Spectrum Brands Holdings Inc. recently announced a plan to spin-off its Home & Personal care (“HPC”) business, with the new company focusing on personal care appliances, shaving & grooming products, batteries, and specialty items. The decision comes after a decline in sales for FY23 and 1H24, and the company filed a confidential Form 10 registration statement with the SEC as part of this process. The separation is expected to provide more focused management attention and resources to the remaining core businesses like Global Pet Care and Home & Garden.
The HPC segment offers a diverse portfolio of brands catering to home appliances and personal care needs, selling primarily through large retailers, online retailers, and other outlets. On the other hand, the Global Pet Care segment provides pet products in the Companion Animal and Aquatics categories, while the Home & Garden segment focuses on household pest control, lawn & garden care, and home cleaning products. Spectrum Brands reported a decline in total revenues for 2Q24, with the HPC division seeing a 4.0% decrease and the Home & Garden segment experiencing a 4.8% increase in revenue.
Operating profit for 2Q24 improved significantly, with adjusted EBITDA growing to $112 million and net income from continuing operations at $49.9 million. The company beat consensus estimates with adjusted diluted earnings per share of $1.62. For FY23, total revenues fell 6.8% YoY to $2.9 billion, with operating loss at $206 million and adjusted EBITDA growing 7.0% YoY to $303 million. The company reported an adjusted diluted earnings per share of $1.53, beating the consensus by 18.7%.
Spectrum Brands’ decision to separate its HPC business is aimed at improving strategic planning, innovation, and marketing efforts tailored to each segment’s specific needs. It may also create more transparency for investors, allowing each business unit to be valued independently and potentially attracting investors focused on the HPC segment to a standalone entity. The company continues to buy back shares and shrink its float to grow earnings and address undervaluation concerns.
While no planned timeline for the spin-off has been disclosed, the process is contingent on various conditions, including final approval from the company’s Board of Directors and the effectiveness of the Form 10 registration statement filed with the SEC. The separation is expected to allow each business to pursue its investor base, capital allocation strategy, and strategic focus, with Spectrum Brands focusing on its core businesses following the completion of the spin-off.
