Solid performances at most segments coupled with constant focus
on minimizing costs facilitated
Spectrum Brands Holdings Inc.
) to post record fiscal 2014 third-quarter results. The company's
adjusted earnings surged a massive 44.4% to $1.30 per share,
beating the Zacks Consensus Estimate by a cent.
Spectrum Brands Holdings, Inc - Earnings
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On a GAAP basis, the company reported earnings of $1.47 per
share, up significantly from 69 cents per share in the year-ago
Net sales for the quarter climbed 3.6% to $1,128.5 million, driven
by a rise in home and garden, battery and Hardware & Home
Improvement (HHI) sales. However, sales fell short of the Zacks
Consensus Estimate of $1,140 million.
Aided by improved sales, Spectrum Brands' gross profit surged
nearly 9% year over year to $417.0 million with the gross margin
expanding 190 basis points (bps) to nearly 37%.
Further, benefiting from record cost savings, the company's
adjusted earnings before interests, taxes, depreciation and
amortization (EBITDA) escalated 7.3% to $202.3 million, marking the
company's 15th year-over-year increase in a row. Also, with the
adjusted EBITDA margin improving 60 bps to 17.9% during the
quarter, the company remains well-placed to witness its seventh
consecutive year of adjusted EBITDA margin improvement.
Sales at Spectrum Brands' Global Batteries & Appliances segment
came in at $494.8 million, up 0.7% from the year-ago quarter, as
lower small appliance sales were compensated well by strong
personal care and battery sales. The segment's adjusted EBITDA came
in at $67.0 million versus $58.7 million in the year-ago quarter.
The company's Global Pet Supplies segment sales totaled $152.2
million, compared with $156.4 million recorded last year. The
decline in sales was attributable to weakness in the aquatics
category, at Europe and North America, partly offset by a marginal
rise in companion animal net sales.
Adjusted EBITDA at the segment slumped 8.9% to $30.7 million, owing
to inefficient price mix and lower aquatic category revenues.
Sales at the Home & Garden segment ascended 11.5% year over
year to $174.6 million, primarily driven by favorable weather and
market share gains leading to greater personal and area repellent
category sales. Additionally, distribution gains from main
retailers pushed up household control sales. The segment also
benefited slightly from its recent acquisition of Liquid Fence
animal repellents. The segment's adjusted EBITDA improved 12.2% to
Spectrum Brands' HHI segment sales jumped 7.6% to $306.9 million,
aided by enhancements in the residential security category along
with sustained global expansion. The segment's adjusted EBITDA of
$59.8 million was up 12.8% year over year, owing to robust segment
Other Financial Details
Spectrum Brands ended the quarter with a cash and cash equivalents
of $85.1 million and a total debt of $3,336.6 million. Also, under
its ABL facility, the company had nearly $194 million remaining.
The Zacks Rank #3 (Hold) company has also reduced its term loan by
$125 million to date and reaffirmed its plan of making a total
cumulative debt payment of roughly $250 million by the end of the
Fiscal 2014 Outlook
Following an impressive third quarter, Spectrum Brands reaffirmed
its guidance for fiscal 2014. Including the HHI acquisition in the
prior-year period on a pro-forma basis, the company expects net
sales for fiscal 2014 to grow at the rate of the Gross Domestic
Product compared with fiscal 2013 net sales.
During fiscal 2014, the company continues to anticipate generating
a free cash flow of at least $350 million and intends to make
capital expenditure in the range of $70-$75 million.
After delivering a strong quarter, despite facing a tough retail
environment, the company remains positive about its future
performance. It looks forward to launching additional products in
all its segments in fiscal 2014 and 2015, developing its online
network and strengthening its global footprint.
Alongside, it plans to undertake efficient cost-cutting measures
and implement a better pricing strategy. Moreover, the branded
consumer products retailer remains committed to generating solid
free cash flows, reducing debt levels, enhancing adjusted EBITDA in
order to boost shareholder value. With these continuous efforts,
the company is likely to achieve its growth objectives and deliver
another strong year.
Other Stocks to Consider
Other better-ranked retail stocks include Citi Trends, Inc. (
), Abercrombie & Fitch Co. (
) and The Men's Wearhouse, Inc. (
), each holding a Zacks Rank #1 (Strong Buy).
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