Newell Brands Inc.

Good morning and welcome to Newell Brands' second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After a brief discussion by management, we will open up the call for questions. In order to stay within the time scheduled for the call, please limit yourselves to one question during the Q&A session. Today's conference call is being recorded. A live webcast of the call is available at ir.newellbrands.com. I will now turn the call over to Joanne Freiberger. SVP of Investor Relations and Chief Communications Officer. Ms. Freiberger, you may begin.

Thank you, Michelle. Good morning, everyone, and welcome to Newell Brands' second quarter 2026 earnings call. On the call with me today are Chris Peterson, our President and CEO, and Mark Erceg, our CFO. Before we begin, I'd like to inform you that during today's call, we will be making forward-looking statements which involve risks and uncertainties. Actual results and outcomes may differ materially and we undertake no obligation to update forward-looking statements. I refer you to the cautionary language and risk factors available in our earnings release, our Form 10-K, Form 10-Q and other SEC filings available on our investor relations website for a further discussion of the factors affecting forward-looking statements. Today's remarks will also refer to non-GAAP financial measures including those referred to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. Explanations of these non-GAAP measures and reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and the tables that were furnished to the SEC. Thank you. And with that, I'll turn the call over to Chris.

Thank you, Joanne. Good morning, everyone, and welcome to our second quarter earnings call. When we conducted our first enterprise-wide capability assessment three years ago, it was clear Newell Brands needed to rebuild the front end commercial and operating capabilities required to compete effectively and grow consistently. That work included stronger consumer insights, a more disciplined innovation system, better brand management, improved category management, greater effectiveness of customer investments, and a simpler and more powerful go-to-market model. Those new capabilities built over the past several years are now taking shape and coming together in a mutually reinforcing manner. For example, consumer-led innovation supported by higher levels of advertising and promotion and stronger retailer activation is improving consumer demand and brand performance. Our innovation pipeline is broader and stronger than it has been in years. All six business units have launched Tier 1 or Tier 2 innovation, with more to come in the second half. We are on track to deliver more than 25 Tier 1 or Tier 2 innovation launches for the full year. More importantly, the process is now more consumer-led, more disciplined, and more closely integrated with our commercial plans. At the same time, stronger retailer relationships, better category management capabilities, and improved service execution are translating into distribution gains. As discussed last quarter, we expected the company to return to top-line growth in the second quarter, driven by stronger innovation, distribution gains, and improved brand marketing. These rebate-built capabilities are now showing up in our second quarter results, which represents an important milestone in Newell's turnaround. We returned to year-over-year growth in both net sales and core sales for the first time in over four years, and results exceeded our expectations across all key financial metrics. Net sales increased 3% and core sales grew 2.3% with both results above the high end of our guidance range. The improvement was broad-based with five of our six business units delivering year-over-year core sales growth. In addition, seven of our top 10 brands and five of our top 10 countries delivered year-over-year sales growth. From a geographic standpoint, it was particularly nice to see the US, our largest market, leading the way delivering approximately 5% net sales growth during the second quarter, which was the first time our domestic business has grown since COVID. Total points of distribution across our US business increased mid single digits versus last year in the second quarter, providing tangible proof that retailers are responding to the stronger innovation, category plans and execution we are bringing to the marketplace. Based on existing customer commitments, and activity already underway, we expect distribution to remain a contributor to growth during the second half of the year. While distribution gains were strong in the U.S., perhaps even more importantly, point-of-sale trends were favorable, which means consumers responded well to our new innovations. Specifically, six of our top 10 brands delivered year-over-year POS growth in the second quarter, while eight of our top 10 improved their growth trajectory sequentially. We also continued to gain U.S. market share behind several priority brands, including Graco, Sharpie, Expo, and Coleman to name a few. These results provide further evidence that stronger innovation, higher levels of advertising and promotion, and improved retail execution are translating into better consumer demand. From a segment perspective, learning and development was the strongest part of the portfolio, delivering nearly 5% core sales growth in the second quarter, led by continued strength in Baby and a return to growth in writing. Baby delivered double-digit sales growth supported by strong consumer demand, increased distribution, and new product innovation. Graco continued to build marketplace momentum with USPOS increasing at a strong double-digit rate in the second quarter and market share growing 2.7 points year-to-date. The strength was broad-based across major retail channels and reflected strong, continued consumer demand for our rotating car seat platform, including the EasyTurn family of products. Nook also delivered double-digit US POS growth and gained market share, supported by stronger innovation and particularly good momentum in e-commerce. Writing returned to core sales growth in the second quarter, supported by distribution gains, innovation, and stronger back-to-school execution. While the back-to-school season is still early, the initial read has been encouraging, with improved retailer execution, new distribution, and strong POS growth across several priority brands. We have seen particularly good momentum behind Sharpie. We continue to build on platforms such as Sharpie Sgel and Sharpie Creative Markers through new colors, forms, and use cases, while advancing a strong pipeline across the broader writing portfolio. Home and commercial also improved meaningfully. Kitchen and Home Fragrance returned to core sales growth in the second quarter, while commercial remained below prior year but improved significantly versus the first quarter. Kitchen delivered its first quarter of core sales growth since early 2023, reflecting improved execution and encouraging consumer response across several priority brands. Ball's canning business is performing strongly, supported by innovation, improved merchandising execution, and ShareGains across the measured channels, while Rubbermaid continues to benefit from strong consumer response to the Brilliance Glass platform. In home fragrance, owned channels delivered a second consecutive quarter of growth and comparable retail stores returned to growth for the first time in more than a decade. These are encouraging signs and we remain focused on strengthening the consumer proposition and improving execution across the business. In commercial, the business delivered a meaningful year-over-year improvement in its core sales growth rate during the second quarter. We are focused on strengthening execution and advancing innovation behind durable platforms such as Rubbermaid Commercial Products and Brute while building on targeted distribution wins with key customers. Outdoor and recreation returned to core sales growth during the important second quarter outdoor season, delivering nearly 4% growth with the U.S. leading the improvement. Coleman Snap and Go is a strong example of the consumer-led innovation we are bringing to market, addressing a real consumer need by making large capacity coolers easier to store, transport, and use. We are also advancing innovation across our Contigo and Bubba beverage platforms with a focus on distinctive design and stronger consumer relevance. Our higher levels of brand support are increasingly being paired with more precise and engaging marketing. We are focused on building relevance around our strongest brands and innovations through programs that reach consumers in the right channels and create stronger retail activation. Komen provides a strong example of how our marketing capabilities are becoming more visible. During the quarter, the team moved quickly to capitalize on a viral consumer conversation around a fictional lazy river product, turning it into a highly relevant brand moment. The activation generated more than 90 million earned media impressions, nearly 48 million social impressions, and 2.8 million consumer engagements largely through organic activity. It also attracted nearly 30,000 new consumer subscribers to our database. This is the kind of modern, culturally relevant marketing capability we are building across Newell, one that strengthens consumer engagement and helps keep our brands part of the conversation. In just a few minutes, I will turn the call over to Mark, who will walk you through our second quarter results and share our updated financial outlook. Before doing that, I want to provide some brief perspective on the macro environment. So far, the consumer and category environment has held up better than originally expected. Coming into the year, we assumed the categories in which we compete would decline about 2%. Category growth was down about approximately 1% in the first quarter, and was essentially flat in the second quarter with the U.S. performing better than EMEA. Average selling prices across the market increased modestly in the second quarter, reflecting broad-based pricing actions by industry participants, whereas at Newell, our approach has been selective and targeted, focused on specific products and categories where appropriate. Even with the better first half category performance, we remain somewhat cautious about the second half and are now assuming the categories in which we compete will decline about 1% for the full year. We expect NOAA to grow faster than this, driven by the improved capabilities we have built over the past several years. On the cost side, we've seen significant volatility in the external environment, with input cost inflation significantly higher than what we expected at the start of the year, and the tariff environment, which includes those issued under IEPA, Section 122, Section 232, and Section 301 changing numerous times. In aggregate, current year input cost inflation inclusive of all tariff impacts is a meaningful headwind for the year, which we are more than offsetting with strong fuel productivity savings and restructuring actions. This is allowing us to bring compelling new innovations across our leading brand portfolio to market at prices that represent strong consumer value. Finally, I want to thank the entire Newell team for their commitment, agility, and resilience. The progress we delivered in the second quarter reflects the hard work of thousands of employees around the world who are bringing our strategy to life every day. Q2 was an important proof point that Newell's strategy is translating into improved performance. The broad-based nature of our top-line growth gives us confidence in the trajectory of the business. Based on second quarter performance and our expectations for the balance of the year, we are raising our full year outlook across all key financial metrics as we look to build on recent momentum through disciplined execution, profitable growth, and strong cash generation, while continuing to earn the competence of consumers, customers, and shareholders. With that, I'll turn the call over to Mark.

Thanks, Chris. Good morning, everyone. Second quarter, 2026, net sales increased 3%, to approximately $2 billion, while core sales increased 2.3%. Favorable foreign exchange generally accounted for the difference between net and core sales. Normalized gross and operating margin as reported and versus the prior year period was 40.8% compared with 35.6% and 16.2% versus 10.7% respectively. The large increase in both normalized gross and operating margin was primarily due to the recording of a receivable for nearly $100 million of recoveries related to IEPA tariffs expensed in 2025. Excluding this one-time benefit, both normalized gross margin and normalized operating margin would have been up slightly year over year. Separately, $26 million of recoveries related to IEPA tariffs incurred before they were nullified and expensed during the first quarter of 2026 were recorded in the second quarter. Within the second quarter, current year IEPA tariff recoveries, when coupled with stronger sales and higher levels of gross productivity, slightly more than offset approximately $23 million of non-IEPA current year tariff expense recognized during the second quarter and more than $60 million of inflationary pressures. During the second quarter, A&P investment increased by $9 million to support the strongest innovation program in 10, if not more, years. which brought A&P spending as a percentage of sales up by 30 basis points to 5.7%. In addition, approximately $30 million of restructuring and other savings, including benefits from the previously announced productivity plan, offset wage inflation and higher variable compensation expense, allowing second quarter normalized overhead as a percentage of sales to drop by 60 basis points versus year ago to 18.8%. Net interest expense was $87 million compared with $82 million in the prior year period, and the effective tax rate was 26.5% versus 19.3% last year. All of this taken together yielded 42 cents of normalized diluted earnings per share versus 24 cents in the prior year period. Now, one might ask how 42 cents compares to our original Q2 guidance range of 16 to 19 cents if the nearly $100 million of one-time recoveries related to IEPA tariffs expensed in 2025, which equates to 17 cents per share, is excluded. In that case, 42 minus 17 yields 25 cents per share. Going one step further, if we also back out approximately $26 million, or 4 cents per share, of recoveries related to IEPA tariffs incurred during the first quarter of 2026, before they were nullified that were also recorded in the second quarter, we would have still exceeded the high end of our EPS guidance range. Turning to cash flow, operating cash flow was an outflow of $204 million during the first half of 2026, compared with an outflow of $271 million in the prior year period, an improvement of $67 million. Year-to-date operating cash flow benefited from lower incentive compensation payments and better working capital management as our cash conversion cycle improved by 15 days year over year, driven primarily by higher days payable outstanding. We also implemented a new automated cash application and deduction management system that is accelerating cash application, improving deduction resolution and strengthening receivables management. Please note that because the cash related to the tariff recoveries accounting entry recorded in the second quarter has not been collected yet, Nothing has been reflected in year-to-date OCF results. We received the first portion of the cash recovery in July, and we expect to recover a substantial portion of these funds before the end of the calendar year, but the timing of the remaining collections is subject to the government's process and remains difficult to predict. Trailing 12-month normalized EBITDA was approximately $1 billion. which produced a net leverage ratio of 4.8 times compared with 5.4 times at the end of the first quarter and 5.5 times a year ago. Before sharing our updated outlook for the year and third quarter, let's spend a few minutes talking about tariffs, overall inflationary impacts, and how we are accelerating productivity efforts to try and mitigate as much as possible the need for broad-based pricing actions. as it relates to tariffs and excluding any IEPA refunds and including everything we currently know about the existing tariff regime, along with our internal assumptions regarding the new Section 301 forced labor tariffs and potential additional tariffs related to structural excess capacity, we expect $127 million of net P&L tariff headwind for 2026, which will be $12 million higher than what we experienced during 2025. On the inflation front, We went into 2026 expecting around $100 million of inflationary impacts. As we sit here today, we now expect that number to be closer to $200 million, with about $50 million of that increase presenting itself since our last earnings call. We have been dealing with these significant challenges by leaning aggressively into our fuel productivity program, overhead reduction efforts, and AI enablement initiatives, so any pricing actions we take can be as small and as targeted as possible. That said, we want to be very clear about something. Specifically, when we look at our underlying run rate tariff costs and underlying inflationary impacts, the pricing actions we have taken don't come anywhere close to offsetting the cumulative cost impacts we have seen across our direct purchase pools, labor markets and third party services. With that understanding and based on our second quarter performance and our latest expectations for the balance of the year, including category growth assumptions and current year tariff and inflationary impacts, we are raising our full year outlook across all key financial metrics. We now expect full year net sales growth of 1% to 2% and core sales growth ranging from flat to 1%. Normalized operating margin is expected to be between 10% and 10.4%. and assuming a full year effective tax rate of around 20%, normalized diluted earnings per share are expected to be between 73 and 77 cents. You will recall that the previous normalized EPS range was 56 to 60 cents. This means that 17 cents or 100% of the one-time recovery related to IEPA tariffs expensed in 2025 has simply been added to the low and high ends of our prior estimate. The end-year 2026 portion of the EPA tariff refund we recorded in the second quarter is being used alongside our aggressive productivity and cost control efforts to offset the significant inflationary pressures we have been experiencing. We believe this negates the need for broad-based pricing actions, which we believe is prudent for two reasons. First, you will recall that last year we took major pricing actions on April 1st, May 1st, and July 28th to protect our structural economics. Thank you for joining us today. which assumes we will receive substantially all of the IEPA tariff recovery by year end and also reflects the updated inflation outlook. As previously indicated, Newell expects to generate an incremental $60 million of cash by the end of the year which will be recognized as cash from investing activities, from liquidating the life insurance assets associated with specialized, non-qualified, defined U.S. benefit plans for certain participating former senior executives. Thank you for joining us. For the third quarter, we expect both net sales and core sales to increase between 2% and 3%. At the midpoint, this means we expect to see sequential increases in core sales performance versus Q2. Normalized operating margin is expected to be between 9.5% and 10.2%, and normalized diluted earnings per share are expected to range from $0.18 to $0.20 with an effective Q3 tax rate of about 10%. In closing, Newell Brands returned to sales growth in the second quarter with results exceeding expectations across all key financial metrics as a reconstituted innovation program supported by considerably higher A&P levels is driving meaningful and we believe durable distribution gains. Chris touched on this earlier, but it bears repeating. The capability-based turnaround initiated three years ago is beginning to take hold. This is evidenced by the fact that five of our six business units delivered year-over-year core sales growth and seven of our top 10 brands and half of our top 10 countries, led by the U.S. at approximately 5%, delivered year-over-year net sales growth in the second quarter. Moreover, the team continues to display amazing resourcefulness and agility in dealing with and operating in a very complex and fluid cost environment, which we believe will allow us, over time, to fully monetize Newell's portfolio of leading brands. We acknowledge there's still a long way to go, but this is a big first step. Chris and I, along with the rest of the executive leadership team, very much recognize and appreciate the hard work and dedication of the Newell Brands team, and we want to say thank you. We're just getting started. Operator, please open the call for questions.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Our first question comes from Lauren Lieberman with Barclays. Your line is open.

Great. Thanks so much. Good morning. Good morning. I wanted to do the annoying thing. Good morning. I wanted to do the slightly annoying thing and pick on the one thing that didn't really inflect, which was commercial. So you've gone through a lot of the really positive things on the call, but I wanted to talk a bit about the commercial business. Just line of sight into that business improving, you know, kind of what It takes, is it innovation? Is it market growth and level of business investment? But curious a bit just to, you know, on that commercial division. Thanks.

Yeah, thanks for the question. You're right. The commercial business improved sequentially, but was still negative in the quarter, as you rightly point out. I think we were optimistic in the commercial business going forward, starting with Q3, that trends are going to continue to sequentially improve. That business, we're focused on bringing new innovation. We are currently launching a revamped brute trash can that is a superior trash can versus what we had previously. We've also launched a line of brute farm products that is getting strong pickup across rural channels. and in that business, which includes the Spontex business in Europe, we launched a very strong innovation on the Spontex brand with the Flex and Go, which is a superior performing sponge product that's about positioned from a pricing standpoint about 100% higher than the base product. All of those initiatives are getting strong consumer and retailer reaction. We think that we're on the right track there. It's just going to take a little bit longer than the other segments to inflect from a positive standpoint. But we believe you're going to see that business inflect in the near term, possibly in the third quarter.

Okay. Fantastic. Thank you. And then just on – and I apologize if I missed this because I was looking at a couple things at once this morning – Just thoughts on back-to-school season, you know, sell-in I'm guessing is, you know, going well, but how much that's falling kind of into 3Q versus 2Q. We've seen some news stories, you know, about how much consumers are intending to spend on back-to-school, so just any thoughts on back-to-school season would be great, too. Thanks.

Yeah, obviously it's a critical time for back-to-school. I'll just make a couple of comments. First, we feel very good about the sell-in of back-to-school. Our fill rates were very strong in terms of the setup of back to school. We also took a slightly different approach this year. Last year, a lot of the stores, we wound up getting set up later than the private label brands last year. And so we got off to a slower start from a POS standpoint at the beginning of the season last year. And then we caught up in the middle and end of the session. This year, we didn't want to do that. So We put a concerted effort with merchandising activity to get our brand set up at the very start of the season, and that appears to be working in a strong way. We've got the first three weeks of POS data, which is effectively the first three weeks of July we get real time. So far in the U.S. business, in the first three weeks, we have gained market share in each of those three-week periods, and our POS is tracking right in line with our forecast. It's very early. The first three weeks are not the biggest weeks. The biggest weeks are still ahead of us. But we're off to a much stronger start from a consumer offtake trend this year versus last year. And we're excited to see that we're gaining share. The brands that are gaining share out of the gate are Sharpie, Elmer's, Prismacolor, to name a few, where we think we're very well set up going into the season. The From a shipment timing standpoint, I don't think there was a huge change in shipment timing between Q2, Q3 that was different than what we expected. I think the shipment timing sort of went according to our plan. And so that was not a factor that drove either Q2 or Q3. And you see that in our guidance where We delivered 2.3% core sales growth, and we're guiding Q3 to be 2 to 3, which is, as Mark said at the midpoint, even a little bit higher than Q2. Okay.

Wonderful. Thanks so much.

Thank you. And our next question comes from Filippo Filorni with Citi. Your line is open.

Hi. Good morning, everyone. I was wondering if you can give a little bit more color on the shelf space gains in North America, how much contribution you realized there in the quarter. And obviously, if you look at your reported results in organic, North America very strong. I'm curious internationally also, like what drove the weakness there in the quarter? And could you see more of those shelf space that you realize in North America also in international business? Thank you.

Yes. So the shelf space gains really are driven by the capabilities that we've put in place. It's the strong new product innovation, the category growth stories, the higher A&P, and the stronger service execution that we're delivering to retailers. All of that has come together in a way that allowed us to win line reviews last year as we went into this year's reset season. and as I mentioned in the prepared comments, our level of distribution in the US market is up mid single digits and we're seeing that really across a lot of our categories because the new product innovation is spread across all six business units and every one of our business units has tier one or tier two innovation. We're seeing distribution gains. It's not every retailer in every category. but in aggregate, our level of distribution is going up. I will say that we're also excited that our consumer offtake has also turned positive in the second quarter. So it's not that this was pipeline shipments. This is really being driven by consumer demand, which is up versus a year ago. And our POS trends are leading the way on this. And so we're excited about that and we think we've got continued distribution gains that we've secured that are going to come as we move into the back half of the year. On the international business, you're right. The international business was down in the second quarter in total. There were some unique things that happened in the international business, particularly Europe has been a little bit softer with the Middle East spillover in that market. and some consumer pullback in terms of consumer demand. In Latin America, we've had very strong consumer demand, but there were some shipment timing challenge in that business. I do expect that you're going to see international turn more positive and improve sequentially as we go into the third quarter. and so we're confident that the international business is going to come back as we go into the back half of the year here.

And if I could just add one thing, you may recall that the international business had grown for six straight quarters up to the third quarter of last year and then due to some second and third derivative effects of the tariffs, we saw some very large markets like Brazil step down meaningfully. You know, Chris just alluded to it, but as we think about, you know, Q3 and going forward, We're confident that the international business is going to come back online. And now that the U.S. business, our largest business, just demonstrated the ability to grow, we're actually really excited about having both of the lead horses pulling in the same direction at the same time. And that turnaround in international is reflective of the same capability build-out that we've been affecting across the domestic markets.

Great. Thank you so much, guys. I'll pass it on.

Thank you. Our next question comes from Brian McNamara with Canaccord Genuity. Your line is open.

Good morning. This is Madison Callanan on for Brian. Thanks for taking our question and congrats on the strong results. Commercials in week, but what are the other brands in the top 10 that are still declining in POS? Is there a common reason for any of them? And what are those expected to return to growth? In all, is modest core sales growth now the expectation? Thank you.

Yeah, so as we mentioned, seven of the top 10 brands drove core sales growth in the quarter. Of the brands that didn't grow in the quarter, some of it is related to timing of innovation on the brands. So as an example, we grew in writing, as I mentioned, because Sharpie had a very strong result. We're growing on Elmer's. We're growing on Prismacolor. But PaperMate, which is one of our top 10 brands, was down in the quarter. We have strong innovation coming on PaperMate because of the timing of that innovation and the timing then of the reset on that brand. That turnaround on that specific brand is a little bit on different timing than the business in total. And so that's typically what you see in the top 10 brands. is that because the innovation is set to launch at different timing throughout the year, it's unusual to see all top 10 brands growing at the same time is the way I would answer that. And so what we're trying to do is employ the same playbook from a consumer insights, superior innovation, strong category insights, great retail execution, across all of the top 25 brands in the company, which represent 90% of our sales and profit, so that we get the majority of them growing and we grow in total as a company, recognizing that it would be highly unusual for every single one of those brands to be growing in the same quarterly period. But we believe if we can get the majority growing, which we have done in the second quarter, that the company in total can grow Thank you for joining us.

will allow us to continue to provide our shareholders with a solid business model that is sustainable.

Great. Thank you. Thank you. Our next question comes from Peter Grom with UBS. Your line is open.

Great. Thank you. Good morning, everyone. So I wanted to get some perspective just on the category. You noted that A very strong first half, but you sounded a bit more cautious on kind of the path from here. And I'm curious, is that just, you know, are you simply trying to be conservative or is there something you're seeing more real time that's informing that view?

Yeah, no, I think it's a little bit more just being wanting to be a little bit cautious on the category growth. So, as I mentioned, you know, we went into the year with an assumption that the category was going to be down 2%. and really the reason why we did that was because the last couple of years it had been running at that pace. We wound up down one in the first quarter and effectively flat in Q2 and what we're seeing from a category dynamic standpoint is that the high income consumer is still driving significant growth in the general merchandise category. Call it mid single digit growth and that's what's leading sort of the growth side. The middle income consumer is relatively flat to down sort of low single digits. The thing that's interesting in the second quarter is that the low income consumer, which had been running down more, is now annualizing that. So they seem to be stabilizing and their year over year decline is reducing, which is why the category, if you follow me, seems to be doing a little better at roughly flat. As we've planned the business for the back half of the year, given all of the moving parts with gas prices, with commodity cost inflation, etc., we didn't want to get above our skis on that. There is a case where if the category continues to be flat in the back half of the year, I would expect that we would do better than what's embedded in our guidance range as a result of that. We just felt like it was prudent not to get too far ahead of ourselves on the category growth assumption.

That makes a ton of sense. And then I guess just on the pricing discussion, it sounds like you're not choosing to lean into price for a variety of different reasons and kind of using refunds as more of the offset to the impact. And obviously, inflation remains volatile. Curiously how we should think about that playbook, you know, should inflation persist? And then I guess related, I mean, do you have any visibility on how your peers are handling the situation?

Yeah, so we've taken two pricing actions since last we reported earnings that I think we've talked a little bit about. We've priced for resin-oriented products that represents a little bit less than 10% of our total business. And largely those resin-specific products are in the commercial business and in the outdoor and rec, the Coleman cooler business, which are very resin-dependent. Those price increases have now gone into effect on both of those brands. It appears that the industry has moved up because the The price spike that we had earlier in resins was just too high for people to move past. And so we don't believe that we are competitively out of step with what the market has done. With regard to the majority of the business where we have not taken pricing, you're right that what we're doing is we're using the top line growth momentum coupled with better fuel productivity savings. and the in-year part of the tariff refund to effectively offset what is a significantly higher inflationary environment than what we had planned going into the year and also what we had thought three months ago when we reported last quarter. Part of that is because we also think that some of this inflation might be peak inflation. We're already starting to see resin prices roll down a little bit. and so as Mark said appropriately in his remarks, what we don't want to do is price for peak inflation and then have to take the pricing back. We're trying to sort of navigate through this in a way that's compelling. I do think that our fuel productivity program is a huge competitive advantage and we are hitting it out of the park. We're running way ahead of plan in terms of productivity savings that the fuel team is delivering this year. And I think that's going to position us from a consumer value standpoint in a much more competitive way versus our competitive set. So we're pretty optimistic that the combination of our tariff-advantaged manufacturing footprint that we've talked about, coupled with this fuel productivity program, is going to position our brands now to have superior innovation but also at Compelling Consumer Values, which we think is going to lead to continued market share gains and top line growth.

Great. Thank you so much. I'll pass it on.

Thank you. Our next question comes from Olivia Tong with Raymond James. Your line is open.

Great. Thanks. Good morning. Now that you've secured the refunds, can you talk about the deployment of those funds and reinvestment opportunities going forward and what's been embedded into the outlook and how you think about not only this year, but, you know, past the, into the next 12 months. And then I don't know if you said it, but was there any benefit to this quarter from the pull forward of Prime Day into Q2 and and then I have a follow up. Thank you.

I'll take the first question and then Chris can comment on the second. So we were very clear in making sure that the entirety of the 2025 tariff refund values were passed through one for one into our current year guidance. And that's what you saw, right? Because it was $100 million, which was $76 million after tax, which was 17 cents. And that's what we took up the low and the high end of our guidance range by. There were some additional in-period refund amounts that we spoke to, and it was $26 million that related to the IEPA tariffs that were in Q1 of 26 that we obviously got effectively refunded to us. But those are all in-year, in-period items, just like the fact that the inflationary environment went from $100 million at the start of the year to $200 million, and we've had to contend with all of that. The other thing I would point out is that on an underlying basis, our tariff exposure year over year, you know, last year was about 115 million on a P&L basis. This year it's 127 if you just strip out all of the noise, right? So the tariffs themselves still are a pressure point in the current year. We've dealt with that by doing a number of things. Chris alluded to the fuel productivity program, which is kind of our secret weapon, you know, That team continues to do amazing things. I mean, they have been literally taking out, you know, mid-single digit, you know, COGS as a percent of sales, you know, each and every year for the past several years. You know, we have 47 sites now that are active in the PEAK program. That's up from 39 at the end of last year. So effectively what that means is over 90% of our targeted sites are enrolled in the program. So that's the exciting thing. And then you might say, well, gee, if 90% of them are already enrolled, you know, have you already got all the juice out from the squeeze? and the answer is no, because of those 47 sites, 16 are in the foundation stage, nine are at base camp, 15 are at climb one and only seven are at climb two, right? So as you move along the continuum, you get more and more efficient, more and more savings is derived. And so this is going to be something that is a capability set that we have uniquely developed here at Newell, which is operating at world-class levels, which is going to allow us to continue to do exceptionally well. And then I guess the last thing I would say, just so that there's no confusion at all, is if you look at the 42 cents we delivered in the second quarter, if you back out the 17 cents that related to the 2025 portion of the IEPA tariff refund, that would bring you from 42 minus 17 down to 25. And then if you took out the first quarter piece, which is, again, out of period, that's another 4 cents, that would take you from 25 basically down to 21. And we guided to 16 to 19. and the reason we were able to beat and exceed was because of the fuel productivity program, because of the incremental sales gains. So we feel really good about where we are and we guided to a Q3 that at the midpoint has sequential growth. We talked about the fact that this is broadening out and it should be across both the US and the international markets. And then if you do one final thing and look at our op margin guidance for the full year, which was 10 to 10.4, if you strip out the elements of the refund related to 2025, which are all the out-of-period elements, right, our guide would basically have us at 8.6 to 9, right, on an op margin basis with the midpoint being 8.8, which basically means that's about a 50 basis point improvement from 25, right? So our algorithm, our financial algorithm that we've laid out We continue to deliver against that consistently despite massive volatility in the marketplace. And once all this starts to normalize, I think you're going to see really good things start to happen.

Just two other questions that you asked. Amazon Prime Day, which moved from an execution standpoint from July last year to June this year, did have an impact on POS results but did not have an impact, material impact on shipments because we typically ship the inventory to Amazon in advance of the execution. So there was not a material change in our shipment patterns as a result of the Prime Day move just to clean that one up. And then I think on your other question on what does this mean going forward as we think for next year, obviously we're not at a position to guide for 2027 at this point, but I think the reason why we wanted to call out specifically the 100 million or the 17 cents a share that was related to 25 as being out of period is, you know, we think that that portion of the tariff refund is not repeatable as we go into 27. We think all of the stuff that has happened in year this year, we do think of as a base that we're going to grow from as we go into next year.

Great. That's super helpful. Just following up a bit on promotion and price mix. You said pricing won't be able to offset inflation this year. Totally understandable. But sort of looking a different way, there's a lot of newness, but you also have a pretty tough consumer backdrop. And given that, you know, back to school and holiday in the second half, can you talk about your level of confidence that you can Hold the pricing and promo plans, especially given the level of competition that's out there right now.

Yeah, I think we feel pretty good about that. And again, it's because we're not taking broad-based pricing. You know, the two areas where we've taken pricing that represent, as I mentioned, less than 10% of our business, we've seen the whole industry move up. Interestingly, in some of our other businesses, we've seen competition price and we have not. because we've got the U.S. manufacturing footprint and we've got this fuel productivity program that we've talked about. And so I think we're pretty well set up and well positioned from a consumer value standpoint heading into the back to school and heading into the holiday season. By the way, I should mention we are monitoring the inflation environment. Inflation has moved, as Mark said, from When we came into this year, $100 million headwind to a $200 million headwind, which is a big increase. We're pretty excited that we've been able to offset that without having to take significant pricing. But that's affecting not just us, it's affecting the whole industry. We are monitoring that, and if the situation continues or gets worse, we may choose to enact future pricing. But as we sit here today, we don't have anything imminent that we think we need to do to deliver the plan and the guide, assuming that the current macro environment sort of holds where it is.

Great, thank you. Thank you. As a reminder, if you'd like to ask a question, please press star 1-1. Our next question comes to Andrea Tashira with J.P. Morgan. Your line is open.

Thank you, and good morning, everyone. I want to pick up from what you just said about pricing. Do you see, conversely, any pressure to potentially having to give back some of the tariff benefit, or if you will? I mean, obviously, Mark had just pointed out that you're still higher year over year, but just to see some affordability improvement, we have heard some of your key customers taking some promo ahead of even the manufacturers themselves. I mean, that was more, I think, on the grocery side, but just thinking ahead if as you look into this innovation, obviously you have this 21, 29, sorry, tier one, tier two innovations. Should we be thinking the innovation is coming in at a higher price level and higher margin? and if you have to reinvest in some of the initial price points, that would be great. Thank you.

Yeah, so let me start with the innovation point. So we are, as you know from the strategy that we put in place three years ago where we decided that we were going to completely revamp the way we do new product innovation. We put in the tiering system. We moved to consumer-led innovation. and completely rebuilt the consumer insights function to make the innovation much stronger. One of the choices we also made was to focus that innovation more at the middle and higher price points within the category. And I would say the majority of the innovation that we're launching is focused at the mid tier with some pockets at the upper tier. And the reason why we chose to do that and not focus in the opening price point Thank you very much. is that the mid and the premium tier parts of the market are actually growing faster than the opening price point part of the market. And the reason for that is because the high income consumer is the one driving all of the growth in general merchandise. And so we think we're doubly benefited from that. Just because the innovation is coming at the mid price point or the lower end of the upper part of the tier does not mean that it can't be a great consumer value. We are focused on making sure that the innovation is a great consumer value, which is why we're focused on all of the productivity savings to be able to offset the inflationary impact. I don't believe that we're going to need to price that innovation down because we're seeing very strong consumer response to it so far. The other thing I would say is as we launch that innovation, it is giving us a mixed benefit on the top line as well. It's sort of another thing that's happening within the P&L. And then on your point relative to the tariff refunds, I think I mentioned in the prepared comments that if you look at the new tariff costs this year from the new tariff regime plus the tariff refunds plus the inflation, all in and say, what was the total input cost picture for Newell this year, inclusive of all tariff refunds, even from the prior year from Q1, et cetera. It is still a headwind this year. And so it's not like we're in a situation where we have some sort of input costs going down. Input costs are going up because the inflationary impact is more than the tariff tariff help. and so we think we're being prudent in terms of how we're planning that and we think we're actually likely because we're not planning to take broad-based pricing likely to be well positioned as I mentioned earlier in the back half of the year.

Thank you.

This concludes today's conference call. Thank you for your participation. A replay of today's call will be available later today on the company's website at ir.newellbrands.com. You may now disconnect. Have a great day.