Newell Rubbermaid Inc. (NWL)

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Newell Rubbermaid (NWL)

Q3 2010 Earnings Call

October 29, 2010 8:30 am ET


Mark Ketchum - Chief Executive Officer, President, Director and Interim Executive Group President of Office Products & Cleaning for Organization & Decor

Juan Figuereo - Chief Financial Officer and Executive Vice President

Nancy O'Donnell - Vice President of Investor Relations


William Chappell - SunTrust Robinson Humphrey Capital Markets

Lauren Lieberman - Barclays Capital

Constance Maneaty - BMO Capital Markets U.S.

Mark Rupe - Longbow Research LLC

John Faucher - JP Morgan Chase & Co

Joseph Altobello - Oppenheimer & Co. Inc.

Chad Bolen - Raymond James

William Schmitz - Deutsche Bank AG

Jason Gere - RBC Capital Markets Corporation

Wendy Nicholson - Citigroup Inc

Andrew Sawyer - Goldman Sachs Group Inc.

Christopher Ferrara - BofA Merrill Lynch



Good morning, ladies and gentlemen, and welcome to the Newell Rubbermaid's Third Quarter 2010 Earnings Conference Call. [Operator Instructions] A live webcast is available at, on the Investor Relations homepage under events and presentations. A slide presentation is also available for download. I will now turn the call over to Ms. Nancy O'Donnell, Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Nancy O'Donnell

Thank you. Good morning, everybody. Welcome to our third quarter earnings call. I'm Nancy O'Donnell, and with me today are Mark Ketchum, our President and Chief Executive Officer; and our Chief Financial Officer, Juan Figuereo.

Before we begin, please note that this conference call includes forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual results may differ materially. If you refer to our most recent 10-K, 10-Q and 8-K reports, you will find cautionary statements and risk factors, which provide a more detailed explanation of the inherent limitations in such forward-looking statements. We undertake no obligation to update any such statements made today.

Also we will refer to non-GAAP financial measures. Please refer to the non-GAAP to GAAP reconciliation's in our earnings release and on the Investor Relations section of our website.

Thank you. And now I would like to turn the call over to Mark Ketchum.

Mark Ketchum

Thank you, Nancy. Good morning, everyone, and thank you for joining us today. I'm pleased to report that Newell Rubbermaid delivered very solid results this quarter. We generated core sales growth in the mid-single digits, healthy gross margin expansion and year-over-year normalized EPS growth, all consistent with our year-to-date trends as well.

I wish we were getting a little more help from the economies in North America and Western Europe, but we're not waiting for these economies to turn. We are making our own momentum. As a result, we are on track to deliver our full year financial targets, and we continue to advance our long-term growth strategies.

We also made good progress on the implementation of our European Transformation Program during the quarter, and we completed four out of the five legs of our Capital Optimization plan. More on this later.

Third quarter core sales increased 5.7%, more than a full percentage point higher than our first-half growth rate. Our growth was broad-based, with virtually all of our business units posting year-over-year core sales growth. We are winning in the marketplace on the strength of compelling new product innovations, impactful advertising and consumer promotions and continuing investments in strategic sales support. Our constantly improving consumer insights, shopper insights, and targeted marketing are helping us drive more consistent and sustainable sales growth.

As expected, our growth was led by our International businesses, which grew 11% in the local currency during the quarter. We're seeing particular strength in the faster-growing, emerging markets of Asia, Latin America and Eastern Europe, where several of our business units are growing strong double-digits. Increasing our international exposure is a key element of Newell's long-term growth strategy. And we will continue to invest strategically to expand our business in these higher growth regions.

Domestic core sales growth for the quarter was a very respectable 4%. Gross margin was once again a good story for us, expanding 70 basis points to 38.1%. Our manufacturing and supply chain teams continue to do a good job, driving productivity in our own plants and with our finished goods suppliers. Operating income margin remained healthy at 13.3% of sales, and normalized EPS rose 11% to $0.42. We continued to deliver on a growth trifecta: top line sales growth, gross margin expansion and bottom line earnings improvement. These results are a further validation of our business model and our long-term growth strategy.

Let me take a few moments now to discuss some of the highlights from our three operating segments. We were pleased to see our Home & Family segment return to growth this quarter, posting 4% core sales growth. The biggest contributor to this core's improvement was the dramatic growth of our Beauty & Style business.

As we told you on our last call, Goody has substantially expanded distribution in shelf space in the U.S. as well as gaining new distributions in several U.K. retailers. These gains were driven on the strength of superior shopper understanding and innovation, including the highly successful Simple Styles line of hair accessories. As a result, Goody turned in a second consecutive quarter of approximately 20% core sales growth. By the way, please take note of the additional pages that we've added to our online earnings presentation deck this quarter. We've described many of the innovations that are referenced in my remarks, starting with Simple Styles on Page 8.

Rubbermaid Consumer GBU generated a mid-single digit core sales increase, driven by increased distribution in the U.S. and Brazil and the launch of innovative new products, including the premier extension of Easy Find Lids and the Reveal Microfiber Mopping system. Many of you saw the Reveal Mop at our Analyst Day back in May, and will remember the compelling value proposition it offers to consumers namely: better cleaning efficacy, less waste, and a lower cost versus the competitive offerings. In early days since the launch of Reveal in August, we're seeing strong sell-through at retail, and we've been investing in advertising and promotion to increase awareness and trial. In fact, our current Reveal TV ad was recently rated one of the top 10 most effective ads that was launched in the third quarter by ACE Metrix.

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