Newell Brands: Portfolio Clean-up Candidate

Disclaimer: This is not investment advice. I am a (NASDAQ: NWL) shareholder.

At roughly $3-4 per share, Newell Brands is not necessarily priced as a turnaround winner - and that’s appropriate. Revenue is still declining, growth remains elusive, and leverage continues to dominate the equity story. But, the market’s current framing appears to miss a more nuanced reality: Newell is no longer broken. It is stabilized. And in that stability sits a form of optionality the market is only partially rewarding. This is not a growth story. This is a balance sheet and portfolio optimization story.

A business that has moved from repair to equilibrium

Over the past year, Newell has done the hardest consumer turnaround work (well, other than reigniting sales): resetting the cost base and restoring margin discipline. Gross margins have improved materially from trough levels, operating costs have been rationalized, and working capital behavior has normalized. None of this has produced top-line acceleration, but has almost certainly reduced ‘existential risk'.

Today, Newell looks like a business that can generate $750-$800 million of normalized EBITDA in a pretty difficult, competitive consumer environment. The problem is not necessarily profitability - it’s leverage. But, I don’t need to tell you that. Enterprise value sits at roughly $6.6 billion with gross debt sitting at around $5.3 billion. Equity remains structurally constrained. Even at reasonable EBITDA multiples, debt absorbs most of the value.

Absent a change in the capital structure or portfolio composition, the most likely outcome is continued status quo: stable margins, modest cash flow, and an equity story that trades sideways. Which, I can’t see CEO Chris Peterson accepting.

Where the optionality lives

The most realistic way for Newell to change its equity story does not only involve revenue growth (although a big piece). It involves simplification. In my view: Yankee Candle.

Although Newell doesn’t specifically break out Yankee Candle segment revenue, we can estimate from filings and commentary the business sits at around $700 million annually. Recent announcements around closing 20 stores (representing just over 1% of brand sales) confirm that physical retail just ain’t it for Yankee Candle. At first glance, an announcement like that was a positive indicator of cutting costs, but then I thought to myself it was more. To me it was an indicator this business might be put up for sale soon. Less stores, less leases, less costs, less complexities. This makes the Yankee Candle asset easier to separate, easier to underwrite, and easier to sell. Call me crazy. I’ve been called way worse.

At normalized margins, a $700 million revenue legacy branded consumer business would reasonable support $100-150 million of EBITDA, depending on promotional intensity and channel mix. In the current private-market, similar branded, slower-growth consumer assets have cleared at 6.5-8.0x EBITDA, depending on quality and stability. Using the midpoint of that range, Yankee Candle could plausibly generate $700 million of gross proceeds in a divesture. Not a heroic assumption, but a conservative one.

Why a $700 million sale matters (even if it’s not transformative)

A $700 million asset sale would not remake Newell overnight. But, it would meaningfully reduce leverage. Applied direct to debt, proceeds of that size would lower net debt by more than 10%, improving credit optics and reducing interest burden. More importantly, it would change how the equity is perceived. Lower leverage does not automatically raise valuation multiples, but it does reduce downside and increase flexibility.

Post-sale, Newell would be a simpler story with fewer volatile categories, less retail exposure, and a clearer focus on its highest-return brands. That kind of portfolio often earns a modest re-rating over time, even without substantial top-line growth. This is why the asset sale is best though of as optionality, not a base-case forecast.

A probability-weighted way to think about the stock

This ain’t the most scientific read, but I think the set up looks something like what I’ll walk through below. With these small consumer turnarounds, valuation exercises have to be taken with a grain of salt.

There is a high likelihood (maybe 40%) that the business remains largely unchanged over the next six months. Int hat scenario, margins hold, leverage slowly grinds down, and the stock remains rangebound in the $3-4 range.

There is another 40% probability that incremental actions (including partial delivering or portfolio cleanup) modestly improve the equity profile without fundamentally changing the business.

Then there is a smaller but more meaningful ~20% probability that Newell executes a decisive move, such as selling Yankee Candle, that accelerates balance sheet repair and repositions the equity. Under that outcome, the stock does not need growth to re-rate. It simply needs less debt and clearer focuses.

At today’s price, the market appears to be discounting the first two outcomes almost entirely, while assigning only limited value to the third. I’m playing for that 20% option. I think the business has a good base to remain range-bound in the $3 range even with a potentially modest sales slow down.

Take takeaway

Newell Brands is not a growth story, and it doesn’t need to be. It is a somewhat stabilized consumer business with leverage-heavy equity and a clear, actionable level to improve its financial profile.

The most likely outcome is continued status quo. But, the presence of a sellable, non-core asset like Yankee Candle introduced asymmetry that the current valuation only partially reflects.

That’s what makes this situation interesting - not because it promises upside, but because it offers credible optionality with somewhat defined risk. Those are the setups worth watching closely.