Executive Summary / Key Takeaways

• Strategic Transformation Yielding Results: Newell Brands is executing a multi-year turnaround, shifting from a period of declining margins and market share losses to consistent gross margin expansion, improved operating profitability, and significant debt reduction, driven by a new "where to play and how to win" strategy.
• Domestic Manufacturing as a Competitive Moat: Extensive U.S. and Mexico-based manufacturing capabilities, backed by nearly $2 billion in investments since 2017, position Newell Brands to disproportionately benefit from global tariff-driven trade realignments, securing new business wins and strengthening its competitive standing.
• Innovation Funnel Rebuilt for Growth: A revitalized, consumer-led innovation pipeline, with the 2025 Tier 1 and 2 initiatives three times the size of 2024's, is expected to drive sequential top-line improvement and market share gains, particularly in the second half of 2025 and into 2026.
• Financial Discipline and Deleveraging: The company has dramatically improved its structural economics, expanding normalized gross margin by 460 basis points in 2024 to 34.1% and reducing its leverage ratio from 6.5x to 4.9x. Management targets further operating margin expansion and a year-end 2025 leverage ratio of approximately 4.5x.
• Outlook and Risks: While facing macroeconomic headwinds like soft global demand and consumer pullback in discretionary categories, Newell Brands is confident in its ability to offset tariff impacts and deliver normalized EPS of $0.66 to $0.70 for 2025, with potential upside from further distribution gains. Key risks include persistent consumer spending pressures and the uncertain duration of specific tariffs, particularly in the baby gear category.

The Reshaping of a Consumer Goods Giant

Newell Brands Inc. ($NWL), a global consumer goods powerhouse founded in 1903, has embarked on a profound strategic transformation, aiming to redefine its market position and financial trajectory. For years, the company grappled with declining normalized gross margins, which fell from 30.2% in 2022 to 29.5% in 2023, alongside a sprawling portfolio of over 100,000 SKUs. This period necessitated a fundamental shift, leading to the launch of a new corporate strategy in June 2023. This strategy, centered on "where to play and how to win," focuses on disproportionate investment in innovation, brand building, and go-to-market excellence for its largest and most profitable brands and markets.

A cornerstone of this strategic pivot is Newell Brands' unique manufacturing footprint. Since 2017, the company has invested nearly $2 billion in its U.S. manufacturing base, emphasizing automation and optimizing its distribution and transportation systems. This foresight has cultivated a highly automated North American supply base, comprising 15 U.S. plants and 2 USMCA-compliant facilities in Mexico. Crucially, over half of Newell's U.S. sales are manufactured domestically and are not subject to tariffs, providing a significant competitive advantage in a volatile global trade environment. This extensive domestic capacity, much of which remains untapped, allows Newell to quickly ramp up production of high-quality, tariff-free products, a critical differentiator as global supply chains recalibrate.

The company's strategic shift also includes a proactive reduction in its reliance on China for finished goods. From 35% of total cost of goods sold a few years ago, China imports were reduced to 15% by 2024, with a target to fall below 10% by the end of 2025. This aggressive diversification, coupled with insourcing initiatives and the qualification of alternative suppliers outside China, positions Newell Brands to capitalize on tariff-driven trade realignments. The company is actively engaging with over 30 customers across various domestic channels, securing incremental business in 13 of 19 categories where it holds a domestic manufacturing advantage. These wins, such as in FoodSaver consumables and Rubbermaid food storage, are a direct result of retailers discontinuing China-sourced competitive or private label products in favor of Newell's tariff-advantaged offerings.

Operational Excellence and Technological Edge

Newell Brands' turnaround is deeply rooted in operational excellence and a strategic embrace of technology. The company's internal "peak" program, a continuous improvement initiative across its 42 global manufacturing plants and numerous service centers, is driving meaningful cost efficiencies. With no plants yet in the most advanced phases (Phases 4-6), there remains ample runway for further gross margin improvement. This program, combined with automation efforts, has reduced supply chain staffing needs by 3,800 positions over the past three years, enabling highly accretive unit economics as the company leverages its domestic manufacturing base.

Technologically, Newell Brands is modernizing its operational backbone. The company has made significant strides in ERP harmonization, successfully completing two additional integrations in Q2 2025, including migrating Home Fragrance from Oracle (ORCL) to SAP (SAP) and consolidating Datasul instances in Brazil. This progress puts Newell on track to complete its ERP harmonization by fall 2026, a remarkable achievement given the 42 different ERP systems inherited post-Jarden acquisition. This standardization is critical for driving efficiency, scale, and a "One Newell" approach across the enterprise. Furthermore, the company is embracing generative AI, partnering with Adobe Firefly (ADBE) and Adobe Express to power its content supply chain. This initiative aims to scale its reach and impact with consumers globally, enhancing brand and product awareness. The integration of AI into customer and consumer service functions is already yielding better quality service and productivity benefits, demonstrating a commitment to leveraging technology for both operational efficiency and enhanced consumer engagement.

The company's focus on technological differentiation extends to its product innovation. For example, the Mr. Coffee Perfect Brew coffeemaker utilizes intelligent technology to automatically adjust brew time, temperature, and water, earning certification from the Specialty Coffee Association. The new FoodSaver handheld Plus machine combines cordless handheld convenience with countertop vacuum sealing power, offering unmatched versatility and keeping food fresh up to 5x longer. These innovations, driven by consumer insights and supported by robust R&D, are designed to deliver enhanced benefits and superior value, positioning Newell Brands to capture demand for mid- and high-price point (MPP and HPP) products.

Financial Performance and Strategic Momentum

In Q2 2025, Newell Brands reported net sales of $1.935 billion, a 4.8% decrease year-over-year, primarily due to soft global demand and distribution losses. However, core sales, which declined 4.4%, largely held market share in the first half of 2025, a notable improvement from prior share losses. Normalized gross margin expanded by 80 basis points to 35.6% in Q2 2025, marking the eighth consecutive quarter of year-over-year expansion and reaching its highest rate in four years. This was driven by gross productivity and pricing actions. Normalized operating margin also increased by 10 basis points to 10.7%, with all three business segments reporting positive operating income for the first time since Q3 2022.

The Learning and Development segment, Newell's most profitable, continues to be a growth engine, delivering its sixth consecutive quarter of positive core sales growth in Q2 2025, with net sales of $809 million. The Writing business saw gains from distribution, pricing, and innovation, while the Baby business, despite a Q2 decline due to retailer ordering timing, showed positive core sales growth for the first six months of 2025. The Home and Commercial Solutions segment, with Q2 net sales of $892 million, saw a 7.3% decline but is expected to return to core sales growth in the back half of 2025, driven by new product launches like the Yankee Candle brand refresh and the Rubbermaid EasyStore food storage. The Outdoor and Recreation segment, the smallest, improved its operating income significantly to $8 million in Q2 2025 from a loss of $11 million in the prior year, though net sales declined 9.3% to $234 million. This segment's core sales growth is not expected to turn positive until 2026, following the launch of key innovations.

Newell Brands' financial discipline extends to its balance sheet. The company generated nearly $500 million in operating cash flow in 2024, driven by an eight-day improvement in its cash conversion cycle.

This enabled a $175 million reduction in net debt, lowering the leverage ratio from 6.5x in June 2023 to 4.9x by year-end 2024. In Q2 2025, the company further enhanced its financial flexibility by redeeming $1.25 billion of 2026 notes with new 2028 notes, an offering that was 4x oversubscribed, signaling strong investor confidence despite subsequent debt rating downgrades. The net leverage ratio stood at 5.5x in Q2 2025, with a target to reach approximately 4.5x by year-end 2025, as the company moves towards its long-term ambition of achieving an investment-grade credit rating.

Competitive Landscape and Strategic Positioning

Newell Brands operates in a highly competitive consumer goods market, vying with diversified giants like Procter & Gamble (PG), Colgate-Palmolive (CL), Stanley Black & Decker (SWK), and Spectrum Brands (SPB). While PG and CL often exhibit stronger brand recognition, higher profitability margins (e.g., PG's TTM Gross Profit Margin of 51% vs. NWL's 34.26%), and more consistent revenue growth, Newell Brands differentiates itself through its broad product diversity and extensive distribution channels. Its ability to offer a wide array of everyday utility products, often at competitive price points, appeals to value-seeking consumers.

Newell's strategic investments in U.S. manufacturing provide a distinct competitive advantage, particularly against competitors heavily reliant on China-sourced goods. In categories like writing, coolers, food storage, and candles, where Newell has significant U.S. manufacturing capability, it is positioned to gain market share as competitors face increased tariff costs. This is a critical differentiator against players like SPB, which may have greater supply chain dependencies, or SWK, which focuses more on professional-grade tools. Newell is actively recommending that retailers replace China-sourced private label or other branded products with its own U.S./Mexico-sourced brands, leveraging its tariff-free production. This strategy could lead to material consolidation in certain categories, with smaller, 100% China-sourced players potentially exiting the market, thereby widening Newell's competitive moat.

While Newell's cost structure has historically been less efficient than some peers, its "peak" productivity program and ERP harmonization efforts are systematically addressing this. The company's increased investment in advertising and promotion (A&P), projected to reach closer to 6% of sales in 2025 (up from 4% in 2022), signals confidence in its rebuilt innovation funnel and improved structural economics. This contrasts with some competitors who may be less agile in reallocating marketing spend. Newell's focus on consumer-led innovation, as seen with products like the Graco SmartSense Bassinet and the Yankee Candle refresh, aims to drive trade-up to MPP and HPP offerings, mirroring successful strategies observed in other market players and validating Newell's strategic direction.

Outlook and Risks

Newell Brands has updated its full-year 2025 guidance, reflecting a dynamic macroeconomic environment. Core sales are now expected to decline between 3% and 2% (tightened from a prior range of -1% to -3%), primarily due to a more cautious outlook on category growth, which is now anticipated to be down approximately 2 points. Net sales are also projected to decline between 3% and 2%, benefiting from favorable foreign exchange rates. Normalized operating margin remains unchanged at 9.0% to 9.5%, representing an approximate 110 basis point improvement from 2024. Normalized diluted EPS is updated to $0.66 to $0.70, reflecting the absorption of a $0.05 per share impact from non-permanent 125% China tariffs that the company does not plan to recover. Operating cash flow is tightened to $400 million to $450 million, impacted by higher tariff-induced inventory valuations.

The company anticipates sequential top-line progress to resume in the second half of 2025, with implied Q4 core sales expected to be flat. This improvement is predicated on the timing of distribution gains, the launch of new innovations, and increased marketing programs. The "tail cleanup" of non-strategic brands is expected to largely conclude in 2025, removing a prior revenue headwind.

Despite this positive trajectory, risks persist. The macroeconomic environment remains fluid, with continued inflationary pressures and high interest rates potentially dampening discretionary consumer spending, particularly among lower-income households. The uncertainty surrounding tariffs, especially the 125% China tariff on baby gear (where 97% of U.S. strollers and 87% of U.S. car seats are China-sourced), poses a significant challenge. While Newell is lobbying for exemptions and has implemented pricing actions, the ultimate impact on consumer demand and competitive dynamics remains to be seen. Legal proceedings, such as the Lower Passaic River matter, also present a contingent liability that could materially impact financial results if adverse determinations exceed current reserves.

Conclusion

Newell Brands is undergoing a profound transformation, moving from a period of operational and financial challenges to one of strategic clarity and disciplined execution. The company's core investment thesis rests on its ability to leverage a unique, tariff-advantaged North American manufacturing base, a revitalized innovation pipeline, and a relentless focus on operational efficiency to drive sustainable, profitable growth. The consistent expansion of gross margins, the significant deleveraging of its balance sheet, and the sequential improvement in core sales trends underscore the effectiveness of its new strategy.

While macroeconomic headwinds and tariff uncertainties present ongoing challenges, Newell Brands' proactive measures, including strategic pricing, supply chain diversification, and increased investment in brand building and technology, position it to emerge stronger. The company's commitment to achieving an investment-grade credit rating and its expectation of continued operating margin expansion and EBITDA growth signal a clear path to enhanced shareholder value. For investors, Newell Brands represents a compelling turnaround story, where foundational strengths and strategic agility are paving the way for a more resilient and profitable future.