Release Date: July 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WD-40 Co (WDFC, Financial) reported a record sales quarter with net sales of $156.9 million, marking a 1% increase compared to the same period last year.
- The company's gross margin improved significantly to 56.2%, up from 53.1% last year, driven by higher average selling prices and lower input costs.
- Sales of WD-40 Specialist products increased by 11% year-to-date, reflecting strong demand and effective promotional activities.
- E-commerce sales were up 11% year-to-date, highlighting the success of WD-40 Co (WDFC)'s digital commerce strategy.
- The company has a strong employee retention rate, with an average tenure of eight years, double the US median, contributing to sustained growth and stability.
Negative Points
- Sales in the EIMEA region declined by 5% in the third quarter, primarily due to lower sales volumes in Turkey and the Middle East.
- The company's cost of doing business increased to 38% of net sales, up from 34% in the same period last year, driven by higher employee-related expenses.
- Homecare and cleaning product sales declined in several regions, reflecting a strategic shift towards maintenance products but impacting overall sales figures.
- Foreign currency exchange rates posed a headwind, impacting net sales figures and contributing to variability in financial performance.
- The planned divestiture of the homecare and cleaning business remains uncertain, potentially affecting future financial outcomes and strategic focus.
Q & A Highlights
Q: It seems like the Q4 guidance is quite wide. Are there factors that could lead to results at the lower end of the range?
A: (Steve Brass, CEO) We narrowed the guidance slightly to reflect our latest estimates, which are within our historical targets of 6% to 9% for maintenance products. The third quarter was a record sales quarter, but we faced tough comparables. The fourth quarter also has challenging comparables. (Sara Hyzer, CFO) Promotional activity and timing of orders, especially in marketing distributor markets, can impact results, which is why we kept a decent range.
Q: With gross margins at 55% to 56%, does this suggest slower growth or a potential give back next year?
A: (Sara Hyzer, CFO) We are pleased with the margin stability and have supply chain initiatives that could be accretive if inflationary headwinds are avoided. If input costs remain stable, these initiatives could further improve margins.
Q: Should we expect SG&A costs to continue rising by double digits in the coming years?
A: (Sara Hyzer, CFO) While we've made significant investments in IT, ESG, and organizational design, we are focused on cost management. We do not anticipate double-digit growth in SG&A costs next year.
Q: How should we think about foreign exchange impacts in the fourth quarter?
A: (Sara Hyzer, CFO) The biggest FX headwind was in Q2, and it improved in Q3. If current rates hold, we expect a positive impact in Q4, although Mexican and Brazilian currencies have been headwinds.
Q: Are tariffs affecting customer or distributor order trends?
A: (Steve Brass, CEO) Tariffs have not caused significant order lumpiness. We have supply chain initiatives offsetting tariff impacts, particularly in the Americas, making it a wash globally.
Q: Why was the full-year guidance range narrowed, and what led to the increase in profitability guidance?
A: (Steve Brass, CEO) As we approach year-end, we have a clearer picture of performance. The narrowed sales guidance reflects structural changes and market conditions. (Sara Hyzer, CFO) The increase in profitability guidance is due to favorable currency impacts and non-operating items.
Q: Can you elaborate on promotional activities and their impact on sales?
A: (Steve Brass, CEO) Our marketing investments focus on brand building and sampling programs, particularly in China and India. Promotions with major retailers can vary in timing, impacting quarterly results. We have a strong promotional program in the US, supporting modest single-digit growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
