Good morning, and welcome to Newell Brands' First Quarter 2022 Earnings Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Sofya Tsinis, Vice President of Investor Relations. Ms. Tsinis, please go ahead..

Thank you. Good morning, everyone. Welcome to Newell Brands' First Quarter Earnings call. On the call with me today are Ravi Saligram, our President and CEO; and Chris Peterson, our CFO and President, Business Operations.

Before we begin, I'd like to inform you that during the course of today's call, we will be making forward-looking statements, which involve risks and uncertainty. Actual results and outcomes may differ materially, and we undertake no obligation to update forward-looking statements.

I refer you to the cautionary language and risk factors available in our earnings release, our Form 10-K, Forms 10-Q and other SEC filings available on our Investor Relations website for a further discussion of the factors affecting forward-looking statements.

Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those we refer to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP.

Explanations of these non-GAAP measures and available reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables as well as in other materials on Newell's Investor Relations website. Thank you. And now I'll turn the call over to Ravi..

first, improving gross margins as we continue to double down on our efforts to offset the significant inflationary pressures and supply chain challenges while improving customer service levels.

The strength of our brands has allowed us to take the appropriate pricing actions on all of our businesses while ensuring they remain a good value for consumers. In addition, we'll continue to optimize commercial spend, price innovation to be gross margin accretive, direct A&P spend towards higher gross margin categories and drive productivity.

Second, continue to drive core sales growth and innovations focus on mastering the 360-degree consumer and shopper journey and delight consumers and customers at each touch point and shoppers at each touch point with compelling storytelling focused on consumer value and brand uniqueness.

We will capture consumer demand by directing A&P to the brands with the highest margins and growth potential and target appropriate consumer segments to maximize conversion. Third, are turbocharge international to accelerate growth in profits. Fourth, continue investing in transforming our supply chain through Project Albian automation.

And last but not least, continue to strengthen the One Newell culture and build on our employee engagement momentum. We remain committed to driving sustainable and profitable growth and building operational excellence throughout the organization while being a force booked good.

We recently announced a carbon neutrality goal by 2040, for all Scope 1 and Scope 2 emissions. We'll also continue to address existing macro headwinds and forge ahead with our strategic initiatives, such as Project Albin, Automation and realizing the potential of International.

Strong results in Q1 are building on our track record of following through with our commitments, and we are confident in our outlook for 2022. I am thankful to our employees for always rising to the occasion and helping us to successfully navigating through the ever-changing operating environment.

I continue to believe that Newell's best days are ahead of us, and we have a significant opportunity to drive shareholder value, onwards and upwards. And now I'll turn it over to Chris..

driving productivity on self-manufactured operations, taking the necessary pricing actions across each business unit, reducing overhead costs, optimizing the effectiveness of promotional spend, and executing on the previously communicated product line exits from low-margin categories, primarily in home appliances and Outdoor & Recreation businesses.

We realize that the consumer is seeing higher prices across every facet of their lives, and we will remain disciplined with our pricing actions while continuing to carefully monitor elasticities. The contribution from pricing has continued to build sequentially with additional actions expected to be implemented in Q2.

For the full year, we still expect pricing and productivity to more than offset the impact of inflation.

The external supply chain dynamics have remained challenging as the industry continues to grapple with longer lead times for sourced products due to ongoing shipping delays, port congestion, limited container availability and constraints on components, labor and trucking capacity.

China's Zero COVID policy also resulted in temporary lockdowns in Shenzhen and Shanghai regions, which further exacerbated these issues. These challenges are not new nor are they unique to Newell Brands and our teams have continued to do an incredible job navigating through this operating backdrop.

To deal with this, we made a series of decisions that have significantly strengthened our supply chain performance. For example, we made a proactive decision to build inventory on top-selling and high priority SKUs. We strengthened our labor force through enhanced compensation, benefits, training opportunities and working conditions.

We accelerated automation efforts across our facilities. And with Avid, we are creating a scaled distribution and transportation platform to further drive operational excellence.

While we do not expect the external supply chain pressures to ease during the balance of the year, our fill rates are improving, and we believe that we are well positioned to meet consumer demand in the majority of our businesses. Now let's turn to first quarter performance.

Note these results include contribution from the Connected Home & Security business, which was divested on March 31. The only metric that excludes CH&S is core sales growth.

Net sales increased 4.4% to $2.4 billion as core sales growth and higher net sales in the CH&S business were partially offset by unfavorable foreign exchange as well as category and retail store exits. Core sales growth grew 6.9% on top of a challenging 20.9% comparison from last year.

Core sales increased in 5 of 7 business units as we lacked difficult comps. On both a 2- and 3-year stack basis, core sales increased in every business unit. Pricing was the primary driver of core sales growth as unit volume was relatively flat to year ago.

Core sales growth was ahead of our expectations due to timing of customer seasonal orders and improved supply chain performance.

Normalized gross margin contracted 100 basis points versus last year to 31.2%, reflecting over 700 basis points of pressure from inflation and the unfavorable impact from foreign exchange, which offset the benefits from pricing and fuel productivity savings.

The gross margin performance improved sequentially from Q4, largely due to a higher contribution from pricing. Normalized operating margin expanded 50 basis points year-over-year to 10.6% as SG&A cost leverage, particularly in overheads more than offset the impact of gross margin contraction.

Net interest expense declined by $8 million year-over-year to $59 million as we reduced the company's gross debt by $609 million since March of 2021. The normalized tax rate was 18.4% below last year's tax rate of 22.4%, largely due to a higher contribution from discrete tax benefits.

We reported normalized diluted earnings per share of $0.36, a 20% increase from $0.30 a year ago. Upside relative to the outlook we provided was driven by higher sales growth, better cost control and a slightly lower-than-expected tax rate. Turning to segment results.

Core sales for the Commercial Solutions segment grew 7.4% on top of a double-digit comparison from a year ago. Core sales for home appliances declined 1.9% as the business lapped 38.9% growth in the year ago quarter, its toughest comparison of the year.

Core sales for the Home Solutions segment grew 1.4% on top of a 33.8% last year as growth in the Food business unit more than offset a decline in Home Fragrance due to a difficult comparison. Store sales for the Learning & Development segment increased 7.4% on top of 17.3% last year, driven by growth in both the Writing and Baby businesses.

Core sales for the Outdoor & Recreation segment grew 22.9% on top of 7% last year as retailers ordered inventory earlier this year to prepare for the spring/summer season. Moving on to cash flow and balance sheet.

In Q1, operating cash flow was a use of $272 million as compared to a use of $25 million last year, driven by increased working capital to support sales growth. We continue to strategically build inventories on top-selling SKUs to mitigate the impact of supply chain obstacles and accommodate the shift in timing of customer orders.

Cash conversion cycle moved up slightly, mostly due to higher inventory. At the end of the quarter, we completed the divestiture of the CH&S business to Resideo Technologies for a purchase price of $593 million subject to customary working capital and transaction adjustments.

We also used $275 million of the company's $375 million share repurchase authorization to buy back shares from Carl Icahn and certain of his affiliates. We ended Q1 with a leverage ratio of 3.1x, slightly below 3.3x in the year-ago period, reflecting both debt paydown and normalized EBITDA growth.

Before going through the outlook for Q2 and the full year 2022, let me provide some context for the forecast. 2022 is off to a strong start with the implementation of the pricing actions that we've announced driving both top line growth and better margin performance.

Thus far, volume elasticities have been below historical levels for most of the categories we compete in. This is something we will continue to monitor and evaluate by category. Within the company's outlook, we continue to assume a moderate level of volume elasticity from price increases.

While consumption patterns vary by business and moderation continues in some categories, overall, they remain above pre-pandemic levels. Q1 results as well as the outlook for the balance of the year do reflect a shift in customer order patterns as a result of the ongoing supply chain constraints.

This is benefiting the first half of the year at the expense of the back half. Given the recent move in inputs, our inflation assumption for the year has gotten slightly worse as we now expect it to account for about 9% of cost of goods sold in 2022.

Going forward, we will continue to act with speed to address both inflationary and supply-related dynamics. We will maintain disciplined cost and cash management and continue to build operational excellence as we accelerate automation and move into the implementation stage of Avid.

Strong Q1 results give us confidence to reaffirm the full year 2022 outlook despite macro uncertainties and external headwinds.

For the full year 2022, we continue to expect net sales of $9.93 billion to $10.13 billion, reflecting flat to 2% growth in core sales and an over 6% headwind from the divestiture of the CH&S business, category exits, closure of some Yankee Candle retail stores as well as unfavorable foreign exchange.

This guidance contemplates normalized operating margin improvement of about 50 to 80 basis points versus last year to 11.5% to 11.8%. Pricing, productivity and mix optimization actions are expected to more than offset a nearly 600 basis point unfavorable impact from inflation as well as higher investment in advertising and promotion.

Normalized earnings per share outlook remains unchanged at $1.85 to $1.93 versus $1.82 in 2021 and currently reflects a mid-teens normalized effective tax rate and a 2% decline in diluted shares outstanding.

There's also no change in the operating cash flow forecast of $800 million to $850 million, which includes the year-over-year headwind from the loss of profits on CH&S starting in Q2 and onetime cash tax payment on this deal.

Although we have made strategic investments in inventory, our forecast does assume that the cash conversion cycle improves year-over-year. We still anticipate about $350 million in capital expenditures for the year, with the increase versus 2021 reflecting onetime capital costs supporting infrastructure build for Project Ovid.

For Q2, we are forecasting net sales of $2.52 billion to $2.57 billion, with low single-digit core sales growth being offset by a greater than 8% headwind from the sale of the CH&S business, foreign exchange, category exits as well as closure of some Yankee Candle retail stores.

Similar to Q1, we are assuming some acceleration of customer orders from Q3 to Q2 as retailers look to secure inventory earlier in the season, and we have an Ovid implementation wave planned for early July.

We expect normalized operating margin to contract 50 to 90 basis points year-over-year to 11.7% to 12.1% reflecting a meaningful step-up in advertising and promotion spending during the quarter and incremental inflation.

We are forecasting a normalized effective tax rate in the low 20% range and approximately 2% reduction in diluted shares outstanding with normalized earnings per share in the $0.45 to $0.48 range.

Newell Brands is a stronger and more agile company today due to the decisive actions we have taken to drive the turnaround and position the company for sustainable and profitable growth. We will maintain strong financial and operational discipline as we navigate through this environment. We continue to see a long runway ahead for value creation.

Operator, let's now move to Q&A..

[Operator Instructions]. And our first question will come from Bill Chappell with Truist Securities..

First question, I guess, just kind of talk about elasticity that you're seeing or if it's maybe too early kind of across the business units and kind of expectations for -- that's built in for recession or no recession as we move to the back half?.

Bill, I'll have Chris comment on elasticity and then I'll talk about your second part of the question..

Yes. So, so far, what we're seeing on pricing elasticity is that it is better than what our historical models would suggest. In other words, we're not seeing the typical volume impact from the pricing we've taken. And I think that's really a function of the fact that the inflationary cost pressure is affecting all manufacturers.

And so as we move prices higher in most of our categories, competition has also moved prices higher. And so in many cases, there's not a price gap that's been created that's leading to elasticity. We continue -- it's still early days on this. We continue to monitor the situation.

As we mentioned in the first quarter, pricing was the primary contributor to the company's core sales growth of 6.9%, with volumes relatively flat. For the balance of the year, what's embedded in our outlook is that there will be some price elasticity.

We continue to expect for the outlook for the year, pricing to be a high single-digit contributor to core sales growth and volume to be down mid-single digits. So we have not changed that view in the outlook for the full year. That's consistent with what we said when we started the year..

Bill, so the second part of your question, and maybe I'll expand it, which you may not have intended. But I presume you're really -- the question is about recessionary conditions, the health of the consumer and the impact.

Did I get that right?.

Yes, absolutely..

Okay. So here is, I think we -- while consumption in the first quarter was down versus last year, we have to recognize first quarter was a very peculiar quarter in the sense of you had that -- in 2021, you had the big stimulus in January, the big stimulus in March.

And some of the consumption growth when we look back and say was just gigantic and take out illustrate with, say, Home Solutions. And I think on core sales, Home Solutions grew about 34% if my memory tells me correctly last year. And Home Fragrance, which is part of that really was the biggest contributor. It was far bigger than the 34%.

So -- and consumption. So if you think about that, consumption was even higher. And so to lap something like that, it's very extraordinary. So it is very tough right now to parse out what is price elasticity, what is stimulus. So we think that stimulus has been the big, big aspect.

So going forward, there's no question that we'll have to be quite sensitive on some of the lower-income consumers and the channels they shop and which is very well positioned, though, because we have for most of our brands, we are very big on good, better, best.

And in the last 3 years, we've sharpened that very much to make sure that there's really good differentiation between good, better, best. And so I think that allows us to cater to the different types of consumers.

So I think that's the second part is a lot of our messaging in advertising, social media were very much now on a value-based messaging and making sure even though we've taken price increases with the strength of our brands, trying to show that we are a great value. And the other aspect is, I think the fact that we've launched a lot of innovations.

Those innovations are providing the uniqueness that show, hey, even though we've taken our price. I think consumers are looking for value rather than the absolute price point, and we think where we remain a good value.

So I -- and look, there are many categories where -- now we're actually seeing consumption increases riding in different parts of the world. We are seeing consumption increase. And now -- and as the office channel opens up, we think that will continue to accelerate, and we are gaining share.

So just think about it, right, with our Sharpies, Paper Mate, we have fantastic gross margins. We are growing and growing share. So I think we are fairly buoyant on that. Commercial, which last year was very tough for the Commercial business because of inflation and with office is pretty much closed.

Now it's coming back and boy, that business this first quarter, up 7%. It's growing back. I'm very positive about end users, even though we've taken a lot of price increases, they are because the Rubbermaid Commercial brand is so strong, and we have put so many innovations like Rubbermaid Bret with wheels, material handling, with new technologies.

So I think the power of innovation is helping that. The last comment I've made is we have been striving for distribution improvements and new channels. And I think that is helping us getting incremental distribution. So going after new consumers.

And then the last comment would be, as we have -- we're really mastering the -- what I call the 360-degree consumer journey and shopper journey.

As the world is becoming more omnichannel, how do you target them? How do you reach them in the moment of where they start thinking about the category to the moment of decision-making? And I think all of this will help us in our journey. So on the whole, yes, there is some concerns about consumer demand out there, but I remain buoyant.

And if anything, I just think on the top line, look, one other quarter where we've beaten our own expectations, and I think The Street, so I feel pretty good about it..

And our next question will come from Wendy Nicholson with Citi..

I wanted to ask about Project Ovid because it's clearly yielding benefits, and it's an important part of your sort of next step towards higher margins.

So Chris, are you seeing any challenges in terms of implementing Ovid? Or any of the things that you're trying to do? I'm just wondering if the supply chain is getting in the way or if there's any impact in terms of the timing of the savings you're going to generate from that program?.

Yes. Thanks, Wendy. And it's very topical and top of mind, not just for me but for many of our employees around -- across the company. We are very much in implementation phase. We remain largely on track with the original timeline that we've set. Recall that Ovid is a phased implementation.

And just to give you a sense of where we are in the program, last year, we did the detailed design work. We've now completed the systems testing work, and that has gone well. We have already executed the centralization of customer service. We've already executed the centralization of our distribution and transportation internal organization.

We've now largely completed the implementation of a transportation outsourced provider, which is a key enabler. Those transitions have happened. We're currently executing where we're headed to, which I alluded to in the prepared remarks, is in early July, we will turn on the first wave of the Newell distribution company.

And that will affect the Food, the Home Appliance and the Baby businesses, which will move into the new Newell distribution company. And so that is a big milestone for us. We have made a tremendous progress with most of our retail partners. Recall that we had different sets of payment terms by business unit.

We've now negotiated with the majority of our retail partners to basically harmonize those and go to a single set of payment terms for Newell, which we'll be implementing as we move into July. We've got the two new distribution centers, the new build distribution center in Pennsylvania is now open and fully operational, which we are excited about.

And the Gastonia, South Carolina will be opening this fall. So we are very much in the implementation phase. I think I said previously that this year will remain an investment year for the company as we're largely doing the implementation work this year.

When we get to next year in 2023 is when we expect the Ovid program to turn into a cost savings benefit for the company..

Wendy, I would like to add 1 thing. If we had done Ovid, tried to do Ovid 5 years ago, I think it could have been a disaster. Even 3 years ago, it would have been difficult. Just imagine with our company where we've had 33 separate supply chains, unifying them into one. What we've created is a culture of One Newell.

And that is so important to the execution of this. We'll have more than 500 people involved in this project. Chris has done a terrific job leading this initiative. But we've galvanized all the people because they believe in One Newell.

We've been able to overcome the silos and to -- and the business units have given up control on the stuff to say, "Hey, we think it's right for the company to have one distribution company.

This whole concept of one order, one invoice, one truck is very powerful." So I think looking 10 years from now, people will look back and say, this was one of the most extraordinary decisions you have made..

And our next question will come from Andrea Teixeira with JPMorgan..

I was just hoping you can update a little bit more on the Writing segment and the puts and takes we should be seeing ahead of your peak season. And from that, any -- we've heard a lot of supply chain issues in many parts of the world, in particular, obviously, as you know, in China.

So I know you source some of the things from there, but you also source from Mexico. So if you can give us like a little bit of an update there.

And so that we understand embedded in your second quarter guide, you have increased market investments that I understand you were just on that end, not flowing through all the upside we saw in EPS for the first quarter into the full year. So I was just trying to bridge the EPS guidance with what you've done so far..

So I'll tackle the first one and then have Chris tackle the second, Andrea. So the Writing business look had a banner year last year 23% growth. Last year is just great. So -- but we've got -- we're off to a great start in first quarter. And the brands remain very strong, whether it's Sharpie, whether it's Paper Mate. There's a good set of innovations.

We've also got innovations that are coming in later part of the year. So -- and it's not just a U.S. thing. We're doing well in Europe. We're doing well in Australia. We just saw share increases in different parts of the world. So I would just say that -- and even the activity side is beginning to have a little bounce.

So I would say the Writing business is very strong. And now with the Office segment opening up. And I think that will be -- that will add because that was a decent size of our overall business. And so I think that will help as well, and we're winning already better than others. And this is thing about having powerful brands.

So overall -- and I think retailers deliberately because they want to make sure that they were ready for the season did that, I think, so far, we don't see any red flags on the season. If anything, we see positive views. And the only part of the business that we have some issues, which is purely supply chain related is the Dymo brand because of chips.

And if we have the chips, we would just do even better. Though even there, we've been launching innovations. We've got a new innovation with a new type of chip that we've been able to source. So -- but that is the one that is holding us back a little bit, especially in Europe. But that's -- otherwise, it's in fine shape.

So I'd say overall, very positive about the business as we look forward to the year..

Yes. On the supply chain question, what I would say is our supply chain remains -- the external environment remains challenging. And you mentioned a couple of the challenges with China and their Zero COVID policies. That has affected us with regard to lockdowns that they've implemented in Shenzhen and Shanghai.

We do source some products from those regions. But that being said, as I mentioned in the prepared remarks, I think the decisions that we've made to build inventory on top-selling SKUs, to solidify our labor force, to accelerate automation and actually, we're now in the implementation phase of Ovid.

And so the ocean freight -- we now are moving more ocean freight than ever to the East Coast as opposed to the West Coast, which has diversified our ocean freight shipping lanes. All of those things have us in a position where our supply chain is in better shape today than at any point since the pandemic started.

Our in-stock rates of retailers have improved significantly. Our fill rates are improving. We still have issues, as Ravi mentioned, on things like Dymo where there's chip shortage. So we're not out of the woods everywhere. But we are in a much better position today on the supply chain than we have been since the pandemic started..

Sorry, quick one, quick thing. I forgot to mention, Andrea. On the actual Writing business itself, we self-manufacture in the states in Tennessee. And while yes, there are always some components that come from different parts of the world, that has been actually a good competitive advantage for us and it remains so. So that's encouraging us all.

Sorry, Chris..

On the question on the guidance, what I would say is that certainly, we're excited about the Q1 results coming in better than we expected. There was a portion of that, that is related to customer order timing being earlier in the season that we think is not necessarily incremental for the year.

There is a portion of the Q1 results that was ahead of our expectation, and that would be incremental for the year. On the other hand, we've had incremental inflation that we've built into the outlook for the year of $80 million, as we mentioned. And so there's a number of moving parts.

We think that the Q1 results give us confidence to maintain the outlook for the year despite the incremental inflation that we're going to incur, which largely is coming in Q2, 3 and 4. So we feel good about the outlook, and that's how I would describe sort of where we are from a guidance perspective.

The other point I would note is Q1 is our seasonally smallest quarter. And so, although we started off better than we expected, we're just heading into the big seasonal periods here over the next 3 to 6 months..

And our next question comes from Peter Grom with UBS..

Congrats on the strong results. So I just wanted to ask about the core sales outlook. Maybe first, can you just help us understand what you're seeing from a category perspective in terms of POS. There's just a lot of uncertainty around the health of the consumer and what that means for durables demand.

And I know ScanData hasn't been a great indicator of your performance over time, but it has slowed here in the U.S. So just -- any thoughts around what you're seeing across your core categories would be helpful. And then just maybe following up on that and kind of following up on Andrea's question, but maybe focusing more on the core sales outlook.

And is there something you're seeing around demand that caused you to reiterate your core sales outlook? I know you mentioned the shift in customer ordering patterns. But you delivered 6% in the first quarter, you expect low single-digit growth in Q2.

So that would just imply a pretty meaningful slowdown in the back half despite much easier comparisons to kind of get to the flat to plus 2% range for the year. So just any thoughts there or maybe how we should think about the magnitude of those shifts in ordering patterns..

one, will there really be a recession? Who knows? 30% of the people seem to think so. So if that happens, what's the impact. The second thing is we now have all the right supplies. We're beginning to get our in stocks up. People have now built up their inventories. If the pull-through is not there, then how will replenishment goes. That's a question mark.

So we don't know. And we think the strength of our brands will all pull through, and we're optimistic. But we think where this guidance we're giving is prudent especially because of not just the first quarter but also second quarter, remember, because of COVID, we said there will be a little bit more and also just the seasonal side.

So I think that really is how we're thinking about sort of first half, second half. The second question on consumer demand. It really varies. So -- and the number 1 thing I'd say is the biggest piece of encouragement is against pre-pandemic. That is 2019. We are double digits well about in our -- all our businesses.

I think that is a very good place to be. And that says, hey, this is not just a pandemic effect. And that Newell's brands are really stronger. And so I think that has caused for some optimism. Second, there are certainly some businesses, home appliances.

After so many years of decline, we had remarkable growth in the second half of '20, in '21 was double digits. So you've got to say, hey, will there probably on some categories, whether it's toasters or coffeemakers because there's some consumer acceleration? Potentially because people can only buy so many coasters and coffee makers.

So -- but we're innovating to do new things like iced coffee, but we didn't stop at that. We've got frap. We've got espresso, et cetera, to continue that cycle. Home Fragrance, as I mentioned earlier, when you have gigantic consumption from last year that you've got a comp, that's sort of tough. But we still think the brand is very strong.

And look, it's not just about while there's more mobility, mental health is a big issue in this country. And people want to burn candles, and we're now into the diffuser category, and we've got a lot of innovations that our Yankee Candle, the whole Radiant line on diffusers for well-being. So we've got a whole well-being collection.

So we think innovation is the key to all of this. And then the way we market very smart marketing and social media is hopefully going to get us to the right type of consumer, which will lead to better conversion. So I think consumer demand right now is a bit of a question mark, but for many of our categories, look, food -- no question.

If there is going to be a recession, we'll actually continue to benefit because as it is with hybrid, there's more meal occasions at home than they were pre-pandemic. Second, if there is recessions, people are going to go to restaurants less, that means more occasions at home. What does that mean? People want to raise net.

They are for food saver, for all for Rubbermaid, they're all going to do well and they did well in the first quarter. So that's another category where the consumer is going to be buoyant. Commercial, I already said the end user is very strong. So all in all, I don't know that I would -- I feel pretty good.

I think the guidance for this time for what we have, I think, is prudent. So I'll leave it at that..

And our next question will come from Kevin Grundy with Jefferies..

Great. Congrats on the strong results and the tremendous progress that you guys have made with the organization, it's been remarkable. So congrats on that. A couple of questions for me. Chris, just on the guidance, which I think collectively people kind of view as conservative, which is understandable given the environment.

But you did say commodities move higher, so that's probably about $0.15. What implicitly, I guess, is better because you guys are kind of seemingly sitting tight with everything else? So maybe just comment on that. And then, Chris, just with respect to buyback sort of setting aside the unique buyback with your largest shareholder around the proceeds.

Maybe just outline again a little bit on timing. It just seems like there's a strong argument to be made that you guys could be moving sooner than later, very positive on the business. The results are good. The balance sheet and free cash flow are much, much better.

The margin opportunity is enormous, particularly in a more stable sort of cost environment. That you kind of pull that together for stock trading at 10x EBITDA, like why the decision not to lean in now when the stock could be materially higher if you deliver on what you think you can do? So your comments there would be helpful..

Very good. So let me start with inflation. So you're right, the incremental $80 million of inflation that we've now baked into the outlook. Basically, we've been offsetting that through 3 things or plan to offset that through 3 things. There's some selective incremental pricing that we plan to put in the market this year that will cover a portion of it.

We also think that we have an opportunity to optimize particularly promotional spend, which is another big lever that we're seeing an opportunity to partially offset. And then the third piece is we are doubling down on opportunity to drive more overhead cost savings.

And so those 3 elements we see upside in that basically we're using to offset the incremental inflation, which is allowing us to sort of hold the outlook for the year. And that's what's baked into the plan. On the buyback question, we authorized, as part of the CH&S divestiture, $375 million. We -- as I mentioned, we bought back $275 million in Q1.

We did execute a 10b-5 program that executed in the month of April, and we bought back $50 million additional in the month of April. And so we've got $50 million remaining that we will look to do prior to the end of the year. As you know, our cash flow is stronger towards the end of the calendar year based on the seasonality of our business.

So we do expect to generate good cash flow. We do expect to complete the incremental share repurchase program this year. And then we'll look to incremental opportunities as we get closer to the end of the year..

Thank you. A replay of today's call will be available later today on our website, ir.newellbrands.com. This concludes our conference. Thank you for your participation. You may now disconnect..