WD-40 (WDFC 103.99, -3.05) is lower by 2.9% after reporting disappointing second quarter results and lowering its revenue guidance for the fiscal year.
The manufacturer of lubricants and other industrial products reported below-consensus second quarter earnings of $0.87 per share on revenue of $96.50 million, which increased 2.0% year-over-year, but was shy of market expectations.
Gross margin improved to 56.4% from 55.4% one year ago.
The company's main unit was also its weakest performer in the second quarter as sales in the Americas declined 1.0% year-over-year to $45.08 million. Conversely, WD-40's smallest segment—Asia-Pacific—saw a 14.0% year-over-year spike in net sales to $15.24 million. Europe, Middle East, and Africa sales grew 2.0% to $36.21 million.
The decline in American sales was due to a 10.0% fall in homecare and cleaning product sales. This was partially offset by a slight increase in sales of maintenance products. Candian sales of maintenance products spiked 25.0% thanks to successful promotional programs and improving market and economic conditions. Western Canada was identified as a pocket of relative strength.
Asia-Pacific sales increased thanks to 21.0% growth in distributor markets and 17.0% sales growth in China. Timing of orders for WD-40 Multi-Use product fueled the increase while new distribution and increased promotional activities in China also contributed to growth.
Europe, Middle East, and Africa sales grew due to a 10.0% increase in sales to EMEA distributor markets. Sales in Russia increased thanks to improving market conditions.
Looking at the product group breakdown, sales of Maintenance Products increased 4.0% to $87.77 million while sales of Homecare and Cleaning Products declined 12.0% to $8.75 million.
For the fiscal year, the company expects to generate earnings between $3.64 and $3.71 per share, which encompasses current market expectations. However, the company lowered its revenue expectations, priming the market for top-line growth between 2.0% and 4.0%, which should translate to revenue between $390 million and $395 million. This is down from previous guidance for revenue between $395 million and $404 million, and short of current market expectations.