WD-40 reported net income of $14.5 million for the quarter ending May 31, a 31% drop from the same period last year, while net sales for its maintenance products group decreased 9% year-on-year to $127.4 million.
Earnings per diluted share fell to $1.07 for the quarter, down from $1.53 the previous year. San Diego-based WD-40’s fiscal year runs from Sept 1 to Aug. 1.
Although net sales were up slightly in the Americas, sales were down by a substantial percentage in the Europe, Middle East and Africa region segment and Asia-Pacific.
Net sales in the Americas increased 2% to $61.4 million. The company attributed the increase primarily due to higher sales of maintenance products in the Canada and Latin America markets, which increased 23% and 10%, respectively. Higher sales of maintenance products in Canada were credited mainly to increased promotional activities and a high level of demand in the industrial channel. Fueling sales in Latin America was continued momentum from the shift to a direct model from a distributor model in the Mexico market since late fiscal year 2020.
EMEA net sales dropped by 16% to $49.4 million. WD-40 said the EMEA decline was due primarily to low sales of maintenance products in both the EMEA direct and distributor markets, which decreased 13% and 21%, respectively. The decrease in sales in direct markets was mainly due to the impact of foreign currency exchange rates and reduced demand for its products, compared to the same quarter in fiscal year 2021, when renovation trends associated with the pandemic boosted demand.
Net sales in Asia-Pacific fell 28% to $12.8 million. The decline was attributed mainly to lower sales of maintenance products in Asia-Pacific distributor and China, which decreased 56% and 25%, respectively. “Both markets were negatively impacted by the company’s inability to ship products due to the severe lockdown measures instituted in Shanghai as a result of a surge in COVID-19 cases in the region,” WD-40 noted in its earnings news release.
“In the third quarter we were up against very strong sales comparisons and had to manage through several global disruptions that negatively impacted our current quarter sales results,” WD-40 Chairman and CEO Garry Ridge said in the company’s earnings news release. “In addition, we are operating in a challenging macroeconomic environment which has continued to deteriorate our gross margin. Although we remain committed to managing our business to
restore gross margin to our target of 55% over the longer term, we continue to experience short-term margin pressures due to inflation.”