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Back-to-school season ‘off to a good start’: Newell Brands CEO

Newell Brands CEO Ravi Saligram joins Yahoo Finance Live to discuss back-to-school savings, inventory, consumer demand, supply constraints, and the outlook for the commercial retail space.

Video Transcript

JULIE HYMAN: Well, we are in the midst of the back-to-school buying blitz that helps companies like Newell Brands. The household goods maker making some changes behind the scenes to better meet demand, shifting distribution centers to the east and streamlining invoices to retailers. Will it be enough to keep the green coming in as clouds gather on the markets and economic horizon?

Joining us now with more is Ravi Saligram, who is Newell Brands CEO. He's here with us in the studio, which is always very exciting for us, especially in this day and age. You guys make Sharpies, too, which I didn't know until I was doing some research for this segment.

So before we get to the behind the scenes changes you've been making, just talk me through demand, and what you guys are seeing as we head into the-- I mean, we really are in back-to-school season already, right? People are already buying lots of supplies.

RAVI SALIGRAM: Yeah. Julie, thank you for having me. And this is week 6 of back to school. And this year again, as schools all reopen, it's off to a very good start.

The first three, four weeks were actually quite buoyant. It slowed down a little, and NPD is expecting that it may actually be a longer back to school. But it's up mid-single digits versus last year. And of course, we're up, too, so we are happy about that.

We've got a lot of great products. We've got the Sharpie S-Note Duo, which is for note-taking. And that's a big trend with consumers. So the writing business is definitely, for us, a bright spot. And given that's our most profitable business, that's going well.

Our commercial business, as offices, have reopened. That's going really well. In second quarter, it was up 10.7%. So that side is going well.

But there are clouds because demand is softening in many other categories. Last year, candle business, Yankee Candle, did extremely well as people burnt a lot of candles to reduce stress during the pandemic. That's slowing down now.

We've also lost a chunk of lower-income consumers who came in due to the whole stimulus package. So we've lost some of that. So demand softening retailer inventories, as they're cutting back, that's what's on our mind. But the great bright spots are our writing business and our commercial business.

BRIAN SOZZI: We'll talk about the economic stuff more in a second, but that's a Sharpie pen?

RAVI SALIGRAM: Yeah.

BRIAN SOZZI: That is-- to me I've never seen a Sharpie pen like that. But I think, it looks like you're reinvesting in the brand. I mean, I thought the tablet was going to kill the pen. I mean, we've been hearing that for years now.

RAVI SALIGRAM: Yeah, that's a great question. This is the Sharpie S-Gel, one of my favorite products in our company. And Sharpie has been always known for permanent markers and, really, all about creative expression. But the brand has so much equity.

So we launched this two years ago, and in two years, it has become a $50 million brand and with great gross margins. And people absolutely love it. It's been taking share away from our competitors, and it's becoming a leading brand. And people absolutely love it in terms of the way it flows. So you should try it. I know you're not--

BRIAN SOZZI: I feel bad. I won't tell you what pen this is. We'll take it off.

JULIE HYMAN: But your point is kind of interesting. Like, you would have thought that pens would go extinct, right? And clearly, from what you're saying, they're not.

RAVI SALIGRAM: Oh, no. It's growing, gel pens in particular. The reason is there is this misconception that technology is just taking over, and people don't want to write. Everything indicates, even the youngest consumers, this is the form of creative expression. And this is what aids literacy and learning. And so we think that this business is thriving.

Now, as you get into hybrid environments-- that's why we are also investing in technology now, to look at the whole, is there a digital pen out there for us? There are obviously things like Apple has for its iPad and stuff. But those are very expensive. How do you digitize this?

BRIAN SOZZI: This one erases, too. This is my tablet. It's pretty-- it's just wild.

RAVI SALIGRAM: Indeed. So we've got an offering that's coming out, even with our pens that has that and things which are environmentally friendly, et cetera. But I think there's a whole misconception. And this is for us one of the most exciting categories, that's why we're investing in it.

And it's this thing that I talked about-- note taking, creative note taking-- that college students are doing. And they're doing it with colors and creating expression for taking notes. So rather than just with the ordinary pen-- so we've got a lot of colors. And this is where our PaperMate, with its flare, that's another great brand for us. And so I think this whole idea of learning, of activity for little kids, I think writing instruments are a big piece of it.

And our Elmer's glue, for instance, we're now launching later in the year something called Squishies, which are all about sculpting. And for little kids with the glue, we've had other things in the past with slime. That became a big hit. Now we're following it up with Squishies.

BRAD SMITH: How are you managing, even with all of the products that you have under the brands, how are you managing inventory differently than some of the competitors that are out there right now? Because as we were talking about earlier, it might be a little bit different for you. And being able to pack away things and then reintroduce them or just re-ship some of that inventory once the season kind of rotates or that cyclicality turns over as well.

RAVI SALIGRAM: Yeah. I think, Brad, obviously, inventory is an issue for everyone today. For us, like with our writing business, Sharpie, is actually made in America. And we get some of the components and chemicals and stuff that we sourced from overseas, but we actually manufacture it in Tennessee. And so that has helped us with really understanding demand and supply.

So the writing business has been good. In fact, we're having some supply constraints still. We could sell more if we could make more on the writing business, the same with our commercial business.

In some of our sourced businesses, like appliances, for instance, where we source from China or outdoor business, a lot of this because of all the supply ocean freight issues that we experienced last year and earlier this year. That has been difficult because things have been on ships, and they've come-- we had expected demand and when demand's fallen off, that obviously gets to a higher inventory levels.

What we've focused on is a lot of our top A and B SKUs, and saying, hey, let's focus in on, really, the SKUs that have high velocity. And we also embarked on a huge SKU reduction in the last three years. When I joined the company, we had about 110,000 SKUs, which is astronomical. We've cut it down now to about 35,000 SKUs, so that's been tremendous. So that helps because of the velocity issues.

But there's no question, inventory, for us, with some seasonal jams, has been an issue. We're working very hard to try and deplete that as the year goes forward. It's a bigger issue on seasonal businesses, as you pointed out, Brad.

JULIE HYMAN: Well, Ravi, from that video, we could certainly see a lot of brands that touch many of us and many of our viewers in their daily lives. So thanks for being here today. Really interesting--

RAVI SALIGRAM: My pleasure and honor.

JULIE HYMAN: --to talk through these different brands.

RAVI SALIGRAM: So few-- I know you can't take it, but can you at least try it?

BRIAN SOZZI: I'll try it. I'll try it.

[INTERPOSING VOICES]

JULIE HYMAN: Ravi, thanks so much.

RAVI SALIGRAM: You can always give it away to someone--

JULIE HYMAN: I need some paper to write on. All right, Ravi Saligram, Newell Brands CEO.

RAVI SALIGRAM: Thank you very much.

JULIE HYMAN: We got to tee it up for Jay Powell in a few minutes. Thanks for being here, Ravi. Good to see you.

RAVI SALIGRAM: I appreciate it.