Newell Rubbermaid Earnings Call Nuggets: Core Sales Outlook and Limiting Investment
Newell Rubbermaid Inc (NYSE:NWL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
Core Sales Outlook
John Faucher – JPMorgan: Can you talk a little bit about the core sales outlook for next year in terms of – you talked a little bit about the cadence, can you break out the impact of the Decor business in terms of whether you think that’s going to be up year-over-year or is that going to be just less of a drag or do you think it can be additive to growth? Then I guess, as you move from the sort of structural investment on the SG&A side to the more marketing let’s say, how long do you think that pays off and what’s the run rate?
Michael B. Polk – President and CEO: John, I’ll take those questions. So, on Decor, it’s not likely to be a growth lever for us, although, the overall Home Solutions segment should deliver growth in 2013 despite having Decor as a drag. The thing to remember on the Decor business is the flow through the year. So, we’ll continue to have an issue in Q1 related to JCPenney not so much related to our operational challenges from the manufacturing consolidation that we did. That may get enhanced in the month of March. As they do the conversion work in store to their Home section reset in early April, so that’s something we have to watch. We actually don’t have as much clarity as you might think we would as to when exactly they’re going to make that move. So there’s some dynamic – we’re going to have to look at that dynamically through the first quarter. I would expect that, that reset doesn’t get traction until the second half of the year. So the first half continues to be a bit of a challenge on Decor, but as I said in the script, the other parts of that segment are really beginning to do reasonably well. We’ve really stepped up the merchandising support and frequency in segments of the Rubbermaid Consumer business and we’re seeing that respond. You could see that in our Home segment results in Q4. We’ve established – we actually have five drive periods set up, that the new CDO will be able to merchandise around in 2013, one, that’s being executed, right now around the Super Bowl with our Food and Beverage portion of the consumer portfolio, another that’ll happen in April connected to spring cleanup, one around the 4th of July, one around back to school, and then one around Black Friday. Four of those are new relative to prior year. So, we’re looking to play the other portions of the portfolio within Home Solutions to compensate for what will be another challenged year, albeit, the drive will not be as significant as it was in 2012. With respect to your question on the flow in of A&P support in other investments and capabilities, our flexibility to do that enhances, as we go through the year. We’ve got in the first half the final tranche of renewal one savings that flow to the P&L and we will manage that. It splits pretty evenly Q1, Q2 and then we see in Q2 the beginning of the more substantial flow in of renewal two savings. Cumulatively, as I said in the script, we’ve got $75 million to work with. I would expect that spending to start to step up in Q2, but the majority of it will be back half loaded and that’s why our core sales growth flows the way it does. We do have rollover programming that will need to support through the entire year connected to InkJoy year two, connected to Parker Ingenuity year two. We’ve launched in Q4 this terrific partnership with the bunch of different artists and music connected to Sharpie self-expression platform which kicked-off with the launch of One Direction’s tour in the U.S. and we’ve got Parker’s 125th anniversary that will won our market through the first half of the year. So, it is not as simple as I laid out in the script, but the step up will really happen in the back half of year with the rollover of 12 initiatives getting more continuity support through the first half.
Lauren Lieberman – Barclays Capital: Just in terms of Baby. So, revenue growth continued to be strong. You particularly commented on share gains in Graco and then Aprica being able to manage these tough comps. So, what progress have you made though on the cost structure because you have talked about limiting investment at this until sort of earn the right to get investment dollars. So, if you can update us on that it would be great?
Michael B. Polk – President and CEO: You see the 40% increase in operating income in the year, part of that’s growth driven, part of that is us pulling back on cost structure. We did make an investment in Q4 to start to build out the brand agenda and you see that reflected in the operating income margin step back in that segment, that’s sort of upfront cost associated with advertising work in new omni-channel project that cuts across, is a marketing program that will cut across direct-to-consumer communication, but all the way in store, so that’s upfront funding associated with that. I’m cautious about putting too much money behind the Baby business for a number of reasons. First of all, we’ve got tremendous innovation driven momentum right now and that continues into 2013. So, with scarce resources in advertising and promotion, I’m not sure, I want to double down on Baby when our strategic priorities are really in Tools, Commercial Products, Writing and in our Home Solutions pillar, and they’d all come before Baby in terms of my priorities, but we’ve got tremendous momentum. The thing you’ve got to manage when you’re looking at these things is, whether it makes sense to double down and really play hard on Baby for growth now, as other businesses are gearing up for growth and that’s an option that we have, I want to reserve the right to play it without getting boxed in too much, but we’ll be cautious there, because of where Baby stands relative to the others in terms of strategic priorities, but as we said, this business is a row, Christi and her team have done an outstanding job of catalyzing the organization around the Baby recovery plan and that momentum continued right through Q4 as we lapped Q4 2011 growth, if you recall Q4 ’11 grew 5%, we’ve now grown on growth. We’ve got great momentum. In the U.S. now, and we’re coming to the tailwind of your Tool momentum in Japan. So, the environment as we go forward changes a little bit. We do have more competitive activity in Japan, so that growth rate will probably temper a little as we go through 2013, but we expect to still sustain growth but not the third consecutive year of double-digit growth, but probably mid-single digits and it’s an open run in the U.S. for us right now. We’re doing all the right things and I’m excited about the prospects for the business there. Europe will continue to be a challenge, although Graco has stabilized in Europe, our challenge in Europe is on Teutonia which is our brand that’s in Germany and Nordic and Poland. So, that’s sort of the inside baseball view on Baby.