Good morning, and welcome to the Newell Brands First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After a brief discussion by management, we will open the call up for questions. Today's conference call is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Joanne Freiberger, SVP of Investor Relations and Chief Communications Officer. Ms. Freiberger, you may begin.

Thank you. Good morning, everyone, and welcome to Newell Brands' first quarter 2025 earnings call. On the call with me today are Chris Peterson, our President and CEO; and Mark Erceg, our CFO. Before we begin, I'd like to inform you that during today's call, we will be making forward-looking statements, which involve risks and uncertainties. Actual results and outcomes may differ materially and we undertake no obligation to update forward-looking statements. I refer you to the cautionary language and risk factors available in our earnings release, our Form 10-K, Form 10-Q and other SEC filings available on our Investor Relations website for a further discussion of the factors affecting forward-looking statements. Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those referred to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. Explanations of these non-GAAP measures are available and reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables that were furnished to the SEC. Thank you. And with that, I'll turn the call over to Chris.

Thank you, Joanne. Good morning, everyone, and welcome to our first quarter earnings call. We had a strong start to the year with Q1 results in-line or ahead of expectations across all key financial metrics. Core sales at minus 2.1% improved both sequentially and versus a year ago. Both Learning and Development and the International business in total delivered core sales growth in the quarter. Normalized gross margin increased meaningfully for the seventh consecutive quarter, expanding by 150 basis points. Normalized operating margin exceeded our outlook even after increasing A&P investment dollars by high-single digits compared to the prior year, and normalized earnings per share came in $0.05 better than the upper end of our guidance range, driven by strong operational performance. We remain confident that Newell's new strategy is working. A key piece of our new strategy relates to product innovation. As we shared last quarter, our multi-year innovation funnel has now largely been rebuilt with exciting consumer-led proprietary products, which will begin launching in a sustained manner starting with the second half of this year. Despite the dynamic operating environment, we remain laser-focused on driving continued progress on our where to play and how to win strategy choices and the capabilities required to deliver against them. That said, we know that tariffs are top of mind, so we'd like to start this morning by explaining why we're confident Newell Brands, after what will likely be a period of temporary disruption, is well-positioned to disproportionately benefit from the global trade realignment currently underway. Specifically, we believe past decisions to proactively prepare for higher China tariffs by aggressively shifting source finished goods procurement to alternate geographies and to maintain and invest in a robust and extensive in-house domestic manufacturing base, while many of our top competitors outsourced or offshored much of their production capability gives us a unique opportunity to not just manage through this period of tariff-related sourcing dislocations, but to be on a net basis significant beneficiaries of them. Let's take each of those two decisions in turn. First, we have made remarkable progress derisking our China supply base over the past several years. Recall that just a few years ago, 35% of Newell's total cost of goods sold was sourced finished goods imported into the U.S. from China. Last year 2024, that number was down to 15%. To help put this in perspective, consider the following. In 2024, total source finished goods imported into the U.S. from all countries represented 24% of Newell's total global cost of goods sold. After netting out the 15% imported from China, Mexico, which is 98% USMCA compliant, was the second largest country of origin, accounting for roughly half of the remaining 9% of U.S. imports. The remaining balance is sourced from various countries, none of which individually exceed 1% of our total global cost of goods sold. This effectively means that China is what we needed to be focused on, that is why even prior to the announcement of an additional 125% tariff on Chinese imported goods, we had plans to reduce U.S. sourced finished goods from China down to 10% by the end of 2025 and even lower than that by the end of 2026. Second, in 2024, over 60% of Newell Brands total sales were in the United States. And since the 2017 Tax Cut and Jobs Act, we have invested nearly $2 billion in U.S. manufacturing, much of which was spent on high-return automation projects and dramatic improvements in our distribution and transportation systems. As a result, more than half of our 2024 U.S. sales were manufactured through an extensive North American supply base and are not subject to tariffs. This means we are now uniquely positioned to support multiple product categories and to successfully partner with and lead our U.S. customers through this tumultuous period of impending supply disruption. In fact, we believe that the number of categories where we are strategically advantaged with North American tariff-free production significantly exceeds the number of categories where we are disadvantaged. Key categories that we manufacture tariff-free across 15 U.S. plants and two USMCA compliant plants in Mexico, which collectively employ roughly 7,300 individuals, include eight of our top 10 brands, namely Rubbermaid, Rubbermaid Commercial, Sharpie, Expo, Yankee Candle, Paper Mate, Coleman, and Oster. We also manufacture NUK Baby Care products and Ball Mason Jars domestically. Many of these products compete against China-sourced brands, which we believe provides us with a significant competitive advantage in the current environment. With a significant number of customers canceling outstanding purchase orders and actively stopping shipments from China, we have significant untapped capacity across our U.S. and Mexico facilities due to the automation and operational excellence programs we have implemented over the past several years. This gives us the ability to quickly ramp up production of high-quality products not subject to tariffs to allow our top strategic customers to keep their store shelves full. When we shared our 2025 plan back in February, we expected a fluid and dynamic macroeconomic environment, which is certainly playing out. Mark will provide additional context on our outlook for the year and walk you through the numbers shortly, but let me spend a few minutes explaining our philosophical and strategic approach to guidance and tariff management. In terms of top-line growth, we are maintaining our net sales guidance for the year. Within this, we are moderating our expectations for category growth from what was previously flat to now down 1% to 2%. We believe this is prudent given lower consumer confidence levels and more muted macroeconomic forecasts. Importantly, we are not changing our forecast for market share for the year, as our new product innovation pipeline remains on track. Offsetting this impact, our foreign exchange outlook based on current rates has improved by 1 to 2 percentage points. Additionally, we continue to expect stronger top-line performance in the back half of the year compared to the front half based on the timing of our innovation launches and distribution gains. Relative to operating margin and earnings per share, we are maintaining our stated guidance for the year as we expect lower commodity and input cost inflation, favorable foreign exchange, stronger productivity results, and select pricing actions to offset higher tariff costs. Within this guidance, we have created two separate tariff buckets. In the first tariff bucket, we have placed five items. First, Mexico and Canadian tariffs, which from a newer perspective have been effectively resolved because our two Mexican manufacturing facilities are 98% USMCA compliant. Second, the initial IEEPA 20% China tariffs. Third, the Section 232 Global Steel and aluminum tariffs. Fourth, the reciprocal tariffs that were announced April 2 and then suspended on April 9, leaving a residual baseline tariff of 10% on all countries except China. Finally, the retaliatory tariffs announced by both Canada and China against the U.S. We expect to fully offset the expected bottom line normalized earnings per share impact from the five elements which make up our first tariff bucket with a number of proactive actions. First, we updated our commodity and input cost estimates for the full year and found additional savings versus our going-in budget estimates in several important areas. For example, the price of crude oil has dropped about 15% since the start of the year and natural gas is down close to 10%, which in addition to providing direct cost savings is favorably impacting resin prices and transportation costs. Second, in tariff-affected markets, our procurement team has gone back to suppliers and extracted broadly speaking a couple of points of cost reduction. Third, we put discretionary overhead in A&P spending under a microscope and made some tough but prudent decisions. Having said that, we still plan to spend more on A&P this year than at any point over the past several years, as we invest in the business. Fourth, we updated foreign exchange rates, which have largely moved in our favor since our last earnings call, and we increased prices in select geographies where exchange rate movements versus the U.S. dollar were justified and appropriate. Finally, we initiated two separate rounds of targeted tariff-related price actions in the U.S., one of which has already gone into effect and one of which will be effective May 1. The good news is that after these five actions, we have a plan to fully offset the negative bottom line 2025 normalized earnings per share impacts related to what we are calling our first bucket of tariffs. The second tariff bucket is uniquely centered and isolated against the incremental 125% China tariff. Given the magnitude of this element and since it seems to be particularly fluid, we have chosen to handle it separately and outside of guidance for now as a sensitivity. As previously mentioned, we already have plans to dramatically reduce our dependency on sourced finished goods originating from China this year. However, considering the incremental 125% tariffs being placed on China, we have done what many leading retailers have done and paused virtually all outstanding Chinese purchase orders. In addition, as we shared on our February call, we put a moratorium in place stating we will not be signing up any new suppliers who do not already have manufacturing capabilities outside of China or have defined plans to do so. We've taken these actions because we believe is a practical matter, excluding the baby gear category that the amount of incremental pricing required to hold gross margins and the associated new retail shelf price at this tariff level would be so significant that it would preclude many consumers from purchasing those items. Therefore, instead of continuing to source finished product or raw materials out of China, we will leverage existing inventory on hand while rapidly developing and qualifying alternative sourcing solutions for impacted items. As part of this effort, we have encouraged our business leaders and brand managers to embrace another round of SKU simplification, which is something Newell has proven to be very adept at, having already cut our SKU count from over 100,000 items to less than 20,000 as of last year. The other thing we are doing, which frankly, we are very excited about, is aggressively selling and providing key strategic retailers access to our tariff-free North America manufacturing base during what we expect to be an extended period of constrained supply in certain product categories. We have already secured notable wins in food storage and vacuum sealing bags, both of which are included in our updated guidance and are in active dialogue across many more fronts as we pursue opportunities to expand distribution and shelf space while simultaneously helping customers offer high-quality Made in America Newell brands to their customers. That said, and in full transparency, the one piece that is most challenging is baby gear, which is an industry-wide issue. This is because approximately 97% of baby strollers and 87% of baby car seats in the U.S. are sourced from China. In the past, the Trump administration offered Section 301 tariff exemptions on baby gear products to help young families afford the significant costs associated with having and raising children. Thus, we are hopeful the administration will do so again, but in the meantime, we will do everything we can to protect and manage our baby gear business. So before turning the call over to Mark, let me reiterate the key message coming out of this morning's call, which is as follows. We believe that the number of opportunities we have in advantage categories where we have domestic or USMCA compliant production exempt from tariffs significantly exceeds the number of categories where we are disadvantaged. Consistent with this, we are actively pursuing numerous incremental sales opportunities and are confident that these short-term challenges will give way to lasting medium and long-term gains. When we look back a few years from now, we believe this time will be remembered as a pivotal point in Newell Brands' evolution into a high-performing world-class consumer products company. It has been seven quarters since we deployed our new strategy, and we remain excited and energized by the progress we are making and the results we are delivering and look forward to sharing additional updates with you in the future. Finally, I'd like to thank our dedicated employees for their resilience throughout this dynamic environment and their continued commitment to operating with excellence and delighting consumers around the world. Mark?

Thanks, Chris. Good morning, everyone. In the first quarter of 2025, our core sales decreased by 2.1%, which was at the high end of our guidance range. This reflects our new product innovation along with some net pricing benefits. Both the Learning and Development segment and our International business, which account for nearly 40% of Newell's total sales, achieved positive core sales growth for the last five consecutive quarters, showing that our new strategy and one Newell operating model are effective. The net sales for the first quarter of 2025 included approximately 2.5 points of currency headwind and just over 0.5 points from category exits. Our normalized gross margin in the first quarter grew by 150 basis points to 32.5%, marking the seventh consecutive quarter of year-over-year improvement. Gross productivity savings and pricing have more than compensated for inflation and foreign exchange.

Please excuse us one moment. We're experiencing a little bit of technical difficulty. Please just hold for one moment.

All dropped.

It looks like we are making progress. If you guys can hear me, okay, and if we can hear you okay, we may begin again if you're ready.

Yeah. We can hear you.

That's great. Thank you for your patience, everyone. Allow us to begin again.

Great. Thanks, everyone for being patient with us on our little technical snafu there. I'm going to go ahead and start with my first portion of my prepared remarks transitioning over from Chris. So thanks and good morning, everyone. First quarter 2025 core sales were minus 2.1%, which was at the high end of our guidance range, reflecting new product innovation and to a lesser extent net pricing benefits. Both the Learning and Development segment, and our International business, which represents nearly 40% of Newell's total sales, posted positive core sales growth for the last five consecutive quarters, which we believe further demonstrates that our new strategy and one Newell operating model are working. 2025 first quarter net sales included about 2.5 points of currency headwind and just over 0.5 points of category exits. Normalized gross margin in the first quarter expanded by 150 basis points to 32.5%, which was the seventh consecutive quarter of year-over-year improvement. Gross productivity savings and pricing more than offset inflation and foreign exchange headwinds.

Please excuse us one moment. We're experiencing a little bit of technical difficulty. Please just hold for one moment.

Now, during Q1, Newell's normalized operating margin was 4.5%, which was comfortably above the guidance range we provided during our last earnings call. Operating margin results were better than anticipated despite higher levels of A&P investment for two reasons. First, core sales came in towards the top end of our guidance range and second, gross margin performance was stronger than expected. Net interest expense of $72 million represented an increase of $2 million from the prior year and a normalized income tax provision of $2 million was recorded in Q1. Relative to normalized diluted earnings per share, we recorded a loss of $0.01 in the quarter, but this was $0.05 to $0.08 above our guidance range without any discrete tax benefits distorting operating results. We had an operating cash outflow of $213 million versus a positive cash flow of $32 million in the year ago period. However, the first quarter is typically Newell's smallest quarter of the year due to seasonality and as a result, it has always historically been a cash take quarter. Last year, we were able to break the trend due to a significant contribution from working capital, which lowered our cash conversion cycle by 30 days. Coupled with a below-target cash bonus payout, which is always made during the first quarter of the year. This year, our cash conversion cycle did improve by four additional days, but it would have improved even more absent the decision to pull some inventory purchases forward to avoid impending tariff increases. A significantly higher cash bonus payout versus a year ago also negatively impacted Q1 operating cash flow. Our net leverage ratio for the quarter was 5.3 times, which compares favorably to Q1 of 2024 when it was 5.6 times. Chris mentioned several ways we are mitigating the impact of looming tariffs, one of which included additional procurement and supply chain related cost savings. Recently, I have been asked with increased frequency if there is still ample gross margin runway ahead of us. Thus, before I take you through our outlook for the full year and second quarter, I would like to address that. Newell Brands has 42 global manufacturing plants and as mentioned earlier, 15 are in the U.S. and two USMCA compliant facilities are located just over the border in Mexico. We have a strong frontline engagement program focused on continuous improvement that we refer to as peak, which is a mountain climbing metaphor, which connotes a never-ending climb to the summit of continual improvement. Within peak, there are six levels of attainment and each level generally takes 12 to 24 months depending on the phase, size, and complexity of the site to complete. Our first sites, understandably took a little longer to ramp, but more recent sites have been moving faster through the program. Phase 1 is referred to as foundations. Phase 2 is base camp. Phases 3 through Phases 5 are designated as Climb 1, Climb 2, or Climb 3, and this is where we expand in sight, extend across the value chain, or consolidate and optimize respectively. And finally, Phase 6 is the summit where continual improvement has become the cultural norm and as such is fully embedded in everything we do. Now with respect to our 42 plants, 15 of our smaller plants have not started their journey. Seven are in Phase 1 and 10 plants are in both Phases 2 and Phase 3. This means we don't have any plants that have reached Phases 4 through Phase 6 yet. Let me repeat that. We don't have any plants in Phases 4 through Phase 6. In addition to our manufacturing facilities, we have seven North American service centers, all of which are in Phase 1 through Phase 3 of peak. And we have only 14 distribution centers out of roughly 70 in total that are currently in either Phase 1 or Phase 2. So yes, while we have made and are continuing to make solid progress in gaining meaningful cost efficiencies, we are not even halfway on our journey to the summit of continuous improvement, leaving ample room going forward for us to continue to improve Newell's gross margin and by proxy operating margin. And of course, peak is just one of the many cost reduction and supply chain efficiency programs we are scaling across the enterprise. In just the past three years, we have reduced our supply chain staffing needs by 3,800 positions through our automation efforts, which gives us a tremendous opportunity to capture highly accretive unit economics as we look to leverage and monetize our strong domestic manufacturing base across our tariff advantage categories. Now turning to our outlook. Having made a series of swift interventions, including targeted pricing actions, incremental cost reduction efforts, and rapid sourcing decisions in conjunction with our Q1 bottom line over delivery, we expect to fully offset on a full-year basis all bucket one tariffs Chris referenced during his prepared remarks. Therefore, today, we are affirming our 2025 financial outlook for net sales, normalized operating margin, and normalized earnings per share. Specifically, net sales are still expected to be between negative 4% and negative 2%, which now includes an approximate 1% headwind largely driven by category exits. Normalized operating margin remains unchanged at 9% to 9.5%, which at the midpoint represents roughly 110 basis point improvement from 2024 and is more than double our Evergreen target of 50 basis point improvement each year. And our normalized diluted earnings per share range is unchanged at $0.70 to $0.76, which represents an 18% increase versus 2024 at the midpoint and on a tax-equivalent basis. Please note that this normalized diluted earnings per share range still assumes an effective tax rate in the low to mid-teens, but also includes a higher level of expected interest expense, which we will likely incur when we refinance the remaining balance on our outstanding April 2026 notes at some point later this year. With all this being said, it becomes clear that the only substantive change we are making to our full-year 2025 guidance relates to core sales. Core sales are now expected to be between minus 3% to minus 1% versus our previous expectation for core sales to finish the year between minus 2% and plus 1%. As Chris mentioned earlier, this change is solely due to a slightly more pessimistic view of category growth which we now expect to be essentially down 1% to 2% in 2025. Previously, we had expected our categories in aggregate to be flat. Finally, for the full year, we have widened our operating cash flow range to between $400 million to $500 million from the previous range of $450 million to $500 million, primarily due to higher tariff-induced inventory valuations. Putting all this together and combining projected cash flow and EBITDA growth, we continue to expect a year-end 2025 leverage ratio of about 4.5 times, which is roughly three quarters of a turn better than where it sits today and moves us closer to our longer-term ambition of being an investment-grade debt issuer. As it relates to the second quarter of 2025, we expect both net and core sales to decline 5% to 3%. Operating margin to be between 10.4% and 10.8% and with a tax rate in the mid-teens normalized diluted earnings per share of $0.21 to $0.24. So in closing, despite the challenging macroeconomic environment, we remain confident that the substantial investments we have made to strengthen our core capabilities are accelerating Newell's business transformation and have put us in a position to not just navigate through today's dynamic business environment but to actually emerge even stronger. This is because we have significantly more categories, which should benefit from increased tariffs than be harmed by them due to our strong domestic and USMCA compliant manufacturing capabilities. It is for this reason, we are affirming our 2025 financial outlook for net sales, normalized operating margin, and normalized EPS as it relates to all bucket one tariffs, which as noted in our press release include the initial two rounds of IEEPA tariffs on China totaling 20%, Section 232 Global Steel and aluminum tariffs, all other reciprocal tariffs of 10% currently in effect for countries outside of China and any retaliatory tariffs that other countries have enacted against the United States. If the additional 125% China tariff remains in effect for the full year, we currently estimate based on a comprehensive sensitivity analysis we have conducted that the unmitigated impact could reduce Newell Brands 2025 normalized operating earnings per share by approximately $0.20. That said, we already have a clear line of sight to recover at least half of this impact, which means the net impact of the continued 125% China tariffs for the rest of the year could be a reduction of up to $0.10 on our normalized EPS guidance range of $0.70 to $0.76.

We will now open the call to questions.

Thank you, operator, and good morning, everyone. I wanted to revisit the topics of retail destocking and the clarification regarding the 125% tariff. Could you walk us through the exit rate for consumption? It seems that from your second quarter guidance, you are still anticipating some destocking by retailers. How should we approach this as we head into the back-to-school season? Additionally, concerning the tariff mitigation efforts at 125%, you mentioned that it wasn't incorporated into your guidance, but there is a $0.20 impact, with a plan to mitigate half of that. Can you elaborate on the timing of these mitigation efforts and why the tariff was excluded from your guidance? Thank you.

Thank you, Andrea. To address the first part of your question, in the first quarter, we experienced a core sales growth of minus 2.1%, which was at the higher end of our guidance and slightly better than our initial expectations. We believe we're on track at this point. We've decided to adjust our market growth assumption, changing it from flat to a decline of 1% to 2% out of caution due to observed consumer confidence levels and the overall macroeconomic outlook. While we haven't seen a broad decline in consumption levels in our categories compared to our plan, we believe it is wise to lower our market growth forecast to avoid overestimating inventory and cash flow issues. Despite this adjustment, we have a solid plan in place to counterbalance the impact on operating income and earnings per share. Regarding retailer inventory levels, we did not observe significant changes during Q1. As a reminder, the Liberation Day tariffs were announced after Q1, so we didn't see a notable increase in inventory during that period. Typically, we analyze our business over six months rather than quarterly, as promotional events can create fluctuations. We believe we are on track for the first half of the year, including our Q2 guidance in conjunction with the Q1 results. On tariff mitigation, we've already taken steps to fully address the tariffs mentioned in our first bucket, with the exception of the additional 125% tariff on China, which we consider a potential risk given discussions around its sustainability. If it remains in effect, our baby gear category represents our largest exposure. Looking more closely at the baby business, about 20% is in baby care, primarily the Nuk brand, which is not affected by tariffs since we produce it in Wisconsin. This gives us a competitive edge over others who source from China, leading us to explore opportunities with retailers to shift their shelf space to our products. The second segment of the baby business includes gear sold outside the U.S., also not impacted by tariffs. The remaining 60% of our baby gear, however, is generally sourced from China and sold in the U.S. For this segment, we've already implemented two price increases, with a 10% rise effective April 1 and another 10% increase set to take effect soon, totaling a 20% increase so far. We have not yet adjusted prices for the 125% tariffs because we've increased our inventory purchases before the tariffs were enacted, leaving us with three to four months of stock that is tariff-free. We've also paused new orders from China for now, avoiding tariff costs at this moment. Eventually, we will need to replenish our inventory, and when we do, it’s likely that both we and the industry will need to raise prices to cover the tariff costs, which we are monitoring closely. Should there be any changes in the tariff situation, we're confident in our preparedness, and if the tariffs remain, we feel well-positioned despite the transitional volatility.

Thank you very much.

Thank you.

Thank you for your question. Our next question comes from the line of Lauren Lieberman from Barclays. The floor is yours.

Good morning. I would like to clarify your approach to utilizing your U.S. manufacturing capacity and discussions with retailers. Are you planning to produce private label products for these retailers? I would appreciate more insight into your near-term strategy and your comments regarding leveraging U.S.-based manufacturing and the available capacity in your system. Thank you.

Thank you, Lauren. Let me clarify. Several retailers have inquired if we would be open to producing their private label products, as many of those items are currently sourced from China. Our response has been that we are not equipped to do that and that's not our focus. Instead, we recommend that retailers stop offering their private label products and switch to our branded offerings. Furthermore, many competitor brands are fully sourced from Asia and face significant tariffs, while we do not. Therefore, we suggest that retailers replace those Asian-sourced products with our items made in the U.S. or Mexico. For example, we have a blender plant in Mexico, one of our two facilities there, where we have invested significantly in automation over the past few years. This has nearly doubled the plant's capacity, and we are currently operating at 50% capacity. We can easily increase production at this plant to meet U.S. demand. Currently, this facility supplies primarily Latin America and does not serve the U.S. market, where most blenders are imported from China or other Southeast Asian countries that incur tariffs. Our Mexican blender plant is tariff-free, providing us a competitive edge. We are actively discussing with retailers the discontinuation of other branded blenders in favor of our Oster branded products, which will offer greater value compared to competing brands. That's the essence of our discussion.

Okay. That's great. Thank you. And then also, I know you mentioned in terms of your core sales guidance and your expectations on categories. I just want to make sure I heard it correctly that at this point, you haven't really seen any change in consumer behavior in your categories that is different than what you had in your budget. But that you're adjusting the core sales guidance on an assumption that the environment does become more challenged and to avoid having excess inventory if that comes to pass.

Yes, that's correct. And it's interesting because it's a little bit hard to predict. We just felt like it was prudent to do that based on sort of the macro forecast, even though we haven't seen it. It could be that we're wrong and the category does better than we think. One of the trends that we've been talking with the market researchers about is if consumers begin to cut back on eating out at restaurants and that type of thing and start to spend more time eating at home, that generally is a tailwind for our category of our kitchen products. And so, it's possible that depending on how this plays out, we may be wrong and overly conservative in our outlook, but we felt like we would rather err on the side of being a little bit more muted in our category growth outlook to ensure that we don't overbuild inventory and ensure that we deliver the cash flow that's in our cash flow forecast.

Perfect. Okay. Thanks so much. I'll pass it on.

Thank you for your question. Our next question comes from Steve Powers with Deutsche Bank. The floor is yours.

I apologize for that. I was muted. If the China tariffs remain in effect, it seems that you won't really notice the effects you've mentioned until the latter half of the year. I have a couple of questions regarding this. First, when considering the annualized 12-month impact, should we assume a run rate of about twice that amount, or will the long-term effects be somewhat less severe due to additional mitigation and possible seasonality? That's my first question. Secondly, based on the sensitivities you’ve analyzed, what would be the corresponding effects on operating cash flow for fiscal '25 as well as an annualized basis, along with your expectations for future leverage ratios?

Great questions. So as we think about the tariff effects, they would, as you rightly said, largely fall into the second half of the year. As we've done our math, we probably think the impact would be roughly 40% in the third quarter, 60% in the fourth. That's partly driven by some of the commentary that Chris offered earlier. As we sit here today, at March 31, home and commercial had about 110 days on hand, learning development was around 120, outdoor and rec had a higher number than that, right? So we have inventory that we can actually bleed through and work into the system. As far as the cash impact, if that $0.10 that we can't mitigate actually does come home to roost and we put that in an after-tax basis, that's probably a $30 million impact to operating cash flow in the current year. Now that said, we widened our range of $400 million to $500 million. And so it's entirely reasonable to assume that it could fall within that. And then as far as trying to project that out into 2026, frankly, I don't think that's a game we really want to play right now because I think people are thinking about tariffs in isolation. And I'm not an economist, I'm not a politician most certainly, but there's a lot of other things at play here. And we're talking about consumer dynamics. Fuel prices are down, the last few inflation reports were fairly benign. There is talk about a meaningful tax cut that would largely advantage and help the lower and middle class. So it's really, I think, too early to say what this looks like on an ongoing basis. We just know that we're well-positioned as we sit here today, we invested in a domestic manufacturing base that others have not chosen to do and we're ready and prepared to help our strategic retailers provide great high-quality products to their consumers.

The other thing I would say on that, which is interesting is that there's a bit of a timing impact here. So in all of these categories where we are advantaged with U.S. or Mexican manufacturing, that revenue upsell that we expect is going to be a little bit delayed because it relies on retailers changing their store shelves or changing their merchandise events, which tends to take a little bit of time to work through the system. And so that as a tailwind, I would expect would be significantly larger in 2026 than 2025 given the timing of implementation of that. The tariff impact on baby, which again affects the whole industry, baby gear in the U.S., I think creates a little bit of a near-term issue. But if the market moves up in pricing, which I expect it will, if it sustains, it's unclear whether that continues as a headwind into 2026 or not.

Yes, it sounds like you have many active conversations where you have a competitive advantage. Regarding our expectations, when do you think these conversations will begin to lead to actual contracted changes? While most of the benefits from your success will likely be seen next year rather than this year, when do you anticipate we will start seeing those outcomes?

Yeah. So we've seen a couple of them already. I mentioned in the prepared remarks on our FoodSaver consumables business, we've gotten some wins there because some of the competitive product was sourced from China, the retailer that was selling that has basically discontinued that item and moved their entire business back to us. So that's a win that will start to materialize in July. Also on Rubbermaid food storage, we've gotten significant uptake in that business. I think I mentioned on the last call, we have a major innovation that's launching this summer with Rubbermaid Easy Store and that's replacing EasyFindLids. It also happens in that business that we manufacture that product in Ohio and much of the competitive product is coming from Asia. And so, we've gotten significant wins on that, both in terms of promotions that are shifting from competitive product to us and in terms of some of the private label product being delisted entirely because it's no longer economically viable that was coming from China. We are beyond those two categories, we are in active discussions on 19 total categories. And so, we factored those two into our guidance, but there are 17 others where we believe we've got a significant competitive advantage that we're having active discussions across our top 10 retailers as we speak on how to navigate and move their stores to advantage our brands.

Okay. Thank you. That's very helpful framing. Appreciate it. I'll pass it on.

Thank you for your question. Our next question comes from Bill Chappell with Truist Securities. The floor is yours.

Thanks. Good morning. You just…

Good morning, Bill.

Taking a step back, I'm not entirely certain I understand why you're still providing guidance. I recognize how you operate and your tariff exposure and pricing, but forecasting market growth, particularly when it combines volume and price, appears extremely difficult at this time across your various categories. Could you clarify how you arrived at that estimate? Are you anticipating price increases in the double digits while volume decreases are also in the double digits? I'm trying to grasp how we can gain confidence, not only in your numbers independently, but also in market growth over the next two to three quarters.

It's a good question. We've discussed this in detail and believe that most of our business is unaffected by tariffs. The significant tariff impact primarily comes from the 125% tariff on imports from China, mostly affecting the baby gear category, which accounts for less than 10% of our total revenue. For over 90% of our business, the tariff impact is minor, and we have a strategy in place to fully counter it. We feel confident about our internal plan and our adjustments to it, and we know how we would respond if the 125% tariff on China continues. While forecasting in the current macroeconomic environment is challenging, we believe that providing some guidance is beneficial for our stakeholders. If we didn’t offer guidance, it could lead to confusion and varied assumptions. We actually feel more positive about our position now than what the market has perceived in recent months. Looking ahead, we believe that this situation may ultimately benefit Newell. Our U.S. manufacturing base gives us a competitive edge that outweighs the disadvantages we face. Unlike some competitors who rely entirely on sourcing from China and are struggling, we are not in that position. There are 19 product categories where we have a competitive advantage and available capacity. The margin on this additional capacity, considering fixed costs, is very promising. If we execute effectively and increase sales through our U.S. and Mexican manufacturing, we expect to be in a stronger position in the medium and long term compared to if the tariffs had not been implemented. And if I could, we've talked in the past about how we've largely rebuilt our internal management reporting systems and our new trade fund management system that allows us to get much better price promotion diagnostics. And so, we feel that we have demonstrated the ability to be pretty good with respect to our forecast as of late. And then as Chris intimated, we feel guidance is frankly an obligation of management. We don't own this company. We have an obligation to our owners to tell them what we know. Now as part of our approach to this particular exercise, I will say that we really went out of our way to derisk our fiscal year plan and that's why I think we've been so communicative on all these different elements as we sit here today.

I appreciate that. It just feels like we are operating in a vacuum because we don't know if your competitors are having liquidation sales or how they are handling pricing. I understand you can make forecasts, but I'm trying to grasp how you predict your competitive environment.

Thank you for your questions. Our next question comes from Brian McNamara from Canaccord Genuity. The floor is yours.

Hey. Good morning, guys. Thanks for taking the questions. So I guess the China sensitivity sounds a little worse than we would have expected given your relatively low exposure there and your high domestic sourcing. Is it simply just lack of pricing in the baby category specifically with triple-digit tariffs in place or is there anything else we should be considering?

I believe the primary factor is the baby category, which accounts for 70% of our exposure to China imports. We've had a strategy for several years to reduce our reliance on China, and we are currently speeding up that process. While there may be some minor effects in other areas, most of the impact stems from the baby gear category. We have a plan in place to address at least half of the $0.20 impact and it may turn out to be even more effective. The stroller market, predominantly in the super premium and premium segments, is being affected as well. Graco, positioned at the high end of mass, could potentially benefit as overall market prices rise, depending on how long the tariffs are in effect. This is the main area of concern.

The other piece of the puzzle is, look, we said it's $0.20 assuming that 125 China tariff stay in force for the full calendar year. We said as we sit here today, we found way that we think we can offset half of it roughly. Well, we still have eight months to go. And the last thing, we're going to do is sit on our hands, right? So the full intention is to continually chew against that and we're optimistic that with the team we have in place and the lines that we have in the water to bring in incremental sales, we can continue to make headway.

Yeah. I appreciate the transparency there. Secondly, Chris, you just alluded to this a little while ago, but your markets, especially the small kitchen appliances still have some pretty significant China sourcing many are 100% as you said. If triple-digit tariffs remain in place on China, wouldn't this result in material consolidation with smaller players effectively dropping out of the market and effectively widen your competitive note?

Yes, there’s no doubt about it. We believe we have a strong opportunity across various product categories. I mentioned that we see a competitive advantage in 19 categories, and we expect some competitors to exit the market, which could lead to substantial market share gains for us in these areas. As noted earlier, we are already experiencing successes in vacuum sealing with the FoodSaver brand and in the Rubbermaid food storage business. Additionally, as Mark pointed out, we have multiple initiatives underway and are actively engaging with retailers to adjust their shelf space and merchandising in favor of our U.S.-made brands.

If we could choose, we would prefer to have the Chinese 125 tariffs either eliminated or guaranteed to stay in place for the entire year. Given our market positioning and strong domestic manufacturing capabilities, we believe that we are well-prepared to benefit from this situation in the mid and long term, even if there might be some short-term disruptions.

Very helpful. Thanks, guys. Best of luck.

Thank you for your question. Our next question comes from Filippo Falorni at Citi. The floor is yours.

Hi. Good morning, everyone. First, I want to ask you on pricing, just following up on Bill's question. Based on the announced pricing as of today, what are you expecting in terms of price contribution in your core sales guidance and just roughly like what elasticities are you assuming based on your expected response from competitors?

Right now, based in our sales walk and our build bridges, we would tell you that for the full year, we think pricing net of elasticity will be up a point or two.

Net of total company number, including international.

Correct.

Got it. Okay. I have a follow-up on the baby gear category. You mentioned previously that during the Trump administration, the industry received an exemption for those categories. Are there any current discussions about requesting another exemption? Do you think it's possible to obtain that exemption again this time?

We are actively working on lobbying efforts to obtain an exemption for baby gear products sourced from China. The Trump administration previously granted exemptions for these products during its first term when the initial tariffs on China were implemented. The situation is dynamic, so I can't predict the outcome, but I can confirm that there are ongoing efforts not only from Newell but also from the industry in general regarding this lobbying initiative.

Great. Thank you so much, guys.

Thank you for your question. Our last question comes from Olivia Tong at Raymond James. The floor is yours.

Great. Thank you so much. You mentioned no change in your market share outlook, but if you were able to secure new distribution food storage. So can you talk through that a little bit in terms of how you're thinking about some of the discussions that you're having in the other 17 categories? That's my first question. And then second, did you price in any other categories beyond baby? And then, my last question is just around your key industries, what your competition is doing and if there's any excess capacity outside of China or even domestically because as you mentioned, the efficiency improvements you were able to achieve in the U.S. and the blender category in getting to 50% more space. Is there other capacity out there that others are able to capitalize on? Thanks.

Let's start with the pricing. We did implement selective pricing on some goods sourced from China, which we anticipated would continue for a long time. This was a minor change, with 90% of the 20% price increase applying to baby gear, and the remaining 10% affecting some smaller businesses that we do not plan to move out of China soon. For financial modeling purposes, baby gear was the main category impacted by this pricing shift. From a capacity perspective, we believe there is not a significant excess capacity in the U.S. or Mexico in our advantaged categories. Many of our competitors have reduced their capacity and shifted to sourcing finished goods from Asia. I mentioned two categories where we've secured wins, while discussions continue in 17 other categories, which is still in the early stages. It's only been about four weeks since the Liberation Day tariffs were announced, and many retailers are still assessing the impact of these tariffs and their mitigation strategies, affecting a wide range of categories beyond those we participate in. We are proactively presenting proposals and plans for the categories where we have a competitive edge. We've initiated discussions with all ten of our top retail customers and are now moving towards engaging with their merchants. Many retailers have paused or canceled their purchase orders from China in these competitive categories, leading us to expect a supply disruption where we have an advantage. This situation could allow us to increase our inventory levels. However, we have not included this potential disruption into our guidance as it remains uncertain. Thus, there is potential upside regarding the additional 17 categories since we do not have commitments yet. That outlines our current approach, and we are actively discussing all these categories with top retailers.

Great. Thank you.

Thank you all for joining, and we look forward to talking in follow-up conversations.

That's great. Thank you. This does conclude the question-and-answer session. Thank you for your participation. A replay of today's call will be available later today on the company's website at ir.newellbrands.com. You may now disconnect. Have a great day.