May 3, 2019 / 11:34 AM / 2 months ago

Newell Brands sees Toys 'R' Us woes ending, shares up 10 percent

(Reuters) - U.S. consumer products maker Newell Brands Inc on Friday beat first-quarter estimates and said the bankruptcy of its retail partner Toys ‘R’ Us would not have anymore impact on its business, sending its share up 10 percent.

The company’s sales in the past year were hit by the bankruptcy of the toy retailer which meant less shelf space for Newell’s baby products, such as Graco car seats and Baby Jogger strollers.

“Coming out of the first quarter, the headwinds stemming from the (Toys ‘R’ Us) bankruptcy subsides and we expect baby to return to growth,” Chief Financial Officer Christopher Peterson said on a post-earnings call with analysts.

The company expects second-quarter profit in the range of 34 cents to 38 cents per share, below analysts’ estimates of 47 cents.

“While the Q2 outlook is less than we hoped, we think sentiment entering the print was so bad it was actually good,” said Wells Fargo analyst Bonnie Herzog.

Newell has been divesting its non-core businesses such as Jostens, Pure Fishing and Waddington Group to focus on higher-margin consumer products as part of its $9 billion turnaround plan.

It has also been raising prices to reflect higher costs related to tariffs and raw materials, while keeping a tight lid on spending to reduce overhead costs, including slowing the pace of hiring.

The efforts seem to have paid off with company earning 14 cents per share in the first quarter on an adjusted basis, well above estimates of 6 cents, according to IBES data from Refinitiv.

Shares of the company rose 12 percent to $16.41, having fallen 21.2 percent in 2019.

Newell’s sales in learning and development division fell 4.2 percent, as the strength in its writing business was offset by lost sales related to the bankrupt toy retailer and a stronger dollar.

Overall, the company’s net sales fell 5.5 percent to $1.71 billion, but came ahead of estimates of $1.69 billion.

The company is in the middle of a chief executive search after it announced in March that CEO Michael Polk would retire at the end of second quarter.

(The story corrects spelling of stroller in paragraph 2 to “Baby”, from “Babby”)

Reporting by Soundarya J in Bengaluru; Editing by Shinjini Ganguli

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