There were no surprises in ACCO Brands’ third quarter 2022 results following the update the company had provided a few weeks ago.
In that trading statement, the office products supplier had reduced its sales and earnings outlook for Q3 and the full year, citing macroeconomic challenges such as high inflation, the strength of the US dollar and the energy crisis in Europe.
Commenting further in the Q3 results press release, ACCO CEO Boris Elisman said: “During the quarter, our North America segment had strong sell-through in the back-to-school (BTS), office and technology categories. However, these improvements were more than offset by retailers’ more cautious approach to inventory replenishment.
“In Europe, the current energy crisis and significant inflation have created a more challenging macroeconomic environment, impacting sales and profits in our EMEA segment. Our International segment delivered excellent results, with double-digit growth in sales and profits.
To offset the near-term macroeconomic challenges, we have implemented cost savings and pricing actions.”
Third quarter results:
Sales declined by 7.8% as reported to $485.6 million from $526.7 million in 2021. Adjusted for currency, the decrease was 2.1%.
Lower inventory replenishment by retailers and a soft demand environment in many countries—especially in Europe—more than offset global price increases and strong volume growth in the International division.
Adjusted gross profit fell to $137.4 million from $157.8 million in Q3 2021, with adjusted gross margin falling by 170 basis points to 28.3%. The biggest drivers of the margin decline were pricing/product costs and volumes.
The reported operating result was a loss of $63 million following a $98.7 million non-cash goodwill impairment charge related to the North America business unit. Adjusted operating profit was $42.8 million, a year-on-year drop of 25%. This was mainly due to the impact of higher inflation that was not fully offset by price increases, lower volumes and unfavorable exchange rates.
Adjusted EBITDA margin fell by 280 basis points to 10.9%.
ACCO Brands North America:
Sales of $257.2 million decreased 10.5% from 2021, while comparable sales declined 10% to $258.5 million. These were both primarily due to lower volumes related to inventory destocking by retailers and lower sales of gaming accessories, partially offset by price increases and higher sales of computer accessories.
ACCO said its Five Star brand took share in the BTS season, while the decline in the gaming category was due to a combination of semiconductor shortages and a normalization of demand post-COVID.
Adjusted operating profit fell by 38% to $25.8 million due to lower sales and gross margins, and increased expenses to support BTS sell-through.
Adjusted operating margin was down by 450 basis points to 10%.
ACCO Brands EMEA:
Sales declined by a reported 19.1% to $130.3 million. Excluding the $24.1 million hit from weaker European currencies, the decrease was 4.1%.
Lower volumes more than offset price increases, while the energy crisis in Europe and “significant” inflation have created a more challenging macroeconomic environment that has impacted sales.
Adjusted operating profit was $7.4 million, down from $17.3 million in 2021, while adjusted operating margin slipped by 500 basis points to 5.7%.
ACCO Brands International:
Sales of $98.1 million increased by 25.6% versus 2021 due to increased volumes and higher prices, primarily in Latin America from in-person education. Adverse foreign exchange reduced sales by $4.5 million. Comparable sales were $102.6 million, up by 31.4%.
Adjusted operating profit almost doubled to $19.2 million, mainly due to higher sales and improved expense leverage. Adjusted operating margin surged by 710 basis points to 19.6%.
Company revenue for the January-September period was $1.45 billion, representing a comparable increase of 4.2%. The benefit of higher prices in all segments and strong volume growth in the International business were partially offset by lower volumes in EMEA and North America.
Adjusted operating profit fell by 17% to $123.5 million.
Elisman concluded: “We remain confident in our strategy and that the solid fundamentals of our overall business have us well positioned for long-term profitable growth. The company is well-capitalized and generates robust free cash flow, which will enable us to successfully navigate the current economic environment. Our strategic transformation plan to be a more consumer-, brand-, and technology-centric company remains on track.”
ACCO reaffirmed its full-year 2022 outlook, with comparable net sales growth expected to be flat to up 2% and reported sales forecast to come in just below $2 billion.