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Tuesday, May 21, 2024

As Outlook Gets Clearer, WD-40 Company Increases Guidance

MANUFACTURING: Full-Year Net Income Could Exceed $70M

SAN DIEGO – WD-40 Company (Nasdaq: WDFC), the maker of the all-purpose lubricant of the same name, released second quarter earnings on April 9 and increased its guidance.

Halfway through its fiscal year, it is still looking for the $570 million to $600 million in annual sales that it had predicted before.

However, it expects net income to be in the range of $67.7 million to $71.8 million. The previous expected range was $65 million to $70 million.

Sara Hyzer
VP of Finance and CFO
WD-40 Company

“We elected to raise our fiscal year 2024 guidance this reporting period due to the fact we have seen consistent improvement to gross margin year to date,” said Sara Hyzer, Vice President, Finance and CFO of WD-40 Company. “These gross margin improvements have been driven by strategic measures we have taken to enhance gross margin linked to our Four-by-Four Strategic Framework and experiencing a more stable cost environment.”

Net income for the second quarter was $15.5 million (or $1.14 per share) on net sales of $139.1 million. In the year-ago quarter, net income was $16.5 million ($1.21 per share) on net sales of $130.2 million.

“For the second quarter, global net sales were up 7% over the prior year with growth across all trade blocs,” said President and CEO Steve Brass. “We also continue to expand gross margin, which improved 160 basis points over the prior year. Overall, we are incredibly pleased with our performance and are confident in achieving our long-term targets to drive sustainable, profitable growth.”

Steve Brass
President and CEO
WD-40 Company

Looking to Sell Home Care Line

In a move indicating an increased focus on core products, WD-40 Company said it is pursuing a sale of its ancillary home care and cleaning product lines in the United States and the United Kingdom. These include the Lava, Spot Shot, Solvol, No Vac, X-14, 2000 Flushes and Carpet Fresh brands.

For now, the company said it plans to retain the products in Australia.

U.S. and U.K. sales of home care and cleaning products brought in approximately 5% of total revenue or $26 million last year, Brass told analysts on a conference call, adding that they sell at slightly lower gross margins than WD-40 Company’s flagship products.

Stateside, demand for home care and cleaning products totaled $3.4 million in the recently ended quarter. WD-40 Multi-Use Product took the lion’s share of sales at $49 million. (Two other categories — WD-40 Specialist products and other maintenance products — had sales of $7.1 million and $4 million respectively.)

Overseas Markets See Growth

Company sales in Europe, India, the Middle East and Africa grew 16% from $46.8 million in Q2 of 2023 to $54.3 million in Q2 of 2024, with Multi-Use Product sales jumping 17% and WD-40 Specialist sales showing the best growth of all, 23%.

Asia-Pacific showed more restrained growth of 4%. Of all markets worldwide, Asia-Pacific showed the greatest gross margin increase: 3.2%.

In comments to analysts, Brass said the company was “heavily invested in China” with 60 employees, “and that’s growing very nicely for us.” WD-40 Company regards China as its biggest market opportunity, with India in second place.

Since it sells its products nearly all over the world, WD-40 Company is paid in a variety of currencies. On a constant currency basis, net sales grew 7% from $130.2 million in Q2 of fiscal 2023 to $139.1 million in the recently ended quarter.

Asked whether a continued strong dollar would benefit the company during the next two quarters, Hyzer said the answer is complex.

“We transact sales in more than seven currencies around the world,” she said. “Given that complexity, it is very difficult for us to predict how a strong or weak dollar (against any number of currencies) may impact our reported results in any given period. We focus our discussions on top line growth on a non-GAAP constant currency basis using weighted average FY23 foreign currency exchange rates. Through the first half of fiscal year 2024 we have delivered top line growth of 7% on a constant currency basis which is right in line with our longer-term growth targets.”

Brazil Purchase Part of a ‘Must Win Battle’

WD-40 Company’s Four By Four Strategic Framework refers to four growth initiatives (internally called “Must-Win Battles”) and Four Strategic Enablers.

The Must-Win Battles are Lead Geographic Expansion; Accelerate Premiumization; Drive WD-40 Specialist Growth; and Turbo-Charge Digital Commerce. The Four Strategic Enablers are a foundation for the Must-Win Battles. They are Ensure a People-First Mindset; Build a Sustainable Business for the Future; Achieve Operational Excellence in Supply Chain; and Drive Productivity via Enhanced Systems.

The business announced on March 4 that it acquired its Brazilian marketing distributor for $7 million in cash. Brass said the move supports the company’s first Must-Win Battle of leading geographic expansion, and that he expects the move to drive revenue growth in excess of $10 million over the next year. A previous, similar transition in Mexico improved sales in that country.

On March 19, WD-40 Company declared a quarterly dividend of 88 cents per share.

Shares of WD-40 Company closed Wednesday (April 17) at $230.62. For the last 52 weeks, the share price has ranged from $278.78 to $181.38.

WD-40 Company
FOUNDED: 1953 as Rocket Chemical Company
CEO: Steve Brass
BUSINESS: Specialty chemicals and household products
REVENUE: $537.3 million in fiscal 2023
STOCK: WDFC (Nasdaq)
CONTACT: 619-275-1400
SOCIAL IMPACT: WD-40 Company’s global hires included 44% women and 51% non-white people between 2020 and 2022
NOTABLE: WD-40 Company products are available in 176 countries worldwide


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