Newell Brands: Toys ‘R’ Us Woes Ending

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Last Friday, Newell Brands Inc, a consumer products maker in the United States, surpassed first-quarter estimates and said that the bankruptcy of Toys ‘R’ Us , its retail partner, would not have any more impact on its business, sending the shares of the company up by 10 percent.

In the past year, the sales of the firm were hit by the bankruptcy of the toy retailer which meant less shelf space for the baby products of Newell, such as Baby Jogger strollers and Graco car seats.

On a post-earnings call with analysts, Christopher Peterson, the Chief Financial Officer of Newell Brands, stated: “Coming out of the first quarter, the headwinds stemming from the (Toys ‘R’ Us) bankruptcy subsides and we expect baby to return to growth.”

The firm expects second-quarter profit in the range of 34 cents to 38 cents per share, below the estimates of analysts of 47 cents.

Bonnie Herzog, an analyst from Wells Fargo, stated: “While the Q2 outlook is less than we hoped, we think sentiment entering the print was so bad it was actually good.”

Newell has been divesting its non-core businesses including Pure Fishing, Waddington Group, and Jostens to focus on higher-margin consumer products as part of its $9 billion (£6.9 billion) turnaround plan.

It has also been increasing its prices to reflect higher costs that are related to tariffs and raw materials, while keeping a tight lid on spending to lessen overhead costs, including slowing the pace of hiring.

According to IBES data from Refinitiv, the efforts appear to have paid off with firm earning 14 cents per share in the first quarter on an adjusted basis, well above the estimates of 6 cents.

The shares of the firm increased by 12 percent to $16.41, having dropped by 21.2 percent in 2019.

The sales of Newell in learning and development division dropped by 4.2 percent, as the strength in its writing business was offset by lost sales that are related to the bankrupt toy retailer and a stronger dollar.

Overall, the net sales of the company dropped by 5.5 percent to $1.71 billion, however, it came ahead of estimates of $1.69 billion.

The firm is in the middle of a search for its new chief executive after it announced last March that CEO Michael Polk would be retiring at the end of the second quarter.