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WD-40 (WDFC -6%) slips today despite topping earnings and sales estimates in Q1 (Nov). Today's lackluster response stems primarily from the multi-use product maker, known most for its WD-40 brand, reiterating its FY25 (Aug) outlook even after delivering meaningful top and bottom-line upside in the quarter. It is important to note that last quarter WDFC issued downbeat FY25 guidance, projecting earnings markedly below consensus at $5.20-5.45 on pro forma revenue growth of +6-11%. By not hiking its previously lowered guidance, WDFC is signaling some headwinds ahead.

• WDFC's reiterated FY25 guidance incorporates the possibility that trends will begin to slow moving forward. For instance, in Q1, EPS expanded by around 9% to $1.39. To reach the midpoint of its FY25 outlook, WDFC must register average earnings of around $1.31 for the next three quarters. Likewise, WDFC's FY25 sales outlook includes the potential for growth to weaken following a 9.2% increase in Q1 to $153.3 mln.
• The Asia-Pacific region, including Australia, China, and others, is potentially weighing on future growth. During Q1, sales in this region contracted by 4% yr/yr to $26.6 mln, driven by lower sales of the company's core product in Asia distributor markets.
• On the bright side, prospects in WDFC's primary Americas region remain healthy. During Q1, sales edged 8% higher in the area to $69.4 mln, supported by the company's namesake WD-40 brand and higher sales volumes linked to promotional activities. Management added that nothing stood out surrounding large volume promotions that boosted sales. Rather, the home center channel in the U.S. stayed strong during the quarter, and retail sales have picked up as retail foot traffic and DIY activity appear to be improving.
• Meanwhile, in the EIMEA region, which includes India, sales surged by 18% yr/yr to $57.5 mln, bolstered by a 19% jump in maintenance products and a 21% increase in WDFC's core product. While the Asian Pacific sales were disappointing, WDFC's success in EIMEA underscores progress within the geographic expansion component of its "Must-Win Battles" framework.
  • Other pieces of WDFC's "Must-Win Battles" include driving higher sales of its premium formats of WD-40, which act as a major contributor to its top and bottom lines, and driving WD-40 Specialist growth, which expanded by 14% yr/yr in Q1.
• A final item to note is WDFC's homecare and cleaning product portfolio, which continues to experience declining sales growth. The company is looking to divest this business, targeting a Q2 (Feb) sale. As such, WDFC backed out this business in its FY25 revenue growth outlook.

WDFC delivered a decent performance in Q1. However, without it flowing into the company's FY25 guidance, investors are left wanting more. The unchanged guidance may also keep sellers in control over the near term until WDFC expresses more confidence in a brighter back half of the year.