Energizer Q1 Earnings Top Estimates Despite Margin Pressure & Tariffs

Energizer Holdings, Inc. ENR reported first-quarter fiscal 2026 results, wherein net sales and earnings surpassed the Zacks Consensus Estimate. While the top line increased year over year, the bottom line declined due to tariff-related pressures and integration costs tied to the Advanced Power Solutions (“APS”) acquisition. Organic sales declined in the quarter, reflecting softer U.S. consumer demand and difficult storm-related comparisons. Still, management highlighted strong cash generation and reaffirmed confidence in margin recovery and stronger earnings cadence in the back half of fiscal 2026.

More on ENR’s Q1 Results

Energizer posted adjusted earnings of 31 cents per share, which beat the Zacks Consensus Estimate of 26 cents. The bottom line declined from 67 cents reported in the year-ago quarter, reflecting lower gross margins, higher SG&A expenses tied to the APS acquisition and increased interest expense. 

Net sales came in at $778.9 million, outpacing the Zacks Consensus Estimate of $715 million and rising 6.5% year over year. The increase was driven primarily by $64.6 million in acquisition-related sales from APS, along with favorable currency impacts. Organic net sales declined 4.3%, largely due to weaker volumes across both segments and lapping prior-year storm-driven demand, partially offset by pricing actions, distribution gains and e-commerce growth.

Energizer’s Q1 Sales Insights by Segments

Net sales in the Batteries & Lights segment increased 8.3% year over year to $685.2 million, supported by APS contribution, and surpassed our estimate of $620.4 million. Organic sales declined 3.8% due to softer category trends and storm-related comparisons, though the company posted nearly 70% growth in global e-commerce and more than 180 basis points of international distribution gains. 

Segment profit decreased 11.4% to $105.7 million, while segment profit margin contracted 350 basis points to 15.4%. This year-over-year decline reflects tariff headwinds, temporary network transition costs and the margin dilution from APS. 

The Auto Care segment posted net sales of $93.7 million, down 5.6% year over year, with an organic decline of 6.9% as discretionary categories faced consumer softness in the United States. The segment sales fell short of our estimate of $96.8 million.

Segment profit fell sharply to $9.1 million from $20.5 million in the prior-year quarter, impacted by elevated input costs and the full effect of tariffs. Management noted that the first quarter is seasonally the smallest and expects performance to improve through the year, supported by pricing actions and innovation initiatives such as the continued rollout of Armor All Podium Series.

Energizer Holdings, Inc. Price, Consensus and EPS Surprise

Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. Quote

ENR’s Margin & Cost Details

Adjusted gross profit declined 7.2% year over year to $271.9 million, while the adjusted gross margin contracted 510 basis points to 34.9%. The decline was driven by higher tariff costs, production inefficiencies tied to network rebalancing, unfavorable product mix and the lower-margin APS portfolio. These pressures were partially offset by production tax credits of $9.7 million and pricing actions aimed at mitigating tariff impacts. We had anticipated a gross margin contraction of 420 basis points.

Adjusted SG&A expenses rose 11.7% to $133.2 million, while as a percentage of net sales, the metric climbed 80 basis points to 17.1%. The year-over-year increase stemmed from APS-related expenses, investments in digital transformation, and higher legal and recycling fees. Advertising and sales promotion spending declined 7.9% to $49.2 million, offering some offset to cost pressures. As a percentage of net sales, the metric shrank 100 basis points to 6.3%. 

Adjusted EBITDA was $106.9 million, down from $140.7 million a year ago, pressured by lower gross margins and the inclusion of the lower-margin APS business. Adjusted EBITDA margin contracted 550 basis points to 13.7%. We had anticipated 560 basis points of contraction in the adjusted EBITDA margin.

Energizer’s Financial Health Snapshot

Energizer ended the quarter with cash and cash equivalents of $214.8 million, long-term debt of $3,318.7 million and shareholders' equity of $141.3 million. Energizer generated $149.5 million in operating cash flow and $124.2 million in free cash flow, representing 15.9% of net sales. The company paid down more than $100 million of debt, repurchased 245,000 shares for $4.5 million and returned approximately $23 million to shareholders through dividends.

What to Expect From Energizer in FY26?

Management’s strategic priorities for fiscal 2026 center on restoring growth, rebuilding margins impacted by tariffs and returning to the company’s long-term historical cash flow profile, with sequential improvement in gross margin and meaningful earnings growth in the back half of the year.

Energizer expects adjusted gross margin improvement of more than 300 basis points in the second quarter on a sequential basis, with an additional 300-400 basis points of improvement anticipated by the end of the fiscal year, driven by pricing actions, operational upgrades and tariff-related supply-chain realignment. The company expects organic net sales to return to growth in the second half of fiscal 2026.

For the second quarter, Energizer expects organic net sales to decline approximately 4-5%, primarily due to shipment timing, especially tied to the plastic-free packaging transition. 

ENR expects second-quarter adjusted earnings between 40 cents and 50 cents a share, up sequentially, supported by margin expansion and productivity benefits. It shows a sharp fall from earnings of 67 cents reported in the second quarter of fiscal 2025.

For fiscal 2026, management continues to expect organic net sales to be flat to slightly up across both Batteries and Auto Care segments. It foresees a modest year-over-year decline in consolidated gross margin, as tariff impacts are gradually offset. SG&A, as a percentage of sales, is expected to remain flat versus the prior year. Energizer guided adjusted earnings in the range of $3.30-$3.60 per share compared with $3.52 in fiscal 2025.

ENR guided adjusted EBITDA between $580 million and $610 million for fiscal 2026, with free cash flow expected to exceed 10% of net sales.

Shares of this Zacks Rank #5 (Strong Sell) company have lost 27.2% in the past year compared with the industry’s decline of 5.8%.

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