The company's President and Chief Executive Officer, Chris Peterson, and the company's Chief Financial Officer, Mark Erceg, are with us today. Chris, opening words, and then we get started with the fireside. Yes, our legal department has told me that I need to read this to start. Today's remarks will contain forward-looking statements which involve risks and uncertainties. Actual results may differ materially, and we undertake no obligation to update such statements. I refer you to the risk factors in our SEC filings for further details. Well done. You might have to conduct a fireside chat. That's right. Okay, great. So Chris, maybe we can start with you. So, you know, since becoming the company's CEO, you announced a new strategy that focuses on the where to play, how to win choices. Just knowing there could be people who are kind of newer to the Newell story or just as a refresher, could you give an overview of how that, you know, what that looks like in practice and how it diverges from the way that Newell had been operating in the past? Yeah, it's a pretty significant difference. If you follow the Newell story, we've been a turnaround for a couple of years. Over the last few years, we've been focused on and made tremendous progress on putting an operational foundation in place that is much stronger. So we've gone from 42 ERP systems down to 95% of our business on two ERP systems. We've taken our legal entities down by several hundred. We've consolidated IT systems from 7,000 apps to 700. We've taken our SKU count from over 100,000 down to 28,000, and importantly, more than tripled our number of SKUs. We put in place a full productivity program in our supply chain that's driving significant cost savings on a year-over-year basis, typically in the 3%-4% cost of goods sold takeout. We put in place a very strong automation system. We've completed Project Ovid, which has moved us in the U.S. from 23 unique supply chains to a single integrated supply chain. As I came in earlier this year and was announced as a CEO, what I wanted to do was turn the company into a new direction. So we started with a full-scale capability assessment. We looked at the 11 capabilities that we think are important to win in this industry. Things like consumer and customer understanding, brand building, innovation, go-to-market, procurement, supply chain, et cetera. We benchmarked ourselves against best-in-class competitors, and what we found was that although we had done very well at making improvements on the supply chain and a lot of the back office functionality, we had major gaps in our capabilities on the front end, and specifically in the area of consumer and customer understanding, brand building, innovation, go-to-market. S o, myself, together with the leadership team, developed a new strategy that is a major pivot in the front-end capability of the company. W e're excited about it because we think that as we embark on this capability improvement on the front end, when you couple that with what we've done on the supply chain and the back end, we think we've got significant opportunity for shareholder value creation going forward. So that's the pivot that we've made. We announced the strategy in June, so just a few months ago. I became the CEO of the company about three and a half months ago. We are very much in execution on the new strategy, and it's a very different type of approach than what the company has taken in the past. So one thing I think that's, that's really struck me with these changes that you're, that you're in the midst of, is the effort to, to factor in scale, right? That Newell and predecessor Newell and predecessor Jarden and so on, that were very much de-scaled, right? So, maybe could you talk a bit about that, too, sort of how scale plays into the strategy- Sure. and the changes you're making? Yeah, it's a good observation, and it's one of the things that has been a plague of this company over the last number of years, is the company has been so disaggregated and so diffused that it really hasn't leveraged scale, but we have the opportunity to do that. So when you look at the new strategy that we've declared, it's an integrated set of where to play and how to win choices. The where to play choices are all about focusing our resources and our efforts on the things that have the greatest impact and the greatest return on investment. So, for example, we have 80 brands that we that we sell today, but 25 of those 80 represent 90% of the company's sales and profits. So we've made a choice to focus on the 25 brands that disproportionately make up the sales and profits of the company. From a geographic standpoint, we have on-the-ground operations in 50 countries, but 10 countries represent 90% of the sales and profits, so we're making a similar choice to focus on the 10 big countries. When you look at the parts of the market that we compete in, we compete with our product portfolio in opening price point products, medium price point products, and high price point products. 70% of our business is in MPP and HPP. We believe that focusing on that will yield a greater return on investment as opposed to OPP, which has historically been a focus of the company. S o the where to play choices are all about distorting investments to drive scale. The how to win choices are all about taking operational discipline and singular process and technology across the front end of the organization, similar to what we've done on the back end, so that we can become the scaled provider in general merchandise. For most of the retailers that we do business with, we are the largest supplier in general merchandise... and they're looking for us to lead the way. We just haven't been doing it as well as we can, and that's the journey that we're on. So I get, you know, all the changes. I just wonder still if these changes are enough to kind of kickstart core sales growth, right? So on the idea of you're the largest supplier in general merchandise, the retailers want you to act like the largest supplier in general merchandise, that's a big check the box, right? N ow you're setting yourself up to be able to have the company behave that way. But something that I guess I've gotten from investors over now many years covering you all, is like, maybe these are just tough categories. So I guess, how would you respond to that? Is it a, you know, function of the categories are just tough, and no matter how much you change and how much you do, you're just gonna be in the same place, or is what you're putting in place enough to kind of jumpstart or change the trajectory on growth? Yeah, we think it's enough to change the trajectory on growth. If you look at the categories in which we compete, and you look over a long period of time, the last 10, last 20 years, on a normalized basis, the categories have been growing low single digits globally. So these are categories that are growing. They're growing at a low single-digit rate. We should be in a position, with the changes that we're putting in place, to grow faster than that, because we should be able to disproportionately grow market share as we get this front-end capability established. Because two-thirds of our brands, we are the market leader. A s the market leader, we have the opportunity to drive category growth disproportionately and drive trade up in the category, and so we should be leading that. We have examples of where we're doing that. You look at the Sharpie business, we're gaining share on Sharpie. We introduced gel pens on Sharpie a few years ago. Many of you heard me talk about gel pens if you've been following the story. That gel pen introduction on Sharpie is closing in on a $100 million business, and that business didn't exist before. Sharpie was historically a permanent marker brand and a highlighter brand, but we're bringing innovation that is superior in the market that can drive category growth and drive disproportionate growth for Newell. I will say it's not gonna be a straight line. Our business tends to be more durable and discretionary, and so, we are in a tough macro environment right now, because we had a COVID surge, and now we're having some normalization in our categories. But we are very confident that we're taking the right actions to return the company to growth over time. Okay, great. So just sticking with the macroeconomic pressures you just mentioned, you know, things could get tougher even still, right? Student loan repayments kicking in and so on, and you're contending with, like you said, this, I guess, a significant pull forward during COVID. So I guess, how do you go about modeling internally, you know, kind of that normalization, right? The longer purchase cycle in a lot of the brands and categories. So are there certain segments that kind of normalize more quickly than others? Because it's just, it's such a different degree of magnitude of length of time and purchase cycle in these categories. Sure, sure. If you look at our product portfolio and the businesses we compete in, we have products that span from very short purchase cycles, like writing, to products that have longer purchase cycles, like small kitchen appliances, which tend to have purchase cycles that might be three or four years in length. F or those categories that were more home-based, that have longer purchase cycles, there was a consumer pull forward of demand, as consumers were locked down during COVID and stimulus money came in, and we saw a surge in our core sales growth. So in 2021, we reported 12.5% core sales growth. In those businesses, which are really the home and the outdoor and rec businesses, we're now seeing those categories normalize to more normal levels. But on the converse side, on writing, we're continuing to see strong growth on that business, because that has shorter purchase cycles. So we monitor consumer dynamics very closely. I think our visibility is pretty good, sort of, you know, 3-6 months out. I wish that our visibility was better longer than that. I will say that the combination of the pandemic, this COVID cycle, the inflation environment that we're in has made this one of the more challenging times to really forecast go-forward demand. And so we don't believe that we're gonna get it right. What we're doing is more of a scenario planning model to say: We want to be prepared to operate well, drive improvement in our capability in a variety of different scenarios, so that over the long term, we're making progress, and we're getting back to sustainable core sales growth as the market normalizes. Okay. But that, you know, when you lowered your sales guidance, in July, you know, and that came with a substantial hit to operating margins and fixed cost deleveraging. So just building on what you just said, like, our impression was you'd rather be kind of lower on inventory to protect cash in the near term, to be ahead of inventory should demand rebound or play out differently. I mean, is that kind of the right way to think about? Yeah, when we started this year, we said that we really had five priorities for this year. The first one was to drive cash flow improvement and return our inventory to normal levels. We've made very good progress on that. So our operating cash flow for the first six months of this year is up $700 million versus a year ago. We've taken our inventory down by $700 million or more versus same time year ago. So our inventory is now getting back to normal levels, and we are making very strong progress at returning to strong operating cash flow, strong free cash flow, which is going to allow us to delever this year. The second priority we set this year was driving structural improvement in gross margin through fuel productivity savings, automation, the Ovid implementation. We're on track to have a record high productivity year this year in terms of cost takeout as a result of those programs. The third priority we said was overhead cost takeout as part of the Phoenix Initiative, and we are on track to deliver that, which we've targeted $220 million-$250 million of cost savings once as the program is fully implemented, which we are very close to finalizing. The fourth priority was to continue simplification and SKU count reduction. We are very much on track to end this year with SKUs below 25,000, so continuing the reduction effort there, which we believe will yield long-term benefit in terms of our operating ability. T he final priority for this year was moving into the new operating model. As part of the new strategy, we've changed the operating model of the company to go from what was seven business units to three operating segments. We've also centralized supply chain and manufacturing, where we believe we've got a big opportunity to drive scale and efficiency in the supply chain. The third, key plank of the operating model change was to change the go-to-market organization and the geographies, to go with a One Newell sales approach to the market, as opposed to having each individual business go to retailers separately. Okay. Speaking of inventory and the kind of go-to-market, last year when we were here, you know, a key theme was retail inventory destocking, and it seems at least that that is passed, for good and forever for everybody. But you did discuss this quarter, this change in retailer shipping terms. So could you elaborate a little bit more on that? What is the change? You know, and that contributes, like, yeah. Yeah. Let's start there. So one of the things that we changed our guidance for when we updated our guidance in July was some of our largest retailers had been ordering our products under a model called direct import. T he way direct import operates is for goods that we particularly source from Asia, they take possession of the goods in Asia, and they then import the goods and move them into the U.S., into their D.Cs and so forth. That contrasts with a another way of delivery, which we call domestic fulfillment, where we import the goods, we take them into our DCs, and we then ship them to their warehouse from our warehouse in the U.S. If you look at our business, because we've now implemented Ovid, and done a meaningful improvement which has resulted in a meaningful improvement in our delivery times, our customer fill rates are up dramatically. Retailers have come to us and said that what they were previously taking via direct import, they now wanna take via domestic fulfillment. We view this as a very positive development because it enables us to leverage scale in our distribution network that we've set up, ship more full truckloads, improve the delivery time to retailers, allow more inventory to come out of retailers, which improves their return on inventory. However, in the short term, what it results in is a one-time inventory destocking because of the move, because typically there's about six weeks of inventory between the port in Asia and the distribution center. S o that six weeks, which would have been an inventory that was owned by the retailer, is now inventory that's owned by us. S o, again, we view it as a good long-term thing. I might add that, we expect to end this year with our direct import business being reduced by over 50% from where it was last year. So this is a pretty meaningful reduction in direct import, and I think it's a good sign of confidence in what we're doing with our domestic fulfillment model as part of the Ovid implementation. Is there scope for that to be reduced further, should this- I think we were- Go well? You know, I think we were over 10% of our U.S business was direct import, and we're now gonna be under 5%. So could it be a little bit more? Yes, but I think it's, there's a limit to how far it can go. Okay. There's a piece where it will always make sense. Yeah. Okay. Let me step back and look a little bit longer term. So in June, when you discussed the new strategy, you spoke to a number of top-line opportunities, new product development, pricing, RGM expansion. You said that, you know, some of these could yield 3-6 points of incremental top line growth. So just to be clear, because there was some confusion maybe on the way that it was discussed, once changes, capabilities are built, everything's in place, does that mean your evergreen target goes to high single dig-- Like, how should we think about that comment on the 3-6? Yeah, let me, let me help with that a little bit. Great. So there were three things that we were really excited about when we first presented the new modified strategy that Chris talked about. One was getting after new product innovation in a more systemic way. We're gonna be focusing on our top 25 brands in our top 10 countries, and as part of that, we're going to have fewer, bigger product innovations that are based on consumer understanding and consumer research. That was one of the capabilities where we were not sufficient, shall we say, and that we know we need to beef up. So once we have consumer-led innovation, we can then put a tiering system in place so that we have tier one, tier two, tier three initiatives. We can distort resources appropriately to the biggest idea that we have, that we think will really drive our sales and category growth with our retail partners. We believe if we do that correctly, we can add 1-2 points of revenue growth from that intervention. In part, it's also driven by the fact that we're gonna be focusing more on MPP and HPP, so that when we do launch product initiatives, they are gross margin accretive, and they grow category sales. That's the first piece. The second thing we're really excited about is what we call pricing and revenue growth management. When we had over 100,000 SKUs, frankly, it was really hard for us to do the diagnostic work to really understand the price architecture of all the product sets that we have in the marketplace. Now that we've gotten it down to a more reasonable level, we can actually do the diagnostics, and we found a whole bunch of places where our price curves were just illogical, where there were just kinks in the pricing architecture, and we're addressing those. In addition, we have a tremendous opportunity because we have over $1 billion in trade funds, but we don't have a centralized trade fund management system, nor did we have a pay-for-performance approach with our trade accounts. So effectively, it was $1 billion that we were just giving away without any per-performance criteria associated with it. Correcting the revenue growth management and the price architecture, we think, is also worth a point or two of revenue growth per annum. The third area is distribution growth. As we really focus on our leading brands, which I should say two-thirds of those in their home markets are actually the leading brand, we believe that we can drive distribution gains with our existing customers, also take our product set into customers today where we're underdeveloped, and then we also have the opportunity to also take certain product groups and categories into other geographic marketplaces. That, we think, is worth 1-2 points of revenue growth as well. So you put that all together, and it's 3-6 points. Now, we're not gonna grow at 3-6 points each and every year, but we have the potential to do that in a normalized operating environment. As far as our evergreen targets, they remain unchanged. It's still low single-digit growth, core sales growth on the top line. It's basically extracting roughly 50 basis points of operating expansion each and every year, and free cash flow productivity at 90% or better. Okay. Okay. Because understanding it's not the evergreen, right? Just thinking about Newell having the potential or the capacity to grow mid-single digits is like that's a big mindset shift. It is. It is a big mindset shift. You know, look, we've got to. As I started this, we are in a turnaround situation. We recognize it. I think the thing that we're excited about is that we've done this capability assessment. We know what needs to happen to fix the company on the front end, and we're now attacking it with vigor. We've put capability improvement projects in each of the areas that we've talked about from a how-to-win standpoint. We have owners assigned, we have clear action plans and clear KPIs that we're running against. It's not gonna happen overnight. This is not gonna be a next quarter or the following quarter story, but over the next two to three years, I'm very confident that we're gonna return to top-line growth. A s we do that, we're gonna be able to leverage the scale that we've put in place on the supply chain and the back office, and I think we've got an opportunity to really leverage our retail partner relationships even more significantly. S so, the thing that gets Mark and I excited is, you know, we need to show the proof is gonna be in showing that we can actually deliver on this. But if we can, I believe there's a real opportunity for this company to be re-rated in investors' minds. Yeah. What about change management? So as, as you guys were talking, I'm thinking, I'm like, this is just a lot, right? S o I guess, how do you handle that from an HR standpoint, and as you talked about capabilities, and then is there an upskilling- Yeah of the organization that needs to happen? Yes. So, when we looked at the capability improvement actions, there were 8 projects that were sort of currently going, that were making good progress, which were largely supply chain simplification. There were 10 new projects that we've taken on, so we're now managing a slate of 18 capability improvement projects, which is a lot, and we recognize that. We went through a long discussion, actually, as a leadership team, of can we handle all 18? Yeah. Or should we try to prioritize 5 or 10 or something like that? W hat we came back with was, no, we need to do all 18, and, you know, we're an organization of 25-30,000 people. W e've built a strong leadership team at the top. We've supplemented that. We are bringing in new people from the outside. So we've added Mark, who's joined us 9 months ago or so as the CFO. We've added, effectively, a chief marketing officer to lead the brand management implementation. We've hired a new head of consumer insights from the outside, who's a 20-year veteran from Coca-Cola, to lead up the intervention there. We're bringing in new leadership across several of our businesses and several of our geographies. We've brought in a new head of Europe. We've appointed a new head of Latin America, and so we are building out the capability. We're assigning brand managers across the top 25 brands. A s we're doing that, we've put in place what we're calling exceptional performance standards, which is a very different expectation for the brand manager going forward versus what the historical expectation was for that role. S o, you know, we're not gonna get it all right. You know, what I've been telling the organization is, I think about this in terms of batting average. If we can do 70% or 80% success rate on these, as long as we know we stub our toe and we find out early, we can course correct, and we're gonna be better off trying to go aggressively with speed across all of these, than trying to stagger it, over too long a period of time. L et me go back to the sort of, I don't call it algorithm, but the conversation in June, right? So the incremental top line opportunity. You also discussed at the time 100 basis points of annual gross margin expansion annually. Can you talk, Mark, a little bit, what drives that and how it ties to the benchmark of the 37%-38% gross margin level that you talked about previously? Yeah, absolutely. So, this is another area that we're really excited about, because as Chris indicated earlier, harnessing the power of scale at Newell, believe it or not, is a relatively new construct and it presents a tremendous opportunity. So we look at it in a number of buckets. The first one is, procurement. We believe we can save 2%-3% of COGS each and every year on a going-forward basis by harnessing the purchasing pools that we have across the aggregate business. We buy about $4 billion worth of materials and source finished goods, and I can tell you that as we stand here today, we have about 25,000 vendors, which is far too many. We're gonna punch that down to probably something closer to 18,000, which will be a best-in-class benchmark. We're also going to make sure that we have multiple vendors qualified for any given purchase pool that's of real size and scope. For example, today, that $4 billion purchase pool, there's 60% of the instances across that pool where we only have one qualified vendor. So if you think about us only having one qualified vendor, and that qualified vendor is aware of that, in effect, they really have the negotiating power versus us. S o we're gonna put that on its head and turn that around by consolidating all the procurement functions under our procurement leader, which wasn't the way the company was run in the past. Before, when we had separate supply chains, they weren't being managed as a collective aggregated pool. So that's a huge opportunity. The second one we're really excited about is what we can do across the plant network. We think we can get 1-1.5% of COGS savings each year going forward out of the plant network. Today, we have 46 plants. They're not geographically in the best locations in many cases, and because of the way we operated in the past, by diffusing our scale, they were all managed, integrated for supply chain purposes to a single business unit. So 90% of those 46 plants only produce one category of product, which is clearly suboptimal as well. That's also led to a great deal of inefficiency. Our capacity utilization is roughly 40% across the network, if you can believe that, and we don't have nearly enough automation and digitization across our factory network. So we have tremendous takeout opportunities as it relates to that, area as well. Across distribution and transportation, we see similar things. You know, we did the Project Ovid program, which was a tremendous step forward as far as leveraging scale vis-à-vis the retailer and having one invoice to that retailer and approaching at scale. But now we have an opportunity across North America, as an example, to probably go from 30 DCs down to 20. We have, like, 19 million sq ft of space, we probably only need 15. A s we do that, we'll become even more responsive. You know, through the first half of the year, our fill rates in North America were 94%, which was an all-time best-in-class number that we posted. It was versus, I think, 82% in the base period. So we also have a whole bunch of opportunities on the distribution and transportation side, which we think could be worth up to 0.5 point of COGS each year, as well. T here's some overhead opportunities. But you take that all together, and we think we can get up to 100 gross margin basis points out each and every year going forward, which will help us drive our overall algorithm to monetize the business. Okay. With that as the starting point, what do you see as the right spot for operating margins? You've spoken to cost savings, but there's also the need to step up advertising spending. Yeah. Does R&D need to go up? How do you think about that? Yep. Like, I think our R&D is about right. It's about 1.5% of sales. I don't think it's been focused and channeled to the biggest consumer-led opportunities, and that's one of the pivots that we're making under the strategy that Chris has been championing. So I think that piece is relatively okay. We do have an opportunity with A&P spending. As a company, we only spend about 4% on A&P, and frankly, that's a bit too low. Some brands are closer to eight or nine. Some, like the commercial product group, may be as low as one or two. So it is a little bit dependent upon that particular product set. But overall, we need to increase that by several hundred basis points so that we can really drive consumer innovation and bring, you know, meaningful, marketing weights, to those innovations to drive consumer offtake and purchase. As we do that, we're going to be balancing these different competing forces. We think gross margin, for us, which sits around roughly 30%, can be in the high 30s, frankly, based on the work that we've done and the assessment that we've completed. As we do that, we're gonna put a couple hundred basis points back into A&P over time, but we're also gonna drive operating margin up considerably from where it sits today. We see no reason why that can't be in the mid to high teens when we complete the program over the next several years. Okay, great. Let's talk about capital allocation. So in May, you announced a pretty substantial cut to dividend, right, 70% cut. Though not much of a surprise, I think, to investors by that point, who, you know, have been close to the story. So can you just discuss the decision to cut the dividend, and also then where your capital allocation priority stands today? Yeah. I think it was driven in part by the fact that we see such a huge opportunity set in front of us. You know, as we think about the supply chain and the work that we can do there, it's gonna require some additional CapEx, but we have really high internal thresholds established for these project funding rates. You know, we're targeting 30% rate of returns for these projects, and we have a plethora of items that are presenting themselves to us, whether it's the DC consolidation effort, whether it's Project Rome, which is one of the ones that we're attacking right now, which is the four-wall costs across our plant infrastructure, whether it's the automation programs that we have in place, whether it's the opportunity to put multi-node factories together, whether it's the opportunity to put, you know, single source, centers of excellence in for blow molding and other types of operations that all the businesses will benefit from. So we have a tremendous set of opportunities that are sitting in front of us, and so that partly informed our decision that we want to have more cash available to fund those programs. In addition, we're obviously going to work towards investment grade. We believe we should be levered about 2.5 times ultimately, and we know that'll take a number of years to get to, but that's what we're committed to doing. T hen we want to pay a fair and reasonable dividend. Right now, we're targeting to be in the 30%-35% range for dividend payout ratio, and obviously, as earnings move, we'll probably tack along with that going forward as a plan. You know, the only other thing I would add to that is. That was my first day on the job as the CEO, was the day we cut the dividend, which is not how you want to start your first day on the job. It's better than ending that way, you know. I think, and the reason why I say that is we are very focused on driving the right thing for the long-term health of this business and getting this company back to being a strong deliverer of shareholder value. W e felt, as we looked through all of the stuff that Mark talked through, that the leverage ratio that we wanted to get to was lower. We didn't want to starve ourselves for investment in high return initiatives in the company. T he payout ratio in that 30%-35% range seemed much more appropriate for the long-term health of this business. Okay. Back at CAGNY in February, Mark, you were, you know, pretty much brand new at that point in your seat, at the company. You noted the potential for tuck-in acquisitions and also possibly some small divestitures. But then in July, when you talked about that bottom 10% of the 55 brands that you're de-emphasizing, it sounds more like kind of run them for cash or maybe some are discontinued, but maybe I'm not sure on the divestiture piece. So I was just curious if there's an update, let's call it, since February, on how you're thinking about M&A and the role in the strategy. Yeah, I think there really isn't an update on M&A. We do not see large scale acquisition or large scale divestiture as an opportunity for us at the current time. We think we've got plenty of organic opportunity to drive shareholder value. On those bottom 55 brands, we've sort of put them into three buckets. It's about 10% of the company's sales and profits, as I mentioned. The first bucket are brands that we believe we can continue to run, but we don't need a big focus on new innovation. S o think of those as, we'll continue to manufacture, supply, distribute, sell those brands, but they will get a smaller amount of innovation compared to the large 25 brands, which are the priority focus. There's a second set of those brands that we believe are very small, making very little money, that we will look to just exit effectively. T hose will largely just be discontinued and replaced by brands that we have that we think can utilize the shelf space better. S o it's not that we're exiting the shelf space, we're trying to replace them with a brand that is more powerful than these small brands that are sort of ancillary. T here's a third bucket that we're looking at, potentially small scale divestiture and/or license, outlicense to another player, where we would own the brand, we would license and somebody else would operate. I think, you know, we're already making progress on that. You know, I think we expect to end this year, you know, when we announced the strategy in June, we had 80 brands. By the time we get to the end of this year, my guess is we're gonna be closer to 60 brands in the portfolio. So we are, we are moving with speed on this. Okay. They're small enough that we don't even realize it's happening- Correct. - basically. Okay. I think we're gonna wrap there. So thank you so much for being here. It's great to have you both at the conference. Thank you. Thank you. L ook forward to more. Okay. Very good. Thank you.