WD-40 (WDFC +4%) saw a notable increase in its stock price after reporting better-than-expected Q3 (May) earnings. The company achieved a record revenue of $155.1 million, a 9.4% year-over-year increase. WD-40 is widely recognized for its flagship product but also offers other maintenance products like GT85 and 3-IN-ONE. Additionally, the company plans to sell its US and UK Homecare and Cleaning Products portfolio.
- WD-40's Q3 sales growth was primarily volume-driven, with currency and price impacts nearly offsetting each other. The gross margin improved to 53.1% from 50.6% last year and 52.4% in Q2, nearing the long-term target of 55%.
- The Americas segment, which constitutes 49% of revenue, grew 6% year-over-year to $75.1 million. Strong sales in Latin America, particularly a 51% increase in WD-40 Multi-Use Product, offset declines in the US and Canada. Latin American sales benefited from a transition to a direct market model in Brazil.
- In the US, end-user demand remained steady, but sales fell 2%. This decline was partly due to a strong performance in the previous year and a 15% drop in non-strategic household brands.
- Sales in EIMEA (Europe, India, Middle East, Africa) rose 13% year-over-year to $59.4 million, with constant currency sales up 10%. The growth was driven mainly by higher sales of WD-40 Multi-Use Product. Asia-Pacific sales increased by 14% to $20.5 million, with a notable 29% rise in China due to successful brand-building programs and customer order timing.
- WD-40 has been implementing a new ERP system, which went live in Q2 and now covers substantial portions of its business. Minor disruptions occurred in Q3, but most critical issues have been resolved. The company also expects to sell its Homecare and Cleaning Products portfolio by FY25 to focus on higher growth and gross margin segments.
Investors reacted positively to the Q3 results, especially after a disappointing Q2 report in April. The continuation of positive trends from the first half of the fiscal year into Q3 and the impressive gross margin improvements contributed to the EPS upside. Despite a downward trend for much of 2024, this report provided a welcome boost.
