Consumer Products

Why Newell Shares Are Crumbling

While the recent tax reform has resulted in raises for employees and more jobs coming to the United States, Newell Brands Inc. (NYSE: NWL) is moving in the opposite direction as part of its restructuring plan. Early on Thursday, the firm announced that it will explore a series of strategic initiatives to accelerate its transformation plan, and some board members are stepping down. Not to mention the company released its preliminary results for 2017.

As for the board of directors, Ian G.H. Ashken, Domenico De Sole and Martin E. Franklin have resigned, effective immediately. De Sole served on the board for 11 years, while Franklin and Ashken came on board with the acquisition of Jarden back in 2016.

In terms of the restructuring, Newell is looking to simplify its model by exploring strategic options for some of its industrial and commercial product assets, as well as for some of its smaller consumer businesses.

Ultimately, the execution of these strategic options would result in a significant reduction in operational complexity through a 50% reduction in the company’s global factory and warehouse footprint, a 50% reduction in its customer base and the consolidation of 80% of global sales on two ERP platforms by the end of 2019.

Newell Brands expects to begin the evaluation process immediately, with any resulting transactions to be completed by the end of 2019.

For 2017, the company expects to see earnings in the range of $2.72 to $2.76 per share, down from the previous range of $2.80 to $2.85. The consensus estimates call for $2.81 per share and $14.78 billion in revenue for the 2017 full year.

Michael Polk, Newell Brands CEO, commented:

Today’s announcement is a step toward a significant acceleration in our transformation plan. We believe that exiting non-strategic assets, reducing complexity and focusing on our key consumer-focused brands will make us more effective at unlocking value and responding to the fast-changing retail environment. A stronger, simpler, faster Newell, together with leading brands, brilliant marketing, outstanding innovation and an advantaged e-commerce capability, better positions us to win in these dynamic times. As a result, we have chosen to explore these strategic options.

Shares of Newell Brands traded down 23% at $24.10 on Thursday, with a consensus analyst price target of $36.29 and a 52-week range of $23.85 to $55.08.