Good morning, and welcome to the Newell Brands Second Quarter 2018 Earnings Conference Call. At time, all participants are in listen-only mode. After brief discussion by management we will open the call for question. [Operator Instructions] As a reminder, today's conference is being recorded. A live webcast for this call is available at newellbrands.com on the Investor Relations home page under Events and Presentations. A slide presentation is also available for download. I will now like to turn the call over to Nancy O'Donnell, Senior Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Good morning, everyone. Thank you for attending our call today. I'm Nancy O'Donnell, and on the call with me are Mike Polk, our President and CEO, and Ralph Nicoletti, our Chief Financial Officer. Before we get started, I would like to point out that we will be referring to certain non-GAAP financial measures. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations. Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in our earnings release and our filings with the Securities and Exchange Commission. I would also remind you that today’s discussion contains forward-looking statements. Actual results maybe materially different due to risks, uncertainties and other factors. The company undertakes no obligation to update any such statements whether as a result of new information, future events or otherwise. Please review our most recent filings with the SEC for description of important risk factors that could contribute to these differences. I would now like to turn the call over Mike for his comments.

Thanks, Nancy. And thanks to everyone for joining the call. On our last earnings call, I unveiled the details of our accelerated transformation plan. In the second quarter, we begin to drive the plan into action. Our industry is changing much faster than most have anticipated. As has always been the case, the consumers driving these changes. She is considering her category in branch choices differently, receiving brand messages and being influenced to purchase in different ways, and clearly is shopping differently. Her new path to purchase has yielded the rapid development of new channels and is driving major change in retailer and manufacturer business models. Given the nature of our categories in our channel footprint, we're on the leading edge of many of these changes. We're acting decisively and with speed as we look to create competitive leverage in this moment of inflection. The accelerated transformation plan is designed to focus and reposition the company to succeed in this rapidly emerging new landscape. We expect to come through an intense period of change in 2018 and 2019 as a $9 billion consumer goods company, well positioned to both leverage a set of competitively advantaged capabilities in product design, innovation, marketing and e-commerce and position to gain market share in our home geographies, while fast tracking our international growth and portfolio deployment. We’ll right-size our organization from the top down to align with our more focused footprint and when coupled with the dramatic reduction in our complexity that comes through portfolio simplification, we will begin to operate more efficiently for improved financial performance. At the completion of our transformation, Newell Brands brands will be simpler, faster and stronger. In the second quarter, we began to execute significant changes in our portfolio, our organization and our business system. We announced and…

Thanks, Mike and good morning everyone. As I go through the financial results, please note that the discussion of the income statement metrics reflect our continuing operations. I'll remind you that under GAAP all overhead costs and interest expense not directly related to discontinued operations are allocated to continuing operations, which burdens margins and profitability in both 2018 and restated 2017 results. The company has initiated cost action plans to fully offset to retain costs over time and interest expense will decline through our planned deleveraging. Reported net sales from continuing operations were $2.2 billion, down 12.8% versus last year due to the headwind from 2017 divestitures, adoption of the 2018 revenue recognition standard and a decline in core sales, which more than offset a tailwind from currency. Total company core sales were down 6.2% during the second quarter, largely reflecting the anticipated retailer disruption within the Baby business, as Toys ‘R’ Us liquidated all of its remaining U.S. stores. And our continuation of inventory destocking on the Writing business within the office superstore and distributive trade channels, as well as difficult comparison on Elmer’s. We also experienced softness in our Coleman and Fresh Preserving businesses related to the late start to spring across the U.S. Reported gross margin improved 50 basis points versus last year to 35.2%, while normalized gross margin contracted 50 basis points year-over-year to 35.1%, as the headwind from higher input costs, unfavorable mix reflecting lower sales in Writing and reduced fixed cost absorption as we managed inventories more than offset the favorable impact of synergies and productivity. Reported SG&A expense of $614 million represented 27.9% of sales, as compared to 27.5% in the year ago period. Normalized SG&A expenses were $535 million or 24.3% of sales versus last year at 23.2%. While expenses were reduced…

Thanks, Ralph. Reigniting core performance and our continuing business is a critical priority and we expect sequential improvement in our operating results in the back half of 2018, despite increased inflation, worsening foreign exchange and the negative impact of the currently proposed and implemented tariffs. While we expect the retail landscape to remain difficult, the second half impact will be less severe than the first. We expect consumer macro's to remain generally good, with U.S. market growth in line with first half levels at about 1%. We expect core sales and our continuing businesses to sequentially improve through the back half, recovering to growth by the fourth quarter, driven by strength in innovation, positive price, as the year progresses, increased brand support versus the first half of the year and generally easier comps in the fourth quarter. Back half launches include Calphalon Premier appliances, Onelink Safe & Sound system from First Alert, Oster DuraCeramic Air Fryer, Baby Jogger space saving City View car seat and Yankee Candle elevations, the first new vessel from Yankee in many years. And we have big activation platforms at the back to school with the Ooey Gluey Slime Games and through holidays with Crocktober and many other brand initiatives in November and December. We expect margins to sequentially improve as a result of strong savings programs and broad based price increases, partially offset by higher A&P. We have adjusted our 2018 full year outlook for discontinued operations and the divestiture of Waddington and Rawlings. We expect full year net sales of between $8.7 billion dollars and $9 billion, this range only include sales from our continuing operations. We expect normalized EPS of $2.45 to $2.65, reflecting a $0.20 adjustment for the impact of Waddington and Rawlings. We expect operating cash flow of $900 million to…

[Operator Instructions] Your first question comes from Stephen Powers with Deutsche Bank.

Hi, Steve.

Great. Good morning. Hey. Hey, Mike. So I'm sorry if I missed it. I know you've given us the numbers to calculate it, but maybe just quickly to just to clarify upfront, could you clarify what the core sales growth was for just the continuing ops in the first and second quarters. And while I appreciate the carve out of continuing ops you know, on the sales line for the year, I guess I was hoping in the release today to get your perspective on operating cash flow and normalized EPS for the underlying business as well. So if you can articulate on that that would be great, as we look forward. But my real question is just from what you have disclosed in the release, does the back half improvement that you're looking to achieve both on the on the sales line, but also on the operating margin line, in the first half it looks like you know, the continuing ops margins were about 250 basis points almost. And then you're looking for those to reverse and improve year-over-year in the back half. So again the comps get easier, but just to build on what you said in your prepared remarks. Just can you expand a bit on some of the larger factors behind that second half improvement, especially given the tariff uncertainty that you called out? Thank you very much.

Yeah. So continuing ops core sales in the first half of the year, I think the numbers were minus 8.6 [ph] and that was up stronger - slightly stronger Q2 - and Q1 in a worse Q2 based on the Baby liquidation issues at Toys "R" Us. So as you recall Toys "R" Us operated a large chunk of stores in the first quarter through about March 20th and from that point forward liquidated their entire fleet and their web platform. So the front half was about minus 8.6 [ph] It's actually pretty close to where we expected it to be, quite frankly Baby and Writing in the second quarter we're slightly ahead of our forecast with Baby a little bit better than we had hoped. And then the softness on outdoor in fresh preserving were the things that were the bit of new news. But in general core sales was where we expected it to be, given the two big things we were planning to deal with in the first half, including the TRU issue and including the issue on Writing channel - traditional channel inventory reset. And so you know, other than the weather related stuff on fresh preserving and on the outdoor category, which contributed to a late spring there weren't many other underlying surprises in the quarter. And we - as I said we expect that to sequentially improve through the back half of the year and return to growth in the fourth quarter. On margins in the first half, given the - Writing is a very profitable business for us, as you know gross margins - you know 50 plus, operating margins well into the 20s and the inventory dynamics in the first half of the year you had a big mix negative in the…

Okay. That's fair enough. I appreciate the color. Thank you.

Yeah.

Your next question comes from Bonnie Herzog of Wells Fargo Securities.

Hi, Bonnie.

It's actually Joe Lackey on for Bonnie. Hi, Mike.

Doesn't sound like Bonnie.

Thanks. So I was - just wanted to talk a little bit about your cash priorities and kind of curious how you're balancing deleveraging versus share repurchases. And obviously how aggressive you'll be with share repurchases, given you are buying back your stock in Q3? And you know, I think we talked a little bit about some deleveraging looking forward in Q3, but longer term can you talk about how long you think it will take to get to your 3 to 3.5 times leverage target and you obviously are committed to maintaining your investment grade debt rating. But are the rating agencies onboard with your deleveraging plans? Thanks.

Yeah. Hi, it's Ralph. You know, to your question you know, first our cash priorities haven't changed. You know, we want to support the base business with good investments there. Want to ensure the dividend stays you know kind of in the range that we've articulated between 30% and 35% and the payout ratio and deleveraging to get to the – to maintain an investment grade rating is the priority use of cash. As I mentioned in my remarks, the vast majority of the proceeds that we just received from Waddington and the sale of Waddington and Team Sports are being applied that way. So that's our priority. You know, within the context of the accelerated transformation plan, there's a significant amount of cash that we're going to be generating with the proceeds and we'll far out seed what we'll need to deploy to deleverage and we'll have the excess cash to make significant repurchases. But the first priority is to get our leverage ratio in the zone that we needed - that we needed to get it to. So you know we're going to be - you know, we're over 4 right now, although on a net basis - on a net basis this quarter we’re significantly below that. We're below four, almost a 3.7 [ph] on a net basis. And we're going to proceed into the - towards a 3.5 range as we move towards the end of the year, and going past that and we've been in a lot of dialogue with the rating agencies on that.

Joe, some of this will depend on how quickly deals get completed and how proceeds flow. So you know, we have as I said all of our processes in flight, and Goody’s well on its way. US playing cards is in the midst of its processes, Jostens well on its way and that these things will play out over the next couple of months and depending on whether we're able to complete those deals before the end of the fourth quarter and get the cash in the bank, we'll be able to do different things. So a lot of this is really going to be a function of when cash is in hand. And clearly, we - as we stated we're prioritizing deleveraging upfront, but we have significant proceeds that are going to go to share repurchase over time and we can flex that as we go depending on where we stand with respect to the underlying performance of the business and the line of sight we have to delivery of the 3 5. And then you know at some point into the future lower. So I think we're going to have all the room to navigate. We're prioritizing upfront deleveraging, but very quickly we get into repurchasing. And again, timing will determine exactly how this year plays out. But as you know, we're going to - our intention is to get all these deals done and cash in hand in early 2019. And so we're going to have a lot of flexibility on how to play this in our original guidance around the balance between repurchase and deleveraging is likely to be how the story plays out.

Thank you.

Your next question comes from Bill Chappell with SunTrust Robinson Humphrey.

Hey, Bill.

Good morning, Mike. just one clarification and another question, on the commentary on tariffs, I just to make sure I understand, there are $100 million of incremental kind of costs you're placing, you think you can place all that away, so I am just trying to understand, how much of that is in your back half guidance, I mean, how much of the growth or sales grow will come from incremental pricing?

Yeah, and there's less than a third of that is in the back half of the year, roughly a third in the back half of the year. And we don't know yet how much of the pricing will stick and how much we will land. I think that's one of the bits of uncertainty. But we've announced pricing ahead of the effective date of - our view of the effective date of this most recent round of tariffs in order to start the clock on customer lead times. So I think we will be effective very, very close to the implementation timetable. And I think if we're in a position where we need to amend the increase for the 25% rate versus the 10% rate that will be tricky and that will be a source of or conversation that we'll have to manage through with our customers. But the answer of your question is roughly about a third of the cost hits this year and we're hoping we can cover it dollar for dollar through pricing. But we've given ourselves some room and cushion within our guidance to deal with the probability of some conflict around that.

Got it. And then just follow up on Coleman, I mean, I know that's an area you've been focused on trying to turn around stabilized for probably about 18 months. But I guess the comment that you had lost some listings for camping, so maybe just an update on where we stand there?

Yeah, the losses on listings related to the Air Mattress business from Coleman at one particular retailer, I think we're coming through the worst of that phase on the brand as we continue to innovate. If you go back in history and Bill you know, this brand really well from your time covering the legacy companies. But this brand has been on a really tough slide and one of our customers. I think we're really at the point now where we're beginning to bottom that out. There were a couple of vulnerabilities coming into the year, but I do think that we're going to be in a healthier position if that particular customer going forward, as we continue - as we start to innovate on the brand and premiumize it. So I feel I feel better about that particular interface and relationship than I have for a long while. We've made great progress. A couple of other big players one in club and one in mass, and we clearly have made terrific progress on our own. DTC businesses, on Marmot, and I think there's an opportunity on Coleman going forward. And so I think the brands forward looking view is better than it's been in a long while, but there's still a fair amount of work to do here. We're not spending a lot of money communicating around the brands at this point and we have to do more work on the margin structure in order to give ourselves room in the P&L to be able to do that. And so I think this is a longer term project. Of course, we've got a great business in Europe, with under Campingaz, we've got a great Coleman business in Japan. We've got a really good business in other parts of the world, both from a margin and growth perspective. But this one cell is the one that is troubling and it's a big one, but we've got the right energy, and people and program you know focused on strengthening that over time.

Okay. Thanks.

Your next question comes from Priya Ohri-Gupta with Barclays Capital. Please go ahead.

Hey. Thank you so much for taking the call. I guess, just one point of clarification in response to a prior question. So we should assume that the original split of proceeds that you had spoken to is about 55% going towards share repurchase, should largely hold intact? And then secondly, Ralph, I was hoping you could speak a little bit to how we should think about commercial paper balances in the context of your debt reduction plan, sort of over the course of what happened in the second quarter, as well as with the plan for third quarter. And how we should think about any possible need for a debt tender versus possibly just accelerating some of the maturities that you have in late ‘18s and early ’19? Thank you.

A few different questions in there. Let me take the back part and then I'll come back to the front part. In terms of debt and the ability to deleverage and take out certain tranches, we’ll look at a mix of either taking a make hold approach or a tender. The good news is you know, kind of where the interest rate environments moved relative to or our issue costs, so we're seeing very, very little frankly no breakage costs on much of the debt. So we're going to be able to retire - we expect to be able to reduce the debt without much breakage costs at all. And again, the tactic of a tender or make hold, will come into play, but most everything in front of us that we're looking to reduce is on the short end of the curve. So it will be pretty inexpensive. So we're confident we could execute that cost effectively. As it relates to thinking about commercial paper, you know, frankly right now we actually have none issued, we paid off some of that in the third quarter. And you know, we'll take a look at you know the need on commercial paper as we move into the front half of ’19, because we'll have some more seasonal needs on - as we build inventory. But I think importantly you know, we also have a 1.250 billion [ph] revolver that's in place that backstops our commercial paper program. So plenty of liquidity. If you think about it because we're going to be retiring debt on the short end of the curve and we have a revolver in place, as well as good accounts receivable securitization program. So we're set on that front.

And then on the balance of repurchase to debt. Yeah, the answer is yes. That's the right number to use and we have really a significant amount of flexibility to - like to tweak that one way or the other. Our orientation when we get the leverage ratios down to where we said we were going to be in the commitments we've made and then there are all kinds of other paths to repurchase. Remember the business is generating a fair amount of operating cash flow. We're not carrying any short term debt now. So you know, we're going to - and we get tons of proceeds from December through probably March. So we're going to have all kinds of flexibility to play this in multiple ways. But I think the right planning stance, as you build out your models and try to figure out EPS dilution if that's what you're trying to navigate, is that the original guidance is what - is what we expect to be able to execute.

And our execution plans have the flexibility to flex that number depending on the business environment. So will - that could modify, so like for instance, right now you know, we're putting the majority of the proceeds - the vast majority proceeds are being used towards debt repayment, and in aggregate the ratio that Mike alluded to is what we're looking at over the total program. But the significant amount of proceeds come - coming in and give us the flexibility to ensure that we hit the leverage targets that we have and have then the ability to repurchase shares in the market, we’ll deployed M&A at some future point in time.

Great. That’s very helpful. And if I can just ask a quick follow up on that. So given that you've repaid your CP balance entirely, that's about 700 million or so from under the first quarter. Should we include that in the debt reduction number that you've articulated? Or should we view that as through separate from that? Thank you.

Yeah, the amount that we repaid from the beginning of the quarter, I wouldn't - beginning of the year, I wouldn't include because we pay some of that down sort of naturally through cash flows in the business. So I would just say that the - you know we've paid a little over $800 million already against the accounts receivable securitization, as I mentioned and then we're expecting $900 million in the third quarter and the CP will be included in that. And then we'll see how the balance of the year flows. But we're not expecting to issue any more CP beyond what we currently exited the second quarter with.

Thank you.

Your next question comes from Nik Modi of RBC Capital. Please go ahead.

Hi, Nik.

Good morning. Hey good morning, Mike. This is Russ Miller on for Nik.

Hey, Ross.

We want to ask there on tariff, appreciate the color you shared in your prepared remarks and following upon Bill's question, wondering if you could share any additional details on the puts and takes here, how confident you are on the appeal you mentioned or being able to ship production versus taking pricing. Any additional color on the timing of having any better understanding of the situation? And then I have a follow up if you don't mind.

Well, you know, the answer to your question is very different business-by-business, we have some businesses that would be very, very difficult to shift production. Something like Baby gear we wouldn't want to do that because of compliance and safety related issues. We've got a 33 plus year relationship with our supply partner. So we're less likely to do that – and something on a business like that. On some of our other businesses there is flexibility to move sourcing relationships. The ability to do that in the moment is a little bit difficult. So there's likely a lag effect. So I wouldn't think that there's a major opportunity in 2018 to accommodate the tariffs that have been put in effect as of July and the ones that are coming as of September. But beyond that time zone into ‘19 there are some possibilities in some of the businesses. With respect to pricing, I think it's too early to know exactly how much of the pricing will land, but we're not going to - we're not going to - we're not going to hesitate to take the price up.

That's helpful. And then as a follow up and if you don't mind, on Writing destocking, can you share some more details on where the pressure is coming from and what would the implications be on that potential deal of Staples acquiring Essendant? We understand…

Sure.

This is not - the inventory destocking and Writing is not the classic type of inventory destocking that you might hear people talk about, you might have even heard us talk about. This is a function of new ownership and new leadership coming into virtually every one of the big office superstore customers and into virtually every one of the big distributed to trade customers and that new leadership and new ownership resetting their core metrics and how they're going to measure success. And that has created a set of inventory metrics and we saw on hand targets that they've set for their total businesses that we need to now shift and adapt to. And so that began last year and we're in the midst of it. We accelerated the big hits associated with pulling inventory out of their networks in the first half of the year to try to get as close to those targets at the inflection point between Q2 and Q3. We got a long way there. We've got more work to do in 2018, but as I said at 3 out of the 4 customers, big customers, we should be at their targeted levels by the end of 2018 with the fourth trailing into 2019. With respect to Staple's and Essendant, we'll see how that plays out. But clearly you know, that will create some more headwinds I would expect, but not insurmountable. The big change is the one we're dealing with now where some of these - some of our partners are taking 10 weeks of supply out of their targets. So it's a huge inventory shift and that - as I said it's largely behind us and as we go forward we'll deal with the normal dynamics associated with the consolidation potential consolidation of players like Staples and Essendant store closures, all sorts of other things that contributed on an ongoing basis to inventory pressure.

Thank you very much, Mike.

Sure.

Your next question comes from Lauren Lieberman with Barclays Capital.

Great. Thank you.

Hi, Lauren.

Good morning. So I was curious if we could just talk a little bit about the go forward strategy for the businesses that you're going to continue to play in. If you just maybe go through like the big ones, what as you look forward do you think about doing differently than you've done to date? So whether it's from an innovation agenda standpoint, whether it's you know, interactions with retailers, just there is - you know we talked a lot about the kind of what you're exiting and we've talked about simplifying the overall organization. But I still feel a little bit unsure about what if anything might be changing and you know kind of the businesses that you're going to you know stay of course on, that will be really helpful.

Yeah. Well, look I think it's grounded in a couple of core beliefs. We believe that brands and innovation matter more today than they ever have before. I know there is a number of theories out there about the fact that brands have less leverage. I don't think that's the case. I think it really is as important as it's ever been to strengthen our brands both in terms of positioning, communication and in product design and the presentation and activation of those brands through all of our channels, whether it's brick and mortar or e-commerce, and so that is really, really important. Given the pace of change we need to operate more efficiently as we bring ideas to market and effectively as we bring ideas to market. So there is within the company a need to strengthen the connectedness and the alignment around the outcomes we seek in the market between those that are responsible for the strategic development for our businesses and those that are responsible for commercial activation. And we've made changes in our design coming out of the second quarter into the third quarter to address some of those opportunities. So we are going to continue to lean our shoulder into our brands agenda, our innovation agenda and our product design agenda and that will matter more and more over time. How we activate that Lauren through the different channels we compete in and is really important because more and more of our business is shifting online. Today in the continuing operations globally roughly 15% of our business globally is e-commerce based. So that's either direct to consumer, that's pure play or that's through our retail dotcom platforms. And I think that probably understates it a bet because there are dynamics out there that get measured…

Okay. And that international piece Mike, I was actually going to ask about that. You're seeing that as like a 2020 and forward, is that something that sort of accelerate in ’19…

Yeah, we’ve got – yeah, I think it's not - it's not a big play for us in 2019. I think it's more 2020 onward. We're doing things in India and in China right now in the Writing businesses. We have obviously a huge appliance business in Latin America. But we actually don't play in every Latin country. There is sort of filling geographies in certain of these businesses, and then there is whitespace work to be done in ‘19 to set up ’20. Big businesses that have a lot of potential are Writing, Baby and to a lesser degree the Appliance businesses where there are unique propositions that we can bring to market.

Okay. And what happened with Home Fragrances in India this quarter, that was, I mean, it was called out and there's been some significant infrastructure investment in that business historically for legacy…

Yeah…

And so just kind of any update on that in particular?

Sure. I think that's right. I mean, obviously we've built the priority acquisition, the product [ph] factory was built and we've got a good and big business there. There's a series of things we're doing to ensure that our tactics across the U.K. and continental Europe are profitable tactics. We've made choices to pull back on certain things that just weren't sustainable and that's had a consequence to our performance in Europe. But it's one of those things that is the right thing to do to set up the brand for the long-term. We're very bullish about the business in Europe. We're going to bring - we're bringing WoodWick to Europe next year. So we have lots of opportunity there, we're just in a an inflection period, last actually couple of quarters have been tough quarters as we pulled back on tactics that weren’t really sustainable.

Okay, thank you so much Mike.

Yeah.

Your next question comes from Rupesh Parikh with Oppenheimer.

Good morning and thanks for taking my questions. Hey, Mike. So first I was hoping to understand what you're seeing from POS growth perspective and also what your market share performance was during the quarter. And then the category growth that 1% seems soft to me, I think at least versus what you guys saw last year in the category. So I was curious what's weighing on the categories you compete in?

Yes. So category growth was pretty much in line with what we saw in Q1, but you're right, slowed versus what we saw in the back half of last year. I think part of that is our spending levels are more conservative this year. And we were pulling back on a number of different tactics that were less profitable for the sake of margin development. And so it was the leader in the markets that that can have an impact on category growth. In terms of market share, we've got really very different outcomes by business, as I told you, we got over - we delivered over 300 basis points of share growth on the Baby Gear business in the in the first half of the year and that was even stronger in the quarter. We've got very good growth on share growth on Home Fragrance, as we move from our retail store footprint to a more wholesale sale based model with triple digit share growth in Home Fragrance. We've got good momentum on our foods market share performance and then some weaker spots. Appliances has been weak in cooking where we're playing from behind and express cooking. We launched Crock Pot Express last year, but Instant Pot came into market in 2010. And so we're playing on the back foot there. But the innovation levels are increasing. We're launching a fourth quart and an eight quart version of Crock Pot Express in the in the fourth quarter and that should help. Cookware shares have been really strong. The stackable's launch last year has been a positive. So within that appliances and cookare, cookware is strong, cooking appliances weak, coffee weak, blending a little bit better and that we have a whole series of other beverage appliances that are doing quite well. So I mean, it's a very different profile by business. The POS tracks to you know, those share numbers and in aggregate POS was probably a little bit weaker, although you know, I’ve decided not to be quoting those numbers anymore because everybody tries to triangulate specifically on them, but the POS based on the share performance is probably a little bit weaker in the second quarter than the first.

Okay. Great. Thank you.

Your next question comes from Olivia Tong with Bank of America Merrill Lynch.

Thanks. Good morning.

Hi, Olivia.

Hi. Three questions actually. First on brand support, just if you could give us an idea in terms of order of magnitude of the increase that you're expecting - that you're putting in place in the second half, particularly which categories brands it's most concentrated in?

Sure.

And then second, I guess, can you just give us what the core sales comps looks like, look like for Q3 and Q4?

Yeah, sure. So you know, I think maybe I’ll - Nancy will kick me under the table, but I'll just give you another metric. Sophie is probably in the other room about to come charging in and told me not to do this. But I think it's helpful for you as you think about the continuing business going forward. Our advertising promotion ratios and you know, you've heard me historically talk about the fact that you know, we want to spend between 4% and upward about 5% of revenue in A&P On the continuing businesses in the back half of the year we're sort of in the mid 4s as a percentage of revenue and you should expect us to be in that general zone as we go forward with a desire to increase A&P ratios in ’19, ‘20 and ’21, depending on the progress we make on margin delivery. But we're in the mid 4s and continuing operations in that mid to high 4s actually in the back half of the year. Our advertising dollars are going to be focused on the news. You know, we've learned over time that you don't get as higher return on investment when you spend on anthematic [ph] campaigns, but you can get a pretty big impact behind new ideas. So Yankee Candle elevations which is this new premium vessel that we're launching, that's going to get advertising support. Our FoodSaver business, which is really responsive to advertising is getting advertising support in the back half of the year. Elmer’s slime which is a big act, we've got this Ooey Gluey slime games initiative that's getting advertising support in the back half of the year. Calphalon appliances which is a big launch of a line of premium appliances that will get advertising support in the back of the year. So our money flows to ideas is sort of the core principle that underpins how we allocate A&P and obviously our goal is to get more money behind the brands over time. I'm happy with the A&P ratios and the continuing businesses in the back half of the year. But you know, as our innovation funnel begins to materialize in the market we're going to have the appetite to spend more. But we've got to give ourselves room in the P&L to be able to afford to do that. And our capacity to spend will be limited by the speed with which we get the cost out of the business and get the gross margins up.

Got it. And then just the core sales comps in Q3 and Q4 and then when it - and then when it comes the contribution from pricing, does your outlook assume you're successful in implementing all the price increases that you were looking for or there's some challenges in full implementation baked into your expectations?

Let me answer your first one, I'm sorry I didn't answer that question. I wasn't ignoring it. Comp sales actually get easier as we go through from Q3 to Q4. Q3 is about the same as what we've been experiencing up until now, a little bit softer comp versus Q2 ’17, but Q4 things get easier in Q1, Q2, obviously will be even easier than Q4. So Q3 is sort of a - there's not a lot of benefit to be had relative to prior year in Q3, but Q4 starts to - the pressure starts to ease on the comps in Q1 and Q2 the same so of ‘19. So I think that's how you should think about the next four quarters. Q3 more competitive, Q4, Q1 Q2 a little easier and more breathing room. What was your second - your added questions Olivia?

On pricing, just in terms of what…

Pricing. Yes, so - our divisions are always very bullish on their ability to land price. And so you know, we price dollar for dollar to the cost moves, whether it's inflation or whether it's - or whether it's something like tariffs and obviously we're doing a lot of work on core productivity. And if there's a competitive issue we won't screw up our price – our relative price points versus competition through pricing. But the divisions are always quite bullish about their ability to land pricing. You know, we tend to hedge some of that back at headquarters and our guidance contemplates a bit of an offset at headquarters versus what the divisions are assuming for the back half of the year.

Thanks.

Your next question comes from Kevin Grundy with Jefferies.

Hey. Good morning, everyone.

Hi, Kevin.

Hey, Mike. I wanted to pick up on some of the channel dynamics, so you don't have to be sort of repetitive and repeat to the earlier question with respect to some of the issues with kitchen appliances at Wal-Mart. But with respect to Wal-Mart though the Nielsen data which you and I have had conversations in the past and the view has been that it's not very representative of the business. But I guess like more recently you know, maybe it has to some degree and understanding it's not picking up particularly online where you guys are doing very well. But it does seem to be more representative, I guess more recently. Can you talk about some of the challenges there? Because it seems more broad based Mike than just what's going on in kitchen appliances or maybe you know, you guys were a little bit slow with some of the innovation, but the Writing business is struggling, some of the food storage business is struggling and it's been pretty broad based and naturally you know retailers want to grow in all channels, as you do, not just online. So can you talk about some of the dynamics there, maybe where you guys need to be a little bit sharper, a little bit quicker, is Wal-Mart deemphasizing some of these categories leaning more in on private label and how do you feel like your position here going forward with your biggest customer? Thank you.

Well Kevin, you've got to win with Wal-Mart they are our biggest customer, as you said and we are winning with Wal-Mart in certain categories and having a tougher time in others, appliances being an example of that. I mentioned coffee earlier and I’ve mentioned the Express cooking arena. So I don't think it's a question of being late. We're playing - we were playing catch up, as I said Instant Pot launched in 2010 long before we got involved in the appliance business. Our choice to accelerate Crock Pot into Express cooking was done last year, having owned the business for about a year or so I thought our reaction time was pretty darn quick. But it's never good to play from behind. You always want to be the first mover. In Food Storage, we're doing fine. And Fresh Preserving we're doing fine, in Writing. We’re doing fine, in Home Fragrance we're doing great, in Baby we're doing fine. So I think your characterization of how we're doing in Wal-Mart isn't representative of how we see the data and with the exception of you know, I think your observations about appliances are right on. And as I said in outdoor where Coleman lost the brand advantage to Ozark Trail probably 2009, 2010, again you're playing - we're playing from behind. But as I said, I think the view forward is healthier than it's been in a while. So I think you've got to win at Wal-Mart, you're right about that. I hope you are not hearing my comments and inferring from them that I'm not committed to a brick and mortar that would be sort of absurd if you were because 85% of our revenue is still brick and mortar based and the vast majority of our infrastructure is still brick and mortar based and we're doing a fine job in many brick and mortar customers. So you've got to win in both and you've got to win share everywhere, irrespective of the category dynamics. So you know that's the only measure of success. And I'd say we're - we've got very positive outcomes in certain categories and on appliances and outdoor in the one customer that you're focused on which is an important one for us, our largest you know, not so good. But these things don't turn overnight. And they know - they will be addressed over time through brand work and through the innovation agenda. And you know, until you've got the right ammunition and the right arrows in the quiver you're going to be vulnerable and that is certainly how we've been since the Jarden acquisition in those two businesses that you've mentioned.

Okay. Thanks, Mike. Good luck.

This concludes our question-and-answer session. I will now turn the call back to Mr. Polk for closing remarks.

Well, I'd just like to close the way I always do which is with a thank you to our team. As I said in the script you know, I'm always amazed at how resilient and determined you are to deliver through what has been a difficult period of time and a difficult set of circumstances, but your determination, your drive and your grittiness to prevail through these tough moments are one of the core assets of the company. And I just want to thank you for your passion and your support.

A replay of today's call will be available later today on our website newellbrands.com. This concludes our conference. You may now disconnect.