Newell Plans Europe Revamp - Analyst Blog

Newell Rubbermaid Inc. (NWL), a specialty retailer of women's apparel in the United States, announced a European Transformation Plan that will focus on improving the profitability of the European business and simplifying its operations. Newell intends to alter and restructure its business, improve performance, cut costs and trigger profits.

 

The plan, which is expected to complete by mid-year 2012, includes a centralized decision making for the company's business functions in Switzerland. Newell also plans to implement SAP in the region.

 

The company foresees refurbishing costs to range between $90 million and $100 million comprising $40 million – $45 million of employee-related cash costs, including severance, retirement, and other termination benefits and relocation costs and $50 million – $55 million of selling, general and administrative expenses. The company expects to incur this cost mostly by the end of 2011. Newell expects annual savings of $50 million – $60 million by 2012.

 

Europe represents the second largest revenue generator for Newell after North America. The company markets Dymo, Graco, Parker, Paper Mate, Paper Mate by Reynolds, Irwin, Rubbermaid, Lenox, Waterman, Technical Concepts, Teutonia, Sharpie and Goody brands in the continent.

 

 

The company still expects to report earnings per share of $1.38–$1.48 for fiscal 2010. The top line is expected to increase in the low-to-mid single digits. In comparison, one of Newell’s peers, Avery Dennison Corporation (AVY), foresees earnings per share of $2.50–$2.80 for fiscal 2010.

 

The Zacks Consensus Estimate on Newell earnings for the fiscal year ending December 2010 is currently pegged at $1.47 per share, which is 1 cent lower than the high end of the guidance. For the current year, the Zacks Consensus Estimate has moved down by 1 cent over the past month as 5 of the 15 covering analysts decreased their projections, while none of the analysts moved in the opposite direction.