softness.

Excluding last year’s investment income, adjusted EBITDA decreased $17 million. Adjusted diluted EPS increased to $1.24 driven by reduced income tax expense, lower interest expense and the reduction in shares outstanding, partially offset by lower adjusted EBITDA. Turning now to Slide 13. Q3 interest expense from continuing operations of $8.4 million decreased $7.3 million due to our lower gross outstanding debt balance. Cash taxes during the quarter of $14 million increased $9.6 million from last year. Depreciation and amortization of $25.1 million was flat to last year. And separately, share-based compensation increased to $4.8 million from $4.5 million last year. Capital expenditures were $10 million in Q3, essentially flat to last year.

Cash payments towards strategic transactions, restructuring related projects and other unusual nonrecurring adjustments, were $8.6 million versus $10.5 million last year. Moving now to the balance sheet. We had a quarter end cash balance of $122 million and $388.5 million available on our $500 million cash flow revolver. Total debt outstanding was approximately $681 million, consisting of borrowings on our cash flow revolver of $103 million, $496 million of senior unsecured notes and $82 million of finance leases. We ended the quarter with $559 million of net debt. Now let’s get into the review of each business unit to provide details on the underlying performance drivers of our operational results. We will start with Global Pet Care, which is on Slide 14.

Reported net sales decreased 9.6% and excluding favorable foreign currency impacts, organic net sales decreased 11.4%. The primary driver of the sales decline was our decision to stop shipping to a handful of customers during tariff-related pricing negotiations. In the case of 1 key customer, the stop-ship lasted a number of weeks. By the end of the quarter, the pricing was in place and we had resumed shipping to this retailer, although our shipments were below normal levels. In addition, sales were negatively impacted by tariff-related supply issues attributable to the period during which U.S. tariff rates on Chinese products were 145%, and we had paused importing Chinese-sourced products. Sales in the early part of our quarter were also negatively affected by capacity constraints at a large retailer, causing the retailer to slow purchases for a period of time.

Those purchase patterns returned by the end of the quarter. These headwinds led to companion animals organic net sales being down low double digits for the quarter. In addition, while we maintained our market share, the overall North American companion animal category declined in the low single digits. We are pleased with the consumer reaction to our innovation and commercial activation, amplified by a successful collaboration with key retailers that resulted in expanded distribution and improved shelf placement. In EMEA, organic net sales for our Good Boy brand increased, driven by successful range reviews in the U.K. and a very successful launch into Germany and Austria, yet overall companion animal sales were down low single digits driven by weakening European consumer sentiment and a sales push into Q4 due to customer warehouse constraints.

Organic net sales in Latin America grew low double digits, predominantly in the chews category. In Aquatics, organic net sales declined in the low teens with sales declining in each region. In North America, consumer demand remained soft and sales were affected by the same pricing negotiation and weeks where we were not shipping to certain retailers. Distribution gains at Pet Specialty offset some of that softness. In EMEA, market share increased nicely. However, sales were impacted by lower consumer demand and the timing of order fulfillment. GPC’s new leaders are focused on commercializing innovation to engage our retailers and consumers. Our recently launched DreamBone CollaYUMS continue our focus on introducing innovation that offers health and wellness benefits for pets.

CollaYUMS are the only 2 in the market enriched with a Type 2 collagen derived from chicken cartilage benefiting hip and joint health, while offering flavor that was liked by 100% of tested dogs. Good ‘n’ Fun is gaining points of distribution including in pet specialty, and we will be launching new innovation in good and tasty treats in the next few months. Our investments in Nature’s Miracle are gaining momentum. Nature’s Miracle has an extraordinarily high loyalty rate driven by its best-in-class product performance. Our investments and partnerships with retailers and influencers to increase consumer engagement along with our recently launched delivery systems featuring our patented flip and go technology to enhance user convenience and drive consumer engagement is being well received by Nature’s Miracle consumers.

In dog and cat food, we went live with an IAMS grain-free line of products and are expanding countries of distribution within EMEA. In Aquatics, we are partnering with key retailers to feature our unique GloFish experience at the front of their stores, promoting the brand and its exciting innovation. This quarter’s adjusted EBITDA of $44 million is $12.7 million lower than last year, and adjusted EBITDA margin was 17.2% compared to 20.1% last year. The reduction in adjusted EBITDA was primarily driven by lower sales volumes, unfavorable mix and inflation, partially offset by operational productivity improvements, lower brand-focused investments and FX. Looking forward, we expect cautious consumer behavior in North America but we remain optimistic about our performance in the category with some recent wins in product distribution and placement together with a positive pace of sales and consumer acceptance to our innovation.

European consumer demand in the pet categories is also feeling the effect of the global economic uncertainties. Yet our Good Boy brand is performing well, and we have a promising innovation pipeline. We remain cautious about Aquatics where some U.S. retailers are reducing shelf space due to lower consumer demand and recent growth trends. We are overall excited about the pet category and believe these short-term headwinds will be behind us in the near term. As a reminder, our prior year fourth quarter net sales were positively impacted by a non-repeating customer pull forward of approximately $10 million in purchases ahead of our SAP S/4HANA go-live last October. Let’s turn now to Home & Garden, which is on Slide 15. We Net sales decreased 10.3% in the quarter.

The cold and wet start to the season delayed POS in our categories, negatively impacting retailer reorder patterns. Net sales in Controls, our largest business, were down low single digits, while net sales in household test, repellents and cleaning were down double digits. While total category sales in each of our categories were lower this quarter, and Spectracide gained market share, with wasp and hornet pest control sales well above category and comps improving with the weather conditions towards the end of the quarter. In fact, Spectracide is the only top 5 brand that grew across the Controls category in the quarter from the data that we see. Hotshot also outperformed the category this quarter, growing in every indoor segment in which we compete, driven by our new products and innovation.

Repel was the fastest-growing repellent brand in the category, where sales in the food, drug and dollar channel this quarter were especially strong, while cleaning sales comparisons continue to be affected by the loss of distribution in the prior year. As the weather improved in the last weeks of June, we saw both POS and retailer reorder patterns improve. And as we closed the quarter, retailer inventory levels were generally flat year-over-year. Our innovation continues to gain support from our retail partners and interest from consumers. The Spectracide one-shot product line, our higher performance, longest-lasting product gained incremental off-shelf display support early in the season inside the home center channel and combined with the continued advertising support contributed to Spectracide market share gains this season.

This year’s innovation launch, the Spectracide Wasp, Hornet & Yellowjacket Trap continues to gain momentum with consumers and support from all of our key accounts. POS performance is well above expectations, and we are in the process of increasing capacity for fiscal ’26. This product quickly gained penetration in the category, one of the highest of any new items in overall pest control. We also launched the new Hotshot Flying Insect Trap this season, in line with our brand strategy of offering strong benefits and significant value to consumers. This innovation was voted Product of the Year for Best in Pest Control. At a value price point to competitive products, the Hotshot Flying Insect Trap provides continuous action to attract and capture house flies and fruit flies with a discrete compact design that blends seamlessly into your home with no setup or electricity required.

POS performance has been very strong, significantly surpassing expectations. Adjusted EBITDA was $38.6 million compared to $43.3 million last year, and the adjusted EBITDA margin was 20.4%, 10 basis points down from last year. The decrease in adjusted EBITDA was driven by lower volumes, inflation, incremental brand-focused investments and negative mix offset partially by productivity improvements, favorable cost variances and lower trade spend. Weather conditions improved in the final weeks of June and have generally remained favorable in the early weeks of our fourth quarter. In fact, we had record high shipping weeks in July. Our retail partners continue to prioritize the lawn and garden category in their stores with off-shelf space and displays, supporting consumer sales during the later breaking season.

We are encouraged that the control season has extended this year compared to prior years with higher POS than typical carrying into the fourth quarter. Our fall cross program is gaining momentum, with retailers recognizing the shifting seasonal patterns and opportunity to continue driving foot traffic throughout the fall as consumers focus on controlling pests inside their homes and weeds in their yards. We are anticipating expanded retail placement for the fall crawl season, supported by incremental in-store displays, promotions and media. Overall, the category remains competitive, and we plan to sustain our brand-focused investment throughout the fourth quarter. And finally, Home & Personal Care, which is on Slide 16. Reported net sales decreased 10.8%.

Excluding favorable foreign exchange, organic net sales decreased 11.4%. Sales in the Home Appliance category were down mid-single digits this quarter, while sales in Personal Care were down double digits. Organic net sales in EMEA were also down double digits, driven predominantly by softness in Personal Care, weaker consumer confidence across the region negatively impacted hair care sales in the quarter, offset by some favorability in shave and groom. Home Appliance sales were down low single digits due to continued softness in brick-and-mortar, partially offset by growth in e-commerce with growth in garment offset by a decline in food preparation. Overall, European consumer confidence remains cautious in the current geopolitical environment.

North American sales decreased around 20%. Similar to EMEA, the sales decline in Personal Care was greater than the decline in Home Appliances. Throughout the quarter, the U.S. HPC team negotiated tariff-related pricing increases. And while pricing is now in place, those negotiations were dynamic and in some cases, required us to stop shipping product to certain retailers for a period of weeks. The negotiations for Personal Care in some cases, lasted longer than those for Home Appliances, negatively impacting relative sales. Product availability and sales were also negatively impacted by the period during which we paused purchases from China. Consumer demand remains cautious and retail prices for the category have hit the shelf. Organic net sales in Latin America grew low double digits with strong growth in both categories, driven by new product launches in Personal Care and cooking and coffee for Home Appliances.

On the commercial side, we launched the PowerXL AIRMAX at Walmart this quarter. The AIRMAX is sourced from Indonesia and sell-in is exceeding our expectations. We’re pleased with our launch on TikTok in the U.K., where our products are resonating well with consumers and monthly sales are growing. The PowerXL brand is developing strong brand awareness and positioning in Latin America across multiple countries and retailers. Our Remington Balder, the Circana-certified #1 brand of head shavers in the U.S. continues to win accolades, having recently been awarded the best overall head shaver by Men’s Journal Magazine. We’re launching a new Remington line, the AIRvive, in our international markets, and recently hosted 40 of our largest European customers at a unique Manchester United event to build on the regional brand strength and positioning of Remington internationally.

We plan to launch the RV in the U.S. in the near term. This quarter’s adjusted EBITDA was $7 million compared to $11.8 million last year. The adjusted EBITDA margin was 2.7%. The decline in adjusted EBITDA was driven by lower volumes, inflation, unfavorable mix and tariffs, partially offset by pricing lower brand- focused investments and distribution costs and FX. We are actively streamlining our global business, reducing our fixed costs and executing our plan to diversify our global sourcing footprint. We are pursuing a dual sourcing model to provide options to source either from China or an alternative country depending on which source of supply provides us with the lowest all-in cost. We also intend to significantly streamline and reduce our U.S. SKU count to simplify our supply chain and the lift of moving production out of China.

With most of our pricing negotiations behind us, we should not have meaningful stop shipment situations in Q4, but do expect that we will have some supply constraints in North America due to the pause in purchases, while the 145% tariff on Chinese imports was effective. Let’s turn now to Slide 17. As David said, given the continuing instability regarding global tariffs, the unpredictable nature of global trade negotiations and the continued cautiousness of consumers in the U.S. and Europe, at this time, we do not have sufficient visibility to provide an earnings framework for fiscal ’25. We are, however, reaffirming the expectation that we will generate approximately $160 million of free cash flow for the year, actively managing our spend and working capital.

In addition, with our sales performance in July, we do expect Q4 year-over-year sales to be improved from the 11.1% organic sales decline we experienced in Q3. To end my section, I want to echo David and thank all of our global employees for their hard work in these challenging times. Now back to David.

David M. Maura: Thanks, Jeremy, and thanks, everybody, again for joining us on the call today. Look, let’s take a few minutes like I normally do, and let’s just recap kind of the key takeaways of today’s call. You can find that on Slide 19. I concluded our last call by telling you I was confident we’d get through the near-term tariff-related volatility and emerge a stronger, more focused company and competitor. We really did make very swift difficult decisive decisions to protect our long-term financial health during Q3. And that’s caused — I mean, Q3 is just — there’s a lot of distortion in the numbers. When you look at not importing product for months and then not shipping for weeks. We didn’t wait. We tackled this thing head on and aggressively.

We didn’t wait to turn off supply from China when tariff rates on Chinese imports, skyrocketed to 145% and higher. We didn’t wait to notify retailers a reasonable tariff-related price increases, and we did not wait to stop shipping when negotiations stalled. We did not wait to develop dual sourcing plans to diversify our supplier base and to regularly reassess these plans to ensure we have the lowest cost sourcing options. We did not wait to take out fixed costs and discretionary spend. Like I said in my earlier comments, I mean, taking $50 million of costs out in 90 days, it was painful. It was a lot of work, but I’m really proud of the teams for just being proactive and getting it done. Thanks, everybody. In a typical quarter, any one of those actions is a significant undertaking, and the team did all this in the third quarter.

Look, we took hits in Q3. We took our medicine. We made some hard decisions, but that’s behind us. Our focus is now in the future. And you know what, Q4 is off to a good start. We are seeing more normalized sales than in Q3. We will have a little bit of supply constraint on some orders still in the fourth quarter, and that’s lingering over from when we paused all the Chinese purchases, particularly in the appliance, but those are going to be all behind us by the end of the fourth quarter. Consumer sentiment in the U.S. and Europe is still a little soft, but we do see signs of improving macroeconomic conditions. And in fact, we expect consumer confidence will stabilize once this heightened geopolitical tension subsides. Weather trends have improved for Home & Garden.

We expect to see continued strong POS levels into the fall. And we’re excited about the fall crawl season that Javier and the team has going on currently. We know the hard work is now behind us, and we’re not kidding ourselves. We expect that tomorrow, we’ll bring more changes and challenges, and we’ll again have to make difficult but correct decisions. However, I’m highly confident that our team of 3,000 global employees will rally together, attack those challenges just like we attacked in this past quarter. We’re going to continue to lean into our competitive advantage as we take on these challenges, knowing our brands, leaders, teams, strong cash flows, strong balance sheet are all there to support us. With the third quarter behind us and a very solid start to Q4, we are now full steam ahead to finish fiscal ’25 strong, and we’re optimistic about setting up for a better 2026.

At this time, I want to turn the call back to Joanne, and we’re happy to take questions.

Joanne Chomiak: Thank you, David. Operator, we can go to the questions for you now.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Brian McNamara at Canaccord Genuity.

Madison Callinan: This is Madison Callinan. First, could you reasonably quantify how much sales you left on the table by stopping shipments and other internal actions in Q2? And what impact, if any, lingers into Q4?

David M. Maura: A lot and less.

Jeremy W. Smeltser: Yes. I mean I think, Madison, if you look all in, we would probably estimate it’s in the neighborhood of $30 million in Q3. And to David’s point, I think it will be quite a bit less than that in Q4.

Madison Callinan: Okay. Great. And why is guidance still so difficult even with the improved clarity on tariffs. We’ve heard from other companies who are more exposed that have added like reinstated guidance or updated the prior outlook. Any color you could give us would be great.

David M. Maura: Well, first, comparison is a thief of joy. We don’t do that. We manage our own business. Look, I think the message I’m trying to get to you guys today is we took this thing on full steam. I mean I use nautical terms because I grew up around a lot of boats, but we stuck to bow this company right into the wave and I’m really proud of how we’ve addressed it. I mean if you’re evaluating the stock, you shouldn’t price it off Q3. Q3 has got a ton of noise where you’re shutting down inputs 2 months. You’re shutting down selling stuff for weeks on end to get pricing and you’re taking $50 million of cost out of the business. That’s a lot of surgery in a 90-day period, and that’s why I’m really proud of the team. What we’ve told you is, say, things are really looking a hell of a lot better.

July is off to a great start. But look, the year — we got hit with this tariff torpedo. And it just doesn’t make any sense — listen, it’s still fluid, right? You can — you read the headlines every single day. And it’s just irresponsible to sit here and say, “Oh, yes, we’re going to predict this stuff like very accurately. We are getting back. What we’re trying to convey is look, we’re in Q4, we think the bulk of this is behind us. We’re getting into a much more normalized operating rhythm. It’s full steam ahead, and we’re setting up for great ’26. So it’s only 2 months away. And obviously, we look forward to talking to you then in November. I think that’s the best way I can tell you where we’re at.

Operator: Our next question comes from Bob Labick at CJS Securities.

Unidentified Analyst: This is Will on for Bob. you’ve been increasing your brand investment in recent years. And can you just talk about your capital allocation strategy in a soft consumer environment? And are there any changes to where you are investing?

David M. Maura: Listen, I think the whole space is undervalued. I think anything that’s facing the consumer, had any sort of tariff exposure to it got destroyed from a share standpoint. I think the shares are dramatically undervalued. We keep buying them every single day. We have a very unlevered balance sheet to continue buying back shares. But I mean we’ve bought back almost half the float. And I guess if the shares want to stay down here, we’re going to keep buying them. At the end of the day, I do want to do M&A. We chased the deal this quarter. Got really close, unfortunately got outbid. We have to maintain discipline when it comes to price and getting return on acquisitions. But we have a vision to triple our Pet business and double our Home & Garden business and find something accretive with appliances.

And I want to maintain enough balance sheet flexibility to accomplish that and we may or may not take on partners to do it. But look, at the end of the day, I think the balance sheet is super healthy. We’re super liquid. We want to go build an AOP plan and put together a much better ’26, and we look forward to talking to you about that in November. We want to invest behind these businesses and grow them organically again. But we want to do accretive acquisitions and M&A. We think our pet platform is amazing. Super excited to have [indiscernible] on board. I just got invited to a leadership meeting in St. Louis and gave them a little bit of a pop talk, but I was blown away by the opportunity we have both organically and strategically. As I talked about last quarter, we think if we can fill in some voids, whether it’s wet food, whether it’s cat, whether it’s some of these treats as we try to expand into treats versus just being in chews all the while strengthening our core chews business, we think our pet platform’s got a very exciting future.

We’ve got a few gaps, health, wellness, food, cat, et cetera. We want to go fill those in with M&A. And so we’re going to continue to pursue that. Home & Garden, I think there’s a couple of things that are coming down the pipe that could fit really well with half year’s business. So we’ve got tons of capital. Everybody calls us. Everybody loves our low leverage. And so there’s tons of capital available to us. We have to be disciplined to find the right assets. And in the interim, we’ll keep buying shares.

Unidentified Analyst: And just a follow-up. Has the M&A environment improved meaningfully with the new tariff map recently [ enacted ]. There’s still too much uncertainty.

David M. Maura: It’s both, right? Uncertainty mix, it’s hard to underwrite stuff that’s in trouble. And so you got to be careful you don’t catch a falling knife. But then there’s a lot of capital still around. And like I just disclosed, we unfortunately just got outbid on something, I think, would have been a fantastic fit with us. Thankfully, it went to private equity. So it will come back again. Hopefully, we’ll get a second shot at it. But no, we think — and if you — I agree with some of the bigger private equity shops. I think what you’re seeing them say is say, look, seller expectations are still too high. Bids are below clearing prices on a lot of stuff. And hopefully, that bid-ask spread narrows and you see more transaction. But I think it’s getting better, but it’s getting better, slower than we’d like.

Operator: Our next question comes from Carla Casella at JPMorgan.

Carla Marie Casella Hodulik: Wonder if you could give us a little bit more color on the pet category. And kind of if you’re seeing a major channel mix there in terms of consumer preferences towards mass club specialty. And you talked about share gains, just more color on where you’re gaining share or where the supply constraint you talked about. You talked about one retailer having supply constraints where that came from? Just any more color on Pet.

Jeremy W. Smeltser: Yes. I mean, I’ll start. So I mean, I think it’s interesting to see the overall category still declining in what we do, particularly for chews and treats, right? And I think that’s been the biggest challenge for all of us that compete in that space because it’s been years of category growth. And I think that goes back to what we talked about on the call, which is it’s really driven by consumer sentiment and some trade downs. And that’s been a challenge for us, really, the last 4 quarters. I think what you heard in my prepared remarks today is actually a little bit more optimism from a number of things. One, we got our pricing through on chews, in particular, that’s very important because that’s our biggest exposure from a category perspective.

And then two, I think as we’ve talked about the last couple of calls, particularly last call, is that all of us are on the same boat, right? Everybody on the chews and treat side, the vast majority of the larger players are sourcing out of Asia. And so the tariff is hitting — tariffs are hitting everybody, and that includes private label. And so we have actually started to improve versus private label in the U.S. market, which is great to see. But Pet definitely was impacted materially by stop shipments. I actually think that if we didn’t have stopped shipments and some product availability issues, we probably sequentially would have improved sales from Q2 to Q3, which again goes back to it actually does feel like it’s bottomed and starting to get a little bit better.

Certainly, we at least maintain share from a POS perspective, even though our net sales were below because of the timing of those stop shipments and retailer could trade. That was mostly in the U.S., a little bit in Europe too around a global customer that really was having just some overall warehouse constraints and issues with too much product in their DCs and it delayed some orders. So overall, I think our message is we think we’re probably incrementally in a better place than we were 6 months ago in Pet. We’ve got our pricing in place and a new team in that business reinvigorating the messaging, both internally and externally with our retail customers, and we’re excited about what’s ahead in ’26.

Carla Marie Casella Hodulik: Okay. Great. And can I just ask on — you talked about the timing of your shipping and holding off on purchases during the tariffs. Are you seeing major volatility in shipping or container rates with yourself and maybe others doing some of the same?

David M. Maura: No.

Jeremy W. Smeltser: Not anymore. No, we’re pretty steady. We’re pretty much on contract rates. We’re really pleased with our relationships with ocean freight carriers. And I think I really don’t see anything disrupting the normal pace in Q4 like we had in Q3. Obviously, barring some blow up in trade negotiations amongst the U.S. and countries that matter to our sourcing.

Operator: Our last question comes from Olivia Tong at Raymond James.

Olivia Tong Cheang: I imagine. So I wanted to follow up a little bit on what was left on the table and of that of that $30 million, how much of that do you think you can make up or have made up already, if you could sort of parse that out between HPC and HNG to start?

Jeremy W. Smeltser: Yes. I mean it’s — that doesn’t really impact H&G, Olivia. It’s really an HPC and GPC issue in Q3. I think probably half of it we’ve already recovered and goes to that solid July that David talked about, particularly around some of the stop shipments. So some of it will miss. Product availability, oftentimes, you miss a little bit of POS, but I don’t think by the time we get through the full year, that will be an overall meaningful impact to our results.

Olivia Tong Cheang: Got it. Sorry about that makes up on H&G. And then putting aside obviously the noise with the stock shipment and the stop ordering. What’s your view in terms of consumer demand. We talked about this a couple of times in the call, but are you seeing any change in demand across price points? Are consumers looking for more value? Or are they holding the line? And then in terms of the pricing that you’re planning, could you talk about how much on average and sort of the range that you’re looking for and when that’s getting implemented?

David M. Maura: I’ll go first and then Jeremy can fix it. Look, I’ve been surprised at how resilient the consumer is. Honestly, given everything thrown at them. And we saw weakness in the U.S. I think last fall coming into the start of this year. And then Europe kind of followed behind that — and again, we — there’s still uncertainty out there, but my personal view is that we’re probably through the bulk of the material volatility and just scaring the hell out of people with tariff rates changing every day and just the unpredictable nature of global trade. And so I think as that kind of calms down, I do think consumer sentiment will start to heal globally. Now if we can get some rate cuts and all the rest of that helps. We clearly have seen people be more judicious in how they spend money, tighter, more selective.

And that’s — but that’s also why we’re so bullish on what we’re trying to tell you, like getting a mod reset, getting better shelf placement, getting our branded product, which actually generates a lot of margin and a lot of turns, a lot of velocity and foot traffic for our retailers and accomplishing that this quarter in Pet, that’s a really positive outcome. And so — look, I would say the consumer has been more resilient than I thought. We have a lot of new innovation in the pipeline. It’s going to take a couple of quarters, right? We just put new leadership in there. It’s going to take some time to get some traction. But we’re pretty jazzed about where I think we can do organically. We want a couple of months here to write an AOP plan and put together something for ’26 and then we can give you a lot more specifics.

But — what would you add to that?

Jeremy W. Smeltser: Yes. I mean I agree with everything David said, when I tell people about what we’re seeing from a consumer behavior perspective is just look at what we’re experiencing in Pet versus what we’re experiencing in Home & Garden and think about the different brand strategies there, particularly in the U.S. So our Home & Garden business is entirely a portfolio of value brands that while we have great innovation, by definition, when consumers go to the shelf and buy our products in those categories, they are values to other brands in that space, and we’re gaining share in every category is what you heard in my prepared remarks. So consumers are looking for value. And I think that’s pretty consistent with what all of our big retail customers say on their earnings calls as well.

And then if you look at Pet, the last 3 or 4 quarters, it’s been a struggle for us to hold share versus category predominantly due to trade downs and private label, but that is starting to get a little bit better. So — but that’s, I think, a great picture of what the consumer is experiencing. But I think the fact that when prices do get raised, when we do a rollback on our premium brands, we actually see consumers come right back to those brands. And so they still really do want those branded products. That’s why I feel so much better heading into ’26 in that business. And then to your last question, I’m really pleased with where we’re at right now. As we sit here, still fairly early in the fourth quarter. And all these trade arrangements have been made just in the last few weeks with countries that matter to us.

And many of them have made arrangements with the U.S. at pricing above the 10% tariffs that we were operating under. We still only have $20 million to $25 million of incremental pricing and supplier concession on an annualized basis that we’re targeting for ’26 to mitigate that. And so that’s a pretty low number across a $3 billion revenue base in 3 different businesses in multiple categories. So to your question on how much price, it’s — by definition, it’s less than 1% in total. And at this point, I think it will be very strategic and targeted from a revenue growth management perspective on how we get that price, and we’ll partner with our retail customers to make that happen and protect, as David always said, protect our bottom line in our house.

Operator: This concludes the question-and-answer session. I would now like to turn it back to Joanne for closing remarks.

Joanne Chomiak: Thank you. And with that, we have reached the top of the hour, so we will conclude our conference call. thank you to David and Jeremy. And on behalf of Spectrum Brands, thank you for your participation this morning.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.