ACCO Brands has reported a comparable sales increase of just under 1% for 2022.
While reported revenue was a drop of 3.8% to $1.95 billion, this represented a comparable improvement of 0.8%. Both reported and comparable sales reflected the benefit of higher prices in all regions and strong volume growth in the International segment; this was partially offset by weaker sales of gaming accessories and lower volumes in North America and EMEA due to the challenging macroeconomic environment. Excluding gaming, comparable sales growth was 5%.
Adjusted operating profit for the year was $175.8 million, a year-on-year decline of about 23%. ACCO said this was due to the impact of inflation that exceeded the benefit of price increases, and lower volumes – partially offset by reduced SG&A expenses.
Trends in the final quarter of the year worsened. Revenue was $499.4 million, a comparable decrease of 7.9%, as lower inventory replenishment at retailers and a drop in volumes more than offset global price increases. Adjusted operating profit fell by around a third to $52.3 million.
“We continue to execute on our strategic transformation, including expanding our product categories, broadening our geographic reach and bringing innovative new consumer-centric products to market,” said CEO Boris Elisman.
“This enabled us to achieve market share gains with many of our brands. These successes give us confidence that our strategy of being a more consumer-, brand- and technology-centric company, and our portfolio of strong brands, will position us to deliver sustainable organic growth over the long term.”
In its earnings release, ACCO provided details of restructuring plans for both its North America and EMEA operating segments that were developed at the end of last year. These are intended to expand margins through initiatives focused on improving operating efficiency and reducing costs.
In North America, the plan is focused on the consolidation of supply chain operations, SKU reduction, automating sales support processes, and sourcing optimization. In EMEA, the focus is on lowering redundancy and enhancing productivity in its operations, fewer SKUs, and sourcing initiatives. This will include a rationalization of the manufacturing and distribution footprint.
Through its actions, ACCO is targeting annualized operating profit improvement of $13 million, with most of this set to be achieved in 2023. Around 75% of the savings will come from lower SG&A, with the remainder via reduced cost of goods sold.
“Our priority in 2023 is to improve our operating profitability and free cash flow through pricing, productivity and restructuring initiatives and more efficient use of working capital,” said Elisman.
“We anticipate that these actions, along with a moderating rate of inflation, will allow us to deliver margin expansion and profit and cash flow growth in 2023. We achieved comparable sales growth in 2022 and are confident in the long-term sales potential of our business. Our proven strategy, which includes geographic diversity, and our strong portfolio of brands and innovative products have us well positioned for continued long term profitable growth.”
The ACCO CEO continued: “While the current economic environment remains fluid, we have an experienced management team with a proven track record of navigating periods of economic uncertainties. We are also well capitalized, with no near-term debt maturities and generate consistent free cash flow. We remain confident in our strategic transformation and believe we have taken the right actions to drive long-term shareholder value.”
Business segment results summary
Q4 sales were $225.7 million, a comparable decrease of 16.1%. Channel inventory destocking and lower demand for gaming accessories more than offset price increases.
Q4 adjusted operating profit fell by more than 50% to $18.7 million.
FY2022 sales were $998 million, a comparable decline of 3.9%.
Positive drivers were higher sales and market share gain in many product categories, and stronger demand in H1 ahead of the back-to-school season. Headwinds included weak gaming products demand, inventory destocking in H2 and the worsening macroeconomic environment.
FY adjusted operating profit was $121.5 million, down from $154.6 million in 2021. Adjusted operating margin was 12.2%, down by 260 basis points.
Q4 comparable sales were $177.9 million, 5.3% lower than in the prior year quarter. Lower volumes amid the challenging economic situation were to blame.
Q4 adjusted operating profit was $18.4 million, down by around 25% year on year.
FY2022 comparable sales were $658.5 million, a drop of just 0.7%. This reflected strong volumes in early 2022 driven by computer accessories and business products, offset by persistent inflation, the challenging demand environment in H2, and the stoppage of sales to Russia.
Adjusted operating profit for the year was $37 million, 52% lower than in 2021. Drivers of the decline included lower sales volumes and reduced gross margins – the latter due to higher costs for finished goods, raw materials and freight.
Adjusted operating margin was 6.4%, down by 520 basis points.
Q4 comparable sales were $119.7 million, an increase of 7.5%, as price increases more than offset lower volumes. Brazil was singled out for its strong sales performance as in-person education returned.
Adjusted operating profit rose by 0.6% to $24.3 million.
Full-year comparable sales were $380.7 million, a year-on-year jump of 19%. This was attributed to increased volumes and prices, primarily in Latin America.
FY2022 adjusted operating profit improved by about 44% to $58.3 million. Adjusted operating margin rose by 310 basis points to 15.8%.
For 2023, ACCO expects comparable sales to between flat and -3%. In Q1, it is forecasting a drop of 7-10% primarily due to the timing of back-to-school shipments, and lower sales of gaming accessories in North America.