REYN Q2 Deep Dive: Stable Volumes and Product Innovation Offset Margin Pressure

Household products company Reynolds (NASDAQ:REYN) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, but sales were flat year on year at $938 million. On the other hand, next quarter’s revenue guidance of $887.3 million was less impressive, coming in 1.1% below analysts’ estimates. Its non-GAAP profit of $0.39 per share was 3.9% above analysts’ consensus estimates.

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StockStory’s Take

Reynolds’ second quarter was marked by stable sales volumes and flat year-on-year revenue, which nevertheless surpassed Wall Street’s expectations. The market responded positively, reflecting confidence in Reynolds’ ability to manage a mixed operating environment. CEO Scott Huckins credited volume gains across waste bags, private label food bags, and party cups, highlighting the impact of new products like Hefty Fabuloso scented waste bags and ECOSAVE compostable cutlery. Management emphasized that product innovation and targeted value offerings were central to share gains, even as consumer confidence declined.

Looking ahead, Reynolds’ guidance remains cautious, with management expecting low single-digit revenue declines and continued margin pressures from higher input costs and tariffs. CFO Nathan Lowe explained that the company’s pricing actions are designed to fully recover commodity and tariff headwinds by late this year, but acknowledged there will be an ongoing interplay between volume and price as consumers remain value-focused. Management remains committed to supporting innovation and growth investments, such as automation and reshoring production, to position Reynolds for long-term improvement, stating, “We see significant opportunities to create value in our business and are focused on unlocking more of that value.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to stable consumer volumes, targeted product innovation, and cost discipline, while noting that input cost inflation and tariffs continued to weigh on margins.

• Category share gains: Reynolds gained market share in Hefty branded waste bags, private label food bags, and party cups, supported by increased investment in these categories and new product formats tailored for value-seeking consumers.
• Innovation in sustainability: The company launched Hefty ECOSAVE compostable cutlery, leveraging technology from the Atacama acquisition. Management noted strong early retail adoption and believes affordable sustainability could reshape the $1 billion cutlery market segment.
• Product portfolio expansion: Reynolds introduced new offerings such as air fryer cups, limited-edition foil, and extra deep paper dishes, which are showing positive early sell-through and are designed to capture demand for at-home cooking and convenience.
• Cost management efforts: The company implemented pricing actions to offset higher input costs—including aluminum and tariffs—and cited ongoing reductions in SG&A (selling, general, and administrative expenses) to maintain agility in a challenging environment.
• New commercial leadership: Recent executive hires, including a Chief Commercial Officer and a new head of Hefty Tableware, are expected to unlock distribution and growth initiatives, particularly in revenue management and product development.

Drivers of Future Performance

Reynolds expects continued pressure from cost inflation and cautious consumer behavior, but is prioritizing pricing recovery, automation, and innovation to support earnings.

• Pricing to offset input costs: Management is executing further price increases to fully recover commodity and tariff headwinds, especially in aluminum-based products, and expects the balance between pricing and costs to improve by year-end.
• Investment in automation and reshoring: Capital is being deployed toward automation projects and onshoring production of select product lines to improve efficiency and reduce supply chain risks, which management believes will unlock incremental margin improvement beyond 2025.
• Sustained focus on value and innovation: The company is expanding affordable product offerings and sustainable solutions, targeting consumer segments seeking convenience and lower price points, while also leveraging innovation to drive incremental growth despite muted category trends.

Catalysts in Upcoming Quarters

Going forward, the StockStory team will closely monitor (1) the pace and effectiveness of pricing actions to offset rising input costs, (2) the impact of automation and production reshoring on operational efficiency, and (3) the adoption and performance of new sustainable and value-oriented products. We will also track whether recent executive appointments accelerate progress in revenue management and innovation.

Reynolds currently trades at $22.54, up from $21.55 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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