SPB Q1 Earnings Call: Tariffs and Consumer Weakness Weigh on Results, Strategy Shifts Underway

Household products company Spectrum Brands (NYSE:SPB) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 6% year on year to $675.7 million. Its non-GAAP EPS of $0.68 per share was 50.7% below analysts’ consensus estimates.

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StockStory’s Take

Spectrum Brands’ first quarter results were largely shaped by external macroeconomic headwinds, most notably a volatile tariff environment and softening consumer demand in key markets. Management attributed the 6% sales decline to weaker category growth in North America and the impact of newly imposed tariffs on products sourced from China. CEO David Maura noted the company responded by immediately pausing nearly all finished goods purchases from China and accelerating efforts to diversify its supply chain to alternative countries. CFO Jeremy Smeltser described the quarter as “challenging,” highlighting increased cost-saving initiatives and inventory management as the company navigated inflation and demand uncertainty. Strategic investments in product innovation and marketing continued, but management was candid about the operational hurdles and ongoing cost pressures.

Looking ahead, Spectrum Brands’ management signaled a cautious approach, citing continued unpredictability in global trade policy and sustained pressure on consumer sentiment in both the U.S. and Europe. CEO David Maura emphasized that, “given the unprecedented global tariff situation,” the company is shifting its operating model to maximize free cash flow and protect its balance sheet rather than pursuing short-term sales growth. The leadership team expects supply chain transitions out of China for most product lines to be completed by year-end, but remains wary of ongoing demand softness and industry-wide challenges. Management stated it will continue to invest in innovation and is poised to capitalize on potential acquisition opportunities in pet care and home and garden, but withdrew earnings guidance due to the current level of uncertainty.

Key Insights from Management’s Remarks

Management cited tariff escalation, supply chain disruption, and weakening consumer demand as the primary factors behind the quarter’s underperformance, while also outlining actions taken to reduce exposure and preserve cash flow.

• Tariff disruption and supply chain shift: The company quickly halted most finished goods purchases from China following new tariff hikes, with CEO David Maura stating these tariffs were now “simply a barrier to trade.” Efforts to move sourcing to countries such as Vietnam, Cambodia, Thailand, and Mexico are underway, with pet care and home and garden expected to be nearly fully transitioned out of China by year-end.
• Consumer demand softness: Management saw deteriorating U.S. consumer sentiment, especially in premium product categories, which led to increased price sensitivity and a shift toward smaller, lower-cost options. European markets also began showing signs of caution late in the quarter.
• Cost management and operational adjustments: CFO Jeremy Smeltser detailed $10 million in annualized cost savings, including reductions in discretionary spending and targeted expense controls. While brand-focused investments increased year-on-year, selective pullbacks in advertising for home and personal care appliances were made to preserve margins during the supply transition.
• New leadership in pet division: The appointment of Ori Ben Shai, a seasoned executive from Kimberly Clark, as president of the Global Pet Care (GPC) division was highlighted as part of a broader strategy to expand in consumable pet categories and explore M&A opportunities.
• Share repurchase activity: Spectrum Brands repurchased approximately 3.2 million shares year-to-date, returning capital to shareholders while maintaining a strong liquidity position, with $140 million still authorized for buybacks. Management stressed discipline to ensure balance sheet strength amid ongoing volatility.

Drivers of Future Performance

Spectrum Brands expects persistent tariff pressures, consumer uncertainty, and ongoing supply chain transitions to shape near-term performance, while M&A remains a potential growth lever.

• Continued supply chain reconfiguration: Management anticipates sourcing alternatives outside China for all but a small portion of pet care and home and garden products by year-end. The home and personal care segment’s U.S. supply transition is progressing, but full diversification is expected to take until at least late next year. Delays or quality issues in onboarding new suppliers could pose risks to product availability and costs.
• Cost discipline and cash flow focus: The company’s primary near-term goal is to generate approximately $160 million in free cash flow, achieved through tight inventory management, reduced discretionary spending, and targeted investments in brand and innovation. Management will prioritize liquidity and protect the balance sheet, even if it means not chasing revenue or earnings growth during this period of volatility.
• Potential for M&A in pet care: CEO David Maura and the new pet division president see current market dislocation as an opportunity to acquire attractive pet food and consumables brands at more reasonable valuations. While no deals have been announced, management believes its strong balance sheet positions it to be a consolidator in the fragmented pet category if conditions become favorable.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace and effectiveness of Spectrum Brands’ supply chain transitions out of China, (2) stabilization or improvement in consumer demand trends in North America and Europe, and (3) progress on cost-saving initiatives and cash flow generation. We will also track potential M&A activity in the pet care segment and any updates on the company’s ability to divest or restructure its home and personal care business.

Spectrum Brands currently trades at a forward P/E ratio of 10.6×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it’s free).

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