Spectrum Brands Holdings, Inc. Q1 2026 results
Snapshot
Spectrum Brands Holdings, Inc. reported $677M of revenue in Q1 2026, up -3.3% year over year, with diluted EPS of $1.21 and an operating margin of 4.0%.
- Revenue
- $677M
- YoY growth
- +-3.3%
- Diluted EPS
- $1.21
- Operating margin
- 4.0%
What management said
- •Welcome to Spectrum Brands Holdings Q1 2026 Earnings Conference Call and webcast.
- •We are pleased that our first quarter net sales and adjusted EBITDA exceeded expectations, despite continued headwinds.
- •These external realities are disproportionately impacting our Home and Personal Care business, where overall global consumer demand continues to be subdued.
- •While these categories were modestly down for the quarter, our brands actually outpaced the category and delivered growth versus the prior year.
- •Our strong financial position affords us meaningful flexibility to capitalize on market opportunities, while continuing to invest in our businesses and return capital to our shareholders.
- •I'm proud of the progress we've made in optimizing our working capital and exercising diligence in our spending, which has strengthened our financial position.
- •This was partially offset by our Global Pet Care business returning to growth, with our key companion animal brands outperforming the market while also benefiting from a softer prior year comparison.
- •Adjusted EBITDA for the quarter was $62.6 million, a decrease of $15.2 million, driven by lower volume and reduced gross margins.
- •Adjusted diluted EPS increased to $1.40, driven by a one-time tax benefit and the reduction in share outstanding, partially offset by lower adjusted EBITDA.
- •Capital expenditure were $8.1 million in the quarter, $2.2 million higher than last year.
- •Cash payments towards the structuring transactions, strategic transactions, restructuring-related projects, and other unusual non-recurring adjustments were $4.8 million, versus $8.8 million last year.
- •Moving to the balance sheet, we had a quarter-end cash balance of $126.6 million, and $492.2 million available on our $500 million cash flow revolver.
What went well
- •First quarter net sales and adjusted EBITDA exceeded expectations despite continued headwinds, reinforcing management's view that the most significant tariff and macro disruptions are largely behind the company.
- •Global Pet Care returned to growth, with reported net sales up 8.3% (organic up 5.8%) as key companion animal brands (Good 'n' Fun, DreamBone, Nature's Miracle, FURminator) outperformed and gained share in chews, stain and odor, and grooming.
- •Generated nearly $60 million of adjusted free cash flow in a quarter that is typically a period of cash usage ahead of the Home & Garden season.
- •Maintained a strong balance sheet, ending the quarter with nearly $127 million in cash, zero drawn on the revolver, and net leverage of 1.65 times, well below long-term targets, while returning $46 million to shareholders.
- •Received a new $300 million board-authorized share repurchase program and repurchased roughly 800,000 shares year-to-date through the call date for about $42.3 million.
What went wrong
- •Total net sales decreased 3.3% (organic down 6%), driven by continued category demand softness in Home & Personal Care and an accelerated seasonal Home & Garden inventory build by some customers in the prior year.
- •Adjusted EBITDA fell $15.2 million to $62.6 million, driven by lower volume and reduced gross margins, with gross margin down 110 bps to 35.7% on lower volume, higher trade spend and higher tariff costs.
- •Home & Personal Care continued to experience subdued global consumer demand, with durable products taking longer to rebound than consumables, and management expects continued pressure into Q2.
- •EMEA Global Pet Care organic sales declined low single digits, primarily due to a decline in dog and cat food following the Eukanuba refreshed portfolio launch, as retailers had accelerated inventory purchases to support the reset.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Net sales | Full-year fiscal 2026 | Flat to low single-digit growth (framework) | Reiterated: flat to low single-digit growth | |
| Adjusted EBITDA | Full-year fiscal 2026 | Low single-digit growth (framework) | Reiterated: low single-digit growth | |
| Adjusted free cash flow conversion | Full-year fiscal 2026 | Approximately 50% of adjusted EBITDA | Reiterated: approximately 50% conversion | |
| Home & Garden net sales | Q2 fiscal 2026 | Not previously specified | Expected flat to slightly up year-over-year, with a big back half |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Net sales | -3.3% (organic -6%) | Continued category demand softness in Home & Personal Care and a prior-year accelerated seasonal inventory build by Home & Garden customers, partially offset by Global Pet Care returning to growth; $18.5 million favorable FX. |
| Adjusted EBITDA | -$15.2 million (to $62.6 million) | Lower volume and reduced gross margins. |
| Gross margin | -110 bps (to 35.7%) | Lower volume, higher trade spend and higher tariff cost, partially offset by pricing, cost improvement actions, operational efficiencies and favorable FX. |
| Operating income | -$17.6 million (to $27.1 million) | Decline in gross profit. |
| Adjusted diluted EPS | Increased to $1.40 | A one-time tax benefit and reduced shares outstanding, partially offset by lower adjusted EBITDA. |
| Global Pet Care reported net sales | +8.3% (organic +5.8%) | Companion animal up high single digits and aquatics up low double digits, aided by a softer prior-year comparison and a prior-year strategic order shift of ~$10 million ahead of S/4HANA implementation. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff and macro recovery | Worst of tariff and economic disruptions believed to be behind the company | Reaffirmed; businesses healing as supply chains restored and pricing taken, with early signs of recovery in consumables while durables lag | |
| HPC appliance strategic solution | Committed to finding a strategic solution as headwinds dissipate | Still committed; ran a process derailed by trade policy, expects improved profitability in fiscal 2026 to drive industry consolidation with Spectrum as the strategic merger partner of choice | |
| Fewer, bigger, better strategy | Concentrate resources on higher-impact initiatives | Continuing; data-driven approach yielding share gains, with innovation pipeline connecting with consumers | |
| Corporate cost / TSA headwind | Highlighted in prior quarter's call | $20 million TSA income headwind from the ASSA ABLOY HHI exit, roughly half to be covered this year; some costs pushed out of Q1 due to timing of S/4 go-lives | |
| S/4HANA ERP rollout | Implemented in North America Global Pet Care and Home & Garden | Preparation underway for appliance business and remaining international regions |
Q&A summary
A competitor said we have reached a bottom in pet. Do you agree?
David Maura declined to call a bottom, saying he has been humbled calling tops and bottoms, but emphasized focus on what the company controls, new pet leadership, investments and share gains with main brands, while noting there are still soft pockets.
How committed are retailers to the garden category this upcoming season, and can you chase if demand is better?
David Maura is very bullish on Home & Garden, citing new leadership, restored operational rhythm and consumer-endorsed innovation like the wasp and hornet trap; he expects Q2 flat to slightly up due to phasing and a big back half, noting being the value price point is advantageous when consumers are stretched.
What is the cadence of improvement to get from flat to plus low single digits for the year?
Faisal Qadir said pet is back to growth and expected to keep growing, Home & Garden growth is a back-half story given disciplined retailer inventory in Q2 and a normal weather season, and Home & Personal Care will see continued Q2 pressure before stabilizing in the third and fourth quarters.
Are levels of investment in brands and at the corporate level where you want them?
Faisal Qadir said corporate carries a $20 million TSA headwind (about half covered this year) with costs pushed out of Q1; brand investment is at the right level for Global Pet Care and Home & Garden, while some HPC investment is being pulled back pending recovery, with dollars reconfigured to be more productive.
How is the innovation pipeline for FY2026 and beyond?
Faisal Qadir said there are exciting new products coming, with successful prior-year Home & Garden launches getting expanded distribution this year and more Global Pet Care products over the next couple of quarters, describing a very good pipeline in both businesses.
How has progress on the HPC business evolved and what gives confidence in executing the plan?
David Maura framed it operationally and strategically: a year ago the business faced a $500 million tariff problem and a two-month buying shutdown, yet it put $20 million of EBIT on the board last quarter; with an unlevered balance sheet and improving profitability versus over-levered competitors, he believes Spectrum will be the strategic merger partner of choice.
On EBITDA cadence and the anomalies in Q1, what gives confidence in the full-year objective?
David Maura said high volatility means healing takes more than a quarter or two; North America (hit hardest by tariffs) is improving, while cheap Chinese product being dumped into Europe is disruptive and must be addressed in Q2, making Q2 a bit messy in appliances but with Q3 and Q4 expected to deliver EBITDA growth in the appliance unit in fiscal 2026.
Is there opportunity to grow GPC faster than single digits, and is aquatics demand improving or just a comp?
David Maura cited new pet leadership, price pack architecture work and four big companion animal brands back in growth, with aquatics recovering in Europe and North America still needing fixing; Faisal Qadir added aquatics is less than a fourth of the business and not a growth driver, with growth coming primarily from companion animal.
Can you quantify net shelf-space wins, and do you expect unusual working capital changes this year?
Faisal Qadir declined to quantify shelf wins but expressed optimism about growth from products launched last year gaining distribution; on working capital, he expects it to remain stable for the year and not be a meaningful use of cash, consistent with free cash flow projections.