Energizer (NYSE:ENR) executives said the company’s fiscal first quarter of 2026 came in ahead of internal expectations and marked progress toward its stated agenda of restoring growth, rebuilding margins pressured by tariffs, and returning to a historical cash flow profile.
On the company’s earnings call, President and CEO Mark LaVigne said Energizer has established “a clear foundation for sequential gross margin expansion and a return to meaningful earnings growth in the back half of the year,” pointing to supply chain actions, customer decisions tied to a brand transition, and cash generation that supported both debt reduction and shareholder returns.
Management highlights: brand transition, distribution gains, and supply chain actions
He also said Energizer strengthened distribution across value and premium brands with key U.S. retailers and advanced innovation initiatives across batteries, lights, and auto care. In addition, the company said it has “substantially completed” a supply chain realignment intended to help restore margins.
Based on those actions, management outlined a gross margin progression that it expects to be meaningfully back-half weighted. LaVigne said the company is positioned to deliver:
- Over 300 basis points of gross margin expansion from Q1 to Q2
- Another 300 to 400 basis points of expansion anticipated by year-end
During the Q&A, CFO John Drabik added that the company’s plan is to get gross margin “back into the low forties,” which he described as a level seen before tariffs became a larger headwind.
Consumer and category trends: stabilization and a December rebound
In response to questions about the consumer backdrop and category trends, LaVigne said the company entered fiscal 2026 expecting a transitional start to the year. He cited softer consumer trends in October and November, lapping hurricane-driven demand from the prior year, and order timing that benefited fiscal 2025’s fourth quarter.
LaVigne said consumer demand has since stabilized and highlighted “a strong rebound in December volumes in the U.S.,” which he noted is Energizer’s largest market. He added that January volume growth is expected to be very positive due to winter storms in the U.S., though management indicated it is still early to quantify the overall business impact from the storm activity.
On battery consumption, LaVigne said scanner trends showed the 13-week volume slightly negative, while the four-week period that included December showed volume turning positive. For the balance of the year, he said the company expects the battery category to be stable and generally consistent with assumptions used to build the fiscal 2026 plan.
Back-half drivers: APS transition, distribution, e-commerce, and pricing
Drabik outlined the building blocks Energizer is using to support its second-half outlook, describing the category as “relatively flattish” and pointing to company-specific growth drivers. Those included the APS customer transition to Energizer-branded products, which he said is expected to provide about $30 million, or roughly 200 basis points, of organic growth.
He also said the company expects additional growth in the back half from increased distribution tied to innovation and the broader portfolio, spanning both brick-and-mortar and “fast-growing e-commerce.” Based on planogram changes, new product development sell-in, and e-commerce growth, Drabik said the company is expecting 400 to 500 basis points of growth in the back half. He added that carryover pricing and targeted tactical pricing are expected to provide a 50 to 100 basis point benefit as the year progresses.
When asked about the pace of improvement given an uncertain environment, LaVigne said the company builds flexibility into its plans and noted that volatility has been a “constant” for several years. He said the organization has developed “muscle memory” to read and react and that management remains confident in the outlook it has provided.
Margin pressures in Q1 and why management expects improvement
Management attributed first-quarter gross margin pressure to three main factors that it expects to ease as the year progresses.
Drabik said tariffs were nearly a 300 basis point headwind in the quarter, in part because the company was still moving through inventory purchased earlier in the year when tariff rates were higher. He said this should improve through the second quarter and into the rest of the year.
He also highlighted the impact of selling through Panasonic-branded product tied to the APS transition. Drabik said Energizer sold about $65 million of Panasonic-branded product in Q1 and characterized the associated gross margin effect as a 200 basis point hit that is not expected to recur.
A third factor was transitional product cost impacts tied to the supply chain reset, which Drabik said were “almost 100 basis points.” He said the company expects to move through most of those impacts by the end of Q2.
In a separate exchange, Drabik discussed input costs and said there was an approximately 80 basis point drag in the first quarter, driven largely by freight and production inefficiencies, while raw materials were described as roughly a “push” overall. He noted zinc spot prices have risen, while there have been moves in lithium and silver, and mentioned R-134a as another input. Drabik said the company is more than 90% fixed on zinc for fiscal 2026 through contracts and inventory and suggested cost pressure could be more of an issue into 2027. He also said the company has taken targeted pricing, particularly in auto care, with impacts expected in the second and third quarters.
Cash flow and capital allocation: debt reduction and shareholder returns
LaVigne said the company generated robust cash in the quarter, enabling it to pay down more than $100 million of debt while returning nearly $28 million to shareholders through dividends and share repurchases.
Management reiterated that debt reduction remains a priority. In response to a question on leverage, Drabik said Energizer expects to be at “five or a little bit below” by the end of fiscal 2026 and said the company is still targeting $150 million to $200 million of debt paydown for the year.
On M&A, management said it will continue to evaluate opportunities, but indicated any potential deals would be “leverage neutral” and would not alter the debt paydown trajectory, implying they would likely be smaller transactions.
In auto care, LaVigne said the first quarter is the smallest for the segment and cited some impact from weather and timing. He said the company is heading into peak season and is “really excited” about the Armor All Podium Series, while noting a “bifurcated consumer” in the category, with higher-end segments showing growth and middle-to-lower tiers seeing more purchase delays or opt-outs.
About Energizer (NYSE:ENR)
Energizer Holdings, Inc is a global consumer products company best known for its portfolio of portable power and lighting solutions. The company’s primary business activities include the design, manufacture and marketing of batteries under the Energizer and Rayovac brands, as well as portable lighting products such as flashlights, headlamps and lanterns. Energizer also produces a range of automotive appearance and protection products, including tire inflators and repair kits, along with personal care offerings like aerosol insect repellents and sunscreen under licensed brands.
Founded in 2000 through the spin-off of the battery business from Ralston Purina Company, Energizer has grown through both organic development and strategic acquisitions.
