WD-40 Co. shares fell in the extended session on Thursday, dropping by as much as 4%, despite reporting fiscal second-quarter results that surpassed Wall Street estimates.
The decline followed the cleaning and maintenance products company’s earnings forecast for the year, which Wall Street had not anticipated. WD-40’s shares had remained practically flat, closing the regular session at $178.61.
In the fiscal second quarter, WD-40 reported a net income of $16.5 million or $1.21 per share. This is against the $19.5 million, or $1.41 per share it recorded during the same period the previous year. Meanwhile, in the year-ago period, its revenue rose to $130.2 million from $130 million. Analysts surveyed by FactSet forecasted this revenue to be at $125.8 million with earnings of $1.15 per share.
Although sales fell somewhat short due to the ongoing pandemic causing supply chain disruptions, the reported sales represent WD-40’s best first-half sales in its 68-year history. Specifically, net sales for the first six months of the fiscal year rose by 24% to $276.3 million.
The significant growth in sales came primarily from the company’s maintenance products segment, where YTD sales were $251.5 million. This is a 29% increase from the net sales of $194.5 million that were reported during the same period in 2020. Also, there was an increase in sales for both the WD-40 multi-use and WD-40 specialist product lines. This is impressive when considering the impact of COVID-19 on many businesses worldwide over the past year.
Despite the growth in sales, WD-40 highlighted how its product sales could have been better in the absence of disruptions in its supply chain. The company reported that it had been experiencing disruptions related to delivery, accessibility, availability of cans, and straws.
In particular, some of the company’s Q1 production plans were disrupted after discovering that the machinery necessary to make its WD-40 specialist cans were not operating at the factory producing them. This issue caused a three-month delay in shipping products to customers.
While the ongoing supply chain disruptions may have impacted expected earnings, these issues did not stop the company from experiencing a surge in shares.
The revenue growth that was achieved by WD-40 throughout the past year was undoubtedly due to the pandemic. As lockdown measures forced millions around the world to stay at home, it spurred a significant increase in demand for the company’s products as consumers tackled countless DIY projects in their home.
This DIY trend during COVID-19 prompted a significant surge in sales across many of the company’s key e-commerce partners, including Amazon and Lowe’s. As a result, WD-40 recorded a considerable increase in revenue, allowing it to exceed Wall Street forecasts for the fiscal second-quarter.
The company’s president and CEO Garry Ridge stated that the pandemic presented some challenges regarding supply chains but also offered them numerous opportunities to continue engaging with end-users on a personal level. He mentioned that this was achieved through their e-commerce platforms, where they were able to maintain close connections with the end-users of their products.
However, with the continuation of the pandemic and the resulting supply chain disruptions, it remains to be seen how long the company can continue to maintain this impressive performance.
WD-40’s record-breaking performance was achieved thanks to a continued focus on the company’s key growth platforms, including e-commerce and numerous geographic expansion initiatives.
Their e-commerce efforts included expanding their presence in Kline’s Industrial and Institutional Cleaning Products retail channels, participating in more e-commerce events, and investing in new programs such as the subscription-based Amazon Dash Replenishment Program.
In addition, WD-40’s geographic expansion efforts included increasing sales in mature markets such as Australia and China, while also focusing on driving growth in emerging markets such as Russia, Turkey, and the Middle East.
Overall, WD-40’s results for the fiscal second-quarter demonstrate the company effectively adapting to the challenges presented by the pandemic, navigating supply chain disruptions, and ultimately exceeded Wall Street forecasts. However, with the ongoing effects of the pandemic and the uncertainties surrounding future performance, only time will tell if WD-40 can maintain this impressive growth trajectory.
