For Immediate Release
- 1Q23 Reported EPS of $1.49
- Adjusted EPS (non-GAAP) of $1.70, down 29%
- 1Q23 Net sales declined 12% to $2.1 billion
- Sales change ex. currency (non-GAAP) of (9%)
- Organic sales change (non-GAAP) of (9%)
- Revised FY 2023 EPS guidance
- Reported EPS of $8.35 to $8.70 (previously $8.85 to $9.25)
- Adjusted EPS of $8.85 to $9.20 (previously $9.15 to $9.55)
MENTOR, Ohio, April 26, 2023 – Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its first quarter ended April 1, 2023. Non-GAAP financial measures referenced in this release are reconciled from GAAP in the attached financial schedules. Unless otherwise indicated, comparisons are to the same period in the prior year.
“Earnings per share were in line with our expectations for the first quarter, despite lower revenue due to higher-than-anticipated inventory destocking,” said Mitch Butier, Chairman and CEO. “We continue to expect a strong second half as the pace of destocking moderates and intelligent label programs accelerate. We have revised our guidance range for 2023 earnings per share to reflect a softer outlook for the second quarter.
“We remain confident that the consistent execution of our strategies will enable us to meet our long-term goals for superior value creation through a balance of profitable growth and capital discipline,” added Butier.
“Once again, I want to thank our entire team for continuing to raise their game to address the unique challenges at hand.”
First Quarter 2023 Results by Segment
- Reported sales decreased 13% to $1.5 billion. Sales were down 9% ex. currency and on an organic basis.
- Label materials sales were down by low-double digits on an organic basis.
- Lower volume, driven by inventory destocking, was partially offset by pricing actions.
- On an organic basis, sales were down low-double digits in North America, high-single digits in Western Europe, and mid-to-high single digits in emerging markets.
- Sales increased by low-single digits organically in the Graphics and Reflective Solutions businesses.
- Sales increased by mid-single digits organically in the combined Performance Tapes and Medical businesses.
- Reported operating margin decreased 230 basis points to 11.0%. Adjusted EBITDA margin (non-GAAP) decreased 100 basis points to 14.2% driven by lower volume/mix, partially offset by benefits from the net impact of pricing and raw material input costs, and productivity. Adjusted EBITDA margin increased 140 basis points sequentially.
- The company anticipates label destocking to be largely complete by mid-year, and Materials Group adjusted EBITDA margin improving sequentially throughout 2023.
- Reported sales decreased 11% to $605 million. Sales were down 8% ex. currency and 9% on an organic basis.
- Sales in high-value categories were up low-single digits on an organic basis.
- Sales decreased by roughly 20% organically in base solutions as customers adjusted inventory levels.
- Enterprise-wide Intelligent Labels sales were up low-single digits on an organic basis.
- Reported operating margin decreased 480 basis points to 8.5%. Adjusted EBITDA margin decreased 340 basis points to 15.7% driven by lower volume.
- The company anticipates apparel volume to rebound in the second half of 2023; throughout the year, Intelligent Labels programs are expected to accelerate and Solutions Group adjusted EBITDA margin to sequentially improve.
- The company announced an agreement to acquire Lion Brothers, a leading designer and manufacturer of apparel brand embellishments with sales of approximately $65 million in 2022.
Balance Sheet and Capital Deployment
In March, the company issued $400 million of 5.75% Senior Notes due 2033. The company used the net proceeds from the offering to repay existing indebtedness under the company’s commercial paper programs and to repay the $250 million aggregate principal amount of 3.35% Senior Notes that was due April 15, 2023.
During the first quarter, the company deployed $44 million for acquisitions and returned $112 million in cash to shareholders through a combination of dividends and share repurchases. The company repurchased 0.3 million shares at an aggregate cost of $51 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down 1.3 million compared to the same time last year.
The company’s balance sheet remains strong, with ample capacity to continue executing its long-term capital allocation strategy. Net debt to adjusted EBITDA (non-GAAP) was 2.5 at the end of the first quarter.
The company’s reported first-quarter effective tax rate was 28.0%. The adjusted tax rate (non-GAAP) for the quarter was 25.5%.
The company’s 2023 adjusted tax rate is expected to be in the mid-twenty percent range based on current tax regulations.
Cost Reduction Actions
During the first quarter, the company realized approximately $9 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $18 million.
In its supplemental presentation materials, “Financial Review and Analysis First Quarter 2023,” the company provides a list of factors that it believes will contribute to its 2023 financial results. Based on the factors listed and other assumptions, the company has revised its guidance range for 2023 reported earnings per share from $8.85 to $9.25 to $8.35 to $8.70.
Excluding an estimated $0.50 per share related to restructuring charges and other items, the company revised its guidance range for adjusted earnings per share from $9.15 to $9.55 to $8.85 to $9.20.
For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “Financial Review and Analysis First Quarter 2023,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.
Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.