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Newell Brands Falls As Company Says Tariffs Could Cause $100 Million Bite

Shares of consumer goods’ company Newell Brands saw losses and even plummeted to a 5.5 year low after reporting second quarter results and revealing that trade tariffs could result in a big hit for the company.

Newell, the Rubbermaid food bowl storage maker, announced that second-quarter net income declined to $131.7 million, or 27 cents a share, from $223.0 million, or 46 cents a share, in the same period a year ago.

Excluding special items, normalized earnings per share were 82 cents, coming in four cents above what analysts had been expecting.

Net sales for the quarter tumbled 13% to $2.20 billion, with the company blaming the negative impact of new revenue recognition accounting standards, the impact of the liquidation of Toys ‘R’ Us on the baby business and significant inventory destocking in the writing office superstore.

Total core sales, excluding the impact of divestitures and foreign currency moves, dropped 8% to $3.73 billion. This was behind analysts’ expectations of $3.83 billion.

The company cut its sales guidance to a range of $8.7 billion to $9.0 billion from $14.4 billion to $14.8 billion and also cut its core EPS outlook to $2.45 to $2.65 from $2.65 to $2.85.

Newell said that U.S. tariffs could cost the company as much as $100 million annualized and hurt each of its businesses, especially its baby, appliances and food segments.

Chief Executive Michael Polk said a key factor that could affect the company’s second-half results is the new U.S. tariffs on China sourced goods, and the retaliatory tariffs imposed by the European Union and Canada in response to U.S. tariffs on steel and aluminum imports.

“While we’ve announced incremental pricing [increases], we’re simultaneously appealing the application, the bulk of these tariffs to the U.S. trade representative office and are considering…possible alternative sourcing options,” Polk said.

He also said during the earnings call, “As the tariffs currently stand, the annualized impact on Newell Brands could be as much as $100 million. Our 2018 guidance contemplates this impact. While we’ve announced incremental pricing, we’re simultaneously appealing the application, the bulk of these tariffs to the US Trade Representative Office and are considering, where possible, alternative sourcing options.”

He added, “Virtually, every business has been impacted with the greatest exposure on baby, appliances and food.”

Optimistically, Polk said, “We’re living through an incredible period of change. The disruptions we’re experiencing present challenges, but as importantly, new opportunities for our businesses and our people. Through this turbulence, our strategy remains unchanged. We’re in the business of building leading brands; brands valued by consumers because they play an important role in consumers’ lives, and valued because the products themselves are designed to perform better than competition, differentiated on the basis of their function, their form, and their finish. With these superior brands, we believe we can build leading market share positions in any country in the world because we have the scale and know-how to establish superior commercial operations designed to reach consumers where they shop.”

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