Household products company Reynolds (NASDAQ:REYN) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 1.8% year on year to $818 million. The company expects next quarter’s revenue to be around $897.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.23 per share was in line with analysts’ consensus estimates.
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Reynolds (REYN) Q1 CY2025 Highlights:
- Revenue: $818 million vs analyst estimates of $820.3 million (1.8% year-on-year decline, in line)
- Adjusted EPS: $0.23 vs analyst estimates of $0.23 (in line)
- Adjusted EBITDA: $117 million vs analyst estimates of $119.7 million (14.3% margin, 2.3% miss)
- Revenue Guidance for Q2 CY2025 is $897.5 million at the midpoint, roughly in line with what analysts were expecting
- Management lowered its full-year Adjusted EPS guidance to $1.58 at the midpoint, a 4.3% decrease
- EBITDA guidance for the full year is $660 million at the midpoint, below analyst estimates of $666.2 million
- Operating Margin: 9.3%, down from 10.8% in the same quarter last year
- Free Cash Flow Margin: 2.1%, down from 8.4% in the same quarter last year
- Organic Revenue fell 2% year on year (-5% in the same quarter last year)
- Sales Volumes fell 4% year on year (-3% in the same quarter last year)
- Market Capitalization: $4.88 billion
StockStory’s Take
Reynolds' first quarter results reflected both external and internal pressures as the company navigated a challenging consumer environment. CEO Scott Huckins pointed to retailer destocking, later Easter timing, and softness in the foam category as notable headwinds, but highlighted that Reynolds outperformed its categories by two points in retail share and grew volumes in key segments like household foil and waste bags. Huckins stated, “We are acting decisively to respond to the changing macro dynamics, and we remain focused on progressing our strategic initiatives.” On the innovation front, management called out product launches such as Hefty Compostable cutlery, leveraging technology from the Atacama acquisition, and expanded distribution for new scents in the Hefty Fabuloso line.
Looking ahead, Reynolds’ revised guidance incorporates a more cautious outlook, reflecting ongoing cost pressures from tariffs and expectations for continued retailer inventory management. CFO Nathan Lowe explained, “Our lower EBITDA guide…contemplates really just our lower retail volume expectation. The revenue guide is unchanged, but the pricing component of that really just serves to neutralize both the direct and indirect impact of tariffs.” Management emphasized that the company is offsetting these headwinds through a combination of price increases, productivity initiatives, and cost reductions, while continuing to prioritize investments in automation and supply chain efficiency.
Key Insights from Management’s Remarks
Performance in the first quarter was shaped by retailer inventory adjustments and cost headwinds. Management’s commentary addressed shifts in consumer behavior, product innovation, and operational responses to tariffs and inflation.
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Retailer Destocking Impact: Reynolds experienced a headwind from retailer destocking, which management sees as a permanent adjustment in how retail partners manage inventory. This affected retail revenues, particularly in the foam category, but management noted that the company still gained share in core categories like foil and waste bags.
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Innovation Pipeline Expansion: Management highlighted progress in product innovation, referencing the launch of Hefty Compostable cutlery (utilizing technology from the Atacama acquisition) and new scents for Hefty Fabuloso waste bags. These efforts are part of a broader push to prioritize and resource larger-scale innovation for growth.
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Category Share Gains: Despite a challenging environment, Reynolds outperformed its categories at retail by two points, driven by distribution gains and the scaling of new products, with no increase in promotional spend compared to last year.
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Tariff and Cost Pressures: The company is facing $100 million to $200 million in annualized cost headwinds from direct and indirect tariffs, mostly related to commodities like aluminum. Management is deploying price increases and productivity enhancements to offset these pressures.
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Supply Chain and Automation Investments: Reynolds continues to invest in automation and network optimization to improve manufacturing productivity. Management believes these initiatives will yield financial benefits later in the year, supporting long-term margin expansion.
Drivers of Future Performance
Management’s outlook for the remainder of the year is shaped by persistent consumer and retailer caution, ongoing cost inflation, and a focus on operational improvements to protect margins.
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Tariffs and Pricing Actions: Reynolds expects tariff-related cost headwinds to continue, with price increases and productivity initiatives aimed at maintaining profitability. Management noted that pricing actions are designed to fully offset direct and indirect tariff costs over time.
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Retail Volume and Category Trends: The company anticipates retail volume to perform at or above category averages, but expects pressure from lower consumer confidence and continued retailer inventory discipline, especially in discretionary categories.
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Productivity and Supply Chain Optimization: Ongoing investments in supply chain automation and procurement efficiency are expected to drive incremental margin improvement. Management cited early positive results from these initiatives and expects more substantial benefits later in the year.
Top Analyst Questions
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Kaumil Gajrawala (Jefferies): Asked if retailer destocking is a temporary or permanent change. Management replied they assume it is permanent and will flow through the full year.
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Peter Grom (UBS): Inquired about category growth expectations and the phasing of tariff cost mitigation. Management explained that lower retail volumes and price elasticity drive the guidance, and cost impacts are expected to phase in over two to six months.
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Lauren Lieberman (Barclays): Sought clarification on the source of tariff pressures and the rationale for segment reporting changes. CFO Nathan Lowe described the split between direct and indirect tariff impacts and the realignment of international reporting by product category.
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Andrea Teixeira (JPMorgan): Asked about consumption trends exiting the quarter and the role of promotions in supporting price increases. Management noted consumption trends were as expected, with no increase in promotional spend, but anticipate some increase tied to new distribution in Q2.
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Brian McNamara (Canaccord Genuity): Requested details on pricing mechanics for aluminum foil and the competitive landscape with private label. Management responded that pricing typically flows through in two to six months and store brand share remained stable in Reynolds’ largest categories.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will monitor (1) the pace and effectiveness of Reynolds’ price increases in offsetting tariff-related cost pressures, (2) any stabilization or recovery in retail volumes as consumer confidence evolves, and (3) the realization of manufacturing productivity gains from automation and supply chain projects. The success of new product launches and the impact of distribution wins will also be key signposts for progress on the company’s strategic priorities.
Reynolds currently trades at a forward P/E ratio of 14.2×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.
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