--Newell Rubbermaid plans to sell its hardware and teaching aid businesses
--Plan to sell businesses comes as first-quarter's core earnings top expectations
--Company also backs full-year earnings targets
Newell Rubbermaid Inc. (NWL) said it plans to sell its hardware and teaching aid units, but still backed its earnings targets for the year despite lost profits and sales from selling the businesses.
Newell disclosed plans to sell brands such as Bulldog picture-hanging hooks and Shurline painting products as it reported a 32% drop in first-quarter profit due to restructuring costs and other chargers. But core earnings topped Wall Street expectations, while organic sales growth rose slightly, even as last year's period was boosted by retailers building their inventories.
The results lifted Newell shares 2% in recent trading to $26.91, bringing year-to-date gains to 20.8%.
Newell has seen ongoing changes to its structure and portfolio since Chief Executive Mike Polk joined the company in mid-2011. Under his watch, Newell has reorganized its operating structure and reduced the number of business units, helping to cut costs that allow the company to focus more of its investments behind products with more growth potential, such as Sharpie markers and its tools and commercial-products businesses.
The plan to sell of the hardware and teaching business, which together had a little more than $300 million in sales last year, is the latest shuffling of the portfolio. In an interview Friday, Mr. Polk said that agreements to sell the two businesses could be agreed to "in a matter of months." Newell hired Rothschild to manage the sale of the hardware business, while it is handling the sale of the teaching business itself. Exiting those businesses "makes us a faster-growing, higher-margin, more-focused business."
Newell plans to recoup some of the losses from selling the business from a lower tax rate that benefited first-quarter results, plus ongoing cost savings. The company on Friday said it is on track to realize annualized cost savings of about $270 million to $325 million by the second quarter of 2015, with about $90 million to $100 million expected by the first half of this year.
Despite a positive employment report Friday in the U.S., Mr. Polk said the outlook for the business in Newell's home market remains unchanged. "We've got more of the same set of assumptions, but we're hoping for better," he said. "It would be nice to get some tailwinds from the economy."
For the quarter, Newell reported a profit of $54.2 million, or 19 cents a share, versus $79.3 million, or 27 cents a year ago. Results for the latest period included restructuring costs, a loss from discontinued operations, and a loss relating to the currency devaluation in Venezuela. Stripping out one-time items, earnings were up at 35 cents from 32 cents a year ago.
Sales slipped 0.8% to $1.24 billion, a figure that excludes the businesses put up for sale, which Newell classified as discontinued operations. Core sales, which exclude the impact of changes in foreign currency, were up slightly, with its baby and parenting business up 6.4% and commercial products up 4.9%.
Core sales in its writing business fell 8.5%, which was hurt by last year's launch of Paper Mate Inkjoy pens.
Analysts expected earnings of 32 cents a share on $1.32 billion in sales, according to a poll conducted by Thomson Reuters, though the sales estimate included revenue from the businesses put up for sale.
Gross margin narrowed to 38.2% from 39%.
-Saabira Chaudhuri contributed to this article.
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