WD-40 targets 4% to 7% FY 2027 net sales growth and $6.40 to $6.70 EPS as gross margin rebounds from Q4 low

• “Today, we reported consolidated net sales of $176.8 million for the fourth quarter and $688 million for the full fiscal year, up 8% and 11%, respectively, versus the prior year,” said Steven Brass.
• “Our fourth quarter gross margin of 52.8% reflects the temporary cost pressure we discussed last quarter,” Brass said, adding, “Based on what we know today, we believe the fourth quarter marked the low point for gross margin, and we expect sequential improvement starting in the first quarter of fiscal 2027.”
• “Sales in the Americas increased 5% year-over-year to $81.3 million,” Brass said, including that “In the Americas, WD-40 Specialist sales increased 7%, driven primarily by higher U.S. volumes,” while “Sales in the fourth quarter increased 10% year-over-year to $69.2 million” in EIMEA and “In Asia Pacific, sales in the fourth quarter increased 13% year-over-year to $26.3 million.”
• “We recently made Japan our newest direct market,” Brass said, calling it “a compelling long-term growth opportunity,” while also framing brand runway as “we estimate the global attainable market at approximately $2.2 billion” and “Having achieved only 24% of that potential, we see a remaining growth opportunity of about $1.7 billion.”
• “Non-GAAP operating income increased 6% to $110.3 million, while non-GAAP diluted EPS rose 6% to $6.18,” said Sara Hyzer, and “Free cash flow for the year was $97.6 million, resulting in free cash flow conversion of 117% of non-GAAP adjusted net income.”

Outlook

• “For fiscal year '27, we expect the following: number one, net sales growth of 4% to 7% with net sales of $715 million to $735 million on a constant currency basis,” said Keith Stauffer.
• “Gross margin of 54% to 55.5%,” Stauffer said, alongside “advertising and promotion investment of approximately 6% of net sales,” “operating income of $114 million to $120 million,” “an effective tax rate of 22.5% to 23.5%,” and “diluted earnings per share of $6.40 to $6.70.”
• “We are encouraged by the start of this new fiscal year and have seen strong revenue and sequential gross margin improvements thus far,” Stauffer said, while cautioning, “Our outlook assumes no material changes in the current economic environment.”

Financial Results

• “Fourth quarter gross margin was 52.8%, down 190 basis points from the prior year,” Hyzer said, and “The decline was primarily driven by approximately 370 basis points of higher specialty chemical and raw material costs,” partially offset by “approximately 170 basis points of benefit from lower aerosol can costs and lower fill fees.”
• “Selling, general and administrative expenses increased $9.4 million to $58.2 million,” Hyzer said, while “Investments in advertising and promotion, or A&P, were $15.8 million, up 26% compared to the prior year,” and “As a percentage of sales, A&P investment was 8.9% compared to 7.6% in the prior year period.”
• “Full year adjusted EBITDA increased 6% to $120.8 million,” Hyzer said, and Brass emphasized supply chain execution as “on-time delivery above 96%” and “more than $7 million in cost savings.”

Q&A

• Michael Baker, D.A. Davidson & Co., Research Division: “I wanted to ask you about the Japan move to the direct market” Steven Brass: “Japan will probably be a bit more of a slow build… over 5 to 10 years,” and “in our first year, we do expect to somewhere between 2x and 4x what were quite moderate sales in our FY '26.”
• Michael Baker, D.A. Davidson & Co., Research Division: “you’re targeting an acceleration” Steven Brass: “continued… implementing Smart Straw capacity and manufacturing capacity in Asia Pacific,” and “considerable upside… premiumization in Asia Pacific.”
• Jon Andersen, William Blair & Company L.L.C., Research Division: “how much price and how much… volume you expect to… contribute” Sara Hyzer: “roughly 75% of our growth in the quarter still came from volume,” and “Price is starting to make a larger contribution… and we do expect that to continue into… FY '27.”
• Aaron Reed, Northcoast Research Partners, LLC: “how should I think about… the margin recovery” Keith Stauffer: “It will be gradual throughout the year,” and “in the back half of the year… we should be approaching above our target of the 55%, if those assumptions hold true.”
• Linda Weiser, Water Tower Research LLC: “marketing partnership with Duluth Trading” Steven Brass: “we’re at the stage of experimenting… it’s small. It’s not overly material.”
• Alfonso (for Dan), Jefferies: “any other input costs” Keith Stauffer: “it’s the oil inputs and it’s the freight that are the main elevated costs.”

Sentiment Analysis

• “I’m trying to understand… the composition, how much price and how much… volume,” “what’s baked in… oil prices,” and “Trying to understand… economic sensitivity,” were framed as multi-part, assumption-testing questions from analysts (neutral to slightly negative), while margin and cost questions repeated across multiple analysts.
• “We believe the fourth quarter marked the low point for gross margin,” “we expect sequential improvement,” and “Our outlook assumes no material changes,” reflected management’s slightly positive but conditional tone, with recurring caveats around uncertainty.
• In Q3 vs. Q4, management language shifted from “We’re encouraged by this momentum” and “confident… recovery” to more explicit trough framing (“low point”) and a more detailed FY '27 range outlook led by the incoming CFO.

Quarter-over-Quarter Comparison

• “As previously announced, Keith joined the company in September and will assume the role of Chief Financial Officer on November 2,” Brass said, while Q3 emphasized the planned transition without naming a start date on the call.
• In Q3, Brass said “we expect gross margin to experience some temporary pressure,” while in Q4 Brass said “the fourth quarter marked the low point,” paired with Stauffer’s FY '27 gross margin target of “54% to 55.5%.”
• In Q3, management highlighted that “third quarter sales benefited from advanced buying,” while in Q4 management emphasized “strong revenue and sequential gross margin improvements thus far” early in FY '27.

Risks and Concerns

• “We expect these pressures to persist in the near term,” Hyzer said, pointing to “higher specialty chemical and raw material costs,” while Stauffer added assumptions that “crude oil prices remain near current levels through the first half of fiscal '27.”
• “We also incurred higher freight costs,” Hyzer said, tied to “Middle East-related supply chain disruptions,” and Brass said, “if things… change… significantly in the second half of the year, we would take further action to support gross margins.”

Final Takeaway

Management presented FY 2026 as a year of double-digit reported sales growth and resilient full-year gross margin despite a Q4 margin trough, while setting FY 2027 targets for constant-currency net sales of $715 million to $735 million, gross margin of 54% to 55.5%, and diluted EPS of $6.40 to $6.70. Leadership changes (incoming CFO Keith Stauffer; outgoing CFO Sara Hyzer moving to Americas Division President) and a new $100 million share repurchase authorization were positioned alongside strategic initiatives including a Japan go-direct expansion, ongoing premiumization, WD-40 Specialist expansion (including a planned Americas launch of the bio lubricant), and continued digital commerce growth, with key risks centered on oil-linked inputs and freight costs.

Read the full Earnings Call Transcript

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