Spectrum Brands

Spectrum Brands, a pet and home good supplier, justified price increases by pointing to pent up consumer demand

The CFO of Spectrum Brands reported increasing prices throughout 2021 and into 2022. JEREMY W. SMELTSER, EVP & CFO:: We expect the current step-up in inflationary pressures to continue throughout fiscal 2022 and that the year-over-year impact will be more acute in our first half reporting of the year. We have implemented price increases in fiscal ’21, and we have put in place further price actions in the first half of this year to counter these headwinds. Our goal is to achieve approximately 70% to 80% price coverage for inflation by the end of fiscal ’22. But we do expect our first half margins to be pressured due to the timing of these price increases. (Q4 2021 Spectrum Brands Holdings Inc Earnings Call, 11/12/2021)

Spectrum Brands reported that profit and gross margins increased thanks in part to higher prices. JEREMY W. SMELTSER, EVP & CFO:Gross profit increased $157 million and gross margins of 34.5% increased 100 basis points, driven by favorable pricing, mix and improved productivity from the company’s GPIP program, partially offset by commodity and freight inflation. We are very pleased with the gross margin performance despite the inflationary headwinds. Adjusted EBITDA increased 21%, primarily driven by volume growth, including acquisitions, as well as productivity improvements and positive pricing, partially offset by margin pressure from commodity and freight inflation. (Q4 2021 Spectrum Brands Holdings Inc Earnings Call, 11/12/2021)

Spectrum Brands told analysts that it had “implemented further pricing increases with our retail partners in Q4 and are actively engaged in taking additional price…”  JEREMY W. SMELTSER, EVP & CFO: :We have also implemented further pricing increases with our retail partners in Q4 and are actively engaged in taking additional price in the first half of FY ’22 to offset further incremental inflation. While we will continue to make incremental investments to growth initiatives such as consumer insights, R&D and marketing across each of the businesses, we believe supply chain improvement and resiliency must continue to be an area of focus for us in fiscal ’22 as we work to improve product availability while simultaneously finding ways to mitigate the cost pressures coming through the global supply chain. (Q4 2021 Spectrum Brands Holdings Inc Earnings Call, 11/12/2021)

Spectrum Brands CEO: “Right now, there’s a very favorable macroeconomic backdrop. The consumers got $2 trillion, $2.5 trillion of excess liquidity. And the consumer so far continues to spend despite price increases. That’s just a fact. It’s the reality of the current environment.”  DAVID M. MAURA, CEO: Yes. I’m going to let Randy take it. But I mean, look, it’s a very fluid and dynamic situation out here at the moment. And we are confident in 2021 — 2022, and we’re giving you guidance. But look, it’s — you can’t just raise prices without looking at consumer demand. Right now, there’s a very favorable macroeconomic backdrop. The consumers got $2 trillion, $2.5 trillion of excess liquidity. And the consumer so far continues to spend despite price increases. That’s just a fact. It’s the reality of the current environment. [Q4 2021 Spectrum Brands Holdings Inc Earnings Call, 11/12/2021]

Spectrum Brands reported its pricing power was strongest in Pet Care, Home and Garden, and Home Personal Care. “JEREMY W. SMELTSER, EVP & CFO:: So from a subcategory perspective, there are definitely some wide fluctuations. From a business unit perspective, the variations are smaller. But I think it’s been mentioned here, we feel that overall, our pricing power with consumers is probably strongest in Global Pet Care, followed by Home & Garden and then followed by HPC. But all 3 businesses have done an excellent job in our mind of communicating well with our retail customers, good partnerships. It’s all about strategizing together to figure out what the right way is to handle these macro issues coming at us, and all 3 businesses are getting priced that I think we’re pleased with thus far.” (Q4 2021 Spectrum Brands Holdings Inc Earnings Call, 11/12/2021)