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WD-40's (WDFC +13%) top and bottom-line beats in Q1 (Nov), accompanied by reiterated FY24 guidance, are stirring up considerable enthusiasm today, pushing its shares to levels not seen since April 2021. Carrying the household and multi-use product maker, most known for its WD-40 brand, to such solid quarterly results was sustained improvements in trends seen last quarter.

• Volume-related sales growth occurred across each of WDFC's geographies. The company estimates that approximately 65% of its constant currency revenue increase stemmed from volume gains, underpinning healthy demand and not just inflation-driven growth.
• In total, revenue climbed by 12.4% yr/yr to $140.4 mln, led by WDFC's EIMEA segment (Europe, India, Middle East, Africa), which headed 20% higher. Meanwhile, the Americas (United States, Latin America, and Canada) and Asia-Pacific (including Australia and China) recorded sales growth of +10% and +6%, respectively.
  • Within WDFC's markets, there were a few items worth mentioning. WDFC's core maintenance products sustained robust demand from the last quarter across the Americas. In Europe, volumes did slip as customers continued adjusting to price hikes. Meanwhile, in Australia, sales turned positive after a double-digit decline in Q4 (Aug), while demand in China remained buoyant.
• WDFC's top-line gains are flowing to its bottom line, which, combined with a 240 bp improvement in gross margins yr/yr, led to a 25.4% expansion in the company's EPS to $1.28.
• Management briefly updated its homecare and cleaning business, which comprised just 6% of total sales in Q1. WDFC is undergoing a strategic review regarding the future of this business. Given how its maintenance products represent much more favorable margins, it would not be shocking to see WDFC offload this division in the near term.
• Looking ahead, WDFC reiterated its FY24 (Aug) outlook, continuing to project EPS of $4.78-5.15 and +6-12% net sales growth yr/yr. Management again discussed its strategic longer-term framework this quarter, reiterating its commitment to building brand awareness, penetrating additional markets, and accelerating premiumization. WDFC has made excellent progress on these fronts, boasting strong growth of 49% in the DACH region (Germany, Austria, and Switzerland), 23% in Mexico, 42% in France, and 59% across Spain and Portugal. Meanwhile, WDFC's decent margin expansion in Q1 showcases its premiumization focus.

WDFC faced several setbacks over the past two years, exacerbated by relentless supply chain hiccups and uneven post-pandemic recoveries across its global markets. However, underneath the problems was sound end-market demand. With many headwinds that plagued WDFC since late 2021 now beginning to ease, a new wind is propelling the company forward, built on top of resilient demand dynamics, boding well for WDFC to make further in-roads on its strategic pillars in 2024.