Avery Dennison Aktienkurs
Vergleich mit Peer Group
📊 Peer Group
📈 Was ist das?
Die Peer Group sind die Unternehmen mit dem ähnlichsten Geschäftsmodell. Sie dienen als Vergleichsmaßstab, um eine Aktie einzuordnen.
🧮 Wie wird sie ausgewählt?
Nach Ähnlichkeit des Geschäftsmodells, also Unternehmen aus derselben Branche, mit vergleichbaren Produkten und einer ähnlichen Kundengruppe. Nur so vergleichst du Äpfel mit Äpfeln.
🏛️ Wofür ist sie wichtig?
Ob eine Aktie günstig oder teuer ist, lässt sich am ehesten im Vergleich beurteilen. Ein KGV von 18 oder ein EV/FCF von 20 wirkt je nach Maßstab günstig oder teuer. Die Peer Group liefert dabei den treffsichersten Maßstab: Unternehmen mit ähnlichem Geschäftsmodell, die denselben Bedingungen unterliegen.
🎯 Was bedeutet das für Anleger?
Liegt eine Kennzahl unter dem Peer-Durchschnitt, ist die Aktie relativ günstiger bewertet, über dem Durchschnitt entsprechend teurer. Ein Abschlag zur Peer Group kann eine Chance sein, aber auch einen Grund haben (zum Beispiel geringeres Wachstum). Der Vergleich ist ein Startpunkt, kein Urteil.
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📘 Marktkapitalisierung
📈 Was ist das?
Die Marktkapitalisierung zeigt, wie viel ein Unternehmen laut Börse aktuell wert ist.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie hilft Unternehmen in Größenklassen (Large, Mid, Small Cap) einzuordnen und gibt Hinweise auf Marktmacht und Stabilität.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Große Unternehmen gelten als stabiler, zahlen oft Dividenden, wachsen aber langsamer.
- Kleine Firmen können stärker wachsen, sind aber schwankungsanfälliger.
- Die Marktkapitalisierung ist ein guter Indikator für Unternehmensgröße, aber kein Maß für Unter- oder Überbewertung.
📘 Enterprise Value (Unternehmenswert)
📈 Was ist das?
Der Enterprise Value (EV) zeigt, was ein Unternehmen tatsächlich kostet, wenn man es komplett übernehmen würde – inklusive Schulden und abzüglich Cash.
🧮 Wie wird es berechnet?
(= Marktkapitalisierung + Nettoverschuldung)
🏛️ Wofür ist es wichtig?
Der EV ist eine realistischere Bewertungsbasis als die Marktkapitalisierung, da er die Kapitalstruktur berücksichtigt. Er ist Grundlage für Kennzahlen wie EV/FCF oder EV/Sales.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Der Enterprise Value zeigt, was ein Unternehmen tatsächlich wert ist – unabhängig davon, wie es finanziert ist.
- Er ist besonders wichtig für professionelle Investoren, da er eine objektivere Grundlage für Bewertungsvergleiche bietet als die Marktkapitalisierung allein.
- Ein Unternehmen mit hoher Verschuldung erscheint im EV teurer, eines mit viel Cash günstiger – auch wenn sie an der Börse gleich viel wert sind.
📘 Nettoverschuldung
📈 Was ist das?
Die Nettoverschuldung zeigt, wie viele Schulden nach Abzug des verfügbaren Cashs tatsächlich verbleiben.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie zeigt, wie stark ein Unternehmen von Fremdkapital abhängig ist – und wie gut es in der Lage ist, seine Schulden kurzfristig zu bedienen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine niedrige oder negative Nettoverschuldung bedeutet hohe finanzielle Stabilität.
- Unternehmen mit viel Cash und geringer Verschuldung sind besser gerüstet für Krisen.
- Eine hohe Nettoverschuldung erhöht das Risiko – besonders bei steigenden Zinsen oder konjunkturellen Schwächen.
📘 Cash
📈 Was ist das?
Der Cashbestand zeigt, wie viele liquide Mittel einem Unternehmen sofort zur Verfügung stehen.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Er gibt Auskunft über die finanzielle Flexibilität: Ein hoher Cashbestand ermöglicht Investitionen, Rückkäufe oder Krisenresistenz.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher Cashbestand zeigt finanzielle Stärke und Handlungsspielraum.
- Cash kann für Investitionen, Schuldentilgung oder Aktienrückkäufe genutzt werden.
- Allerdings: Zu viel ungenutztes Kapital kann auch auf mangelnde Investitionsideen hinweisen.
📘 Anzahl ausstehender Aktien
📈 Was ist das?
Die Anzahl ausstehender Aktien gibt an, wie viele Aktien eines Unternehmens aktuell im Umlauf sind und von Investoren gehalten werden.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie ist die Grundlage für viele Kennzahlen wie Gewinn je Aktie (EPS), Marktkapitalisierung oder KGV.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Je weniger Aktien im Umlauf sind, desto höher fällt z. B. der Gewinn je Aktie aus – wichtig für Bewertung und Dividendenrendite.
- Aktienrückkäufe verringern die Anzahl ausstehender Aktien – und steigern den Wert je Aktie.
- Kapitalerhöhungen haben den gegenteiligen Effekt: mehr Aktien → Verwässerung der bestehenden Anteile.
📘 Kurs-Gewinn-Verhältnis (KGV)
📈 Was ist das?
Das KGV zeigt, wie oft der Gewinn pro Aktie im aktuellen Aktienkurs enthalten ist – also wie „teuer“ eine Aktie im Verhältnis zum Gewinn ist.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Das KGV gehört zu den bekanntesten Bewertungskennzahlen. Es hilft Anlegern einzuschätzen, ob eine Aktie im Vergleich zu ihrem Gewinn eher günstig oder teuer erscheint.
🧮 Berechnung
📊 KGV (TTM) = bezogen auf den Gewinn der letzten 12 Monate (Trailing Twelve Months):🎯 Was bedeutet das für Anleger?
- Ein niedriges KGV kann auf eine günstige Bewertung hindeuten – oder auf Probleme im Geschäftsmodell.
- Ein hohes KGV kann Wachstumserwartungen widerspiegeln – oder eine überbewertete Aktie.
📘 Kurs-Umsatz-Verhältnis (KUV)
📈 Was ist das?
Das KUV zeigt, wie viel Anleger für 1 € Umsatz eines Unternehmens zahlen – unabhängig vom Gewinn.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Das KUV ist besonders bei wachstumsstarken oder noch nicht profitablen Unternehmen hilfreich. Es zeigt, wie hoch der Umsatz an der Börse bewertet wird.
🧮 Berechnung
Marktkapitalisierung = 13,01 Mrd. $ | Umsatz (TTM) = 9,25 Mrd. $
Marktkapitalisierung = 13,01 Mrd. $ | Umsatz erwartet = 9,44 Mrd. $
🎯 Was bedeutet das für Anleger?
- Ein niedriges KUV kann auf Unterbewertung hindeuten – oder auf schwache Margen.
- Ein hohes KUV kann hohe Erwartungen widerspiegeln – oder übermäßigen Optimismus.
- Besonders sinnvoll bei Wachstumsunternehmen, bei denen der Gewinn oder Free Cashflow (noch) keine Aussagekraft hat.
📘 Unternehmenswert zu Umsatz (EV/Sales)
📈 Was ist das?
EV/Sales zeigt, wie viel Anleger für 1 € Umsatz eines Unternehmens zahlen, wenn man auch Schulden und Cash berücksichtigt – es ist eine kapitalstrukturbereinigte Version des KUV.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Diese Kennzahl eignet sich besonders für den Vergleich von Unternehmen mit unterschiedlicher Verschuldung – sie zeigt, wie teuer ein Unternehmen tatsächlich im Verhältnis zum Umsatz ist.
🧮 Berechnung
Enterprise Value = 16,46 Mrd. $ | Umsatz (TTM) = 9,25 Mrd. $
Enterprise Value = 16,46 Mrd. $ | Umsatz erwartet = 9,44 Mrd. $
🎯 Was bedeutet das für Anleger?
- EV/Sales ist neutral gegenüber der Kapitalstruktur und eignet sich gut für Unternehmensvergleiche.
- Ein niedriges Verhältnis kann auf eine günstig bewertete Aktie hindeuten – ein hohes Verhältnis auf hohe Erwartungen oder Überbewertung.
- Besonders nützlich bei wachstumsstarken, noch nicht profitablen Firmen.
📘 Unternehmenswert zu Free Cashflow (EV/FCF) | ex SBC
📈 Was ist das?
EV/FCF setzt den Unternehmenswert eines Unternehmens ins Verhältnis zu seinem Free Cashflow. Die Kennzahl zeigt damit, mit welchem Vielfachen des aktuellen Free Cashflows ein Unternehmen bewertet wird. EV/FCF ex SBC berücksichtigt zusätzlich aktienbasierte Vergütungen (Stock-Based Compensation, SBC). SBC verursacht zwar keinen direkten Cash-Abfluss, kann bestehende Aktionäre jedoch durch die Ausgabe zusätzlicher Aktien verwässern. Deshalb wird SBC bei dieser Variante vom Free Cashflow abgezogen.
🧮 Wie wird es berechnet?
EV/FCF ex SBC = Enterprise Value ÷ (Free Cashflow (TTM) − SBC)
🏛️ Wofür ist es wichtig?
EV/FCF ermöglicht eine Bewertung auf Basis des Free Cashflows und ergänzt damit gewinnbasierte Bewertungskennzahlen wie das KGV. Die Variante ex SBC berücksichtigt zusätzlich die wirtschaftliche Belastung durch aktienbasierte Vergütungen und ermöglicht dadurch eine konservativere Betrachtung aus Sicht der Aktionäre.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein niedriges EV/FCF bedeutet, dass der Unternehmenswert im Verhältnis zum aktuellen Free Cashflow niedrig ist. Die Ursachen dafür sollten jedoch immer im Unternehmens- und Branchenkontext betrachtet werden.
- Ein hohes EV/FCF bedeutet, dass der Unternehmenswert im Verhältnis zum aktuellen Free Cashflow hoch ist. Das kann beispielsweise auf hohe Wachstumserwartungen oder eine vorübergehend schwache Cash-Generierung zurückzuführen sein.
- Bei positiver SBC und positivem bereinigtem Free Cashflow fällt EV/FCF ex SBC in der Regel höher aus als das klassische EV/FCF.
- Besonders aussagekräftig ist die Kennzahl bei Unternehmen mit relativ stabilen und gut einschätzbaren Cashflows.
- Bei negativem oder sehr niedrigem Free Cashflow ist EV/FCF nur eingeschränkt aussagekräftig und sollte nicht wie ein gewöhnliches Bewertungsmultiple interpretiert werden.
📘 Kurs-Buchwert-Verhältnis (KBV)
📈 Was ist das?
Das KBV zeigt, wie hoch der Marktwert eines Unternehmens im Verhältnis zu seinem bilanziellen Eigenkapital ist.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Das KBV ist besonders bei Substanzwerten (z. B. Banken, Industrie) relevant. Es hilft Anlegern zu erkennen, ob ein Unternehmen unter oder über seinem buchhalterischen Vermögen bewertet ist.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein KBV unter 1 kann auf Unterbewertung oder schwache Rentabilität hindeuten.
- Ein KBV über 1 zeigt, dass der Markt dem Unternehmen Mehrwert über den Buchwert hinaus zuschreibt (z. B. Marken, Patente, Wachstum).
- Das KBV eignet sich besonders gut für Unternehmen mit stabilen, materiellen Vermögenswerten.
📘 Dividende je Aktie
📈 Was ist das?
Die Dividende je Aktie zeigt, wie viel Geld ein Unternehmen pro Aktie an seine Aktionäre ausschüttet – typischerweise jährlich oder quartalsweise.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie ist die absolute Größe der Auszahlung je Aktie – wichtig für alle, die regelmäßige Erträge suchen oder Dividendenstrategien verfolgen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine stabile oder wachsende Dividende je Aktie ist oft ein Zeichen für ein solides Geschäftsmodell.
- Die Dividende je Aktie allein sagt aber nichts über die Rendite – dafür ist auch der Aktienkurs relevant (→ Dividendenrendite).
- Langfristig steigende Dividenden sind oft ein sehr gutes Merkmal (z. B. Dividenden-Aristokraten).
📘 Dividendenrendite
📈 Was ist das?
Die Dividendenrendite zeigt, wie hoch die Dividende eines Unternehmens im Verhältnis zum Aktienkurs ist.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie hilft dabei, Dividendenaktien vergleichbar zu machen – unabhängig vom absoluten Auszahlungsbetrag.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine stabile Dividendenrendite kann auf verlässliche Ausschüttungen hinweisen.
- Ein Vergleich der 1J- und 5J-Rendite hilft zu erkennen, ob das Dividendenwachstum mit dem Kurswachstum Schritt hält.
- Eine niedrige Rendite ist nicht zwingend negativ – sie kann auf starkes Kurswachstum hindeuten.
📘 Dividendenwachstum
📈 Was ist das?
Das Dividendenwachstum zeigt, wie stark ein Unternehmen seine Dividende je Aktie über die Zeit gesteigert hat.
🧮 Wie wird es berechnet?
5J: durchschnittliche jährliche Wachstumsrate (CAGR)
🏛️ Wofür ist es wichtig?
Stetig steigende Dividenden gelten als Zeichen für finanzielle Stärke und Aktionärsorientierung – besonders interessant für langfristige Investoren.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein stabiles Dividendenwachstum ist ein Zeichen nachhaltiger Ertragskraft.
- Ein hohes Dividendenwachstum kann ein erheblicher Hebel deiner Rendite sein:
- Wenn ein Unternehmen z. B. 1 € Dividende zahlt und diese über 5 Jahre jährlich um 15 % erhöht, bekommst du im 5. Jahr bereits 2 € je Aktie – doppelt so viel wie zu Beginn!
📘 Ausschüttungsquote (Payout)
📈 Was ist das?
Die Ausschüttungsquote zeigt, wie viel Prozent des Unternehmensgewinns (pro Aktie) als Dividende an die Aktionäre ausgeschüttet wird.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Quote hilft einzuschätzen, ob eine Dividende auf Dauer tragfähig ist – besonders im Verhältnis zum erzielten Gewinn.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine niedrige Ausschüttungsquote bedeutet: Das Unternehmen behält einen größeren Teil des Gewinns für Investitionen – typisch für Wachstumsunternehmen.
- Eine moderate Quote (z. B. 25–50 %) steht oft für ein gesundes Gleichgewicht zwischen Ausschüttung und Zukunftsinvestitionen.
- Hohe Ausschüttungsquoten können attraktiv wirken, sind aber riskanter, wenn die Gewinne schwanken oder sinken.
📘 Dividendensteigerungen in Folge (Erhöhungen)
📈 Was ist das?
Diese Kennzahl zeigt, wie viele Jahre in Folge ein Unternehmen seine Dividende pro Aktie erhöht hat – ohne Kürzung oder Aussetzung.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Ein langer Track Record kontinuierlicher Erhöhungen spricht für Verlässlichkeit, solide Finanzen und aktionärsfreundliche Unternehmenspolitik.
🎯 Was bedeutet das für Anleger?
- Ein langer Zeitraum mit Dividendensteigerungen stärkt das Vertrauen – besonders in Krisenzeiten.
- Solche Unternehmen gelten als verlässlich und planbar für Einkommensinvestoren.
- Je länger die Serie, desto stärker das Commitment gegenüber den Aktionären.
📘 Umsatz
📈 Was ist das?
Der Umsatz zeigt, wie viel ein Unternehmen insgesamt mit seinen Produkten und Dienstleistungen verdient – also den Bruttoerlös vor Abzug von Kosten.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Der Umsatz ist eine der zentralen Kennzahlen zur Einschätzung der Unternehmensgröße, Marktstellung und Wachstumskraft.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein wachsender Umsatz zeigt eine steigende Nachfrage und kann ein guter Frühindikator für Gewinnsteigerungen sein.
- Vergleiche von aktuellem und erwartetem Umsatz geben Hinweise auf das Marktumfeld und Analystenerwartungen.
- Wichtig: Starker Umsatz allein genügt nicht – auch Margen und Profitabilität zählen.
📘 EBITDA
📈 Was ist das?
EBITDA steht für „Earnings Before Interest, Taxes, Depreciation and Amortization“ – also Gewinn vor Zinsen, Steuern und Abschreibungen. Es zeigt das operative Ergebnis eines Unternehmens, bereinigt um bilanztechnische und finanzierungsbedingte Effekte.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
EBITDA ist eine verbreitete Kennzahl zur Beurteilung der operativen Leistungsfähigkeit – insbesondere bei kapitalintensiven Unternehmen oder im internationalen Vergleich.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hohes oder wachsendes EBITDA spricht für starke operative Erträge – unabhängig von Bilanzierung oder Steuerlast.
- EBITDA ist besonders nützlich, um Unternehmen branchenübergreifend zu vergleichen.
- Wichtig: EBITDA ist keine offizielle Gewinnkennzahl – Abschreibungen und Finanzierungskosten werden ausgeklammert.
📘 EBIT
📈 Was ist das?
EBIT steht für „Earnings Before Interest and Taxes“ – also Gewinn vor Zinsen und Steuern. Es zeigt das operative Ergebnis eines Unternehmens nach Abschreibungen, aber vor Finanzierungs- und Steueraufwand.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
EBIT ist eine zentrale Kennzahl zur Beurteilung der Profitabilität aus dem Kerngeschäft – unabhängig von Kapitalstruktur oder Steuersystem.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hohes EBIT deutet auf ein profitables Kerngeschäft hin – vor Zinslasten oder steuerlichen Effekten.
- Es erlaubt objektivere Vergleiche zwischen Unternehmen mit unterschiedlicher Finanzierung.
- Im Vergleich mit EBITDA zeigt EBIT bereits den Einfluss von Abschreibungen auf das operative Ergebnis.
📘 Nettogewinn
📈 Was ist das?
Der Nettogewinn ist der verbleibende Jahresüberschuss (oder -fehlbetrag) eines Unternehmens – nach Abzug aller Kosten, Steuern, Zinsen und Abschreibungen
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Der Nettogewinn ist die zentrale Erfolgskennzahl – er zeigt, wie profitabel ein Unternehmen nach allen Kosten tatsächlich arbeitet.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein steigender Nettogewinn zeigt, dass das Unternehmen effizient wirtschaftet – trotz aller Kosten.
- Die Entwicklung des Gewinns beeinflusst z. B. direkt das KGV und weitere Kennzahlen.
- Im Zeitverlauf lässt sich ablesen, wie stabil und profitabel ein Geschäftsmodell wirklich ist.
📘 Free Cashflow (FCF) | ex SBC
📈 Was ist das?
Der Free Cashflow gibt an, wie viel Bargeld tatsächlich übrig bleibt, nachdem ein Unternehmen seine Betriebsausgaben und Investitionsausgaben gedeckt hat. Der FCF ex SBC zieht zusätzlich die aktienbasierte Vergütung ab, um den Cashflow um den Effekt der nicht zahlungswirksamen SBC zu bereinigen.
🧮 Wie wird es berechnet?
Free Cashflow ex SBC = Operativer Cashflow − SBC − Investitionen in Sachanlagen (CAPEX)
🏛️ Wofür ist es wichtig?
Der FCF spiegelt die tatsächliche Finanzkraft eines Unternehmens wider – unabhängig von den bilanziellen Gewinnen. Er zeigt, wie viel Spielraum ein Unternehmen für Dividenden, Aktienrückkäufe oder den Schuldenabbau hat. Der FCF ex SBC zieht zusätzlich die aktienbasierte Vergütung ab und zeigt, wie hoch die Cash-Generierung nach Abzug der SBC ausfällt.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher Free Cashflow bedeutet, dass ein Unternehmen echte Finanzkraft besitzt – unabhängig vom bilanzierten Gewinn.
- Er ist oft die solideste Grundlage für nachhaltige Dividenden und Aktienrückkäufe.
- Sinkender FCF kann ein Warnsignal sein – auch wenn der Gewinn stabil aussieht.
📘 Umsatzwachstum
📈 Was ist das?
Das Umsatzwachstum zeigt, wie stark sich die Erlöse eines Unternehmens im Vergleich zum Vorjahr verändert haben – tatsächlich (TTM) und auf Prognosebasis (erwartet).
🧮 Wie wird es berechnet?
Erwartet = (Umsatz erwartet ÷ Umsatz Vorjahr − 1) × 100
Erwartetes Wachstum basiert auf Analystenschätzungen für das laufende Geschäftsjahr.
🏛️ Wofür ist es wichtig?
Ein wachsender Umsatz ist ein zentrales Signal für steigende Nachfrage, Geschäftsausweitung und Marktanteilsgewinne – besonders bei Wachstumsunternehmen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Wachstum ist der Motor langfristiger Wertsteigerung – besonders bei Technologie- und Wachstumsaktien.
- Wichtig ist nicht nur das aktuelle Wachstum, sondern auch dessen Nachhaltigkeit.
- Prognosen zeigen, ob Analysten weiteres Potenzial erwarten – oder eine Verlangsamung.
📘 EBITDA-Wachstum
📈 Was ist das?
Das EBITDA-Wachstum zeigt, wie stark das operative Ergebnis eines Unternehmens vor Zinsen, Steuern und Abschreibungen im Vergleich zum Vorjahr gestiegen oder gesunken ist.
🧮 Wie wird es berechnet?
Erwartet = (erwartetes EBITDA ÷ EBITDA Vorjahr − 1) × 100
Erwartetes Wachstum basiert auf Analystenschätzungen für das laufende Geschäftsjahr.
🏛️ Wofür ist es wichtig?
Ein steigendes EBITDA ist ein Zeichen für verbesserte operative Ertragskraft – unabhängig von Finanzierungsstruktur oder Abschreibungen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Starkes EBITDA-Wachstum signalisiert operative Effizienz und Skalierung – besonders relevant in Wachstumsphasen.
- EBITDA-Wachstum ist ein Frühindikator für Margen- und Gewinnentwicklung – sollte aber stets im Zusammenhang mit Umsatz und EBIT betrachtet werden.
📘 EBIT Wachstum
📈 Was ist das?
Das EBIT-Wachstum zeigt, wie stark das operative Ergebnis eines Unternehmens (nach Abschreibungen, aber vor Zinsen und Steuern) im Vergleich zum Vorjahr gewachsen ist.
🧮 Wie wird es berechnet?
Erwartet = (erwartetes EBIT ÷ EBIT Vorjahr − 1) × 100
Erwartetes Wachstum basiert auf Analystenschätzungen für das laufende Geschäftsjahr.
🏛️ Wofür ist es wichtig?
Das EBIT-Wachstum ist ein direkter Indikator für die wirtschaftliche Entwicklung des operativen Geschäfts – unter Berücksichtigung der Kapitalintensität (Abschreibungen).
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Steigendes EBIT signalisiert wachsende operative Rentabilität – auch unter Berücksichtigung von Abschreibungen.
- Das EBIT-Wachstum ist ein wichtiges Maß zur Beurteilung von Geschäftsmodellen mit hohen Investitionskosten.
- Im Zusammenspiel mit Umsatz- und EBITDA-Wachstum ergibt sich ein umfassendes Bild zur operativen Entwicklung.
📘 Nettogewinn-Wachstum
📈 Was ist das?
Das Nettogewinn-Wachstum zeigt, wie stark der Jahresüberschuss eines Unternehmens gegenüber dem Vorjahr gestiegen oder gesunken ist – sowohl tatsächlich (TTM) als auch auf Basis von Prognosen (erwartet).
🧮 Wie wird es berechnet?
Erwartet = (erwarteter Nettogewinn ÷ Nettogewinn Vorjahr − 1) × 100
Der erwartete Wert basiert auf Analystenschätzungen für das laufende Geschäftsjahr.
🏛️ Wofür ist es wichtig?
Der Gewinn ist die entscheidende Ergebnisgröße für ein Unternehmen. Ein wachsender Nettogewinn deutet auf steigende Effizienz, stabile Kostenkontrolle und nachhaltige Ertragskraft hin.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Wachsender Nettogewinn stärkt die Bewertung, Dividendenfähigkeit und Kursfantasie.
- Stagnierender oder rückläufiger Gewinn trotz Umsatzwachstum kann auf Margendruck hinweisen.
📘 Free Cashflow-Wachstum
📈 Was ist das?
Das Free-Cashflow-Wachstum zeigt, wie sich der freie Mittelzufluss eines Unternehmens im Vergleich zum Vorjahr verändert hat – also der Betrag, der nach allen operativen Ausgaben und Investitionen übrig bleibt.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Free Cashflow ist der echte, verfügbare Geldzufluss. Wachstum in diesem Bereich ist ein Zeichen für finanzielle Stärke und steigende Flexibilität bei Dividenden, Rückkäufen oder Investitionen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Sinkender Free Cashflow kann auf steigende Investitionen, höhere Kosten oder stagnierende operative Erträge hindeuten.
- Besonders bei Dividendenwerten ist das FCF-Wachstum wichtig – denn Dividenden werden letztlich aus dem verfügbaren Cash gezahlt.
- Ein negativer Trend sollte genauer analysiert werden – er ist nicht zwangsläufig schlecht, aber potenziell ein Warnsignal.
📘 Bruttomarge
📈 Was ist das?
Die Bruttomarge zeigt, wie viel vom Umsatz nach Abzug der direkten Herstellungskosten (Material, Produktion) als Bruttogewinn übrig bleibt – also der „Rohgewinn“ eines Unternehmens.
🧮 Wie wird es berechnet?
Auch: Bruttomarge = Bruttogewinn ÷ Umsatz × 100
🏛️ Wofür ist es wichtig?
Die Bruttomarge gibt Aufschluss über die Profitabilität eines Produkts oder Geschäftsmodells vor Fixkosten, Steuern und Zinsen. Sie zeigt, wie effizient ein Unternehmen produzieren oder einkaufen kann.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe Bruttomarge deutet auf starke Preissetzungsmacht und effiziente Herstellung hin.
- Sinkende Bruttomargen können auf Kostensteigerungen oder Preisdruck hindeuten.
- Besonders im Vergleich zu Wettbewerbern liefert die Bruttomarge wertvolle Einblicke in die Geschäftsqualität.
📘 EBITDA-Marge
📈 Was ist das?
Die EBITDA-Marge zeigt, wie viel vom Umsatz als operativer Gewinn vor Zinsen, Steuern und Abschreibungen (EBITDA) übrig bleibt. Sie misst die operative Effizienz – ohne Verzerrungen durch Finanzierung oder Buchwerte.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die EBITDA-Marge hilft zu verstehen, wie viel operativer Gewinn ein Unternehmen aus jedem Euro Umsatz erzielt – unabhängig von Kapitalstruktur oder steuerlichem Umfeld.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe EBITDA-Marge zeigt starke operative Ertragskraft – unabhängig von Bilanzierungseffekten.
- Die Marge ermöglicht gute Vergleiche zwischen Unternehmen und Branchen.
- Ein stabiler oder wachsender Wert kann auf effiziente Kostenkontrolle und Skalierbarkeit hindeuten.
📘 EBIT-Marge
📈 Was ist das?
Die EBIT-Marge zeigt, wie viel Prozent des Umsatzes als operativer Gewinn nach Abschreibungen, aber vor Zinsen und Steuern übrig bleiben.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die EBIT-Marge misst die operative Ertragskraft eines Unternehmens unter Berücksichtigung der Kapitalintensität (z. B. Maschinen, Anlagen). Sie eignet sich gut zum Vergleich von Geschäftsmodellen mit unterschiedlich hohen Abschreibungen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe EBIT-Marge zeigt, dass ein Unternehmen auch nach Abschreibungen effizient arbeitet.
- Sie ist besonders relevant in kapitalintensiven Branchen.
- Langfristig stabile oder steigende Margen sind ein Zeichen wirtschaftlicher Stärke und Preissetzungsmacht.
📘 Nettomarge
📈 Was ist das?
Die Nettomarge zeigt, wie viel vom Umsatz am Ende als „Reingewinn“ übrig bleibt – also nach Abzug aller Kosten, Zinsen, Steuern und Abschreibungen.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Nettomarge gibt an, wie effizient ein Unternehmen über alle Stufen hinweg wirtschaftet. Sie zeigt, wie viel Gewinn tatsächlich je Euro Umsatz übrig bleibt.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe Nettomarge zeigt, dass ein Unternehmen nicht nur operativ stark ist, sondern auch seine Finanzierung und Steuerbelastung im Griff hat.
- Vergleiche mit Wettbewerbern geben Einblicke in die wirtschaftliche Qualität.
- Sinkende Nettomargen trotz Umsatzwachstum können ein Warnsignal sein – etwa für steigende Kosten oder sinkende Effizienz.
📘 Free-Cashflow-Marge | ex SBC
📈 Was ist das?
Die Free-Cashflow-Marge zeigt, wie viel Free Cashflow ein Unternehmen im Verhältnis zu seinem Umsatz erwirtschaftet. Der Free Cashflow entspricht vereinfacht dem operativen Cashflow abzüglich der Investitionsausgaben. Die Free-Cashflow-Marge ex SBC berücksichtigt zusätzlich aktienbasierte Vergütungen (Stock-Based Compensation, SBC). SBC verursacht zwar keinen direkten Cash-Abfluss, kann bestehende Aktionäre jedoch durch die Ausgabe zusätzlicher Aktien verwässern. Daher wird SBC bei dieser Kennzahl vom Free Cashflow abgezogen.
🧮 Wie wird es berechnet?
Free-Cashflow-Marge ex SBC = (Free Cashflow − SBC) ÷ Umsatz × 100
🏛️ Wofür ist es wichtig?
Die Free-Cashflow-Marge zeigt, wie effizient ein Unternehmen seinen Umsatz in Free Cashflow umwandelt. Ein hoher Free Cashflow kann dem Unternehmen finanziellen Spielraum für Dividenden, Aktienrückkäufe, Schuldentilgung oder weitere Investitionen geben. Die Variante ex SBC berücksichtigt zusätzlich die wirtschaftliche Belastung durch aktienbasierte Vergütungen und ermöglicht dadurch eine konservativere Betrachtung der Cash-Generierung aus Sicht der Aktionäre.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe Free-Cashflow-Marge zeigt, dass ein Unternehmen einen hohen Anteil seines Umsatzes in Free Cashflow umwandelt.
- Das kann dem Unternehmen mehr finanziellen Spielraum für Dividenden, Aktienrückkäufe, Schuldentilgung oder Investitionen geben.
- Die Free-Cashflow-Marge ex SBC berücksichtigt zusätzlich die mögliche Verwässerung durch aktienbasierte Vergütungen.
- Besonders aussagekräftig ist die Entwicklung über mehrere Jahre. Sinkende Werte können beispielsweise auf höhere Investitionen, Veränderungen im Working Capital oder eine schwächere operative Entwicklung zurückzuführen sein.
📘 Eigenkapitalquote
📈 Was ist das?
Die Eigenkapitalquote zeigt, wie hoch der Anteil des Eigenkapitals an der Bilanzsumme eines Unternehmens ist – also wie stark es sich aus eigenen Mitteln finanziert.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Eine hohe Eigenkapitalquote steht für finanzielle Stabilität, Krisenfestigkeit und gute Bonität. Sie ist besonders relevant bei der Beurteilung der Verschuldung.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe Eigenkapitalquote signalisiert finanzielle Stabilität – besonders in Krisenzeiten.
- Ein niedriger Wert kann auf ein höheres Risiko oder eine aggressive Verschuldung hinweisen.
- Wichtig: Die Eigenkapitalquote sollte immer gemeinsam mit der Eigenkapitalrendite betrachtet werden. Nur so lässt sich beurteilen, ob ein Unternehmen nicht nur solide, sondern auch effizient wirtschaftet.
📘 Eigenkapitalrendite (ROE)
📈 Was ist das?
Die Eigenkapitalrendite zeigt, wie effizient ein Unternehmen mit dem Kapital seiner Aktionäre arbeitet – also wie viel Gewinn es pro Euro Eigenkapital erwirtschaftet.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Eigenkapitalrendite ist eine zentrale Rentabilitätskennzahl. Sie hilft Anlegern zu erkennen, ob das Unternehmen eine attraktive Verzinsung auf das eingesetzte Eigenkapital erwirtschaftet.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Eine hohe Eigenkapitalrendite spricht für ein starkes, effizientes Geschäftsmodell.
- Besonders interessant ist sie bei kapitalintensiven Firmen oder solchen mit hoher Eigenkapitalquote.
- Wichtig: Ein sehr hoher ROE kann auch auf hohe Schulden hinweisen – daher sollte sie immer im Kontext mit der Eigenkapitalquote betrachtet werden.
📘 Return on Capital Employed (ROCE)
📈 Was ist das?
ROCE misst die Gesamtrentabilität eines Unternehmens – also wie effizient es das eingesetzte Kapital (Eigen- und Fremdkapital) zur Gewinnerzielung nutzt.
🧮 Wie wird es berechnet?
Das eingesetzte Kapital ist das gesamte betriebsnotwendige Kapital, unabhängig von der Finanzierungsquelle.
🏛️ Wofür ist es wichtig?
ROCE eignet sich besonders gut für den Vergleich unterschiedlich finanzierter Unternehmen. Es zeigt, wie effektiv ein Unternehmen Kapital investiert – unabhängig von der Kapitalstruktur.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher ROCE zeigt, dass ein Unternehmen sein Kapital effizient einsetzt – unabhängig davon, ob es durch Eigen- oder Fremdkapital finanziert ist.
- Je höher der ROCE im Vergleich zu ähnlichen Unternehmen, desto mehr Wert schafft das Unternehmen mit seinem investierten Kapital.
- Besonders wichtig ist der ROCE bei Firmen mit hohen Investitionen – z. B. in Industrie, Energie oder Infrastruktur.
📘 Return on Invested Capital (ROIC)
📈 Was ist das?
ROIC zeigt, wie effizient ein Unternehmen das Kapital investiert, das langfristig im operativen Geschäft gebunden ist – unabhängig davon, ob es aus Eigen- oder Fremdkapital stammt.
🧮 Wie wird es berechnet?
- NOPAT = „Net Operating Profit After Taxes“
- Investiertes Kapital = operatives Vermögen abzüglich nicht-verzinster Schulden
🏛️ Wofür ist es wichtig?
ROIC ist eine der präzisesten Kennzahlen zur Bewertung der Kapitalrendite – besonders im Vergleich zur Eigenkapitalrendite, weil es Verzerrungen durch Schulden vermeidet. Er zeigt, ob ein Unternehmen Mehrwert für alle Kapitalgeber schafft.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher ROIC zeigt, wie gut ein Unternehmen mit dem tatsächlich investierten (betriebsnotwendigen) Kapital wirtschaftet.
- Im Unterschied zu ROCE wird nur Kapital betrachtet, das wirklich zur Finanzierung operativer Aktivitäten dient – und verzinst werden muss.
- Besonders hilfreich, um die Kapitalrendite von Unternehmen mit viel „überschüssigem“ Kapital oder zinsfreien Verbindlichkeiten realistisch zu vergleichen.
📘 Verschuldungsgrad (Leverage Ratio)
📈 Was ist das?
Der Verschuldungsgrad zeigt, wie stark ein Unternehmen durch verzinsliche Schulden (z. B. Kredite und Anleihen) im Verhältnis zum Eigenkapital finanziert ist.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Kennzahl hilft, das finanzielle Risiko und die Abhängigkeit von Fremdkapital zu beurteilen. Ein hoher Verschuldungsgrad kann die Eigenkapitalrendite steigern – birgt aber auch erhöhte Risiken bei Zinsanstiegen oder Liquiditätsengpässen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein niedriger Verschuldungsgrad steht für finanzielle Stabilität und Unabhängigkeit.
- Ein hoher Wert kann auf erhöhte Risiken hinweisen – insbesondere bei schwankenden Zinsen oder konjunkturellen Schwächen.
- Wichtig: Immer im Kontext zur Branche und Kapitalintensität bewerten.
📘 SBC | in % Umsatz
📈 Was ist das?
SBC (Stock-Based Compensation) bezeichnet die aktienbasierte Vergütung, die ein Unternehmen seinen Mitarbeitern und Führungskräften gewährt. Der Prozentanteil zeigt, wie hoch die SBC im Verhältnis zum Umsatz ist.
🧮 Wie wird es berechnet?
SBC in % Umsatz = (SBC ÷ Umsatz) × 100
🏛️ Wofür ist es wichtig?
Aktienbasierte Vergütung ist für Aktionäre ein realer Kostenfaktor. Sie erhöht die Aktienanzahl und verwässert damit die bestehenden Anteile. Der Anteil am Umsatz zeigt, wie stark ein Unternehmen auf dieses Mittel setzt und wie viel der Wertschöpfung an Mitarbeiter statt an Aktionäre fließt.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein niedriger Wert ist grundsätzlich positiv: Die aktienbasierte Vergütung fällt im Verhältnis zum Umsatz gering aus.
- Ein hoher Wert kann dagegen auf eine stärkere Abhängigkeit von aktienbasierter Vergütung und ein höheres potenzielles Verwässerungsrisiko hindeuten. Entscheidend ist dabei auch, ob das Unternehmen die Verwässerung durch Aktienrückkäufe ausgleicht.
📘 SBC in % FCF
📈 Was ist das?
SBC (Stock-Based Compensation) bezeichnet die aktienbasierte Vergütung, die ein Unternehmen seinen Mitarbeitern und Führungskräften gewährt. Der Prozentanteil zeigt, wie hoch die SBC im Verhältnis zum Free Cashflow (FCF) ist.
🧮 Wie wird es berechnet?
SBC in % FCF = (SBC ÷ Free Cashflow) × 100
🏛️ Wofür ist es wichtig?
Aktienbasierte Vergütung ist für Aktionäre ein realer Kostenfaktor. Sie erhöht die Aktienanzahl und verwässert damit die bestehenden Anteile. Der Anteil am freien Cashflow zeigt, wie groß die SBC im Verhältnis zur vom Unternehmen erwirtschafteten Cash-Generierung ist. Da SBC nicht zahlungswirksam ist, wird sie bei der Berechnung des FCF typischerweise nicht als Cash-Abfluss berücksichtigt.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein niedriger Wert ist hier meist günstig. Die aktienbasierte Vergütung fällt im Verhältnis zur Cash-Erzeugung gering aus.
- Ein hoher Wert bedeutet, dass ein großer Teil des ausgewiesenen freien Cashflows durch nicht zahlungswirksame SBC gestützt wird.
- Je höher der Wert, desto stärker kann die SBC die tatsächliche wirtschaftliche Belastung für Aktionäre widerspiegeln.
📘 SBC-Wachstum 1J
📈 Was ist das?
Das SBC-Wachstum 1J zeigt, wie stark sich die aktienbasierte Vergütung (Stock-Based Compensation) eines Unternehmens im Vergleich zum Vorjahr verändert hat.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Das SBC-Wachstum zeigt, ob die aktienbasierte Vergütung für Aktionäre zunehmend oder abnehmend relevant wird. Steigt die SBC deutlich, kann dadurch langfristig auch die Verwässerung der Aktionäre zunehmen. Gleichzeitig handelt es sich um einen nicht zahlungswirksamen Aufwand, der in der Gewinn- und Verlustrechnung das Ergebnis mindert, in der Kapitalflussrechnung jedoch wieder hinzugerechnet wird.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher positiver Wert ist meistens negativ, denn steigende SBC kann die Belastung für Aktionäre erhöhen, insbesondere durch mögliche Verwässerung.
- Entscheidend ist, ob die Entwicklung der SBC langfristig nachhaltig bleibt. Ein gewisses Maß an SBC ist bei vielen Wachstums- und Technologieunternehmen üblich.
📘 Aktienanzahl-Wachstum 1J
📈 Was ist das?
Das Wachstum der Aktienanzahl zeigt, wie stark sich die Zahl der ausstehenden Aktien innerhalb eines Jahres verändert hat.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Aktienanzahl bestimmt, auf wie viele Anteile sich Gewinn und Vermögen des Unternehmens verteilen. Sinkt die Anzahl der Aktien, steigt der relative Anteil bestehender Aktionäre. Steigt sie, werden bestehende Aktionäre verwässert. Die Kennzahl macht damit Verwässerung und Aktienrückkäufe direkt sichtbar.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein negativer Wert ist meist positiv, da die Zahl der ausstehenden Aktien zurückgeht.
- Ein positiver Wert deutet auf eine Verwässerung bestehender Aktionäre hin.
- Ein sinkender Wert ist nicht automatisch positiv: Entscheidend ist auch, zu welchem Preis und wie die Rückkäufe finanziert werden.
📘 Shareholder Yield
📈 Was ist das?
Der Shareholder Yield zeigt, wie viel Wert ein Unternehmen im Verhältnis zu seiner Marktkapitalisierung durch Dividenden, Aktienrückkäufe und Schuldenabbau für seine Aktionäre schafft. Damit geht die Kennzahl über die klassische Dividendenrendite hinaus.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Die Dividendenrendite allein zeigt nur einen Teil davon, wie ein Unternehmen sein Kapital zugunsten der Aktionäre einsetzt. Neben Dividenden können auch Aktienrückkäufe den Anteil bestehender Aktionäre am Unternehmen erhöhen. Ein Abbau der Verschuldung stärkt zusätzlich die finanzielle Position des Unternehmens. Der Shareholder Yield fasst diese drei Komponenten in einer Kennzahl zusammen.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein höherer Wert bedeutet mehr Kapitalrückgabe bzw. einen stärkeren Schuldenabbau zugunsten der Aktionäre.
- Die Zusammensetzung ist wichtig: Dividenden, Rückkäufe und Schuldenabbau haben unterschiedliche Auswirkungen.
- Rückkäufe schaffen nur dann Wert, wenn die Aktien zu attraktiven Preisen zurückgekauft werden.
- Entscheidend ist auch, ob die Kapitalrückgaben und der Schuldenabbau nachhaltig finanziert werden.
📘 Ergebnis je Aktie (EPS)
📈 Was ist das?
Das Ergebnis je Aktie (EPS) zeigt, wie viel Gewinn auf eine einzelne Aktie entfällt – und ist eine der wichtigsten Kennzahlen zur Bewertung von Unternehmen.
🧮 Wie wird es berechnet?
Die verwässerte Aktienanzahl berücksichtigt auch potenzielle neue Aktien, etwa durch Optionen, Wandelanleihen oder andere Umtauschrechte.
🏛️ Wofür ist es wichtig?
EPS bildet die Basis für viele Bewertungskennzahlen wie KGV, PEG oder Payout Ratio. Es macht den Gewinn für Aktionäre vergleichbar – unabhängig von der Unternehmensgröße.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- EPS hilft, die Profitabilität pro Aktie zu erfassen – und ist besonders wichtig im Zeitvergleich oder im Vergleich mit Analystenschätzungen.
- Steigendes EPS kann ein Zeichen für stabiles Wachstum oder Aktienrückkäufe sein.
- Wichtig: Verwende verwässertes EPS für realistische Bewertungen – besonders bei stark aktienbasierten Vergütungssystemen.
📘 Free Cashflow je Aktie (FCF je Aktie)
📈 Was ist das?
Der Free Cashflow je Aktie zeigt, wie viel freier Mittelzufluss einem Unternehmen pro Aktie zur Verfügung steht – nach Investitionen, aber vor Dividenden oder Schuldentilgung.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Der FCF je Aktie zeigt, wie viel liquide Mittel pro Aktie tatsächlich im Unternehmen verbleiben – wichtig für Dividenden, Aktienrückkäufe oder Schuldentilgung. Im Gegensatz zum Gewinn ist er schwerer manipulierbar und daher besonders aussagekräftig.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher Free Cashflow je Aktie ist ein Zeichen für hohe finanzielle Flexibilität.
- Er zeigt, wie viel Kapital ein Unternehmen effektiv einsetzen oder ausschütten kann.
- Besonders relevant für dividendenstarke Unternehmen oder solche mit starker Kapitalrendite.
📘 Short Interest
📈 Was ist das?
Short Interest zeigt, wie viele Aktien eines Unternehmens aktuell leerverkauft wurden – also von Investoren geliehen und verkauft, in der Erwartung fallender Kurse.
🧮 Wie wird es berechnet?
Der Wert zeigt den Anteil der Aktien, der aktuell auf fallende Kurse spekuliert wird.
🏛️ Wofür ist es wichtig?
Short Interest dient als Stimmungsindikator: Ein hoher Wert deutet auf Skepsis oder negative Erwartungen gegenüber dem Unternehmen hin – kann aber auch zu einem „Short Squeeze“ führen, wenn der Kurs plötzlich steigt.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein niedriger Short Interest deutet auf Vertrauen in das Unternehmen hin.
- Ein hoher Wert kann ein Warnsignal sein – oder eine Chance, wenn sich die Stimmung dreht.
- Besonders spannend in volatilen Märkten oder vor wichtigen Quartalszahlen.
📘 Employees
📈 Was ist das?
Die Mitarbeiteranzahl zeigt, wie viele Personen ein Unternehmen weltweit beschäftigt – ein Indikator für Größe, Struktur und Geschäftsmodell.
🧮 Wie wird es berechnet?
🏛️ Wofür ist es wichtig?
Sie hilft bei der Einschätzung von Skaleneffekten, Effizienz und Personalkosten. Zusammen mit Umsatz und Gewinn lassen sich Kennzahlen wie Produktivität je Mitarbeiter ableiten.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Viele Mitarbeiter bedeuten große operative Komplexität – aber auch hohes Umsatzpotenzial.
- Produktivität je Mitarbeiter ist ein wichtiger Indikator für Effizienz.
- Besonders spannend bei stark wachsenden Tech- oder Industrieunternehmen.
📘 Umsatz je Mitarbeiter
📈 Was ist das?
Der Umsatz je Mitarbeiter zeigt, wie viel Erlös ein Unternehmen durchschnittlich pro Beschäftigtem erwirtschaftet – eine Kennzahl für Effizienz und Produktivität.
🧮 Wie wird es berechnet?
Die Mitarbeiterzahl stammt in der Regel aus dem letzten verfügbaren Jahresbericht.
🏛️ Wofür ist es wichtig?
Diese Kennzahl hilft, Geschäftsmodelle zu vergleichen – insbesondere zwischen arbeitsintensiven und technologiegetriebenen Unternehmen. Ein hoher Wert deutet auf Automatisierung, Effizienz oder hohen Wertschöpfungsanteil hin.
🧮 Berechnung
🎯 Was bedeutet das für Anleger?
- Ein hoher Umsatz je Mitarbeiter spricht für ein skalierbares und margenstarkes Geschäftsmodell.
- Ein niedriger Wert kann auf arbeitsintensive Prozesse oder geringere Wertschöpfung hinweisen.
- Besonders hilfreich beim Vergleich von Tech- vs. Industrieunternehmen.
Avery Dennison Aktie Analyse
Analystenmeinungen
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Analystenmeinungen
17 Analysten haben eine Avery Dennison Prognose abgegeben:
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Avery Dennison — Special Call - Avery Dennison Corporation
1. Management Discussion
Good morning, everyone. Welcome to Avery Dennison's 2026 high-value category Showcase. I think you all know me, but I'm Willie Gilchrist, Vice President of Investor Relations. It's great to see you here today at our headquarters in manner. We're excited to feature our high-value categories and their strategic importance to our financial objectives. Today's presentation materials are available on our website. And the presentation is being recorded. A replay will be available later this afternoon.
Before we dive in, a couple of important reminders for you all. For those joining us in person, you received an embellix digital activation trigger patch -- when you checked in, if you tap it with your phone, it bring you to a access today's agenda, presentation slides, showcase demonstration, speaker bios and more information event. Couple of other things to note. Although we do not anticipate any emergencies here today, for those of you in the room with us, in the event there is an emergency, please evacuate the building. You'll see a map here, got fines holes 1 and 2 in the parking lot, and that's going to keep you safe.
Second thing is, in addition, please note that throughout today's discussion, we'll be making references non-GAAP financial measures. The non-GAAP financial measures that we use are defined and qualified and reconciled from GAAP in the appendix of the presentation. I remind you that we'll be making certain predictive statements that reflect our current views about our future performance and financial results. These forward-looking statements are made subject to the safe harbor [indiscernible].
Finally, we have a great agenda here for you today. We're all thrilled about this and very excited. You'll be hearing from Dean and Greg and several other leaders on the strategic importance of higher categories. We'll take you through each of these high categories over the next about 90 minutes, and then we'll invite everyone back up on stage for Q1. After that, we'll have lunch, and then we will do a person. We'll do a demonstration of all the high-value categories at the facility here.
With that, I'm going to turn it over to Deon Stander, our President and CEO.
All right. Good morning, everybody, and welcome to Avery Dennison's high-value category showcase. So whether you hear in person today or on the webcast, thank you for making the time to spend with us at your day today as well. I'm Dean Stander, I'm the President and CEO of Avery Dennison. On behalf of the whole Abridenson team, we're excited to share a deeper view into our high-value categories. which are the key growth platforms where we consistently deploy capital both organically and inorganically.
Today is all about giving you a clear view of what these platforms actually do. The expanding addressable markets they tap into the secular tailwinds behind them, our competitive moats and of course, the specific growth initiatives driving our performance within those. But before we zoom into the individual platforms, let's just take a step back and really look at the foundational a snapshot of Avery Dennison today.
As you know, at our core, Avery Dennison is a global leader at the intersection of material science and digital identification. We operate in over 50 countries with 35,000 employees. We build solutions that address key industry challenges, such as optimizing supply chains, reducing waste, mitigating loss and driving its advancing circularity and connecting brands directly with consumers. Financially, this positioning delivers strong, highly resilient performance. In 2025, we rated $9 billion in net sales, balanced across our Materials and Solutions group.
And while the enterprise delivered solid mid-single-digit organic growth in the past 5 years, our high-value categories outpaced the core baseline with high single-digit growth, now representing nearly $4 billion of our total top line. Crucially, high-value category margins consistently trend above our enterprise average, proving that as these platforms scale they systematically lift the profitability of the entire company.
But beyond these headline numbers, our momentum is underpinned by the structural resilience of our broader portfolio. And as you can see, this structural resilience rests on 3 key pillars. Firstly, roughly 60% of our sales are tied to essential less economically sensitive end markets like food, beverage, pharma, and personal care; providing durable demand through any cycle. Second, the global footprint is exceptionally well balanced.
Strong core positions across North America and Europe are complemented by emerging markets that now represent roughly 30% of our revenue, giving us direct exposure to faster-growing economies. And third, as you can see in the chart, our portfolio transformation is accelerating. High-value categories now represent roughly 45% of our total sales, up nearly 10% over the last 5 years. This diversification provides us a distinct advantage a resilient foundation that protects earnings through macro volatility, paired with dynamic growth engines that drive outsized profitable revenue growth in time.
Expanding these categories to nearly half our revenue isn't happening by chance. It is a direct outcome of how we execute our core enterprise strategies. So to be clear, these strategies are proven and have guided us across cycles with high-value category growth remaining a consistent foundational pillar. While high-value cutter expansion is listed as our first pillar, it directly aligns with our commitments to lead at the intersection of the physical and digital and environmental and social responsibility while allocating capital with discipline.
At the same time, pillars 2, 4, and 5 emphasize continuing to grow our base business profitably is vital for us. These market-leading businesses provide reliable foundation to deliver earnings and cash flow and enable investment across our portfolio. Together, these 5 pillars give us the strategic balance to deliver GDP-plus growth and top quartile returns through any cycle, which we believe is a recipe for superior value creation.
Now let's look at how the strategic engine operates within our first reporting segment, the Materials Group. The Materials Group is the undisputed global leader in self-adhesive label materials roughly 2.5x the size of our next largest competitor, generating over $6 billion in sales, approximately 38% of this segment is now in high-value categories. This business is built on durable competitive moats.
Our global scale serving over 10,000 converting partners, our deep material science expertise and vertical integration into adhesives, capital-efficient assets that yield strong free cash flow conversion. The financial impact of our high-value category strategy here is clear. While our core businesses grow steadily, the high-value category platform delivers mid-single-digit organic growth at profit margins that trend consistently above the segment baseline.
In short, Materials Group combines a highly productive cash generative foundation with strong growth, high-value category businesses that drive long-term GDP plus growth. Now turning to our Solutions group, you can see how high-value categories scaling creates an even faster growth acceleration. The Solutions Group serves as our high-growth digital and branding engine generating $2 billion in net sales with high-value categories now accounting for approximately 60% of the total mix, backed by vertical integration, extensive application expertise and over 1,500 patents in intelligent labels alone, this group solves critical industry challenges and supply chain visibility labor efficiency and brand identity.
The financial impact is compelling. Our high-value category platforms and solutions growing at low double-digit organic growth while generating premium margins above the segment average. Solutions Group is leveraging these category expansions to power outsized top and bottom line growth. So while each segment addresses different customer needs, all of our high Valley category growth engines are linked by common macro tailwinds. And as you can see on the slide, whether in Materials & Solutions every value category in our portfolio is propelled by 3 powerful secular tailwinds: digitization, sustainability, and personalization.
Because our high-value category sits squarely at the intersection of these trends, they enable us to solve the 4 primary industry challenges we recognize, which are optimizing labor and supply chain efficiency, reducing waste and mitigating loss, advancing circularity and sustainable materials and connecting brands and consumers more transparently. Solving these ubiquitous challenges expands our addressable markets, positions us as the partner of choice with customers and gives us confidence that our high-value categories will continue to outpace GDP across cycles.
To bring this all together, my final slide illustrates how this intentional strategy has systematically shaped our financial portfolio over the past decade. Our strategies have proved our long-term financial thesis -- and what you see here is direct relationship between expanding our high-value category exposure, drive organic outgrowth and expanding overall enterprise margin. In our materials group, high-value categories are growing at mid-single-digit rates outpacing GDP, leading to the high-value category mix expanding to nearly 40% and driving meaningful underlying margin expansion.
Meanwhile, for the Solutions Group, the transformation has been even more dramatic growing mid-teens has helped us improve the high-value category exposure to 60% of our sales, which has contributed to substantial margin expansion. The specific strategies and end market growth drivers for each high-value category that you will hear about later today underpin the strong confidence and conviction we have in continuing to see outsized growth across our portfolio.
And over time, these high-value categories will continue to expand as a percentage of our total revenue, serving as one of the key engines for continued margin expansion[indiscernible]. With this foundation set, I'm delighted to hand over the stage to Daniels, our newly appointed Materials Group President. Danny brings strategic -- deep strategic expertise across our businesses and he will take you through a deeper dive into our materials platform and the growth drivers within it. So Danny, over to you.
Thanks, Deon and hello, everyone. It's really great to be here to talk about the materials group and specifically the opportunity that we have within Performance Materials. Before I dive into the Performance Materials, I would like to spend a few minutes on my impressions about the Materials group over the last 100 days for me in the role. I spent a considerable amount of time in the materials group over the last 16 years. And so I come to the role with a good understanding of our markets, strategies, our strengths, and our opportunities.
In recent weeks, I've spent an opportunity to visit many of our sites around the globe, and it's given me very clear understanding of our strength where we can perform better and our opportunities that will drive profitable growth and create superior long-term value. What I've seen and heard has been inspiring. Across our reads, our employees and our leadership teams, both prioritize -- recognize the strength and opportunities and share strong conviction in our group's long-term potential.
They also have clear understanding of the priorities that are required to realize the potential. So what are these priorities? They are: first, growing our base business above our markets; second, accelerating our differentiated growth in high-value categories; third, leveraging our capabilities and access to converter channel access to lead at the intersection of physical and digital and drive intelligent label growth; and lastly, continuing to use our proven productivity playbook and disciplined capital allocation to ensure our manufacturing cost advantages enable us to grow profitably and generate strong returns.
So this is a great time to be part of the materials group. High-performing business with the potential for accelerating profitable growth. We are approaching these opportunities from a position of strength, building on resilient franchise with a strong market position, strong profitability and the best team in the industry. I'm excited to be part of this team in its future.
Now as Deon mentioned, growth in high-value categories will be key to delivering robust organic growth, exceptional returns and strong economic value added. Today, we will highlight 3 of them: specialty and durable labels, which will be covered by Marianna, our Vice President and General Manager of Materials Group in EMENA, Graphics and Reflective Solutions, which will be covered by Bethany our VP and GM of our Graphic Solutions in North America and Performance Materials, which I will cover.
Over the last decade, these businesses have generated mid-single-digit organic growth CAGR, they serve markets with above average growth potential and large profit pools, and they all leverage our core capabilities. So let me start with Performance Materials. Performance Materials are highly engineered functional materials, including pressure-sensitive tapes, liquid adhesives and sealants that serves specific critical customer needs in being, ceiling, embodying sealing, protection, thermal management, connectivity and many other functional materials in end markets.
As you can see on the left-hand side of the slide, Performance Materials is a $500 million business for us today and has growth at mid-single-digit CAGR. It's composed of our industrial and medical tapes and adhesives businesses, including our recent acquisitions of Taylor Adhesives. Sales fall into 4 end markets, building and construction, for example, the adhesive views to install flooring in your homes, industrial, and electronics, connecting semis in your phones, automotive, including brake shims, and noise vibration and EV vehicles and medical, for example, in wearables.
In the middle of the slide, you can see that sales are concentrated across North America and EMEA, followed by Asia Pacific. All cuts represent strong growth potential. In the next few minutes, I would like to share how we view these products and solutions, the markets and the significant growth and margin opportunities we see in them for the materials group. Now it all starts with the value of our products and solutions deliver to our customers.
Our customers rely on us to help them address strong number of industry challenges from labor scarcity and productivity pressures to sustainability and regulatory requirements. With our ability to custom genetics, we're also helping them adapt to the evolving technology trends such as flexible electronics and mineralization and meet new functional requirements such as lightweighting, electrification, conductivity, noise and vibration damping and thermal management.
In addition to the growth tailwind and solving large customer challenges, a key to the attractiveness of this space is that these products typically provide critical functionality while representing only a very small part of the total end product cost, allowing us to capture strong margins by leveraging our application expertise and adhesive vertical integration to custom engineer the specific product needs.
As I mentioned earlier, the market for these businesses are large and growing at attractive rates and we see significant opportunities for further expansion. As you can see on this slide, our current addressable high-value market, we estimate to be approximately $20 billion, and we expect it to grow by mid-single digits driven by strong secular trends and evolving customer needs. They include -- these include increasingly complex platforms, performance specs, growing industry applications like electrification and thermal management demand for more sustainable solutions and work in productivity needs and safety requirements.
On a regional basis, the overall market is well balanced between developed and emerging regions with Asia Pacific experiencing the strongest growth. From a competitive standpoint, an interesting and unique characteristic of this market is while globally it's large in size with fragmented competition individual segments could be in nature with high competitive concentration.
So for example, the top 5 industry players hold just 25% global share, but in specific flooring and adhesives, flooring adhesives, the top 5 players hold about 75% share, clearly more concentrated. Finally, on this slide, you can see that we sell to a wide range of customer segments piling manufacturers, converters, and distributors and the key differentiator for most of these customer groups, as I highlighted earlier, is product performance, quality and service.
Now let's talk about where we are and how we intend to leverage our strategic capabilities to win here. As I mentioned, the markets is highly fragmented. Our Performance Materials business competed with a range of large generalist providers as well as niche specialists. And in many of our markets, we're building from a modest share position, providing us with a great growth opportunities. On the left side of the slide, you see that we bring a number of key differentiators to these markets, which we believe position us well to grow our rings and increase our competitive moat over time.
First, in product in product performance and innovation, we bring strength in material science, customer relation, and application expertise. Second, in manufacturing, quality and reliability, we bring vertical integration in adhesive manufacturing laminating expertise and a global network of assets that can produce at scale with industry-leading quality, reliability, and efficiency. Our strategy on the right-hand side is to leverage these strong differentiabilities to drive organic growth rates at least in line with the mid-single-digit industry rate and to expand our margins.
Some of these key initiatives that will drive our -- some of these key organic initiatives that will drive our growth are leveraging our existing product lines and relationships to enter new distribution channels and broaden our geographic reach increasing our presence in fast-growing end markets, such as energy storage, building construction, electronics and medical applications and expanding the adoption of the solvent-free adhesive innovations, including our proprietary advanced acrylics and UV Walmart.
Let me spend a couple of minutes on these innovations as we believe they are unique and offer great potential. So based adhesives are the gold standard for many of today's adhesive applications. They provide a superior binding strength and excellent UV, chemical moisture and temperature resistance. But they also have a couple of challenges. The higher cost and potential safety risk and high VOC levels. So we asked ourselves, is it possible patch solvent performance by reducing cost and the environmental impact.
And the answer is yes. Building on decades of material science expertise, our R&D and engineering teams have successfully developed proprietary differentiated technology platforms that deliver solvent like properties across a range of applications from automotive, building construction to medical applications, and they do it with lower overall cost and superior environmental performance. These technology innovations are opening an entirely new opportunity for growth in our external trade adhesives, performance tapes and specialty label businesses.
In addition to these robust organic initiatives, we also see say upside potential with disciplined bolt-on M&A. Now some of you might be asking, what's your approach to M&A in this space? Well, we target high-value opportunities that have strong strength, strategic fit, can expand our capabilities and differentiation and strengthen our portfolio. Look for companies that complement, strengthen or expand our current product lines and market penetration, and we look for potential combinations that offer significant cost benefits.
And finally, I know this is important to you, we approach the relation of these opportunities in a disciplined way, ensuring we deliver superior returns. Now a good example to bring to life one of the product opportunities that we talk about is tailor adhesive in our growth opportunities in artificial turf for adhesive. Outdoor artificial turf, think about football fields or any athletic field in our schools, provide an excellent surface but have a broad range of usage and comes with predictable, reasonable maintenance cost.
It is increasingly used in municipal, educational, and residential projects. And we estimate the addressable market globally to be about $700 million, growing at 8% CAGR North America, which is Taylor primary market, is growing at 11% CAGR. [indiscernible] is taking share from natural grass and that increases the need for unique adhesives. Tapes are -- these are -- there are substantial opportunities to capture adhesive share with a higher performing, more versatile product. So after a lot of work about R&D and engineering teams, we have developed a product that meets the need. A new terrain turf adhesive, which we launched recently, and we see significant interest from customers.
We adopted our proving indoor polyurethane technology for exterior use and brought terrain to market quickly and cost effectively. What Terrain does is replace labor-intensive 2-part adhesive with a ready-to-use single component solution that eliminates the site -- the need for site mixing accelerate installation times and minimize costly contractor errors. It also provides contractors with an extended working time for precise SEM adjustments yet Ceres rapidly to support heavy traffic in just 6 hours.
Finally, it's waterproof formula inherents our strict indoor air quality standards, giving us a sustainability focus low VOC product that puts us in a great position to capture projects, increasingly specify sustainability materials, sustainable materials. With Terrain, we developed a superior product that is well positioned to capture growth and premium margins. And this is just 1 example of our product innovation. You have an opportunity to see many of them later on in the showcase boots.
So in conclusion, taken all together, our Performance Materials business have very attractive growth and profit opportunities across a number of high-value end markets, and we have many of the key capabilities required to win. In every market and industry we serve, we have innovation that constantly advances the materials we use in the proprietary technologies we use. We are vertically integrated in adhesives, which gives us deep advantages in developing, scaling and delivering our products and we have a global footprint, allowing us to serve both developed and emerging markets with a great quality, service and efficiency.
We're focused on leading our existing capabilities to grow organically and supplementing it with disciplined M&A to drive further differentiation, expanding growth opportunities and margins. We will continue to build on more than 9 decades of expertise in material science, process technology and manufacturing innovation to deliver value in a rapidly changing world for our customers and all of our stakeholders. So the bottom line -- the Materials Group is a high-performing business, and I hope that you today, you'll see that the performance materials, graphics and reflectives and specialty and durables, are very attractive spaces to invest in and have great potential for superior value creation.
We have the right capabilities. We have the right assets, and we have the right teams to win. Up next, Mariana Rodriguez, Vice President and General Manager of Materials Group Emina will share our perspective on our largest high-value category of specialty and durable labels.
Thank you, Danny. Good morning, everyone. It is a pleasure to be here today to talk about our specialty and durable labels business, our largest high-value category in Materials Group and Evensen. Last year, these categories generated 1.2 billion in global sales. They have delivered compounded annual growth in the mid-single digits over the past 5 years. Of equal importance, they commanded premium margins, and we believe they will continue to do so.
Our solutions are highly valued because they solve unique performance challenges and deliver critical functionality across a wide range of applications. We were clear with our customers and end users to develop these solutions, and they are frequently locked directly into product specifications. They built sticky, long-lasting relationships, and a highly reliable revenue stream. Growth opportunities for these categories are global. Europe represents today the largest market for us followed by North America and Asia Pacific.
But because pressure-sensitive labels penetration is lower in emerging markets, we expect higher growth in Asia Pacific, where the adoption of label technologies is accelerating. This morning, I want to focus on why we're excited about these categories and the initiatives driving our continued growth. So what are specialty and durable labels. Specialty and durable labels are used in demanding applications across a wide array of end markets.
Everything from food, beverage, and consumer electronics to automotive chemicals and pharmaceuticals. Specialty label materials solve targeted application requirements and compliance needs. Some examples of this include recloser packaging for food freshness, ice bucket resistance in wine and spirits, decorating labels in premium food and beverage and insulation for cold chain logistics.
Durable label materials bring certified performance standards. They are engineered to withstand extreme environmental challenges, like high temperatures, harsh solvents, UV exposure, or mechanical stress across multiyear life cycles. Think about semiconductor applications, solar panels, chemical drums and auto parts to name a few. What makes this category so attractive is a combination of resilient end markets, durable secular tailwinds, a market structure that heavily favors our scale.
Roughly 75% of our end markets are highly stable, and overall, they delivered growth above GDP. This underlying growth dynamics are supported by a few long-term mega trends, which you can see on the left-hand side of the slide. Aging population, demand for freshness and convenience in food premiumization in beverage, cold chain expansion, electrification as well as requirements for increased durability across finished goods.
All of these trends are boosting growth rates across these categories. So how -- and why do we win here? First, this market is where performance, reliability, quality and compliance really matters. Customer needs solutions that performed consistently in demanding applications. This creates differentiation far beyond price and puts a premium on technical expertise.
Second, while the competitive landscape is relatively concentrated, the converted customer base is fragmented across thousands of players. This gives an advantage to scale global players like us serving customers across geographies while delivering agile execution at a local level. We also see customer needs are getting more complex. They require higher performing and functional materials, and they need a partner to help them navigate evolving regulatory requirements.
Our ability to combine global innovation capabilities with deep technical expertise and local execution positions us well to capture these opportunities. That translates directly into how we create and deliver value, and we have multiple levers to do so. We grow with attractive end markets, gain share through differentiated solutions and expand business with existing customers. We also help accelerate premiumization and innovation as well as leverage our global scale to drive operational efficiency.
We believe we are well positioned to take advantage of this industry's growth while expanding the value we create from that growth. Today, Avery Dennison is a recognized industry leader already in this specialized labeled markets. We have built leadership on decades of material science expertise, and we maintain it through focus on market-driven innovation. What positions us to win is simple, deep technical expertise, strong customer and end user connectivity and consistent product performance and reliability. We combine our leading R&D capabilities were world-class process technologies. Just as importantly, our close relationships with converters and then users gives us front row into where markets are evolving.
Those insights give us an edge to turn emerging needs into differentiated solutions. This powerful creation of capabilities and experience is central to our strategy. Our value proposition is multidimensional. We offer a portfolio that delivers in complex applications we're vertically integrated in pressure sensitive DCs and films. We have the technical expertise to engineer solutions that solve customers' complex challenges. We have the process technology and scale to consistently deliver on product performance and quality, and we have the technical support capabilities and long-standing converter relationships to ensure end-to-end customer satisfaction.
Looking ahead, we're driving growth through several key initiatives. We are increasing our share in core markets through next-generation materials. In sectors like beverage, food, and personal care, we're enabling premiumization and sustainability. We are expanding our recycled and compostable label material product lines, developing products that enable clarity and innovating with high-performance solutions in pharma, chemicals, and durable goods.
We're capturing new growth opportunities in attractive areas such as electrification and mobility, cold chain and functional packaging. We're combining our own expertise with strategic partner networks to develop engineered solutions for these emerging needs. An example of this is Therma VIPs, which provides temporary insulation for pharmaceutical gold chains. We also have [indiscernible] , which reduces food waste by extending the shelf life of fruits and vegetables. These are just a couple of examples of how we transform a simple label into functional packaging.
Underlying all of this is our broad converter channel access customer engagement. By collaborating closely with our customers from identifying the problem to solution delivery we bring differentiated products to market, creating long-term sustainable value. A key driver of our commercial success is our strategic partner network and a go-to-market model. Much of our work with end users or OEMs goes well beyond just a single product.
Our collaboration model starts with deep engagement across the full ecosystem. This gives us line of sight into market needs, validates product performance, and creates pull-through demand, shaped by this insights, innovation is market-focused and delivers differentiated and application-specific solutions. By investing in the technical and compliance needs of our customers, we also become strategic partners and expand our addressable market and long-term sources of growth. It is a connected customer-led model from insights to adoption to value creation.
This model is creating market expansion opportunities in many markets such as durable goods, electrification, and pharmaceuticals. Now let me give you an example of how this all comes together. Let's take the pharmaceutical market as an example of this. There's a few key market trends driving increased needs for specialized labels in the pharma sector. A couple of these are, for example, the biologics market growing by high single digits, while the GLT1 patient population is expected to nearly triple over the next few years. This require label solutions that perform.
And these tailwinds create a multiyear growth opportunity for suppliers that can consistently meet pharma's rigorous standards. In practice, our customers in this space face a few packaging challenges. Regulatory complexity where a single-drug formulation may require multiple versions due to languages or country-specific requirements, supply flexibility where manufacturers must have a quick response to the manships or vaccine rollouts, packaging line integrity, where on high-speed filling lines, even a small issue like a DC bleeding can jam equipment resulting in costly downtime.
We address these challenges through our dedicated global pharma portfolio. We qualify multiple materials for a single application and provide technical and compliance support at a local level. By deeply understanding our customer needs, we bring new solutions to life, anything from light blocking labels that protects sensitive biologics to embedded RFID technologies that enhance supply chain visibility. You'll get to see some of this during the showcase.
To sum it up, specialty and durable labels represent an exciting high-value growth opportunity for us. We're well positioned to win, and we will continue to invest and expand our leadership position in these categories. Thank you for your time today. Up next, Bethany Nock, General Manager of Graphic Solutions North America will cover graphics and reflective solutions.
Hi, everyone. Thanks, Marionne. It's great to be here with you today. Graphics and Reflective Solutions represent our second largest high-value category within Materials Group. Today, I'll give you a closer look at these product lines and explain what makes them such an important part of our business and our growth story. Before I do that, let me ask you to picture your ride here today. You likely saw a luxury vehicle that used car wrap and had a cool color and gave it that nice finish or maybe a semi truck that had a huge brand image or a logo on the side. Those are all often a result of our graphic films.
Our Graphic Solutions include premium quality, decorative and functional films. These films are used for personalization. Our films also provide protection and visual enhancement, not only for vehicles, but also for buildings, trains, signage and storefronts. Our reflective product lines use highly engineered retroreflective materials to enhance roadway visibility and safety. And I guess on your way here today, you probably saw plenty of road signage and even temporary work zone signage. Those are all products within our reflective business. These high-value categories serve a broad and diversified market.
In graphics, the majority of our sales are concentrated in corporate branding, automotive and architectural segments. And reflective, our business is focused on transportation infrastructure, traffic and highway work zone safety sectors. If you look over to the lower left of the slide, you can see that overall, these product lines delivered over $700 million in 2025. They have organically grown at mid-single-digit CAGR over the last 5 years. And these products capture premium margins. End market customers have demanding expectations in terms of quality, reliability and durability.
We consistently meet those expectation with unique expertise in the materials used, application challenges and regulatory requirements. We are innovators able to develop new solutions to address tough challenges. We are a vertically integrated end-to-end manufacturer and we can reliably deliver on [indiscernible] at scale. We estimate the total addressable market to be approximately $4.5 billion, and we believe the market will continue to grow at mid-single-digit rate, driven by long-term trends.
Within the automotive sector, consumers are increasingly interested in vehicle personalization and customization, luxury car owners prefer products that are offering protection. They want to be able to protect that high-end vehicle. And then think about electric cars. Many people own an electric vehicle and think about that. You know they're not taking it in for an oil change. OEMs and dealers are looking for new opportunities to expand their high-margin service and accessory revenues. They find our graphics products are an attractive add-on option.
Our primary customers and reflective are contractors that are supporting government-funded and regulated transportation and infrastructure projects. Demand for our materials continue to grow. This is driven by increasingly urgent need to repair, revitalize, and sometimes replace much of the world's aging infrastructure. There is also a continued shift toward digital printing and cost efficiencies and the creation of reflective road signs. These high-value categories have 2 distinct competitive landscapes.
Graphics products have a large, diverse, and fragmented end user customer base installers which is served by a concentrated set of distribution channels. The reflective competitive landscape is fairly concentrated with a fragmented customer landscape of approximately 1,400 global customers, including direct converters, road contractors, work zone, and vehicle OEMs. Market size opportunity aligned closely with regional economic development. Roughly 65% of our addressable market is currently located in developed countries.
We expect higher rate of growth across the Asia Pacific region, in line with faster growth rates in household income on our -- for car fleets and road infrastructure as well. Both sets of markets come with customer and industry challenges that our products are designed to address. In automotive end users, customers and converters have strict quality and durability expectations. And OEMs have shrinking profit pools that they wish to replenish, offering customization opportunities to consumers. Reflective customers require products that address road sign visibility issues, including graphite vandalism, adverse weather conditions.
All of our customers face for scarcity issues and rising costs. Across our markets, Avery Dennison holds a strong competitive position. We are #2 in most of these markets and are focused on building our leadership. Within graphics, we are leveraging film differentiation superior process technology and expanded channel access to accelerate our profitable growth in the automotive aftermarket and in the OEM market. We use our significant experience in material science technology to produce functionalized films and engineered adhesives that continually improve product performance and innovation.
Our in-house color cast PVC films are delivering greater color customization and flexibility. We are leveraging our proprietary material science capability, in micro replication to create more highly reflective materials like our unique full cube reflective technology that is improving solutions for complex road geometries. We codeveloped digital printing equipment and workflow software, and we are transforming from a traditional material supplier into an end-to-end solution provider.
We now streamlined customer expectations ensure regulatory compliance and deliver strong, superior performance with warranty coverage creating competitive advantage and we're not standing still. We have a number of key initiatives to play and drive in that future growth. We are pursuing a number of strategies to broaden market share and capture new innovation. These include accelerating growth by expanding into our auto OEM, dealer, and installer relationships, embedding value and added digital services as well as scaling advanced printing, and product solutions into emerging markets.
The growth opportunity for graphics and automotive market is particularly compelling. Major trends are reshaping this market and creating increased demand for next-generation vehicle services. Over the last several years, one of our fastest-growing categories within graphics, has been our premium cast film portfolio, which enables both printed designs and customizable color wrap change in for fleet as well as personal vehicles. We've been a leader in this category for more than 20 years and we continue to benefit from the growing trends in vehicle personalization.
But as consumer awareness and adoption increase, our opportunities are expanding beyond the traditional aftermarket and into OEM and dealership channels. EV adoption is accelerating that shift. OEMs and dealers are looking for ways to differentiate their offerings with service packages and margin revenue streams. But all that said, personalization is just one part of the opportunity. Vehicle owners, particularly in the luxury and premium segments are increasingly looking for appearance and value. They want to protect that value of their vehicles. This is driving demand for paint protection films, which is an important part of our portfolio. It protects against scratches, stone ships, staining, all with self-healing technology that helps maintain the appearance of vehicle.
Our strong position and reputation in vehicle reps provides a great natural foundation to move into that adjacent and growing category. Looking ahead, we see an excited convergence between personalization and protection. With next-generation solution films that combine color change and protective functionality into a single product. Our ambition then is to extend the leadership in cast films into growing functional protective film category, bringing the same innovation, performance, and differentiation that has offered us and defined our position in cast films.
We began by expanding into clear protective films and have since extended the portfolio into color PPF or paint protection film that enables the protection and personalization in this category and for new opportunities of growth. Now let's consider the industry shift into digital printing. That's driving the growth in the reflective business. Road signs take a beating across useful life from Graffiti, do and other environmental factors.
Transportation agencies are increasing expectations and sign shops are looking for new ways to improve both product and manufacturing efficiency in growing numbers, they are adopting digital printing solutions, which are both more sustainable and more cost effective. Our strategy is to deliver best-in-class one-stop shop printing solution to this market that begins with an end-to-end ecosystem. We provide a unified product package with proprietary ink and film materials, software and equipment needed to operate backed by a single source warranty ownership.
This one-stop solution, which is unique in the industry, also comes with an ongoing global technical support, ensuring that shops can operate efficiently and reliably. Our traffic jet printers deliver built-in anti-graffiti and anti-de overlays that have set new durability benchmarks. We have now installed over 1,000 traffic jet system globally. And as performance specifications continue to rise, we are well positioned to lead the industry's ongoing digital, which continues to play a key role in advancing our high-value strategy.
In conclusion, we have a strong $700 million base business. We have deep innovation, the teams, the service and the footprint in Graphics and Reflective Solutions to drive consistent profitable growth across this attractive growth market. So on your way home today, I hope you look around and thank Avery Dennison Graphics and Reflective solutions. Now on to Francisco Melo, our President of Intelligent Label Technologies and Digital Solutions.
Thank you, Bethany, and good morning, everyone. It's great to have you with us today, and I'm delighted to provide an update on the enterprise Intelligent Labels platform. Intelligent Labels is a progressive family of sensor technologies that today primarily consists of UHF or RAIN RFID, enabling businesses to digitize physical items at scale, unlocking supply chain optimization, product traceability, and authentication from factory to consumer to resell or recycling.
As AI continues to transform industries, the need for accurate real-time data becomes even more critical for powering AI models that inform the right decision making. Our intelligent labels solutions provide the important item level ground data, ground truth data that powers these models. We reached over $900 million in sales in 2025, having compounded at low teens organically in the past 5 years. Our margins are higher than the company average, driven by the value we create for customers through our solution selling approach.
We focus on customers' challenges, understand what drives their ROI and work in partnership to establish a solution that meets their needs. We continue to drive adoption, realizing new use cases and value creation opportunities for customers and have strategically invested ahead of the market growth to both capitalize adoption and maintain our leadership position.
Today, end customers' demand is concentrated in developed markets, primarily in North America and Europe, while our manufacturing footprint is strategically positioned at the source of production. We primarily serve customers in apparel, logistics, general merchandise, and food segments, helping them address and overcome challenges related to labor and supply chain efficiency, waste reduction, and shrink, transparency, and circularity while simultaneously helping brands better connect with our consumers.
Our addressable market is large at 350 billion units underpenetrated and with units expected to grow at mid-teens, driven by favorable secular trends. In retail segments, customers are relying on RFID to data to improve the omnichannel fulfillment and drive sales uplift. This began in apparel, but expanding to general merchandise as consumer buying behaviors continue to shift to an omnichannel approach.
Consumer demand is also shifting with expectations for better product availability, faster delivery and specifically for food, increased freshness, which is becoming a critical differentiator in grocery. Across all segments, our customers are grappling with higher labor costs, increasing the need for improved efficiencies, and productivity across the supply chain.
With the explosive growth of AI, item-level data will help unlock additional value for businesses where accurate data is essential to fuel business models and improve decision-making. While apparel remains the largest market segment at approximately 60% of unit value, we are increasingly seeing new large-scale opportunities in food, logistics, and general merchandise, creating a runway for future growth.
Specifically in food, freshness management is a key driver as growers look to improve product availability to drive foot traffic and increase sales lift and reduce waste. This was highlighted in the McKinsey survey, which found that in North America, both consumers and retailers rank freshness and quality among the most important factors in the in-store experience. Our unique position in the industry is defined by our leadership across 2 critical areas of the RFID value chain.
We design and develop high-performance, high-quality inlays, that we sell directly to end users, leveraging our data management and converting capabilities and through our converted network as based materials. The combination of the end user access and the vast converted network uniquely positions us to drive adoption across multiple categories. Most other companies in our space only play in one node of the value chain.
We are focused on delivering growth by leveraging our competitive advantages and leading position across 3 main areas. First, we have an industry-leading unique go-to-market capability where we have relationships with end users that enable us to understand their problems gain insights into what drives the ROI and partner directly with them to accelerate adoption, along with the capability to fulfill both directly and through channel partners.
Second, we hold the broadest patent portfolio in the space due to our world-class innovation talent spanning RFID engineering capabilities and material science expertise. We're able to bring these capabilities together to overcome significant technical challenges to create first-to-market innovations that expand the use cases and accelerate access in new categories.
Third is our scale. We've produced well over 100 billion inlays to date, multiple times more than other players. We have manufacturing capabilities that leverage proprietary high-speed process technologies and a footprint to meet the supply chain continuity requirements of our customers. In addition to these core capabilities, we are exploring how our access to billions of item-level data points, combined with the newer AI models can deliver differentiated value through data-driven solutions that help customers realize greater returns from their RFID deployments and create new monetization opportunities for us.
Our growth will be enabled by a combination of go-to-market execution, sensor innovation to drive adoption and expand use cases across our target segments. Our investments in Willett buses our sensor portfolio, creating offering for passive Bluetooth low energy solutions that enable condition monitoring throughout the supply chain, a key growth driver in the Food segment. The food opportunity represents the largest addressable market for intelligent labels.
Retailers are looking to digitize the supply chains and address 2 key priorities. Maximizing product freshness and driving profitability. With resin margins in food, opening inventory and ensuring freshness are critical. Condition monitoring throughout the supply chain to ensure freshness combined with efficient in-store inventory management as a direct impact on profitability. Earlier this year, we launched the AD IdentiFresh inlay series containing first-to-market FID innovation designed specifically to meet RF performance requirements in the food category.
Our proprietary antenna design and inlay construction overcome key operational challenges in the food retail environment improving real performance on densely stacked items, particularly within high moisture environments like meat cases, enabling item level management to FID creates value for the customer through improved efficiency, and labor productivity, presiance management, waste reduction and sales uplift.
Our strategic partnership with Willett enables us to scale low-energy Bluetooth technology for condition monitoring throughout the supply chain, hawking real-time data flows to inform decision-making and maximize product freshness. Combining the 2 technology creates the opportunity for true end-to-end supply chain management for the food sector from pallet to case to item level. As you can see from the pie chart on this slide, we are early in the commercial activation of the full TAM.
Customers are yet at varying stages of assessing, piloting and commercializing in only about 10% of the total addressable space. And momentum is building in our pipeline is increasing nearly 40% in the past year alone. Recent announcement of Kroger and Walmart, combined with ongoing pilots and programs with other retailers are a testament to the work we are doing to drive adoption in the segment. Our experience deploying RFID programs in the past 2 decades, combined with our unique innovation capabilities spanning from our F&G material science creates a competitive advantage for[indiscernible] .
We're also addressing upcoming legislative requirements related to PPWR, packaging and packaging waste regulation and EPR extended producer responsibility under which customers and businesses will be required to meet new compliance requirements for recycling and end-of-life management of packaging materials. Our AV clean flake, our FID products have been recognized by the Association of Plastic Recyclers and resi class as compatible with existing PET recycling streams.
We continue to drive adoption in this space to ensure we remain the go-to innovation partner for our customers as legislation evolves. As you can see, the opportunity in front of us is significant. Momentum in new categories is building and secular trends like AI will further accelerate the need for sensor technologies that establish ground truth data. Thank you for your time. I would now like to turn it over to Ned Peverley, our Vice President and General Manager of Vestcom.
Thank you, Francisco, and good morning, everyone. It's a pleasure to be with you here this morning to discuss the Vestcom business. We are continuing to expand our shelf edge solution set where we play in the central role in driving retail productivity and shopper engagement while navigating and capitalizing on key digitization trends. Vestcom delivers market-leading price communication and media solutions. At the retail shelf edge, built on a foundation of advanced data composition capabilities to seamlessly manage the complexity of high promotion frequency retail.
As store digitization accelerates through digital media integration and the adoption of electronic shelf labels or ESLs, Vestcom StorLink software platform is powering our next phase of growth. In 2025, Vestcom exceeded $500 million in sales for the first time in our history, delivering a mid-single-digit organic growth rate since Avery Dennison acquired the business in 2021. Currently operating entirely within the U.S., Vestcom generates attractive premium margins.
This profitability is driven by data management expertise and our ability to generate outsized value for our clients by engaging shoppers driving sales, and reducing costs. By delivering on our value proposition in a compelling way for decades, we've earned the business of over 70 leading retailers across grocery, drug, dollar, and specialty channels, including the likes of Kroger, Albertsons, Ahold Delhaize, Walgreens, CVS, and Dollar General.
We provide a comprehensive portfolio of shelf-edge pricing execution and ESL management software that enable retailers to bring their pricing and merchandising strategies to life in store. Once a retailer outsources their shelf edge of Vestcom. We then also retain the right to partner with CPGs to use the shelf edge as a media vehicle to deliver their brand messaging to shoppers at their point of decision. What better time to influence a shopper's decision than when she's in the aisle with a shopping cart ready to make a purchase.
Our addressable market in the U.S. retail is over $2 billion and growing low single digits, powered by tailwinds in physical retail media and store digitization. In our core grocery, drug and dollar channels, clients face structural headwinds from rising labor costs and store labor scarcity. Retailers increasingly rely on our shelf edge automation to streamline execution and drive store-level productivity. Equally important, physical stores are reemerging as the primary engine for brand differentiation.
Retailers are seeking ways to engage, educate and inspire shoppers right at the point of decision using rich product information, lifestyle attributes and dynamic messaging to build loyalty and expand basket size, this drive to elevate the in-store experience directly intersects with a massive financial catalyst, explosive growth of retail media networks or RMNs. Retail Media has become vital to retailer profitability, delivering high-margin ad revenue that directly bolsters their bottom line.
As online channel saturate, brands are shifting retail media network spend back into physical stores where research reports widely site that over 85% of retail transactions still occur. While paper shelf tags remain our largest volume foundation, growth is shifting toward an emerging Software-as-a-Service opportunity driven by expanding ESL adoption. While U.S. grocers are accelerating ESL adoption to capture labor efficiency small format retailers and drug and dollar stores seem to lag due to lower operational ROI from the investment.
Increasing consumer concerns and legislative activity to limit dynamic pricing may also slow mass adoption here in the U.S. This creates a bifurcated landscape where paper solutions remain essential alongside digital formats. From a competitive standpoint, the market remains split between traditional print converters that lack software and dynamic media capabilities and hardware-driven vendors that face commoditization and lack deep retail operational expertise.
Here at Vestcom, we hold a unique position as a central data orchestrator, connecting retailers, CPG brands and hardware platforms to deliver both analog and digital communication in store. Vestcom operates from an unmatched position of strength at the retail shelf edge, anchored by deep-rooted retail partnerships, proprietary technology, and a proven ability to solve complex operational challenges.
Our competitive mode is defined by 3 primary pillars: first, our breadth of solutions. We're the only provider capable of seamlessly executing both analog and digital shelf edge solutions, enabling a hybrid store with operational consistency across paper tags, ESLs in both digital and analog media. Secondly, our product innovation in a master. Our expertise in complex data management and proprietary composition powers our software to orchestrate both physical and digital endpoints from a single source root.
Our unique ability to integrate item-specific price and promotion data with branded media highly differentiated among media providers. Third, our unmatched operational and commercial scale. Our national network of specialized service bureaus delivers near-perfect execution with 99.8% on-time in-full performance. While our dedicated national CPG media sales team actively engages over 500 CPGs, unlocking high-margin ad revenues that help fund our retailers shelf edge infrastructure.
Building on these advantages, Vestcom is evolving into a true omnichannel provider, the only partner in the industry capable of delivering both physical and digital shelf edge solutions at scale. This leverages our deep retail acumen, unmatched pricing and promotions expertise, execution excellence while adapting to the evolution of digitized retail. Our strategy is focused on high-margin growth centered around 3 core initiatives: first, growing our analog media business by maximizing opportunities as the exclusive in-store media partner at Walgreens while further expanding our blades media solution across targeted clients.
Second, winning a greater share of ESL deployments through establishing StorLink as the software of choice across all major ES deployments, while capturing a meaningful portion of ESL hardware business through our strategic partnership with Salem. And third, scaling in-store digital media by expanding our in-store digital media footprint through a combination of organic development and strategic partnerships.
In addition to these core initiatives, we're also leveraging our relationships with food retailers to unlock pilots and help accelerate the adoption of intelligent labels across our client base. To double-click into our digital transformation, our growth story centers on accelerating our footprint across 2 key areas: electronic shelf labels or ESLs, and in-store digital media. For electronic shelf labels, U.S. large format grocers and mass retailers continue to explore ESLs, catalyzed by Walmart's nationwide rollout.
In this expanding space, Vestcom Storelink platform will serve a critical role as retailers central one source of truth software to orchestrate and deliver price and promotional messaging across both ESLs and analog tags. Our competitive advantage here is clear. We're already deeply data integrated with our retailers' core systems. We seamlessly enable both digital and analog environments and our software is completely hardware agnostic, preventing vendor lock-in for our clients.
When it comes to in-store digital media, the market is forecast to grow at low teens CAGR through 2029, reaching $1 billion with most U.S. retailers actively testing various solutions in preparation for scale deployments. In this expanding in-store media as a Vestcom is uniquely positioned to serve as the preferred in-store media provider, offering a diverse portfolio of analog and digital solutions with tag media exclusive to Vestcom.
Our competitive edge stems from 3 distinct strengths. First, we have a dedicated national CPG sales team already in place, engaging over 500 brand partners. Second, we have a unified physical and digital strategy; and third, we uniquely integrate item-level price and promotional messaging directly into dynamic media content. Later today, you'll get to see within our demo showcase the opportunity to experience these solutions in action.
In summary, as physical retail evolves, Vestcom is well positioned to continue serving as an indispensable partner for the modern shelf edge, driving sustainable, high-margin value. Thank you for your time, [indiscernible].
Authenticity for leagues, teams and global icons. And third is professional identity. Where we provide certified durability and safety performance across industrial and corporate workwear. Our offering is streamlined into 3 integrated solutions. First, the embellishments themselves which include high-definition transfers, embroider patches, woven, and specialty 3D badges. Second is experiences that encompass custom studio and digital consumer engagement. And third, are services that span our in-house creative agency and application services.
Embellix operates in an addressable market that is greater than $3 billion and continues to expand through adjacencies with mid-market -- with market -- end market growth of mid-single digits overall. This expansion is supported by secular tailwinds, including rising consumer demand for customization, growth in active lifestyles, digital fan engagement, and the global cultural shift towards experience-based spending. While our current sales exposure is heavily weighted towards mature end markets, driven by the global performance brands, sports teams, and licensing networks lower penetration in the Asian end market represents additional long-term growth opportunity.
The competitive landscape in this space is highly fragmented, composed mostly of regional embellishers and niche converts. Brands and teams prioritize quality, supply chain reliability, and resiliency, rapid turnaround time and global continuity of product. Embellx bridges a critical operational gap by linking brand and league headquarters directly to Tier 1 garment manufacturing hubs worldwide.
In doing so, we solve the industry's most cost friction points eliminating global branding consistency, shortening lead times for volatile hot market demand and providing full regulatory compliance. The unique combination of material science expertise digital technology know-how positions us as a key partner to facilitate physical to digital connections between fans, teams, athletes, and artists under tight time frames. We are a global leader with numerous advantages over our nearest regional competitors.
When you examine our right to win, our ability to outpace the market and drive margin expansion is on 4 structural differentiators. First, our approach to integrated solutions architecture. We do not operate as a commoditized trim vendor. Instead, we leverage our Embelex portfolio, delivered through automated factory platforms application services and turnkey retail solutions with the ability to also integrate unique digital experiences to create a unified ecosystem.
This shifts our customer relationships from transactional purchase orders into sticky, multiyear strategic partnerships that deliver higher lifetime value. Second, we operate with global scale and localized execution and have optimized our manufacturing operating system around standardized site archetypes, by balancing high-volume, cost-efficient agent production hubs with agile nearshore cells closed by key distribution centers to deliver hyperspeed turnarounds worldwide.
This dual-track network allows our brand partners to navigate trade tariffs, inventory volatility without sacrificing speed to market. Third, we focus on upstream strategic wiring, bridging brands, and garment factories and embedding our teams directly into brand design centers. 18 to 24 months before product launch. By collaborating on early concept development, we mandate our embellishment technologies into seasonal lines and secure exclusive rights for major global sporting events building long-term revenue visibility.
And lastly, we leverage our material science expertise to deliver high durability specialty solutions that solve complex garment decoration challenges. These proprietary materials protect delicate technical fabrics while accelerating factory throughput and lowering application energy costs for garment manufacturers. Our strategy has positioned us to drive growth and growth aligned with attractive end market growth expanding share across brand, fan and professional identities as well as white space opportunities.
We will do this through a number of key initiatives, including scaling experiences through custom studio in venue customization, which you'll spend -- you'll see a little bit more detail this afternoon and shifting customer engagement from transactional consumables to high-value connected solutions and ongoing brand expression ships.
Focusing on innovative solutions to differentiate ourselves that unlock entry into high-growth market segments and adjacent apparel categories. We are deepening our strategic relationships and licensing portfolios across global performance brands, sports leagues, and arena operators to secure exclusive events and tournament rights similar to what we just executed with the World Cup.
A key growth opportunity for Embelex is custom Studio, our in-venue customization solution. Custom Studio delivers live product customization powered by on-demand function, digital designs and connected operations. Built for clubs, venues and retailers, it is a turnkey system that enables in-venue fan-driven personalization. Custom Studio changes the game by transforming every merchandise moment to a connected fan experience. We have a short video to bring this game-changing solution.
[Presentation]
Custom Studio is a key part of our fan identity go-to-market pillar. We're capturing major tournament rights, while expanding our licensing footprint in adjacent high-growth categories like music, merchandise, entertainment, and venue pop-up. Through our consumer research, we have validated the pain points and opportunities surrounding in-venue customization with respondents highlighting that they will abandon purchases if wait times are too long and that they are willing to pay a premium for personalized merchandise. Custom studio creates the opportunity to maximize monetization around emotional consumer moments and hot market events or fancy seamless experience and the opportunity to customize merchandise to commemorate the moment.
Custom studio has been designed to increase speed and efficiency by blending elevated design and mobile-first custom kiosks to engage fans. To drive operational efficiency, we have also integrated clear count RFID into the offering to automate component inventory management, eliminate backouts while boosting throughput. In summary, Embelex represents a highly attractive growth opportunity supported by a well-defined strategic road map by capitalizing on favorable secular tailwinds scaling our software materials platforms and optimizing our global operating system in a lot positioned for future growth. Thank you. I look forward to answering any of your questions this afternoon. And I will now hand it over to Greg Lovins, our Senior Vice President and Chief Financial Officer, to cover the financial section of the presentation.
All right. Thank you, Michael. Good morning, everybody. So -- as Dean highlighted today, today is really about showing you how our high-value categories contribute to our long-term growth into overall delivering on our enterprise strategies. As you've seen throughout each of the deep dive discussions here, we have differentiated positions in attractive markets, and we're excited about the profitable growth opportunities across each of these platforms.
I'm going to walk you through a few key areas here this morning with a quick review of our total company historical financial performance, a reminder of our long-term financial framework and growth algorithm, and our performance against that framework. Our -- and how our -- we continually shift our portfolio using M&A into the future. So -- this next slide here demonstrates how our balanced strategy has consistently translated operational execution into value creation over the past decade.
Looking across our key financial metrics, 4 clear performance trends stand out. First, on top-line growth, we have consistently delivered GDP plus organic growth over the 5-year cycles, highlighting our resilience through market volatility and while macro disruptions and disjointed end markets in recent periods moderated our growth, a resilient model has allowed us to navigate these headwinds and maintain strong earnings trajectory.
Second, regarding margin expansion, our intentional mix shift towards high-value categories, combined with persistent productory efforts, has driven sustained expansion in EBITDA margins. This combination of top line growth and margin expansion has directly compounded bottom line, nearly tripling our adjusted earnings per share over this 10-year horizon.
And finally, underpinning it all is our disciplined focus on economic value added or EVA, increase or overall EVA at a 10% compound growth rate as we've consistently generated returns well above our cost of capital. This proven long-term track record gives us confidence in continuing to deliver on our financial framework as we look forward. Now let's review our long-term framework as we laid out in September of 2024 and how we're progressing against our key metrics on the next slide.
As a reminder here, this framework is built on 4 key pillars that guide our value creation model, delivering strong top line growth with 5% or more sales growth ex-currency, while expanding our margins. with an adjusted EBITDA margin of 17-plus percent by 2028. In compounding our adjusted earnings per share at 10% annually, while delivering top quartile return on capital relative to our peers.
Looking at our performance against this framework from the 2023 baseline through to the midpoint of our guidance for 2026, we're tracking well against the majority of these targets while managing through macro challenges over the past couple of years. While top-line growth is overall tracking behind our long-term target so far, we're on track from a volume mix perspective. which has been partially offset by deflation related pricing, particularly in 2024 and 2025.
Our margin execution is progressing well, and we're on track to meet or exceed this target, powered by positive mix shift and our continuous drive for productivity. That strong top-line growth and margin expansion drives our EPS growth, which is also largely on track, while our disciplined capital deployment continues to sustain top quartile returns on total capital. In short, our operating model is performing, and we're fully focused on executing against these goals over this cycle.
To see how this top-line performance breaks down in detail, let me double-click on the long-term growth algorithm that we also laid out in September of 2024, and show you how we're performing against each of these building blocks. As you saw in the previous slide, our long-term growth algorithm targets 5% or more sales growth ex currency, with the growth vectors behind these targets driven by volume and mix growth over time. That target is built on 1 point of profitable growth contribution from our base bus, then with the majority of our growth coming from the high-value categories with 2 points from our non-intelligent label high-value categories, and 1.5 points from intelligent labels, then with additional upside from strategic M&A in these high-value categories.
Looking at our progress against this growth algorithm, -- our execution across the majority of our building blocks is tracking in line with our expectations. Again, from 2023 through the midpoint of our '26 guidance, our base business is delivering low single-digit growth contributing the expected 1 percentage point to the company growth rate. As you heard from all the leaders this morning, our non-intelligent labels high-value categories have been delivering strong growth at a mid-single-digit rate, adding roughly 2 points to the company's growth rate.
And disciplined M&A has contributed approximately 0.5 point of additional growth, largely from the Tailored Adhesives acquisition that we closed at the end of 2025. Intelligent Labels has been growing at a mid-single-digit pace, which is below our long-term target rate. Macro end market challenges in apparel and general merchandise alongside slower-than-anticipated adoption in food and logistics categories have led to slower growth over the past couple of years than we had hoped for.
As Francisco discussed, we maintain our strong conviction in this significant market opportunity. We have a strong leadership position and strong competitive advantages that allow us to drive adoption across these categories, with ample room for continued growth in apparel and significant white space in food and logistics. Looking at this 5-year cycle through 2028. We expect growth rates in the next 2 years to accelerate from the mid-single-digit pace over the last 3 years in Intelligent Labels, with growth over the 5-year cycle in the high single-digit range.
Now in total, these building blocks are delivering approximately 3.5 points of sales growth ex currency through 2023. And while that's below our long-term target due to deflation related price reductions, our volume mix growth is on track with a 5-point compound growth rate, demonstrating the strong fundamental resilience of our portfolio overall. Now executing on this organic growth algorithm reshapes our business over time, systematically accelerating our portfolio mix shift into these high-value categories.
This slide here demonstrates how that shift delivers over the next few years through 2030. For this, we assumed the organic growth rates on the previous slide that we've talked about, coupled with our base business growing in the low single-digit range. With these assumptions, organically, our high-value category should expand from mostly 45% in 2025 to roughly half of our revenue by 2030.
The core takeaway here is structural as high-value categories become a progressively larger portion of our overall mix, they systematically elevate the company's baseline growth rate, delivering in strong top-line growth rate with Dennison as a whole, while directly driving structural margin expansion over time. This organic trajectory forms our baseline, but our strong balance sheet, improving capital deployment playbook give us the financial capacity to accelerate this mix shift through disciplined M&A as well.
On the next sheet, you can see we're sitting comfortably within our target leverage range today. And over this cycle, we have roughly $8 billion of investment capacity in the next 5 years. And that's backed by a strong, robust free cash flow generation. We deploy this capital through a consistent disciplined framework, reinvesting organically with roughly half of our internal CapEx directed towards high-value categories. Returning capital to shareholders through growing dividends and leveraging a flexible bucket for opportunistic share buybacks and strategic M&A.
As you see on the right side of this chart, our M&A strategy is laser-focused on acquiring or investing in attractive high-value categories where we're uniquely positioned as a high view owner to accelerate growth. Over the past several years, we've demonstrated this discipline across our platforms, expanding intelligent labels through SmartTrack, TexTrace and the Willie's investment building out Vestcom and Embelixs through acquisitions and strengthening Performance Materials with the Tailor's Adhesives acquisition.
These transactions are clear examples of how we systematically find high-return opportunities across our categories, which we'll continue to pursue moving forward. Ultimately, our disciplined capital allocation framework reinforces our portfolio mix shift, driving outsized growth and delivering top-tier total shareholder returns over the long term. To wrap up, our high-value categories continue to serve as a primary growth engine for Avery Dennison driven by strong market growth, competitive differentiation and a disciplined capital allocation strategy, we remain confident in our ability to deliver on our long-term financial targets. So thank you all again for your interest in Avery Denison. We'll be happy to take your questions as we get everybody back on stage.
Well, thank you all for your attention so far. We'll now move to about a 30-minute Q&A session. Before we do, just a few quick reminders. -- on the scope -- we won't be taking questions on currently quarterly performance or our 2026 facial outlook. We will be doing that on our Q3 call coming up in about a month. Second point is we kind of ask that your questions focus on today's strategic topics. Teams have put a lot of work in here, and so we want to focus on what they presented.
Second, I'll keep this session smoothly. Please raise your hand, and I'll have -- I'll call your name, to Mike's Sarah Emily will find you, and then you can begin your question once they have brought to you the mic. Please state your name and your company first. And let me just sell to 1 question and 1 follow-up, and we'll get to as many questions as we can in and there'll probably be 2 time for a follow-up after that.
So with that, let's kick off with the first question. Go ahead, George.
2. Question Answer
George Staphos, Bank of America. Thanks for the presentation and details, everybody. ringer. Two questions.
Couple of years ago when you figure Analyst Day, the total addressable market for audio was roughly 350 million units. But right now, at least in the presentation, it's also 350 billion units. Can you talk to us about how the market over the last couple of years within those categories, recognizing an opportunity to snapshot this growth? Why has the market improves? Is that the orienting question number one. .
Question number two, again, we really appreciate dialogue on high value going missing a little better for every segment, it seems like markets are higher than the company average. Yes, when I look at return on capital, which is -- but if I look at basically the EBITDA divided by our assets since '20, it really hasn't moved. Again, no one's done that have over the last 3 years than, but why is that the case as capital intensity in these inofcategories increased. And so you're getting more growth with more margin, but it costs more to get there.
Francisco, will you ask -- address the first 1 and Greg, you handle the second.
Sure. Happy to. So thank you, George, all for the question. When we look at the total addressable space, we obviously are pulling together the overview of what we think to be everything that can be addressed within the service space call it. When we bring that together, we obviously see some of the trends of what's happening in the space. So if you look into the apparel space, it typically trends within GDP. So there could be small variations within that.
But in the bigger picture of things, we don't really go category by category and adjust it as such. Another example of that you'll hear later on we're actually expanding the portfolio. You heard us talk about the investment in William. So that does expand a little bit. But on the bigger picture of things, it is a number that is not really relevant from saying it's a couple of billion more or a couple of bit less. We just feel that it's consistent from a total opportunity perspective.
George, let me just add, typically, markets will grow depending on the end markets, now the grow GDP, plates and GDP. And so part of our assumption whether it's $350 billion or $362 billion, -- it's -- it's big enough, I mean that's the point of this at the end of the day. I think we have a long runway ahead of us. And our conviction is given our position given our innovation, given our teams, I think we're ideally positioned to take advantage.
Our objectives remain the same. We want to continue to be the majority provider in all our FID markets. And we've, as you know, invested ahead of the curve to create the adoption mechanism as many of these markets because my view has consistently been that when these markets do drive adoption through cycles, we're going to disproportionately benefit from that.
Yes. I think on your second question, George, I don't think anything has changed on the capital intensity, kind of organic capital intensity of our business over time. Certainly, we've been investing ahead of the curve, and we've talked about that in intelligent labels and building that capacity over the last number of years. But outside of that, I don't think there's much of a difference from an organic perspective.
However, in the last 5 years, we have done a number of acquisitions. Obviously, we acquired Smart late 2020 and then Vestcom, a number of Embelex acquisitions. We closed on Tailored Adhesives at the end of last year. So we have been adding capital investments into the acquisition space, and it takes a couple of years to regain that from an ROTC perspective. So I think we're on still the right trajectory there, and we feel good about what we're delivering now, but continue upward momentum on ROTC over time.
John McNulty, BMO. Can you help us to think about the high-value category in aggregate margin perspective, where it was maybe 5 years ago? And when you look forward over the next 5 years, does that margin profile improve because of the incremental value add? Does it come down a bit just because just target broader and broader markets? Like how should we be thinking about the trajectory of that over time?
Yes. Let me start, and then I'll Greg and Wayne as well. I think over the last period that you referred to, we've seen slight margin incretion across those high-value categories. Large as a consequence of some of the innovation that we bring to bear. Now as we look forward, all things being equal, John, given our innovation, given our position, we should see more margin accretion over time in that but we're also investing ahead of the curve, for example, in IL. And so there's going to be a point at which it's not going to happen for the next while anyway.
But as we invest ahead of the curve, whether it's in innovation or particularly, let's say, an IL and those assets and so forth, you're not necessarily drive the incremental margin that you'd expect until you then get scale leverage out of those assets in time as well. So that's the way I'd think about it. In aggregate across the portfolio, they remain higher than the segment and company average and there are individual pieces I've talked about this before, within each high-value category, which may be slightly less margin, some slightly higher, depends on the differentiation. But on aggregate, they typically all are across the company average higher.
Maybe just as the follow-up on the food side for IL, it sounds like it came in a little slower than maybe you'd hoped at least a few years relative to a few years ago. I guess, can you speak to the interest and the excitement that's picked up since the Walmart and Kroger moves? And is there any metric, whether it's whatever the top 10 grocers that you can speak in terms of pilot penetration and traction there. I guess, can you help us to think about where that growth trajectory is going and how it's accelerating .
Frances, do you want to dress?
Yes, sure. Happy to. We've seen -- first of all, let me start by saying we continue extremely confident in the value that we're able to create within the category. You heard me say earlier on that we saw our pipeline expand by from 40% from prior year to this year, which obviously means that we have a number of pilots and initiatives, which is significantly broader. We typically don't talk line by client and region by region.
But I would say both in North America and in Europe as main focus areas where we're seeing significant progress and data that allows us to, again, reinforce that we have both initial rollouts that are starting to approach and the number of pilots that continue to reinforce that belief. And that typically addresses what I said earlier on about typically freshness and those elements has been core elements from a value perspective.
I think, John, the only thing I'd say is I've always been pretty clear view on this that -- the first customer that you get in a new segment is useful because it proves that there is an ROI of some sort. The second one is actually strategically important because it means that within that segment, there's ubiquity of that solution. The third one really says that the flywheel is now starting to drive from a duction perspective. And our job is to make sure we're getting that adoption cycle going quicker. So the number of improve pilots that we're seeing the trials, some of the rollouts, I think they're all adding to the overall momentum sense.
And my conviction this area has really grown even more over the last couple of years. I'm frustrated that we haven't actually delivered on the growth over the last couple of years some cyclical events. But my conviction level is very high, particularly in food where you can see a compelling ROI that the retailers are consistently feeding back to us as well.
Let's go here to go with Mike.
Thanks, guys, for the presentation. tee helpful. Two quick questions. A couple of years ago, you mentioned in Intelligent Labels organic sales growth rate around 15%. I wanted to see whether that still is intact with an that growth rate, particularly that you've followed over the last couple of years. I think, Greg, you mentioned maybe in the next couple of years, you're going to drive high single-digit growth. So how do you get back to that 15%, what do you -- and what is that -- is that a slower direct target and 2 of it is, when do you think you'll get there?
And then to just some high-value categories growing mid-single digits, I think you said you expect some acceleration in those in that mid-single-digit growth rate as well. When do you think you will be -- what should we expect to see that is 2 years founders, -- what should we see those categories start to reaccelerate?
Yes. So Mike, on IL, Greg was clear in this in this 5-year cycle, we've only seen sort of single-digit growth, not what we'd anticipated in the first 3 years. And so our current view is that we will assume that by the time we get to the end of the 5-year cycle, you're going to be at this kind of high single-digit rates. The math on that would imply somewhere around double-digit growth couple of years, and that's where we see it to be. I think in the long term, what I would say about IL overall is my learning has been that while the market size and the opportunity is significant, we're going to continue to see some episodic gyrations.
And those episodic generations are the adoption related in the sense that you have a couple of customers go 1 year, the next year, there may be only one, you have this up and down performance. The second thing is just what the macro environment may do. We have more of a challenging macro environment. It certainly impeded some of our business that relates, for example, apparel, even maybe some of the logistics piece as well. So we feel good about where the direction of the business is.
I'm confident that as this adoption cycle increases, the flywheel gets going, we're going to see the other piece that Francisco talked about, which is, at the end of the day, a lot of AI modeling relies on accurate data -- that's really what it is. accurate data, AI drives much more insight and actionability, but if your data is not accurate. It's really tough to drive action and insight. And so I actually think it is going to be a catalyst for more item-level identification right from the source. So our product was made, why it was formulated, where it came from all the way through the supply chain to retail, ultimately to the end of life at consumer level as well. Remind me of the second question sorry, Mike.
You expect to hit that 15% thing. You expected that 15% target. It sounds like you do with [indiscernible].
It's going to be very long. There were years we'll be more then there'll be years and we will be less than that, like that's the way.
Probably in near term or you expect a high single-digit growth in the next year.
We're going to need -- yes, the math would suggest you're going to have to have double-digit growth as we go through the next couple of years, yes. And that's what our conviction is around that. I think as it relates to high-value categories, I think your question was around growth of high-value category-specific.
So the last couple of years, obviously, those is mid-single digits. Should we expect at some point for them to grow higher than it seems like you're present various initiatives along in the different segments to drive more pronounced growth. When should we see that growth at to start flowing.
So I will answer that by saying, I think we've made really solid progress high-value categories. You can see the market drivers there, not competitive position. We've been growing mid-single digits. Clearly, we have an ambition to do more of that as we take share if we deliver our innovation, but I wouldn't say that is going to be manifest in a particular period. I think for us to say that we're going to grow mid-single digits for now moving forward is a very good baseline to have. And if we outperform that, great, that will be fantastic as well. .
Let's go over here to Josh.
Josh Spector from UBS. I had a couple of questions around the Performance Materials piece. I think if you go through all these presentations, the market share 15%, 20% performance Materials about 2%. So I was wondering how you could talk about how you approach acquisitions growth in that market overall. Is there a higher hurdle rate you take to M&A in that area because of the lower market share and perhaps more volatility and the last thing on this is more just some of those and even what you talked about with solutions, it's more adhesive technology. It's not really a total solution like a label or maybe some of the tagging and branding on the solutions side. So why does all that fit together and what Avery is trying to do overall.
Yes. So on the first question around M&A, I think like I said, working for companies that will basically enhance our capabilities today and then we're high-value on resolve. If you think about the market, when you're saying it the share is low, and it's true, we're operating from a modest share position. The really important thing is to look at the application-specific shares. So the market, while it's large, fragmented within specific applications. There are niches and that's the application expertise. And there, the share concentration looks a little different.
So for example, the Taylor acquisition we've done -- we've acquired a leader in the flooring adhesive space that is actually providing us with a significant share within that application. So I think the way we're going to look at it forward is looking for specific application leaders in areas that when we acquire them, provide us with a significant position within that specific end market or application, et cetera, that we're looking for.
On top of it, we're looking for things where we can add value or they can add value to us. For example, again, on Taylor, it was the technology or on adhesives, we can basically enable Taylor is doing in a better, faster way as well as procurement because we're backward in good into acrylics and they were a big customer of acrylics and so those are kind of the elements that we're looking for. I think the second question that you said around kind of the adhesive element and it's not dilution, I would argue that it's a critical -- if you looked at everything that everybody talked about here, Adhesive is a critical component of actually enabling that solution.
And so while it's not a solution on its own, it's a critical enabling technology that we have a unique expertise in -- and we're backward integrated into it, which is different than many of our competitors. And that provides us with a unique position to actually win and create superior value in those opportunities.
Let's go to Jeff .
Jeff Zekauskas at JPMorgan. I think I might try the acquisition question again. Some of the other adhesive companies have acquired in medical adhesives. And medical adhesives, I think, is very much pressure-sensitive adhesive technology. And various companies of various sizes in various geographies have been available, but it seems that that's been a market more recently where you've not had an active interest. Why is that?
Let me start off by saying, Jeff, we actually do maintain a fairly healthy M&A pipeline across all these. And I wouldn't necessarily comment on any opportunity that we're looking at now. But certainly, in the context of the way Danny framed it, I think we're -- I always think about this, that ultimately, M&A is just an expression of a strategy. So it has to be a supportive one of our strategy, which we lifted up. I think the second thing for me is, it typically has to be in 1 of our high-volcategories, which adhesives is -- and we have to be the high-value owner.
So we need to bring something to that. I always use the example that we could go buy a completely remote type of business in which we have no expertise. It will be high value, but we don't bring anything to it. We're not a financial buyer. We're here to make sure that we're delivering value in the way that we are set up and for the markets that we serve as well. So as it relates to medical adhesive technology, much there is -- a lot of it is precious in it, but some of it is not as well. The way I think about that is if we can find clear examples where we can bring differentiation in that market or where we can add competency and capability to that through vertical integration, the critics example, they don't quote it. Then certainly, they are on our watch list as well. And you know yourself, some of these assets don't always become available at the ideal times as well, so.
Hillary Cacanando from Deutsche Bank. So a question for Danny. You mentioned the addressable market is $20 billion. Where do you see the largest opportunity to gain market share out of the $20 billion and when you look at your current end markets, which market is underpenetrated right now where you see good opportunity for the next 5 years.
Yes. I mean I think you'll hear some of the -- in the showcase, you'll see some examples of building and construction and general UV Wormalt and what that can do. And as far as opening new opportunities for us as well as replacing solvent. You'll hear some things around from a Taylor team around what we can do in flooring. So there isn't -- I wouldn't call it there's 1 place -- like I said, it's a pretty broad and fragmented kind of place. And we are looking for opportunities where we have unique capabilities.
So in flooring, for example, we drive more in building construction. We have some unique capabilities that we're trying to drive more penetration, et cetera. So that's kind of how we're looking at it. The market is -- like I said, it's very large and there is many opportunities. What we're looking for is places like Dan mentioned, where there is -- the value is high. So the value that we can bring is high, which will allow us to capture PMA margins and where we can have unique capabilities.
And today, it's through kind of a purchase settie adhesives. We're adding to the portfolio through the acquisition of Taylor and that's kind of another lens that we're looking from an M&A perspective. .
Think about our Performance Materials business, both liquid adhesives and segment and performance types as well. So, we've historically a relatively good-sized performance types business, where we're leveraging our traditional technology and skill and capability, including vertically into adhesives to provide what I would call utility on the label. So we provide performance tapes going to fractions. They hold and replace mechanical fasteners, but they also provide noise, vibration and some dampening as through the adhesive construction.
So it's the combination of these 2 things that really matter for us as well in terms of really identifying an application in interterritorial using a material sensibility and then getting that stickiness it comes out of really expect in for a very long time as well.
And then a question on sustainability. It seems like there's a huge sustainability push in Europe, right, with PPWR and -- are you seeing anything similar in the U.S.? Does it seem like there is any type of like regulatory push, but maybe from the consumer customer-driven side or anything like that, anything similar that provides you with opportunity in terms of sustainability.
So Mariano, why don't you talk through Europe but also give some input into what you're seeing in the U.S. as well, and we can follow in. .
For sure. So I'm leading the European business, I'll speak a little bit through that lens. This is a central part of our strategy, right? So over the last several years, PPWR has been a center focus for us in terms of the development we have to do in innovation with material science to bring products that enable circularity. I think one of the things we're seeing also is how we can continue to add value, not just as a material supplier, but also helping navigate through very complex environment that we're living through in terms of regulation and the evolution of this regulation over the next few years.
We see that we are in Europe definitely leading from a global standpoint. And I think that is giving us definitely a position of advantage overall in terms of our global positioning on sustainability. I think the trends that we see in North America are a little bit different, but there are a lot of signs there in terms of how certain states or certain end users et cetera, are putting still sustainability at the forefront.
So really how we view it is we've got a perfect place in Europe to be able to advance this and accelerate. And then with our global and ability to translate solutions from one place to the other, that position us well for being able to be ready in other places in the world like North America, when this trends continue to happen.
Good. Do you want to talk about DPP, maybe between yourself and Michael, just give a perspection.
Sure. Maybe if I may just build on the North American comment. So 1 of the things we see is I think I mentioned earlier on a brief speech that we have an inlay from an indulgent labels portfolio perspective that's been approved by the American Plastics Recycle Association. And that's a big deal, and it's a requirement in called California and several others and it's increasing. So it is coming. Is it coming at the same pace and at the same sort of focus is Europe, -- probably not, but it certainly is coming and it's increasingly becoming important.
And we're the only 1 that was able to create that allows you to do that. So it does not pollute the recycling stream from a PAT perspective as an example. So it is important. We'll continue to be increasingly important in that lane.
Yes, I think the only other point on North America is there are certain states pushing a much different agenda, which will require the apparel retailers and brands to comply because they don't segregate product by state. So there will be requirements that California may imply that might spur like Nike to behave different later for Walmart. So I think we do see that coming as well. As far as DPP, I think that's definitely a platform we're sure well to play in. The vehicle of choice will be that transition from a is DPP label. Obviously, we have a strong business in that space. We also have a strong foundation of digital with what Francisco has built within AMA. And so it's a natural place for us to play, and it's something that we're driving active most of our brand customers.
I would say at the high level, took a step back, sustainability for us is still a significant value creation -- there's both the stewardship requirements in terms of what we do around the world, but it can create significant value for us, not only from a cost reduction perspective, our own greenhouse gas reductions, efficient operations, but also in terms of the way we engage customers.
And I think we're just starting to the start of that led by Europe, but certainly here in the U.S. as well. We also have -- so later on, if you have an opportunity Michael Kollaras put his hand, he leads sustainability for us globally as well. So he can also talk around some of how the applications around PPWR,DPP, EPR are going to come to bear in these markets to useful reflecting point as well.
Thank you. Good morning, everybody. Roberts, Raymond James. Thank you, everybody, for the presentation. I think first at you've been quite work in here. Invesco, I believe this slide said the growth rate was low single digits. I think digital media growing at low teens. So what explains the variance there from the category as a whole? And maybe on that business how much is hardware versus solutions? And the second part of the question, if I could try to make some parallels or differences between that business and intelligent labels.
How does the competition compare specifically for hardware players versus Avery Dennison. That is a full suite of services. And then maybe for both Vestcom and intelligent labels as a new program, new category or new customer starts to roll up. How does the margin profile or life cycle compare? Is there a certain time line to reach the Stem average? Is that due to just rolling out the program with a new customer or a period where you have outsized share and there certainly differences between the 2 businesses, but endocardial as well.
So let me start with the competitive landscape, which was 1 of the questions you hit on. So in the ESL space, essentially there's 4 large global ESL hardware players. As I discussed, our Store Link software platform, we've intentionally built to be hardware agnostic. So we have interfaces with all 4 of those hardware players, whichever hardware player a retailer wants to adopt, our software platform can manage and execute that solution with excellence. And we think that puts us in a really compelling, strong position there as we go forward.
In terms of some of the market trends overall. Obviously, we quoted some specific data around in-store digital retail media, which has significant growth rates across the in-store media landscape overall, we're seeing significant growth by the continued growth and power of retail media networks as retailers have found they can generate much higher margins through all revenue streams like media and data than they can through selling products to shoppers.
And so retail media networks have become an increasingly important part of their portfolio. Within that retail media network, there is a portfolio of solutions that address traditional marketing funnel, upper funnel, middle funnel, lower funnel. I would argue we've got the best solutions in the business in that lower funnel to drive conversion. So as brands are investing to build awareness, generate purchase intent. They then need to complement that by investing in store with us to drive conversion and get that item ultimately at asked.
And through both our analog and emerging digital solutions, we've got really effective media solutions to drive that conversion and help round out that spend and generate really high incremental return on ad spend for their media investments there.
I'm not sure if I hit the questions .
I think the only thing I can Mason, it's such a unique business. At the end of the day, when the consumer steps into the store unless they have a very strong brand next at the shelf edge, they're making their moment of truth decision based on what they see in front of them. So I do think that as Retail Media Network have grown, they've also started to realize the power of that moment of truth decision in front of the shelf edge. We are uniquely positioned to help facilitate and I think Derek wrong, a lot of the data that we've seen about shelf edge promotional activity versus, let's call it, traditional above the line or through the line kind of media and then trade marketing effectively. The return on advertising is disproportionately higher when you get to the consumer at the moment of truth. And that's what we have a unique opportunity to facilitate as well. .
And as you might imagine, using data and analytics, we can drive very tight correlations investing in that media and incremental sales. And so we invest heavily both through acquisition of data and analytics to provide that receipt for services back to our brand partners you spent $1 with us. We put 3 back in your pocket. A good day for them every day.
Maybe the question I think Matt asked was also just what's the kind of margin profile you start a customer midway through. And then I'll talk about that for Francis can talk about IL and specific as a differentiator.
Yes. So our margin profile is pretty steady as we ramp up a customer. We -- as we take on a new customer, we will invest ahead of time to fund a pilot to quantify the value that we create and make it a really easy decision for that customer to adopt our solutions. And so we'll invest ahead of revenue to make that happen.
Once the revenue turns on, the margin profile for us is pretty steady. -- maybe bridging to the IL piece, 1 of the things I'm excited about my team is excited about is because we have relationships with 70 of the top retailers here in the U.S. marketplace, we're in a really unique position to open doors and engage in dialogue on our IL solutions and bring those to life, particularly with our grocery retailers and activating solutions to the perimeter.
And we're starting to get some really strong traction with our growth retailers and supporting Francisco and his team to unlock those doors and get the pilots rolling and eventually get the revenue turned on with those programs.
Yes. Maybe just on the margin profile from an IO perspective thank a couple of comments. So 1 is when you're innovating for your application, you know you have some inefficiencies as you drive as you run things up. So over time, if you're really doing something fundamentally it is normal that you would see an improvement over time as you would with anything which is new and where you are particularly innovating.
And then obviously, you have the flip side of that, which is when you're not innovating and you're providing a more, call it, standard solution you obviously start to see more competition come in. So I think it's a bit of a mixed bag. Our percentage is always that we need to be ahead of the company average. That's a company, our commitment, and that is the way we manage it from the portfolio perspective with that sense.
Go over here to John John, do you have 6 questions there?
I'll do my best to keep it start off by saying thank you all. I appreciate all the information. It's great insight to all the high-value categories. So Francisco, I want to start, I'm trying to get a better sense of the improvement in the pilots. Does it include any part of the Walmart business that you guys have announced are starting to ramp up on? And then included in that is coming from grocery peers that you are looking to convert some testing in? Is it new categories within the stores?
And then tangentially, maybe you can just talk about how long it takes to monetize some of these pilots. I realize that it's very different earlier the penetration versus some of the harder end markets like logistics with First Mile. But maybe just touch on that.
Yes. So maybe came just starting from the beginning. So -- our -- when I mentioned the 40% roughly improvement from a pipeline year-on-year, that is most of it driven by new logos, if you'd like. It has some expansion logo. So as an example, if you're working with the retailer and you've done Mirand now you have to do a fundamentally different solution, which requires the innovation I've mentioned that we've developed into, say, protein, which has high moisture and solutions from a stackability and reliability perspective that we consider as a new opportunity from within that same logo.
So it's a mixed bag, but it is primarily driven by new logos that we've been able to drive new pilots with in North America and Europe.
Got it. And then I realize this is maybe a little bit of an unfair question. But just thinking kind of over the next couple of years instead of just cycle, and we've seen what the CAGRs look like across all the high-value categories. But just thinking about the next couple of years, can each of you walk through maybe some of the puts and takes to think about in terms of performance relative to those past 5-year CAGRs. Some of the bigger wins obviously become headwinds going into next year and as them. But maybe between some of the head end, some of the things you're more excited about that could push growth over that 5-year CAGR target, just looking out.
Well, maybe start off and then I'll ask a couple of the individuals to go through that. I think I was fairly clear in this. We see historically mid-single-digit growth. Our assumptions moving forward will be at that or above as we move forward from here and that will depend on execution, our innovation and so forth. When I think about the kind of individual piece of the business where we may sometimes have an event like World Cup and what happens when you lap that, part of the drive that we have at the moment we need to make sure we're driving new innovation to market quicker.
So that when we get to these points, we can offset that with new customers, new solutions and applications. And so I wouldn't say at the macro level, there's any one of these we have a deleterious effect on that, let's say, next year or the year there afterwards because typically, we're able to offset it with other growth opportunities. And World Cup is a good example of a significant World Cup bump last year, this at a the team were able to offset that with more customized activity that happened actually in the market after that as well.
So you can see kind of balance in this. There may be individual pieces by quarter quarter-on-quarter comparison. But generally, overall, our ambition is to continue to make sure we maintain that kind of 5% growth plus as we move forward from here. I don't know if there's anything specifically in graphics and reflectives were think.
Sure. So if you remember when I was talking about, we have specifically prioritized our focus around the automotive aftermarket and OEM segment. So we continue to see growth in that space, particularly with new technologies to walk through in the showcase afterwards. But when we talk about people are continuing to personalize and customize their vehicles and also looking to protect their vehicles. That's a potential large opportunity for us, not only in aftermarket, but also in the OEM space. So I think that looks really promising for us in this space.
Michael, maybe just on Embelix. .
I think you mentioned World Cup. I think that's a great our acquisition strategy has built up new capability. So traditionally, World Cup would have been an event for us where we had a dramatic improvement in revenue based on offshoring and when games were being constructed. Now the new capabilities, we can actually also do the onshore piece of it into the in-event monetization. So traditionally, World Cup would have been a big headwind year to -- this year, it was an equal size event.
So you take that capability we build and how we think about Olympics and we think about Euro '28 and we think about all these events globally, we have a different capability to bring to market to do both sides of the offshore and the onshore piece, which it's something that deems going to drive going forward.
Let's go to you, Josh. Right in the back.
Guys. Maybe just to kind of expand on that HPC growth question. I'm curious, the last number of years, your customers have really focused on premiumization, whether it be through product reductions, SKU focus, et cetera. Now that, that dynamic is at least directionally kind of maybe going towards affordability, just given what's going on in the world right now. How do you guys think about that in context of your growth targets going forward? And does that pose any sort of risk to that?
I'll let the team in. But for me, Josh, at the highest level, I think all of our ABCs are fundamentally anchored in what I we talked about, which are the long-term secular trends, the digitization of indecision items, irrespective of whether there's an affordability issue of premiumization, that trend is real, I think, personally unstoppable, that's going to continue. If you think about personalization, the me in the physical product, the consumer experience that they want to have, I don't think this cuts across all demographics as well, and it's across all affordability levels.
So while there may be a choice that people have to make part discretionary. I don't think you necessarily see that trend changing. And then sustainability, I think, is going to be at the heart of the trend that's going to continue to drive moving forward. It's going to challenge industries and businesses to be more active in resource allocation resource optimization and again, I don't think that changes by the cost of a particular component or the economic cycle at any 1 time.
Now at the broader level, are there specific things and individual pieces of these high-value categories that may drop off slightly if there is just an affordability issue sitting on the table for, let's say, the next year? Maybe. But I think it's de minimis. It doesn't funnily change the trajectory of the activity we're doing all the innovation we're trying to bring to market at the same time.
If I could some of the innovation we're trying to bring even in the high-value categories is stuff around lower cost lower-cost ways of doing -- getting the same value or even more value. And so if I give the example of well melt in the adhesives, but even in the graphics in the automotive aftermarket, part of the work that we're doing is how do we make the install faster, which is the highest cost of the install app is actually the cost of the labor.
And so if we can speed up the way -- with the material science that we have, it can speed up the time that it takes to the installer to install an item or a wrap then that makes it more affordable allows us to win share. So I think there's all these elements, and there are so many different applications that were kind of the different businesses are going after that I think to Dean's point, it's kind of both ways, but we're targeting both sides of the equation.
Final thing I'd say, Josh, is if you just think about what we're trying to do with high-value category, generically across them is trying to identify a unique customer or industry issue and then creating a solution which addresses that, which means by definition, that customer or that industry is getting a return on investment. It's kind of the discussion we always have around IL is the cost of the tag inhibitor not if you're creating enormous value from either reducing labor or increasing speed, then it's not the determinant driver, it's the ROI that customers get.
And when you move the dialogue to that piece, becomes a much easier discussion around move the things away from cost affordability, price, et cetera. Not always, there's always going to be procurement departments. That's their job at the end of the day, but that's largely where we're trying to orientate many of our high-value category approaches.
SP1 All right. Let's take 2 more questions.
There was no discussion about like the logistics piece in IL. Can you talk about the logistics piece and do you see anything the pipeline should it be growing? Is it flattish? And when you look at your exiting the year at like a high single-digit growth for IL, when you get to 2028, how much of that is really volume and how much of that is mix?
Yes. So thank you for the question. A couple of things. So logistics, we continue to see a number of initiatives, pilots and smaller, I would call them rollout, so very application-specific that gives us very confident that things will continue. We obviously have a very large player in the space that's been very vocal of the value they see from it. So we're very confident, and we have a number of pilots that gives us confident we will see that.
Now these are big moves that imply a significant transformation. And as such, the timing isn't always the 1 we would expect to Dean's point earlier, and the sort of somehow frustration that we have that we haven't been able to push it as hard as we wish, but the confidence is absolutely there. And we're confident that will happen primarily in North America with the large players, but also we're seeing traction now in European unit. So I'm confident that will be a space that we will continue to push.
There was a second question, so I kind of know what it was.
From a future growth perspective. Yes. So as you get into like 2028, when you get to like your high single-digit exit growth rate, how much do you think is volume contribution, what's like mix contributing from selling like a higher value enable?
It is mostly a volume, meaning it is mostly driven by new initiatives. Now those initiatives have a different impact, right? So when you look at our portfolio, you mentioned logistics. Logistics is typically a lower ASP pro versus, call it, an embedded apparel product that we use in Michaels business, where the ASP is significantly higher. So overall, I would say it's primarily volume driven. Within that volume, there are different impacts that the can programs have.
Generally, volume is growing faster than revenue with top. Absolutely. Volume grows ahead of revenue Yes. .
Bryan Burgmeier from Citi Research. Thank you for taking on -- just going back to Vestcom really quick. Can you give us a sense maybe of the penetration rate for the ESL versus analog? Is that now? And maybe what do you kind of assume or expect that could reach by 2030? And is that sort of evolution over time contribute to the margin profile? Or is it pretty static throughout as you said before?
So as I mentioned, our business is very U.S.-centric today. So my answer will be a fairly U.S.-centric answer. -- think about the market dynamics. What we see in the market -- the U.S. market today is predominantly analog, migrating towards digital imagine -- but it's not a uniform migration by channel. And so what we see is in larger format stores, predominantly grocers and mass retailers that want to have a larger store, e-commerce is a bigger part of the store, et cetera. There's more labor savings opportunities.
The ESL business case is stronger there. Conversely, small-format stores, drug, dollar, et cetera, that are often labor constrained. They can't pull labor out. The ESL business case is not nearly as strong. So as we think about adoption, what we're seeing, and I think we'll continue to expect to see in the U.S. marketplace as those larger format retailers adopting at a much higher rate than what you see in the small format retailers for the ROI frankly, just doesn't as effectively.
As that happens, right, it unlocks new revenue streams for us that we haven't had before, right? So we now have revenue streams from software as a service that didn't exist very recently and excited to continue to make that an integral part of the ESL solution for those retailers who do adopt and unlock, frankly, new revenue growth for us there that we're excited about.
George Staphos with BofA. Two questions primarily on intelligent labels. So to the extent that everything we read about diesel costs are going up, freights going on. cost of manufacturing labor is going up. There's always been a cyclicality to the adoption cycle with IL that we understand in terms of capital dollars, but it would seem like this kind of environment might be in an environment where you can actually accelerate adoption, even though the cyclicality -- the cyclical tailwinds aren't what they need to be.
How do you think about that Francisco and Dean, is there an opportunity to maybe increase or accelerate adoption relative where you'd normally be just because the cost of doing business is a lot more challenging than it used to be the case, Question number one. Question number two, just for Bethany. Bethany, can you talk about thanks -- can you talk about the share trends within your markets and whether you're gaining or keeping up? And what's particularly helping you in the market? And again, share trends within Graphics and reflects every Francisco.
I think there's 2 things that -- so one, obviously, as you said, in theory, if you have labor shortages and if you have challenges with higher costs and you need to be more efficient, that should drive the need for more automation and more ways of making you be more efficient as such. Having said that, it also creates a level of uncertainty and a level of, I would call capital constrains that people at times are not willing to make the investment that they would otherwise be doing. So I think those things Ela, we've seen people saying one thing or the other. So it's kind of hard to say that we will see an acceleration cause of that macro environment. it's a mixed feedback from that perspective.
Anything else -- so in relation to graphics and reflectives in terms of the marketplace. So the total addressable market, I mentioned was $4.5 billion. And it is a pretty fragmented space overall. There is no 1 majority share from a competitive landscape perspective. Nobody has that. We are the #2 player in that space. There are a number of different competitors across the board. But I would say our -- we continue to grow. There's tons of opportunity.
As I mentioned, our sales in 2025 were around $700 million so obviously, there is significant opportunity for us to continue to grow. And our strategic priority in that automotive segment, specifically as well as our second largest within the corporate brand space positions us well to achieve that.
But do you think you're gaining share at this juncture or kind of maintaining.
Say we're gaining share. .
And too, when you look at Bethany slides, part of that market size she showed includes pain protector film and window films, where we historically haven't been that much of a player in versus wrapping films as Bethany said earlier, we've been in for decades. So I think there's opportunity there for us to continue growing in that area faster than the market because we're looking to figure out how we can build a bigger position in those markets as well.
And similar true on the reflective side, we're also gaining share, just.
I think, George, the only other thing I'd say at a high level, you can sense from the team's discussion on what they said. Growth for us is a significant particularly in this kind of more muted macro environment. The challenge we as a leadership team have assumed is that we need to find a way to grow both in the short term and the long term, and there's kind of really focus in the shorter term around saying, -- are we executing with efficiency alacrity and making we're really meeting customer needs that drive share gain typically using those levers, quality of service, the quality of product that we have -- we've actually seen that over the -- particularly the last year, we've taken share in most of our businesses around the world.
The second piece, which is what we talked about, you heard from the team is just this acceleration of innovation outcomes, action innovation pipeline, but let's get to market quicker with new products faster and faster because it's that that drives differentiation in the longer term, and that then supports the future growth rate as well, and that's the focus of the team overall.
Excellent. Thank you all for your questions. That's going to conclude our formal presentation. Let me give you a little run down what we're going to do here, everyone joining me an from all of us Avery Dennison for your time today. If you have any questions, please reach out to me directly. For those of you in the room, here's the next steps. Lunch is going to be served next door. Feel free to grab lunch and mingle with us from Avery Dennison. That will be about 30-minute session and then we're going to recompetinat the back of the room here for the demo showcase. -- our fruit number is on your badge. The demo stations will be around 20 and 23 minutes or so. We're going to go through there's 7 of them, you're going to have a group leader please let the people and the demo presentations get through their kind of their prepared remarks, so you can understand what's going on, there will be plenty of time at the end for Q&A. And thank you very much for your attention.
Great. Thank you, everybody. Bye.
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Avery Dennison — Special Call - Avery Dennison Corporation
Avery Dennison — Special Call - Avery Dennison Corporation
Showcase: Avery Dennison stellt High‑Value‑Kategorien als Wachstums‑ und Margin‑Treiber vor; RFID (Intelligent Labels) bleibt Schlüsselchance mit längerer Adoptionskurve.
📣 Kernbotschaft
- Strategie: Fokus auf „High‑Value‑Kategorien“ (Spezial‑Labels, Graphics/Reflective, Performance Materials, Intelligent Labels, Vestcom, Embellix) als Kernwachstumstreiber und Hebel für strukturelle Margenausweitung.
- Position: Marktführende Material‑ und Digitalkompetenz, vertikale Klebstoff‑Integration und breite Converter‑Channel‑Zugänge sichern Wettbewerbsvorteile.
🎯 Strategische Highlights
- Portfolio‑Mix: High‑Value‑Kategorien machen ~45% des Umsatzes; Ziel: ~50% bis 2030 durch organisches Wachstum + gezielte Bolt‑on‑M&A.
- Product Innovation: Neue Technologien: lösungsmittelfreie Klebstoffe, Terrain‑Turf‑Adhesive, AD IdentiFresh‑RFID (Lebensmittel) und kombinierte BLE/ RFID‑Sensorik für Frischeüberwachung.
- Kommerzialisierung: Vestcom‑Software (StorLink) als Brücke zu ESLs (Electronic Shelf Labels) und Retail Media; Embellix erweitert On‑site‑Customization und Event‑Monetarisierung.
🔍 Neue Informationen
- Produktlaunches: Terrain (einzelkomponentige Turf‑Klebstoffe) und AD IdentiFresh‑Inlays für feuchte Lebensmittelumgebungen wurden vorgestellt; AV‑Clean‑Flake für PET‑Recycling bestätigt.
- Transaktionen: Tailored Adhesives (Acq. Ende 2025) als Beispiel für diszipliniertes Bolt‑on‑M&A; kein neues finanzielles Guidance‑Update genannt.
❓ Fragen der Analysten
- RFID‑Adoption: Pipeline +40% YoY, aber Kommerzialisierung langsamer als gedacht; Management sieht Hochlauf zu hoher‑einstelligen/ später zweistelligen Raten über den 5‑Jahres‑Zyklus.
- Kapitalrendite: Analysten hinterfragen ROIC trotz Margenanstieg; Management verweist auf vorlaufende Investitionen in IL‑Kapazität und M&A‑Integration als zeitlich versetzte Effekte.
- Vestcom/ESL: Erwartete ungleichmäßige ESL‑Adoption (große Formate vs. Small‑Format); Software‑SaaS und Retail‑Media als Margenhebel.
⚡ Bottom Line
- Implikation: Präsentation liefert klare strategische Roadmap: High‑Value‑Kategorien sollen Wachstum und EBITDA‑Margen langfristig anheben. Kurzfristig entscheidet die Geschwindigkeit der RFID‑Adoption und die Integration ausgewählter Zukäufe über die Beschleunigung der Prognosen.
Avery Dennison — Q2 2026 Earnings Call
1. Management Discussion
Ladies and gentlemen, welcome to Avery Dennison's Earnings Conference Call for the Second Quarter ended on June 30, 2026. [Operator Instructions] As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website.
I would now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.
Thank you, Ellen, and welcome to Avery Dennison's Second Quarter 2026 Earnings Conference Call. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified and reconciled from GAAP on schedules A-4 to A-8 of the financial statements accompanying today's earnings release. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release.
On the call today are Deon Stander, President and Chief Executive Officer; and Gregory Lovins, Senior Vice President and Chief Financial Officer.
I'll now turn the call over to Deon.
Thanks, Gilly, and good morning, everyone. We delivered strong second quarter results across the board. On a year-over-year basis, organic sales growth accelerated to 8%, adjusted EBITDA margins expanded, adjusted EPS grew by 19% and adjusted free cash flow generation was strong at more than $360 million. While these results benefited from continued customer inventory stocking in Materials Group. Excluding this tailwind, we continue to drive a step change in the pace of our sales and earnings growth.
Our performance this quarter once again demonstrated the strength and the resilience of our portfolio. Sales growth was balanced across both base and high-value categories with high-value categories returning to mid-single-digit growth as we expected. Combining this improved organic growth with our commercial and operational excellence allowed us to expand adjusted EBITDA margins across both segments even against a volatile and inflationary cost backdrop. Our priorities are clear. We are continuing to drive both earnings growth and business resiliency by leaning into our proven playbook.
First, we're investing in innovation, service-led differentiation to drive share gains and expand new business opportunities. The strength of this focus was evident in our second quarter performance where organic sales growth accelerated. Second, executing commercial and operational agility, including productivity and pricing actions to mitigate inflationary pressures. And third, generating strong free cash flow and maintaining a healthy balance sheet. Our balance sheet strength and robust cash generation supported the increased pace of our share repurchases during the quarter and another increase in our dividend while continuing to invest in our long-term growth priorities.
Turning to our segment results. Materials Group delivered organic sales growth of approximately 10%, driven by high single-digit volume mix growth as well as low single-digit pricing realization as we began to pass on cost inflation. During the quarter, the business delivered solid performance across both base and high-value categories. Encouragingly, high-value categories grew mid-single digits year-over-year, led by Specialty and Durable Labels as well as Intelligent Labels. Base categories grew low double digits, driven by underlying market growth, continued share gains and the benefit of customer prebuys.
In Label Materials, customer prebuying persisted longer into the quarter than we initially anticipated, driven by accelerating raw material inflation as well as customer concerns regarding surety of supply, particularly in Europe and parts of Asia. Looking forward, while it is difficult to predict the timing of when the unwind will happen due to continued geopolitical uncertainty, we anticipate the majority of the unwind in the third quarter with a smaller carryover into Q4. From a profitability perspective, Materials Group adjusted EBITDA was strong, growing high teens with margins expanding compared to prior year.
In the Solutions Group, organic sales grew 3%. The quarter was characterized by solid low single-digit growth across both our high-value categories and base solutions. Within our high-value platforms, Embelex delivered robust low double-digit growth, driven by core market expansion and strong World Cup demand. Intelligent Labels grew low single digits, while Vestcom was down slightly as we lapped a major customer rollout from 2025. In our Base Solutions, we were pleased to see sales return to low single-digit growth. From a profitability perspective, execution on our productivity playbook more than offset higher employee-related costs. This allowed us to deliver strong EBITDA margin expansion.
Pivoting to our enterprise-wide Intelligent Labels platform. Sales were up low single digits compared to prior year, in line with our growth expectations for the quarter. As anticipated, this headline number reflects varying dynamics across our major end markets. In our largest category, apparel and general retail, we delivered another quarter of strong performance with sales up approximately 10%. This growth was driven by continued program expansions in apparel alongside a solid recovery in general retail. Conversely, we experienced a headwind in logistics, where sales were down double digits. This was driven by the difficult comparison of lapping outsized share gains from 2025 and softer overall customer demand in the segment.
Looking ahead, we continue to expect 2026 growth for our Enterprise Intelligent Labels platform to outpace 2025. In apparel and general retail, we expect to deliver strong full year growth as adoption continues to deepen. In food, we are positioning the platform for an acceleration in the back half of the year, driven by the beginning of the rollout with the largest U.S. grocery retailer and expanding activity across other customers. Finally, in logistics, we are managing through the normalization of outsized volume share gains from 2025 with our largest partner, while continuing to expand pilots with new logistics customers.
As to our outlook, we are returning to providing full year guidance, reflecting our team's strong execution through a dynamic environment and the challenges of precisely timing the second half customer inventory destocking in Materials Group. For the full year 2026, we anticipate $10 to $10.30 in adjusted earnings per share on organic sales growth of 3% to 4%.
In summary, our strong second quarter performance, delivering another quarter of accelerating sales and earnings growth, highlights the differentiation and underlying strength of our enterprise. We remain focused on the key secular tailwinds shaping our long-term strategy while continuing to execute the operational actions required to navigate cyclical dynamics and inflationary shifts with agility. The proactive steps we are taking to accelerate innovation-led differentiation, serve our customers and ensure supply chain resilience further strengthens our competitive moat. Our proven strategies, market-leading resilient businesses, agile teams and disciplined capital allocation approach give us confidence in our ability to deliver sustainable growth in 2026 and beyond. I am proud of the global Avery Dennison team. Their agility and operational execution continue to drive strong results, giving us momentum as we execute across the balance of 2026 and beyond.
Now over to you, Greg.
Thanks, Deon, and hello, everybody. In the second quarter, we delivered strong adjusted earnings per share of $2.89, up 19% compared to prior year. Earnings growth was driven by higher volume and productivity, partially offset by higher employee-related costs and targeted growth investments. As Deon mentioned, customer inventory prebuys were a contributing factor during the quarter, adding an estimated $0.25 to earnings.
Second quarter reported sales were up 11% year-over-year, with organic sales growth of 8%, driven by strong volume mix and slightly favorable pricing. We estimate that roughly half of the organic growth was from customer prebuy activity. Reported sales also benefited from approximately 2 points of growth from foreign currency translation and 1 point of growth from the Taylor Adhesives acquisition.
Adjusted EBITDA margin was 17.1% in the quarter, up 50 basis points compared to prior year. And we generated strong adjusted free cash flow of $365 million in the quarter, primarily driven by earnings growth and working capital improvements. Our balance sheet remains strong with a quarter end net debt to adjusted EBITDA ratio of 2.3x. Capital allocation during the second quarter remained consistent with our established framework.
We returned over $210 million to shareholders through a balanced combination of $76 million in dividends and $138 million in share repurchases, an accelerated pace relative to the first quarter. This brings our year-to-date capital return to shareholders to roughly $350 million. These actions underscore our ongoing commitment to disciplined capital deployment while preserving our financial flexibility.
Turning to segment results for the quarter. Materials Group organic sales were very strong, coming in 10% higher than prior year, driven by high single-digit volume mix growth. Excluding our estimate of the year-over-year benefit from customer prebuys, underlying organic sales growth remained strong at mid-single digits.
Turning to Label Materials. Similar to the first quarter, we believe we successfully gained share and realized favorable year-over-year pricing as we acted to mitigate the impact of rising raw material costs. From a regional perspective, compared to prior year, volume mix in North America was up mid-single digits. Europe delivered strong mid-teens growth. And in emerging markets, both Asia and Latin America grew high single digits.
Organic growth across our Materials Group high-value categories grew mid-single digits, led by low double-digit growth in Specialty and Durable Labels and high single-digit growth in Intelligent Labels. Industrial Tapes grew low single digits and Graphics and Reflective sales were comparable to prior year. Materials Group adjusted EBITDA was up 17% compared to prior year, with margins up 20 basis points. This margin expansion reflects strong volume, ongoing productivity actions and the net benefits from pricing and raw material costs, inclusive of cost-out reengineering. These factors more than offset an unfavorable product mix and higher employee-related costs.
Regarding raw material costs, we experienced mid-single-digit year-over-year raw material inflation in the second quarter, representing high single-digit sequential inflation, slightly above our expectations. Our teams continue to execute our proven playbook to navigate the current inflation environment through strategic sourcing actions, reengineering and the timely implementation of pricing actions. Looking ahead for the remainder of the year, while the situation remains uncertain, we're currently anticipating high single-digit year-over-year inflation in the second half.
Shifting to Solutions Group. Organic sales were up 3%, with both high-value and base categories delivering low single-digit growth. Within high-value categories, Embelex delivered strong low double-digit growth, Intelligent Labels grew low single digits with particular strength in apparel and general retail categories, while Vestcom was down low single digits as we lapped new program rollouts from the prior year. Solutions Group adjusted EBITDA margin was 18.6%, expanding 150 basis points year-over-year and 220 basis points sequentially. This margin expansion was driven by continued execution of our productivity initiatives, the reversal of prior year tariff-related network inefficiencies and a positive net price/cost impact, inclusive of tariff-related costs. Together, these benefits more than offset higher employee-related costs and our targeted investments in growth.
Turning now to our full year 2026 outlook. We anticipate reported sales growth of 5% to 6%. This includes organic growth of 3% to 4% with approximately 1.5% from currency translation, 1% from the Taylor Adhesives acquisition and a nearly 0.5 point headwind from the fiscal calendar change. We expect full year adjusted earnings per share in the range of $10 to $10.30, representing 7% growth year-over-year at the midpoint. This full year earnings growth is driven by benefits of organic growth, which is primarily volume mix driven, a largely neutral impact from customer inventory management for the full year, productivity actions, including restructuring benefits of more than $60 million, offsetting headwinds from wage inflation and the normalization of 2025 temporary savings, which are largely incentive compensation related and a net benefit of approximately $0.30 from combined currency, share count, interest and tax.
Additionally, we remain committed to strong free cash flow, targeting roughly 100% conversion for the year with fixed and IT capital spending of approximately $260 million. From a quarterly earnings cadence perspective, we're assuming that third quarter will see a larger-than-normal sequential earnings decline, driven by our customer destocking timing assumption, which will represent an approximate $0.50 sequential headwind versus the benefit we saw in the second quarter. While we expect a sequential headwind in the second half as these customer prebuys unwind, underlying earnings momentum remains strong across the balance of the year.
In summary, we delivered a strong second quarter, achieving 8% organic sales growth and 19% adjusted earnings growth. We generated very strong free cash flow, increased our dividend and accelerated share repurchases while maintaining a strong balance sheet with leverage coming down to 2.3x. Our updated 2026 outlook anticipates 3% to 4% organic sales growth and roughly 7% EPS growth, demonstrating positive momentum toward our long-term targets. Overall, our resilient portfolio, agile execution and disciplined capital allocation give us high confidence in our ability to deliver strong long-term value to all stakeholders.
With that, we'll now open up the call for your questions.
[Operator Instructions] Your first question comes from the line of Ghansham Panjabi with Baird.
2. Question Answer
Can you just give us a bit more granularity as it relates to the growth outlook for Intelligent Labels for 2026 relative to the low single digits you generated in 2Q? And in particular, how is your view on the major end market verticals such as apparel, general retail, food and logistics changed, if at all, relative to the last time you reported 3 months ago?
Thanks, Ghansham. Yes. Our anticipation has always been that we would continue to see our growth ramp in the second half of the year. And then when I look at the individual segments in apparel and general retail, we continue to expect solid growth as we go through the second half of the year, largely on the new program rollouts we're doing as well as the continued strengthening in some of the general retail execution as well.
In logistics, specifically, we're expecting a continued share and volume challenge relative to 2025 when we grew outsized share and volume in that period. And we expect that to persist for the remainder of the year, while we continue to also expand pilots with our existing customers that we have and some new customers in the logistics pipeline.
And in food, we're expecting a much more meaningful contribution from the food programs as we go through the second half of the year, largely on the significant retailer rollout that we talked about for a while as well as a lot more activity in new customer programs overall that we're seeing in the food sector, Ghansham.
Your next question comes from the line of George Staphos with Bank of America.
Congratulations on the progress. I wanted to dig into the prebuy effect in materials and there are a couple of components to it. I think you said that the effect of prebuy was more or less 5 points, mid-single digits in the second quarter and recall the figure being 1 point in the first quarter, and I think it was 1.5 points at the materials level. Did I relate those correctly? And does that mean, in essence, there's 6% or 6.5% that ultimately has to be destocked over the rest of the year? How should we interpret that? And why is there so much going on, especially it sounded like in Europe?
Yes. Thanks, George. So in 1Q, we talked about relatively around 1 point of growth from customer inventory building. I think I mentioned earlier, about half of our organic growth in Q2, we would estimate, is related to inventory build. So in total, closer to 5 points of growth in the first half or added net first half about 2.5% growth for the whole half of the year. And we would expect to see that come out in the second half, as we said. So I think you would see that change from first half to second half. At the same time, from an organic growth perspective, that will largely be offset in the second half by the fact that we'll have more pricing action versus prior year, where we still had deflation in the first quarter carryover from last year. We'll have more pricing impact year-over-year in the second half.
I think to your point, we're seeing that more in Europe and Asia, and that's where we're seeing more of the inflationary pressures as well, as well as just more customer concern, I think, about surety of supply. And as we move through the second quarter, we continue to see that inflation increase in the middle part of the quarter. And obviously, it's been quite up and down since then. So customers are still seeing a pretty uncertain environment. And I think that's what led to a lot of the stock build that continued throughout the second quarter.
Your next question comes from the line of John McNulty with BMO Capital Markets.
So I guess maybe a couple of related points on the margin side. I guess, can you help us to think about price cost in the second half and if you'll catch up with pricing just given your expectations for cost to be kind of up in the high single digits?
And then I guess, somewhat related on the margin front in solutions, you're kind of hitting a high watermark. Anything special about that in terms of why you're kind of at these levels? Or is this kind of the new baseline now that you're starting to see volumes stabilize and IL starting to grow again?
Yes. Thanks, John, for the question. So when we look at the second quarter from a price/cost perspective, and I'll talk sequentially, we saw high single-digit inflation from Q1 to Q2, and we had mid-single-digit price increase from Q1 to Q2 to help mitigate that in addition to, obviously, material engineering and our procurement teams continuing to work to mitigate that as well. So I think we largely mitigated the majority of that in the second quarter from a sequential perspective. When we look Q2 to Q3, we would expect low single-digit sequential inflation, largely carryover from what we saw as we move through the second quarter, but I will say it continues to be a pretty uncertain environment there. So we've seen oil, like I said a minute ago, move up and down quite a bit over the last few weeks. But right now, our expectation is low single-digit sequential inflation and low single-digit sequential price as well, Q2 to Q3.
If I shift to your second question on Solutions margins, I think overall, there's a couple of drivers there. That team has continued to drive pretty significant productivity year-over-year. Certainly, that's having a benefit on our margins there. At the same time, there's a nice volume rebound. Our apparel business was growing mid- to high single digits in the quarter as we lapped some of the tariff implications from Q2 last year with some strong growth in our Embelex platform, our high-value category there that we talked about earlier as well.
So overall, it's both strong volume growth in apparel as well as productivity across the business. And we did have a couple of small onetime type benefits in the quarter, but still strong underlying results. We may see a little bit of moderation in that margin in Q3, but we still expect the second half to be above prior year.
Your next question comes from the line of Jeff Zekauskas with JPMorgan.
A two-part question. It sounds like you're gaining more traction with your customers in Intelligent Labels in the general food category. Is it baked goods or frozen foods? Or are there themes that are allowing you to expand your reach?
And for Greg, you've talked about inflation in employee costs. Is this onetime? Or what's the rate? Or how large are your employee costs as a percentage of your cost base? Can you help frame the employee cost issue?
Thanks, Jeff. Let me deal with the first and then Greg can take the second. We continue to have very strong conviction in the growth in the Food segment as we move forward over the years to come because we see the return on investment at the retail level to be so strong in all the pilots that we've done and some of the rollouts that have been underway for a while. I think the way I'd characterize it, Jeff, is the initial focus has been really around bakery. It's the more simple one to implement. But we are, as you know, working through protein now, which has been more technically difficult to do, but that's where we brought our innovation to bear where I think we continue to sustain advantage.
And then beyond protein within the next categories really at the periphery of the store will be in perishable items, the further perishable items. And I think those will follow in suit. I certainly think that 2 things are also playing in thematically. So one is, I think retail at an aggregate level is recognizing that the greater urgency with which they have digitized their stores overall to drive more of a digital platform to their stores, the more they're likely to succeed in driving the efficiencies and consumer connections they really desire. And clearly, technologies like IL play a very significant role in enabling that, driving return on investment, both from a labor productivity, gross margin expansion and sales uplift. We've seen that consistently, particularly in perishable foods.
And so I think the only other thing I'd say from our perspective is it's an area where we're going to continue to invest. The scale of our customers that are now in pilot has continued to expand. Our pipeline has expanded in that regard includes a number of other U.S. retailers and European retailers and also some areas very specifically where, for example, DSD deliveries are taking place in certain categories as well. So we have high conviction in it, and I see it as a longer-term growth opportunity within our broader high-value category portfolio overall.
Yes. And Jeff, on your second question, I think there's 2 areas of employee costs where we're seeing a headwind year-over-year. One is the normal year-over-year wage inflation that we see across the business. And that's more normal levels of what we've seen in the recent past. I think the other one is -- the larger one really this year from a year-over-year perspective is incentive compensation. So last year, clearly, we delivered below our targets. Incentive comp payouts were well below target levels last year. And this year, we're on track at or above, depending on the business, to deliver on our targets. So there's a relatively sizable incentive compensation headwind.
When I look at the overall earnings growth formula kind of year-over-year, from an order of magnitude perspective, our productivity is basically largely offsetting our wage inflation and our incentive compensation. So that's roughly the size of those headwinds versus our productivity.
Your next question comes from the line of Josh Spector with UBS.
I wanted to just dig into the organic growth guidance. So the 3% to 4% range. If we try to unpack that a bit. I mean, my calculations here would say pricing in the second half is up, call it, 3%, maybe to 4%, and you have that, call it, 3-ish percent headwind in the second half. So therefore, volumes then at the base level, excluding the kind of destocking dynamics, are maybe flattish. Is that how you would frame it? Because you sound more positive on some of the higher growth areas within materials, RFID improving. I don't know if there's an offset that we're missing.
Yes. So I think, Josh, when you look first half to second half, first half organic growth is around 4.5% on the full first half basis with a couple of points of that, we would estimate from stocking as we've talked about here. And we had, as I said earlier, a little bit of price down, particularly in the first quarter as we start to lap some of that deflation from prior year. So volume growth -- volume mix growth in the first half of the year in that low to mid-single-digit range.
I think second half is somewhat similar from a volume mix perspective, but we have the destocking impact coming in. It's a headwind in the second half, largely offset by the fact that price now, we're no longer lapping the deflation from prior year. So the price actions that we're taking are a positive year-over-year in the second half. So I think underlying volume mix trends relatively similar, low to mid-single digits in the first and second half with a little bit of price differential between the halves as well that's impacting that in addition to the stocking impact.
Your next question comes from the line of Matt Roberts with Raymond James.
Deon, I appreciate all the comments you've given thus far on food, but if I could dive a little bit deeper on the contribution in the second half, very specifically on just how far has that rollout progressed? Is there still incremental run [indiscernible]. Walmart, I know that's beginning here in the second half, but what percent of that initial rollout should we be thinking about in '26?
Matt, you're breaking up on. Matt, you're breaking up on it. Can you start again from the top. I missed the question, Matt.
Yes. Is that better now?
Yes, try that.
Okay. Basically, I'm looking to get a little bit more granular on the food contribution, specifically Kroger, how far along that rollout has progressed? Is there anything incremental in second half from that? Walmart, I know that begins to ramp in the second half, but any percentage terms you could frame around that rollout in '26 and '27 and into '28.
And I believe a third grocer here has announced a pilot and you referenced some pilots in grocery. So how material are those new programs in second half? Or how long would you expect them to be in pilot phase before any expansion given it seems like food is certainly newer, but perhaps broadening faster than other categories.
Yes. Let me end where you -- the end part of your question, Matt, and I'll address the rest here. I think there is certainly much more accelerated interest from customers. They can clearly see the benefits of returns they get, as I said, on labor productivity, gross margin expansion and sales uplift as well.
Specifically on Kroger, the rollout continues to go as they've planned. And the second half of the year, the only thing that is different that we said we're working on, which we are, which is really the protein piloting. And as that goes successfully in the second half of the year, we'll be looking to roll that out as we go into the start of next year.
On Walmart, I think my observation on that customer continues to be that they are really committed to the technology. You can see it roll out across all of their stores in terms of both general merchandise and apparel and increasingly now in the food area as well. And they continue to see the return on investment of the technology as well, both in those areas as well as in food. Typically with kind of large-scale deployments, time lines can vary slightly, but our current assumption is the commercial rollout in this customer to begin in the second half of '26, and we're working very closely with them now on key deployment milestones to ensure a successful implementation. As it relates to the other customers, yes, the pilots are accelerating. I won't go into detail, but which specific customers they are, and we anticipate that largely those will manifest in '27 and beyond. And that's when you see the benefit of those positive pilots turning into broader implementation and rollouts.
Your next question comes from the line of John Dunigan with Jefferies.
Deon and Greg, I really appreciate all the details and congrats on a good quarter. I want to go back to the customer inventory build. It sounded like there was some carryover from the inventory build in 1Q. But did you see destocking through the quarter? And has it progressed into 3Q? Or are you already seeing some of that destocking?
And related, was there any portion of the 10% apparel and general retail RFID growth that was tied to the customer inventory build? It didn't sound like it from your comments, but just wanted to confirm.
And then one last point of clarification, Greg. I just want to make sure I heard you correctly on the 3Q EPS, you said it was $0.50 lower quarter-over-quarter. Did I get that right?
Yes. Thanks for the question, John. So on stocking, as we said in the first quarter, we had about $0.05 earnings per share impact we estimated from stocking that started really kind of early to mid-March in the first quarter. We saw that continue as we talked about last quarter through April. At the time, we thought it would reverse later in the quarter, but we continued to see more uncertainty as we move through the quarter and inflation continuing to increase in the middle part of the quarter. So we saw that stocking really continue not only through April, but also through May. And it's a little bit different by region, but Europe and Asia, where we've seen most of that stocking impact. We saw some of it continue in June, early June, but largely June started to more normalize from a volume impact. And then we're expecting that or a large portion of that to come out in the third quarter. And we've started to see signs of that here in the first few weeks of July as well.
So I think our expectation is that will continue as we move through the rest of this quarter. None of that is in Solutions, really a Materials Group phenomenon that we're seeing here. We really haven't seen that stocking impact on the Solutions or Intelligent Labels side of the business.
From the sequential headwind, basically, the roughly $0.25 benefit we got from our customers increasing their inventory in Q2, our outlook would be that assumes a roughly $0.25 headwind then in the third quarter. So that's the 50% or $0.50 Q2 to Q3 sequential headwind that we'll have from an earnings perspective. And again, that's an estimate based on what we're seeing right now, as I said, with that destocking starting, and we'll obviously see how the situation in the Middle East evolves as we go through the quarter. But right now, that's our estimate of what the Q3 impact would be.
And John, let me just reiterate on -- particularly in apparel and general retail, there was no impact of inventory stocking or building that Greg spoke about. Most of that growth was really driven by new program rollouts that we've had -- that we talked about in the past, and some of them are delivering as we go through the second quarter into the third and fourth quarter as well.
Your next question comes from the line of Mike Roxland with Truist Securities.
A really high-level question here. Just I want to get a sense, Deon, from you of how you think about volume growth in your base label business. A number of leading CPGs recently said they're done lowering prices. They're going to focus on raising prices at the expense of volumes. And then really, it's all being driven by the fact that they've seen margins compress over the last several quarters as a result of lowering prices. So how should we think about this renewed focus on price affect volume? And how does that affect the materials business? Could you see volume -- the materials business shift from a GDP plus business to a GDP or GDP minus, particularly if you see CPGs more aggressively go after price? Any color you can provide would be helpful.
Yes. Thanks, Mike. I mean we've seen the cycle go through this when it comes to CPG volumes. You're right. CPG volumes, I think largely over the last couple of years, have been relatively flat, if not slightly down. But we did see some encouraging signs in the first quarter around certain segments of CPG volumes. Home and Personal Care certainly grew a little bit. But I think partly the continued weighing in of inflationary impact has -- no doubt, has the CPGs weighing up how they balance of promotional activity for volume relative to pricing and the consumer impact thereof. And we don't necessarily see it fundamentally changing forward as we move through the rest of this year given the uncertain environment we see.
I will say our best measure that we look at is we typically look at both GDP and then we also look at retail sales, absolute retail sales. And I think we provided some detail in the materials. GDP has, I think, moved slightly lower globally, varies by region. Retail sales on aggregate are around 1% growth at the moment overall. And think about our business being largely consumer staple led in our base label business with some elements of logistics going into that as well.
So we don't see fundamentally a big shift in our volumes of base label volumes. Greg talked about kind of low single-digit volume growth as we move through the rest of the year. We don't anticipate it to be very different from that. The only other thing I'd say in there is we continue to take share in this business -- in our base label business overall. And we've made a significant effort to make sure that as we think about how we service our customers, really anchoring around what it takes for service excellence and differentiation is starting to yield some benefit. We've also lent a lot more, and you've heard me talk about this, into our innovation to make sure we continue to secure differentiation and move forward. So as an example, a lot of the work that we've seen around where the growth in the base label business come from, which is largely filmic products, we tend to have a leadership advantage in filmic products.
There's also a lot of impact that we're seeing from sustainability, recyclability. And there, some of our innovation like our AD CleanGlass or AD CleanFiber are really starting to resonate with customers. And so a combination of those helps us drive more share gain, which I think is very durable. And then there's a secondary element, which is typically during more uncertain times, Mike, you tend to see customers -- when there are uncertain times in those areas, particularly in Europe and Asia, with the flight to the market leaders for surety really. So we certainly do benefit a little bit from that impact as well.
Your next question comes from the line of Anthony Pettinari with Citi.
A lot of my questions have been asked, but I'm just wondering with the reinstatement of the full year guide, is it fair to think of that as just kind of a onetime action to kind of help us understand the impact of the prebuy and the reversal over the full year? Or would you anticipate going back to a full year guide? Or just kind of how do you think about that?
Yes. Thanks, Anthony. So I think there's obviously a lot of drivers when it comes into thinking about our guidance. I think the first one for us is our business has been operating very well. Our teams have been doing a really nice job managing through what's been a pretty uncertain environment in delivering solid top line growth, delivering strong productivity and generally just increasing the pace or underlying pace of our earnings growth. So we feel confident and good about what our teams are doing to perform there.
And secondly, I think as Deon mentioned earlier, we've got a little bit more uncertainty, as we've talked about here, with timing of destocking given continued uncertainty in the Middle East and how that will play out in the quarter, and will we see more destocking or less destocking between Q3 and Q4. So we think it's a little bit better for us to give full year at this stage. Our intention is not to go back and forth between different guidance time horizons in the future, though. So we're obviously not talking about 2027 guidance here, but our intention would be to stay with one approach as we go forward.
Our final question comes from the line of George Staphos with Bank of America.
A point of clarification and then a question on Intelligent Labels. So Greg, and I think John asked the question. So if we're assuming a $0.50 headwind because the up $0.25 becomes a down $0.25 and recognizing there's not scalpel-like precision with this, it isn't intended that way on your side. Since we had a $0.05 in the first quarter that was going to reverse, should we worry instead that it's $0.30 that has to come out and therefore, it's more of like a $0.60 sequential downtick in 3Q?
And then, Deon, the question on IL, I know you've been asked this in the past likely. Do you see AI as an enabler and an accelerator for Intelligent Label? Or might it be, in some ways, a competing technology or enabler of competing technologies. And so there's less of a pie to shoot after recognizing the pie is big for Intelligent Label.
Thanks, George. As you said, we had about $0.30 impact in the first half is what we estimate the impact of destocking was at our customers. And we're doing our best to try to triangulate around how we think that will come out between Q3 and Q4. Our view right now is a quarter or so of that comes out in the third quarter, and we've got a little bit of hangover and the rest of that in the fourth quarter. Again, it's a little tough to call, especially given how much of that stocking happened in Europe where we've seen the bulk of the inflation and the impacts there, especially with the holiday period that starts in August. So we'll see how that settles out. But that's our best case assumption -- or our best guess right now on what we're seeing so far in July and how we think that plays out and what we're hearing from our customers through the rest of the quarter.
Yes. And George, on your question is, is AI an accelerator for IL? Yes, I believe it is, absolutely. And maybe I'll just give you a slight context that I still think the biggest secular trend we're going to see over the next 5 or so years is the continued digitization of industries and of items. And if you think about it from an IL perspective, every time an item is tagged at source and has data available about how it is made, where it has made its life through the supply chain into retail, how it gets used in retail and ultimately to the end in terms of consumer use and disposal, you're generating significantly more data at the item level than ever historically.
Now AI, I think, is going to be an enabler to parse out and make a lot more sense and inference from that data. That's the real benefit it brings. And so in some ways, if you think about it, if AI helps you make more sense of data at, for example, a retail level, you now have much more ability to make more surgical decisions about what you want to do with items, which allows you to expand your ROI based on the work that you've done using IL, which in itself then creates a flywheel for more AI adoption. That's the hypothesis that I have, and I think we're starting to see that play out.
I'd say a more -- stepping back at a more broader level for AI, at least for Avery Dennison, I think I've spoken in the past, George, around we're seeing this both as a driver for efficiency internally in productivity, a driver to help us accelerate innovation outcomes quicker and then also to help us solve customer problems to accelerate our growth algorithm. We've invested -- we're investing in it. We have a Chief Digital Officer that we brought on board, and we've actually dedicated teams just to make sure that the big bets that we're taking will ultimately manifest in driving our growth algorithm or improving our profitability.
Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
Thank you, Ellen. On behalf of everyone at Avery Dennison, I want to thank you all for joining today's call and for your continued interest in our company. As always, we're happy to address any follow-up questions you may have. Thank you again, and this concludes today's conference call.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
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Avery Dennison — Q2 2026 Earnings Call
Avery Dennison — Q2 2026 Earnings Call
Solides Q2: starkes organisches Wachstum und Cashflow, aber teils durch Kunden-Prebuys gestützt und mit Q3-Destocking-Risiko.
📊 Quartal auf einen Blick
- Umsatz (reported): +11% YoY im Q2
- Organisch: +8% YoY (ca. 50% der Stärke durch Kunden-Prebuys)
- Adj. EPS: $2,89 (+19% YoY)
- Adj. EBITDA-Marge: 17,1% (+50 Basispunkte)
- Free Cash Flow: $365 Mio. im Quartal; Nettofinanzverschuldung/Adj. EBITDA 2,3x
🎯 Was das Management sagt
- Wachstumsfokus: Investitionen in Innovation und Service-getriebene Differenzierung zur Marktanteilsgewinnung
- Operative Disziplin: Produktivitätsmaßnahmen und gezielte Preiserhöhungen zur Abschwächung von Rohstoffinflation
- Kapitalallokation: Erhöhte Rückkäufe und Dividendenerhöhung bei starker Cashgenerierung und stabiler Bilanz
🔭 Ausblick & Guidance
- FY2026 EPS: $10,00–$10,30 (≈7% Wachstum am Mittelpunkt)
- Organisches Wachstum: 3%–4% für 2026; reported +5%–6% (inkl. Währung & Akquisition)
- Risiko Q3: Erwarteter Q2→Q3-Sequential-EPS-Headwind ≈ $0,50 wegen Destocking; Mehrzahl des Unwinds erwartet in Q3, Rest in Q4
- Inflation & Capex: Rohstoffinflation H2: erwartete hohe einstellige YoY; Capex ≈ $260 Mio.; Ziel ~100% FCF-Konversion
❓ Fragen der Analysten
- Intelligent Labels: Apparel und General Retail stark; Logistics normalisieren nach 2025-Ausreißern; Food soll H2 durch Rollouts (Kroger, Walmart) deutlich zulegen
- Prebuys / Destocking: Management bestätigt ~50% des organischen Q2-Wachstums aus Prebuys; Timing der Entleerung unsicher, Q3 Hauptquartal für Rückbau
- Preis vs. Volumen & Kosten: Mid‑ bis high‑single-digit Rohstoffinflation; Preiserhöhungen und Produktivität sollen Kosten weitgehend ausgleichen; Lohn- und Bonuspuls als temporärer Kopfwind
⚡ Bottom Line
- Für Aktionäre: Starkes operatives Quartal mit erheblichem Cashflow und aktiver Kapitalrückführung; kurzfristig ist die Aktie jedoch anfällig für das Q3‑Destocking und anhaltende Rohstoff-/Lohninflation. Langfristige Chancen stammen aus Intelligent Labels (insb. Food/Apparel) und strukturellen Marktanteilsgewinnen.
Avery Dennison — Q1 2026 Earnings Call
1. Management Discussion
Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the first quarter ended on March 31, 2026. [Operator Instructions] As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website.
I'd now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.
Thank you, Lucas, and welcome to Avery Dennison's First Quarter 2026 Earnings Conference Call. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified and reconciled from GAAP on schedules A4 to A8 of the financial statements accompanying today's earnings release. We'll remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release. On the call today are Deon Stander, President and Chief Executive Officer; and Greg Lovins, Senior Vice President and Chief Financial Officer.
I'll now turn the call over to Deon.
Thanks, Gilly, and hello, everyone. We delivered a strong start to 2026 with first quarter organic sales up 1%, driven by mid-single-digit volume mix growth and adjusted EPS up 7% year-over-year. These results once again demonstrate the benefits of our diversified portfolio and our strong productivity and cost control management. .
Our performance this quarter was a clear display of our resilience as stronger Materials group results offset a softer Solutions Group performance. and growth in our base Label Materials business more than compensated for temporary softness in certain high-value categories. As we have seen in past cycles, geopolitical uncertainty has triggered a significant shift in raw material inflation.
While we do not know how long this inflationary pressure may last, we are responding proactively, implementing price increases and driving material reengineering where necessary to offset these pressures. Our history of successfully managing through inflation cycles gives us high confidence in our ability to protect our profits. Furthermore, our proven ability to manage security of supply to meet customer demand remains a distinct competitive advantage, helping to ensure we remain the partner of choice for our customers if supply chains were to tighten.
We continue to take decisive actions to drive both earnings growth and business resiliency by leaning into our proven playbook. Firstly, our focus remains on investing in innovation and service-led differentiation to drive growth through share gains and expand new business opportunities.
To this point, we recently signed an agreement to invest an incremental $75 million in Wiliot, a move that deepens our long-standing partnership and strengthened our enterprise-wide Intelligent Labels platform. This investment includes a dedicated joint go-to-market team to accelerate adoption across retail, food and logistics. It also positions us as the preferred [ inlay ] commercial partner, leveraging our leadership in design and manufacturing to bring commercial scale to Wiliot's complementary technology.
Secondly, we are maintaining our commercial and operational agility by taking swift commercial, procurement and cost actions to stay ahead of inflationary pressures. Thirdly, we're extending our scenario planning, a strength of ours and driving greater productivity and disciplined cost management to protect our bottom line through a wide range of scenarios.
Turning to our segment results. Materials Group delivered reported sales growth of 11% over the prior year. On an organic basis, sales grew approximately 2%, driven by mid-single-digit volume and mix growth that was partially offset by deflation related price reductions. The quarter's performance once again highlighted the strength of this business. We saw strong growth in our base categories, which grew mid-single digits and provided a critical offset to a quieter quarter for our high-value categories, which were down low single digits.
Within our high-value platforms, graphics and reflectors declined mid-single digits and Performance Materials were down low single digits, reflecting a combination of difficult year-over-year comparisons, customer order timing and softer auto end market sales. We anticipate these high-value categories to return to growth as we go through the year. In Label Materials, we observed some customer prebuying during March that has persisted into April. While it's difficult to predict the exact amount and timing of the unwind, we currently expect this volume to largely unwind during the second half of Q2.
Our teams remain focused on aligning production levels and cost structures with the shift in demand, utilizing our framework for managing stocking cycles. From a profit standpoint, adjusted EBITDA was up low double digits and margin up 10 basis point increase compared to the prior year. This was a direct result of our team's execution. We leveraged our operational rigor as well as contributions from raw material engineering initiatives.
These efforts effectively counter the headwinds from a less favorable product mix and higher employee-related costs, ensuring we grew the bottom line while continuing to serve our customers. In the solutions group, reported sales for the quarter decreased 3% with sales down 1% on an organic basis. The quarter was defined by the steady performance of our high-value categories, which grew low single digits and continue to serve as the long-term growth driver of this segment.
Within the high-value categories, Vestcom and Embelex both delivered solid mid-single-digit growth, which was partially tempered by intelligent labels, which was down low single digits. In our base categories, sales were slightly worse than expected, down mid-single digits. From a profitability perspective, adjusted EBITDA margin for the quarter was 16.4%, down 80 basis points compared to the prior year.
While we realized clear benefits from operational efficiencies and a net benefit from pricing and raw material costs, these gains were more than offset by higher employee-related costs, lower base category volumes and our investments in future growth. We remain committed to these investments as they are critical to ensuring innovation-led differentiation, which translates to strong long-term growth and margin expansion.
Turning to our enterprise-wide Intelligent Labels platform, sales were down low single digits compared to the prior year, a result that came slightly below our growth expectations. However, this headline number really reflects a tale of 2 different dynamics across our end markets. In our largest category, apparel and general retail, we saw encouraging performance despite the high hurdle of a pre-tariff comparison from the first quarter of 2025, sales were up low single digits.
This growth was fueled by successful program expansions, demonstrating that adoption and apparel continues to expand. Conversely, we saw a more pronounced headwind in logistics, where sales were down low double digits. This is largely a reflection of softer logistics customer demand and managing inventory during this customer's transition to an updated chip. We remain focused on the long-term adoption curve here. And as we navigate these market -- varied market timing, we are continuing to position the platform for the retail and food rollouts we have planned for the back half of the year.
Looking ahead, we continue to expect 2026 growth for our enterprise Intelligent Labels platform to outpace 2025, with performance more heavily weighted towards the second half of the year as major programs scale. In apparel and general retail, we expect to deliver full year growth, while our food category is set for an inflection as our rollout with the largest U.S. grocery retailer across bakery, meat and deli ramps up in the back half of the year.
Finally, in logistics, we are lapping outsized volume share in 2025 and proactively managing this by expanding pilots with new partners throughout 2026. Turning to our outlook for the second quarter. We anticipate earnings growth at the midpoint of our guidance range with organic sales growth of 0% to 2%. Our performance will once again be driven by the levers within our control, scaling our differentiated solutions in both our high-value category and base businesses, accelerating pricing to offset increased raw material inflation, maintaining a relentless focus on productivity and cost management, and effectively deploying capital to drive earnings.
In summary, our first quarter performance as well as our ability to grow share in earnings demonstrates our differentiation in a dynamic environment. We are focused on the underlying secular growth drivers that inform our strategy as well as the business resiliency actions to manage through cyclic pressures, inflationary shifts with agility. The proactive actions we are taking to ensure supply chain resilience and accelerate innovation led differentiation, evidenced by our deep in partnership with Wiliot further strengthens our competitive moat.
Our proven strategies, market-leading resilient businesses, agile teams and disciplined capital allocation approach, drive confidence to continue to deliver growth in 2026 and beyond. I want to extend my sincere gratitude to our global team for their focus on creating value for all our stakeholders their agility and their continued dedication to excellence. Over to you, Greg.
Thank you, Deon, and hello, everybody. In the first quarter, we delivered strong adjusted earnings per share of $2.47, up 7% compared to prior year. Earnings growth was driven by higher volume productivity and favorable foreign currency translation, partially offset by higher employee-related costs and targeted growth investments. As Deon mentioned, the quarter benefited from customer prebuys ahead of price increases, particularly in the last few weeks of March, which we estimate was an approximate $0.05 tailwind to earnings in the quarter.
First quarter reported sales were up 7% over prior year, with organic sales of 1% as strong volume mix was partially offset by deflation related price reductions. Reported sales also benefited from approximately 5 points of growth from foreign currency translation and 1 point of growth from the Taylor Adhesives acquisition. Adjusted EBITDA margins were at 16.4% in the quarter comparable to prior year. We generated strong adjusted free cash flow of $104 million in the quarter, primarily driven by an improvement in working capital compared to prior year as well as continued disciplined capital expenditures.
Our balance sheet remains strong with quarter end net debt to adjusted EBITDA ratio of 2.4x. Our capital allocation during the first quarter remained consistent with our established framework, and we returned $133 million to our shareholders through a balanced combination of $72 million in dividends and $61 million in share repurchases with the majority of the repurchases completed in March.
These actions underscore our commitment to returning capital, while preserving the financial flexibility and balance sheet strength to define our capital allocation approach. Turning to the segment results for the quarter. Materials Group organic sales growth came in 2% higher year-over-year as mid-single-digit volume mix growth was partially offset by low single-digit deflation related price reductions. Organically, base categories grew mid-single digits, more than offsetting high-value categories, which were down low single digits.
Turning to label materials. We believe we successfully gained share during the quarter while also benefiting from customer purchase timing ahead of price increases. From a regional perspective, volume mix in North America was up mid-single digits, while Europe delivered approximately 10% growth. In emerging markets, Asia Pacific also grew approximately 10% and Latin America grew high single digits. Organic growth in our high-value categories in Materials Group was down low single digits overall, with low single-digit growth in specialty and durable labels which was more than offset by a mid-single-digit decline in Graphics and Reflectives and low single-digit decline in Performance Materials, which includes our performance tapes and adhesives businesses.
Regarding the Taylor Adhesives acquisition, the business continues to perform in line with our expectations. Materials Group adjusted EBITDA was up 12% compared to prior year, with margins up 10 basis points. The expansion reflects our continued strong execution on leveraging productivity, the net benefit of pricing and raw material costs, inclusive of material reengineering, and strong label volumes, partially offset by employee cost, mix and investments.
Regarding raw material costs, we experienced low single-digit year-over-year raw material deflation in the first quarter. That deflation shifted to inflation as we went through March. We saw impacts on commodities, which are linked to petrochemical prices. Our teams are leveraging our proven playbook to navigate the inflation spike through strategic sourcing adjustments in the implementation of pricing.
Overall, we are anticipating high single-digit sequential inflation in the second quarter. Shifting to Solutions Group. Organic sales were down 1% while high-value categories grew low single digits. Base categories declined mid-single digits. This reflects continued softness in apparel demand as we lap a strong pre-tariff baseline in 1Q 2025 as well as ongoing inventory management from our customers.
Within high-value categories, Vestcom was up mid-single digits, driven by the continued benefit from new program rollouts. Embelex was up mid-single digits, driven by both the World Cup and industry growth. Intelligent Labels fell low single digits on lower logistics industry and general retail. Solutions Group adjusted EBITDA margin was 16.4%, which was down 80 basis points year-over-year. We're continuing to benefit from our productivity focus and net pricing and raw material costs but these are more than offset by higher employee-related costs, lower base category volumes and ongoing growth investments.
Turning to our outlook for the second quarter. We anticipate reported sales growth of 2% to 4%. This sales growth includes organic growth of 0% to 2%, approximately 1% from currency translation, and approximately 1% from the Taylor Adhesives acquisition. We expect adjusted earnings per share in the range of $2.43 to $2.53 representing approximately 3% growth year-over-year at the midpoint. This earnings growth is driven by benefits of productivity actions, which more than offset headwinds from wage inflation and growth investments. The anticipation of destocking, which is projected to impact label material volumes in the latter half of the second quarter and the normalization of 2025 temporary savings, largely from incentive compensation expense and a net benefit from combined currency, share count interest and tax.
We've also outlined key contributing factors for our full year 2026, which are largely unchanged from our prior outlook on Slide 9 of our supplemental materials. We continue to expect an approximate $0.25 EPS benefit from the combination of favorable currency which largely benefited Q1 and a lower share count, partially offset by a higher adjusted tax rate and interest expense. We've increased our expectations for restructuring savings, now anticipating greater than $55 million as we continue to lean into our productivity levers. And we remain committed to strong adjusted free cash flow, targeting roughly 100% conversion for the year with fixed and IT capital spending of approximately $260 million. And assuming current economic conditions persist, we anticipate sequential increase in earnings throughout the year in line with our recent historical seasonal patterns and excluding the impacts of destocking from the prebuy timing.
In summary, we delivered a strong start to the year, achieving adjusted EPS growth of 7% compared to prior year. These results reflect our ability to drive volume and productivity while navigating a dynamic environment. We are well positioned to offset the latest round of significant inflation by leveraging our procurement excellence, improving pricing discipline. And we generated $104 million in adjusted free cash flow this quarter, and returned $103 million to shareholders, and we continue to operate within our disciplined capital allocation framework, while maintaining a strong balance sheet.
With that, we'll now open up our call for your questions.
[Operator Instructions] Your first question comes from the line of Ghansham Panjabi from Robert W. Baird.
2. Question Answer
So on Intelligent Labels, how did that play out relative to your initial expectations for 1Q? And also, has that -- has your view on 2026 core sales for this business change just given the events over the past couple of months or so?
Ghansham, Q1 played out slightly lower than we had anticipated, mostly on kind of the logistics volume that we saw both at the customer level and some changes that they were managing through inventory in preparation for a new chips they were having. While we haven't given an outlook for the rest of the year, I still believe we're going to see growth through the whole of '26 relative to 2025 overall Ghansham. And in particular, because we're going to see the second half of the year when we're going to see some of the new programs ramp, particularly in food, as we talked about the Walmart ramp for us in the second half of the year.
We also have a number of other apparel programs that were planned in and a couple of new ones that are also coming along as well. And so overall, while it's difficult to know what the second half of the year will play out from a macro perspective, I feel good about our ability to drive those new programs and have them roll out and hence, we'll start to see an expansion of our growth rate as we go through the year.
Your next question comes from George Staphos from Bank of America Securities, Inc.
I wanted to [ peer ] into the revenue bridge for the quarter. So I appreciate the detail again. You said sales growth is put at 2% to 4%, organic is 0% to 2%. We have 1% from FX and 1% from Taylor. So it suggests there's not a lot of impact if we're not misreading this from pricing. Can you talk about how the work you're doing to offset cost pressure will materialize in terms of pricing in 2Q and perhaps more in 3Q given lags.
Relatedly, any common denominator in terms of the weakness in volume we saw in the high-value categories in materials?
Yes. Thanks, George. I'll start with the first question. So I think you're talking about the second quarter outlook. So we look at the amount of inflation, I think I mentioned in the prepared remarks that we're seeing high single-digit sequential inflation in Q2, and we are implementing price increases pretty much across the globe to manage through that. So we would expect sequentially from Q1 to Q2 kind of a low to mid-single-digit price impacts to offset that inflationary pressure.
Now from a year-over-year perspective, we still have some carryover deflation, which is part of what drove pricing down, as I talked about in the first quarter, down in low single digits in Q1 versus prior year, really driven by carryover pricing with the deflation that we were seeing last year. So some of that carryover deflation -- carryover price down offset some of that price increase in the second quarter, but we would expect a slight overall net price increase in Q2 versus prior year.
Your next question comes from sorry...
So George, the only other thing I'd add is that historically, when we talked about kind of price and inflation, we've always historically seen historically in the past of about a quarter gap. But as we've gone through the last few cycles in this, we know now that our ability to manage pricing to offset inflation is really much improved, and we don't anticipate any really gap in the timing of how we manage inflation and as well the pricing we put through.
In terms of your high-value category question on Materials group overall, there were some idiosyncratic reasons for it in the first quarter, particularly on graphics and tapes were down, largely to do with a really strong comp in the first quarter of last year, some inventory -- intra-quarter inventory dynamics with some distributors and some end market sales where we saw some softness in our graphics business. But our anticipation is that we go through the year, we're going to see a return to growth for those categories and overall volume to increase as we go through the year.
Your next question comes from Jeff Zekauskas from JPMorgan.
You're estimating flat earnings per share in the second quarter relative to the first quarter. And normally, the second quarter is seasonally stronger. And I understand there's a little bit of prebuying and you called that out as being a nickel. But usually, the seasonality is stronger than that. So is what's restraining second quarter earnings growth, the timing of the raw material inflation that you'll get back later. .
And then in the third quarter, you're usually seasonally weaker than you are in the second, but you'll have growth in intelligent labels, you'll have a little bit more price. So in the third quarter, are we beginning to go up or flat or down? Where do we step?
Yes. Thanks, Jeff. So on your first question, so as I mentioned, we had about a $0.05 benefit of prebuy in Q1, which then comes out of the second quarter, which creates really a $0.10 swing from the first quarter to the second quarter. Now historically, we've had somewhere around $0.10 to $0.15, depending on the year, a sequential seasonal benefit, as you mentioned, so largely offsetting that.
When we look at other factors, I would say, we have probably a very slight price inflation lag impact, but that's largely offset by productivity increases as we're moving through the year as well. So overall, it's really the seasonal benefit, offset by the prebuy impact largely driving that. Now if we look at the rest of the year, I think as we mentioned in our remarks, we do expect continued sequential earnings growth as we move through the year.
Now prebuy impacts, as you said, with lower Q2, that should be a benefit from Q2 to Q3. And exactly, as you mentioned, we expect continued improvements in things like high-value category growth as we move through the back half of the year, continued earnings impacts from share buybacks as well and continuing to drive productivity growth. So we would expect to continue to see sequential improvements in earnings as we move through Q3 and Q4.
Your next question comes from John McNulty from BMO Capital Markets.
Maybe just dig a little bit more into the IL business. Logistics weak, it sounded like on 2 things: customer volumes and then the chip change. I guess can you -- presumably, the chip change is a temporary thing and you get that back? I guess, can you help us to think about how much of it was just from general weakness in volumes versus that chip shift. And then just as a secondary kind of related question, the investment that you just made in Willie, if you can give us some thoughts on how you can leverage that opportunity and how that maybe brings that business potentially more meaningfully to you over time?
Yes, John, the majority of what we saw in logistics softness was down to end customer demand volumes, and I think you've seen that publicly announced today as well. I think there was some degree of impact on the chip timing, but it will largely be resolved by the time we get through the second quarter as well.
I will say on logistics, you recall what we talked about in our call last time is that we -- we are really -- we did really drive outsized growth and share in 2025. And this year, we're going to be looking to lap that. That growth in share came because a large number of our competitors weren't necessarily able to service the accounts in the way anticipated and we had to step in to sort of provide support in that.
And our planning and expectation is that will normalize in time as well. We have yet to see that in the first quarter, but that's our planning and expectations stand at the moment. And what we're doing in logistics, specifically is to make sure we continue to accelerate when I'm seeing some very positive pilots in logistics with our other logistics providers at the moment as well.
Turning to Wiliot. I'm really pleased with the investment in this complementary technology. They've been a partner for us for a long time and we're deepening that relationship. We're specifically making sure that we're effectively getting joint go to market and our role in providing support for them as the largest manufacturing designer from our scale and network, I think, will be invaluable to both of us as we move forward. Wiliot in itself is a technology that's reliant on Bluetooth. So it's not RFID in the way that you think about it. And it's largely applicable, John, when you think about condition monitoring.
So when items need sensing as it relates to changes in temperature, humidity and light, this is where the technology really comes to bear. We've always talked about having a portfolio of sensors that are applicable in each business case really. So think about this being really applicable in sort of food, pharmaceuticals, some logistics where at a case in pallet level, where you need more of that condition sensing technology to bring to bear.
Our view as we move forward is that there's 2 things for us. It opens up the total addressable market further for our Intelligent Labels platform overall. We think that condition monitoring is probably another 75 billion units in the long term. And at the same time, it gives us a position of strength as we think about our breadth of solutions that we can provide in partnership now to all of our customers moving forward.
Your next question comes from the line of Josh Spector from UBS.
I wanted to just clarify 2 things. One, on the price cost side, I think, Greg, you talked about it being a slight negative in 2Q. I'd be curious just is all the costs flowing through in 2Q? Or do you have something else to deal with in 3Q based on what we see today? And then just in your answer to Jeff's question earlier just around your comments about sequential earnings growth through the year. .
I mean you have that qualifier about with historical earnings seasonality, but I heard you answer that you think earnings would be up in 3Q. And then seasonally, you're normally up in the fourth quarter. Is that the right way to think about it? Or would you characterize it differently?
Yes. So on the price/cost, I think I mentioned a slight negative headwind, I think, Q1 to Q2 from price/cost to timing. We are continuing to see inflation increase as we move here into at the end of April and early May. So we're continuing to do price increases. Some regions are seeing higher inflation than others and are even entering a second round of pricing action.
So there may be a slight headwind, but overall, pretty closely matching price inflation here as we go through the second quarter. I think there will be some carryover sequential inflation then based on that in Q3. So inflation that we're seeing somewhat middle of the second quarter will flow into the third quarter as well. And we'll see a little bit of sequential inflation impact in as well as sequential price benefit from Q2 to Q3.
I think I was talking about -- I mean we're not giving second half guidance, so I won't comment specifically there. But our expectation is that, as I said, we continue to drive significant productivity. We increased our restructuring outlook as we gave in the slides here today. We continue to drive high-value category growth, and we're continuing to allocate capital in a way to hopefully continue to increase earnings as well. So our focus is continuing to drive a sequential improvement as we move through the quarters.
Your next question comes from the line of John Dunigan from Jefferies.
Thanks for all the details, Deon, Greg. Really appreciate and congrats on performing well in a pretty tough environment. I wanted to ask on the Intelligent Label business, you talked about the headwind from the logistics share gains that you had last year, but I think you mentioned that you didn't really see any of that giveback in 1Q. I mean, how much should we pencil in for a headwind year-over-year here in 2026?
John, overall, we're not necessarily forecasting with the remainder of the year. We'll look like my view is that we are anticipating planning for some of that outsized volume and share that we gained in 2025, we'll lap against that if things normalize. But the way we're thinking about that is we're going to be working to make sure we're offsetting some of that with an impact of additional pilots we're expanding with some of our other logistics customers.
The biggest part of our overall IL program during 2026 is really going to be our food program as we roll out with Walmart during the second half of the year. And just recall, what I said about that was we thought it'd be somewhere in the sort of high single-digit to low double-digit equivalent value across a 2-year period on our total 2025 IL revenue.
We're still planning to see the start of that significant ramp during the second half of this year. And because of that announcement, we've also seen a lot more inbound from other food retailers and food supply chain players who are interested in understanding how they can leverage the technology. I'm encouraged by pilots that are running one in North America and one in Europe with some large grocery retailers that I think will have a lot of impact as well as a supply chain part of the direct-to-store delivery for one of our retail customers as well, which is a different use case.
So overall, from a food perspective, we're expecting that to ramp and then in apparel, we're going to continue to see new programs roll out, a couple that are already in flight and 2 that will start later in the second part of the year. The other piece that I'm really encouraged by is the traction we're seeing with some of our innovation technology that comes to bear in this as well, John. We spoke last year a lot about the rollout that we've done with the Inditex Group based on our loss prevention and visibility solution. We actually now have a second customer, another footwear brand that we'll be [ starting to use ] that as we go into the second half of the year. So not just new customers but extending technology to be able to drive new use cases as well.
Your next question comes from Mike Roxland from Truist Securities.
Deon, just a follow-up on John's question. It sounds like you're expecting -- or pretty confident in Intelligent Labels ramping in the back half of the year relative to the first half. So to the extent you can comment, how do you think about the cadence of IL over the duration of the year? Because certainly, to hit your guide for 2026 in terms of growing beyond excuse me, for -- yes, growing beyond 2025, it implies some loyalty growth, which it seems like it's going to be more 2H weighted than 1H weighted. And then secondly, just relatedly, any update on your key logistics customer and deployment internationally?
Yes. So Mike, you're right. We are going to be seeing a significant ramp in the second half of the year. And sequentially, our run rate of growth will improve as we go through from here through the second half of the year as well and that gets us to seeing our growth above 2025 by the time we exit the end of the year.
As it relates to our logistics customer, we are continuing to work with them on the international expansion piece, and that's going relatively well according to the plan that we have with them. The [ secondary ] piece we're also doing, you probably saw some commentary out in the press on this is not only we are focused on what's called the last mile fulfillment centers, where we've been very active over the last couple of years. But as they orientate and also start to think about first mile, so this is the shippers themselves, their own franchise stores, stores and other customers, we're involved in providing support in that regard as well. And ultimately, I think in logistics, we're going to get a combination of business models that some people will choose to focus on last mile. First, others will focus on first mile, and we're seeing that with 2 or 3 other logistics players as we go through some of the pilots as well.
Your next question comes from Matt Roberts from Raymond James.
A couple of times during the call you referenced the playbooks for cost reduction and specifically for inflationary pressures. So given you all have a unique window into a wide range of end markets into how your customers are thinking about pricing going forward, whether that's in food, apparel or other categories? How are your customers looking to offset their own cost via price?
And what impact do you expect that to have on the volume outlook going forward? You talked about extended scenario planning. Maybe how far are we from reaching a threshold that consumer elasticity, if you will, following years of price increases at retail. So kind of a holistic general question there on inflation and customary elasticity.
Sure, Matt. Look, I think let me just start with saying relative to our assumptions at the start of the year, it's clear that inflation is certainly will be higher than we had originally planned, and the economic indicators are lower than when we started at the beginning of the year. Now what's very difficult for us is to estimate the impact, the timing and the consequence of how that might play out as we go through the second half of the year.
But as you pointed out, we are expanding our scenario plans and widening it further to make sure we're really prepared for all eventualities in the volume environment that may or may not play out. I think the biggest part, and Greg talked about this earlier on, why I feel confident in our earnings growth trajectory as you go through the year, just to reiterate again is because we're going to continue to accelerate some of our productivity. You've seen -- we've updated our restructuring to $55 million. The largest part of it will play out as we go through the second half of the year.
We know our high-value categories will continue to expand as we go through the year, not just because, for example, materials group had some idiosyncratic growth was challenged in the first quarter, and that will improve as we go through the year, but also our IL growth will ramp as we go through the second half of the year. And then finally, of course, we're having the impact of share count reduction that will help us as we go through the second half of the year as well.
I think when I look at our end markets overall, here's what I see currently, and it is varied across end markets varied within the end markets as well. I'd say on our materials business, our label side, customers have been depending on where they are by regions where we've seen stronger inflation. They've been more cautious in the way that they've been thinking about the end outcome.
Certainly, some of them have been doing some prebuy. We particularly see that in Europe, in Asia, a little bit emerging in North America as well. When you talk to customers over there, I think there's twofold. I think our end market retailers are really thinking and end market brands are really thinking about consumer confidence in that regard.
Now as you've known, for last couple of years, CPG volumes have been really muted. And the encouraging thing, at least at the start of this year, we've seen at least a couple of CPGs starting to indicate they're seeing some volume growth. That could be a positive benefit for us despite what's happening from an inflationary perspective. I think when you look to apparel, certainly, apparel sentiment has been pretty soft for quite a long time.
It went through the tariff challenges during last year. Now we're seeing apparel customers thinking about what it may mean from an inflationary perspective on end market demand. It is, after all, a discretionary purchase. That said, apparel imports are still continue to be very low and apparel inventory to sales ratios are at the low since it been '21.
And as go through the year, we may see some upside as things normalize in that regard. We continue to work with customers. We're hearing different things about how they're managing as they're thinking about back-to-school sourcing and then ultimately into holiday as well. So our assumptions are, if we don't see any further deterioration in the macro environment from where it is now, we would anticipate sequential earnings growth, as Greg called out, as we go forward through the year.
Your next question comes from Anthony Pettinari from Citi.
Just following up on Intelligent Labels. Understanding the big ramp is in the second half of the year. But I'm just wondering, was there anything notable in terms of the exit rate in the first quarter? Was that stronger or weaker it seems like comps could get potentially easier in 2Q. So I'm just curious if you saw any acceleration in the March or April.
Nothing that stood out dramatically, Anthony. Certainly, in the second quarter, we should see easier comps on our apparel and general merchandise because if you recall, tariffs really took hold in the second quarter of last year when we saw, I think, a negative outcome during the second quarter then as well. So no leading indicators would suggest there's any difference.
I will say that as I look into where we are now, our current run rates as we're seeing in April reflect on both businesses, just a continuity of what we saw during March really overall. Apparel continues to be solid from what we can see initially and for our materials business, particularly labels business, we continue to see some of that elevated activity, which as Greg spoke about, we're anticipating unwinding as we get through the second quarter.
Your next question comes from Hillary Cacanando from Deutsche Bank Securities.
In terms of capital allocation, you bought back $61 million shares this quarter, given that your leverage is stable at 2.4x leverage. How should we think about the pace of buybacks for the remainder of the year, particularly balancing against your investment pipeline?
Yes. Thank you, Hillary. So we continue to follow our playbook, I think we followed for a while on share buybacks where typically, we take a return-based approach where we use a grid in a period where we're seeing share price increase, we may pull back a little bit on the pace of repurchases in a period like we saw in March where we saw the share price decelerate, we increased our pace of purchases. So the vast majority of our Q1 share buyback, actually, came in the month of March and then April kind of continued at a relatively similar pace. So it will somewhat depend, of course, on how that plays out as we go through the year. We'll continue to take a return-based approach on our share buybacks accordingly.
Overall, from an allocation perspective, we feel good about the capacity that we have to continue investing in the business organically, of course, with CapEx, with innovation, related investments, investments like Wiliot, it's, of course, like to help increase our future growth rates as well as looking at opportunities for both M&A and continuing to do share buybacks. So we feel good about our capacity across all of those fronts, and we'll continue to take the balanced disciplined approach on all those as well.
Your next question comes from George Staphos from Bank of America Securities Inc.
Two quickies here. First of all, Deon and Greg, can you elaborate further on how you're expanding the scenario planning? Is it just pulling more levers on the productivity and maybe ramping the buyback as the market has allowed you? Or are there any other elements that you can share here on the call in terms of how you're expanding the playbook? Secondly, in terms of pre-buys recognizing at the end of the day, you're in business to serve your customers. What are you doing to prevent, if you will, too much pre-buying that gives you a bit more of a destocking that has to be managed 2Q and perhaps into 3Q.
Thanks, George. Yes, in terms of expanding our scenarios, you touched on the major drivers of those. You look to understand where there's additional productivity opportunities for us in lower volume scenarios or less, if their volume continues to grow. I think the only other thing I'd say is we continue looking at what are we going to do from an innovation perspective. And when we have new products or solutions in the pipeline, can we accelerate them even quicker to get to market? .
The final element I will say is our teams have been really focused on thinking through what it takes to continue to win and drive share with our customers, both new and existing customers as well. And part of that comes down to our commercial excellence backed up by the innovation that they are seeing that we're delivering to the market and, of course, supported by our consistent quality and service delivery. So those relationships we have with customers, we see an opportunity for us to continue to increase our share of wallet with them as well.
Final point I'd make is typically what we see in more uncertain environments, particularly inflationary environments and where and if supply chains are more challenged, we normally see a migration from customers back to the market leaders because they trust the security that we can provide. And that may represent another upside for us as we think through just in terms of expanding our nid scenarios for more share gain as well.
Yes, I think some of that addresses the question on prebuy as well. I mean there's 2 primary reasons that customers do prebuy. One is to ensure certainty of supply and materials. And the other is to manage price increases that they see coming in the market. I think overall, as Deon said, our global scale is a big competitive advantage for us when it comes to ensuring certainty of supply to our customers, leveraging our procurement excellence, our sourcing strategy.
We learned a lot from the challenges of '21 and '22 from that perspective, expanded our supplier and sourcing strategies from there. I really feel good about our ability to ensure certainty of supply for our customers. So I think that's one way we help limit the impact of prebuys getting too large. I think what we're seeing here is a much lower scale than what we saw in '21, '22 when we saw 3 or 4 quarters of inventory building before the destock happened in 2020 -- late '22, early '23.
So right now, it's a month or so of inventory build. We're going to continue to manage that very closely, and we'll see how that plays out as we move through the quarter, but we're going to stay on top of that, of course, as we go.
Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
Thank you, Lucas. On behalf of everyone at Avery Dennison, I want to thank everyone for joining today's call and for the continued interest in Avery Dennison. This concludes today's conference call.
Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
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Avery Dennison — Q1 2026 Earnings Call
Avery Dennison — Q4 2025 Earnings Call
1. Management Discussion
Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the fourth quarter ended on December 31, 2025. [Operator Instructions] As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website.
I'd now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.
Thank you, Miriam, and welcome to Avery Dennison's Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified and reconciled from GAAP on schedules A-4 to A-8 the financial statements accompanying today's earnings release.
We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release.
On the call today are Deon Stander, President and Chief Executive Officer; and Greg Lovins, Senior Vice President and Chief Financial Officer.
I'll now turn the call over to Deon.
Thanks, Gilly, and hello, everyone. We delivered solid full year 2025 results with adjusted EPS of $9.53 and $707 million of adjusted free cash flow, a performance that once again underscores the durability of our franchise and our ability to activate multiple levers across a range of macro scenarios. While ongoing trade policy changes and softer consumer sentiment have been headwinds for our business, we successfully leveraged our productivity playbook to maintain an adjusted EBITDA margin of 16.4%. Our results demonstrate the resilience of our model as we remain focused on driving outsized growth in high-value categories, accelerating innovation to advance our differentiation, delivering productivity to protect base margins and allocating capital effectively.
Turning to the fourth quarter segment results. In Materials Group, reported sales increased 5%. While sales were down slightly on an organic basis, we saw low single-digit volume in mix growth that was more than offset by deflation-related price reductions. We are continuing to advance our strategic shift towards high-value categories, which now represents 38% of the segment's portfolio, a figure we expect to expand with a full year of Taylor Adhesives.
Within this segment, Intelligent Label delivered high single-digit growth, underscoring its role as an important growth engine, while Performance Materials grew mid-single digits and Graphics and Reflectives grew low single digits. High-value categories helped balance our base categories, which were down low single digits in the quarter, lower than expected, on softer customer volumes.
From a margin perspective, adjusted EBITDA margin was 16.6%, down 40 basis points compared to the prior year. This reflects the impact of higher employee-related costs and some onetime benefits in the prior year fourth quarter, which our team worked diligently to partially offset through the benefits of our ongoing productivity actions.
In Solutions Group, sales increased roughly 1.5%. This segment continues to lead our portfolio shift, with high-value categories now representing 60% of the Solutions Group portfolio. This proved critical this quarter, as our high-value categories provided a necessary offset to our base solutions, which continue to be impacted by tariff-related uncertainty. Specifically, our base apparel business was below our expectations, down roughly 7% as customers balance inventory positions with the impact of post-tariff pricing decisions.
Within our Solutions Group high-value platforms, Vestcom grew more than 10%, Embelex delivered high single-digit growth, and Intelligent Labels, tempered by the consumption trends in apparel and general retail IL, grew low single digits. From a profitability perspective, our disciplined focus on our productivity playbook and a favorable high-value mix allowed us to deliver an adjusted EBITDA margin of 17.8%, which is up nearly 1 point sequentially and comparable to prior year, successfully offsetting high employee-related costs and our continued investments in future growth.
Turning to our enterprise-wide Intelligent Label platform. Sales grew mid-single digits compared to prior year, in line with our expectations for a sequential improvement in the rate of growth. This was driven by our key growth market segments and a partial recovery in apparel, which grew low single digits this quarter. While apparel and general retail sales have been impacted by tariff policy changes, resulting in flat full year sales, our food, logistics and other categories delivered outsized performance with high teens growth in Q4 and approximately 10% growth for the full year 2025.
Looking ahead to 2026, we continue to anticipate growth in this platform above the pace we achieved in 2025. We expect the pace of growth to be stronger in the second half than the first half as we lap a stronger first quarter 2025, which was largely unaffected by tariffs and as new programs roll out.
In apparel and general retail, we expect to return to growth as we continue to navigate the impacts of tariff policy uncertainty. In food, adoption is set to accelerate through our major fresh grocery rollout with Walmart, with revenues ramping in the back half of 2026. Finally, in logistics, we are focused on expanding pilots with new customers, following a year of outsized growth with our largest customer.
Pivoting back to the enterprise level. While I am pleased with our ability to protect margins and earnings in this environment, I am not satisfied with our organic revenue growth. While much of this is due to cyclical challenges, we are taking decisive action to inflect this growth trajectory.
As you can see on Slide 10, our high-value categories, which have secular tailwinds, remain a key enabler of enterprise growth and portfolio strength, growing at a mid-single-digit CAGR over the past 6 years and expanding to roughly 45% of our sales in 2025, a 12-point increase since 2019. Expanding these solutions to new customers and end markets will add to our growth trajectory.
Accelerating innovation outcomes in both high-value categories and the base categories is also key to changing our growth trajectory. This allows us to expand our opportunity with existing customers and to grow into new markets.
Within our Solutions Group, we're advancing this through examples such as our Intelligent Labels Fresh solutions for food traceability, the expansion of Vestcom Storelink software platform for centralized retail execution, and the growth of Embelex's Custom Studio Fanzones to drive in-venue fan engagement. Similarly, in Materials Group, new innovations such as the expansion of our Cleanflake portfolio to more packaging substrates to advanced circularity and the introduction of smart materials to accelerate Intelligent Label adoption throughout the channel.
Additionally, to further enhance our differentiation, we are also expanding our digital capabilities, use of automation and leveraging AI to enable additional operational productivity and fixed cost innovation, strengthen our service and quality, shorten our innovation cycles and provide more data-driven solutions that our customers require to address their fundamental challenges.
Stepping back, as you can see on Slide 9, executing on all our key strategies with proven business resilience enables us to deliver GDP-plus growth and top quartile returns across cycles. In addition to investing in innovation to drive growth in our high-value categories and base businesses and positioning ourselves to lead at the intersection of the physical and digital, we will continue to relentlessly focus on productivity to strengthen our market-leading positions in both our businesses. We will also continue to be disciplined in capital allocation to deliver returns and improve our portfolio.
Finally, I'm pleased to report that we achieved our 2025 sustainability objectives which we laid out in 2015. These include reducing our energy intensity and enabling more sustainable products and solutions for our customers. Similarly, we're making good progress towards our 2030 sustainability objectives we set in 2020.
Now moving to the outlook for 2026. In line with our recent practice of providing a quarterly outlook, we will be continuing this approach for the foreseeable future. As such, for the first quarter of 2026, we expect adjusted earnings per share to grow approximately 6% at the midpoint on organic sales growth of 0% to 2%. Given key economic indicators remain largely consistent with 2025 levels, we are not planning for any macroeconomic tailwinds in the near term. Our performance will instead be driven by the levers within our control: Scaling our differentiated solutions in high-value categories, returning our base business into profitable growth, maintaining a relentless focus on productivity and effectively deploying capital to drive earnings.
In summary, we have exited a dynamic and challenging year not just more resilient, but structurally stronger to deliver longer-term value creation. Advancing our strategic priorities underpins our confidence in returning to stronger growth and delivering top quartile returns. We are entering 2026 with the right playbook, the right team and a path to return to growth in line with our long-term targets. I want to extend my sincere gratitude to our global team for their dedication to excellence and their unwavering focus on executing our strategies.
And with that, over to you, Greg.
Thanks, Deon, and hello, everybody. In the fourth quarter, we delivered solid adjusted earnings per share of $2.45, up 3% compared to prior year. Earnings growth was driven by higher volume and productivity, partially offset by higher employee-related costs and targeted growth investments. From an overall sales perspective, our business continued to be impacted by a softer consumer environment and customer uncertainty due to the impact of trade policy changes.
Fourth quarter reported sales were up 3.9%, with organic sales comparable to prior year, as positive volume was offset by deflation-related price reductions. As expected, we benefited from an estimated 1.5 points impact from our shift to the Gregorian calendar at the end of the year and 1 point of growth from the Taylor Adhesives acquisition.
Adjusted EBITDA margin remained resilient at 16.2% in the quarter, down slightly compared to prior year. And we again generated strong adjusted free cash flow of $303 million in the quarter, bringing our full year 2025 free cash flow to $707 million with a free cash flow conversion rate of greater than 100%. And our balance sheet remains strong with our quarter end net debt to adjusted EBITDA ratio at 2.4.
We continue to execute our disciplined capital allocation strategy. For the full year, we returned approximately $860 million to shareholders, including $572 million in buybacks and $288 million in dividends, reinforcing our commitment to delivering shareholder value while maintaining a strong balance sheet.
Now turning to segment results for the quarter. Materials Group organic sales were down approximately 1%, as low single-digit volume mix growth was more than offset by low single-digit deflation-related price reductions. Organically, high-value categories grew low single digits, while our base categories were down low single digits.
Turning to regional label materials organic volume mix trends versus prior year. In developed markets, volume mix was down low single digits in North America as consumer product demand continued to impact volumes, while Europe delivered mid-single-digit growth. In emerging markets, Asia Pacific and Latin America were both up low single digits. Our high-value categories in Materials Group delivered low single-digit organic growth. This growth was driven by Intelligent Labels, which delivered a high single-digit increase. Performance Materials, which includes our Performance Tapes and Adhesives businesses, was up mid-single digits, while Graphics and Reflectives were up low single digits, and Specialty and Durable labels were comparable to prior year.
Materials Group continued to deliver resilient margins with an adjusted EBITDA margin of 16.6% in the quarter. While this was down slightly compared to prior year, it reflects our ability to largely defend profitability through productivity efforts, which nearly offset the headwinds from higher employee-related costs and a lower volume growth environment.
Regarding raw material costs, including the cost of tariffs, we continued to experience modest sequential raw material deflation in the fourth quarter, capping a year where total raw material costs declined low single digits. Our teams remained agile in navigating dynamic markets, mitigating tariff costs through strategic sourcing adjustments and the implementation of select pricing surcharges. Overall, including tariffs, our outlook is for relatively stable sequential material costs as we enter 2026.
Shifting to Solutions Group, sales were up 1.3% organically. High-value categories performed well, up high single digits, with base solutions down mid-single digits, driven by softer base apparel sales. Within high-value categories, Vestcom was up more than 10%, driven by the continued benefit from new program rollouts. Embelex was up high single digits, driven partially by World Cup sales, and Intelligent Label sales grew low single digits on lower apparel and general retail volumes.
Now turning to enterprise-wide Intelligent Labels. Sales expanded mid-single digits compared to prior year. Growth was once again driven by food, logistics and industrial categories, which were up high teens for the quarter and now represent approximately 30% of our total IL portfolio. Offsetting this strong momentum was the performance in apparel and general retail, which, combined, were down low single digits for the quarter. And these markets represent 70% of our Intelligent Label sales and continue to be impacted by tariff-related pressures. Solutions Group adjusted EBITDA margin was 17.8%, which was comparable to prior year, as benefits from our continued productivity efforts and higher volume were offset by higher employee-related costs and ongoing growth investments.
Now stepping back to look at our long-term financial performance. We remain focused on delivering strong results across cycles. Reflecting on our 2020 to 2025 targets, we delivered solid results despite multiple cyclical challenges by leveraging the strength of our portfolio. We successfully exceeded our top line goals and performed well on our profitability targets, with EBITDA margin ahead of our long-term objective. However, we did fall short of our adjusted EPS target, which came in at 7% ex currency, trailing our 10% target, partially due to the impact of acquisition intangibles amortization. Additionally, ROTC, while in the top decile of our peers, finished at 15%, largely driven by the impacts of our acquisitions, including Taylor Adhesives, which closed in the fourth quarter of 2025.
Turning to our '23 to 2028 targets. We are currently in line or ahead on most of our targets. And as Deon mentioned, our focus is to shift our organic sales growth trajectory to achieve our targets for this cycle.
Now turning to our outlook. For the first quarter of 2026, we anticipate reported sales growth of 5% to 7%. Our guidance does not presume an improvement in external market conditions. This sales growth includes organic growth of 0% to 2%, approximately 4% from currency translation and approximately 1% from the Taylor Adhesives acquisition. We expect adjusted earnings per share to be in the range of $2.40 to $2.46, representing approximately 6% growth year-over-year at the midpoint. This earnings growth is driven by benefits of organic volume mix growth and productivity actions, which more than offset headwinds from wage inflation and growth investments and the normalization of 2025 temporary savings, including incentive compensation, and a net benefit from combined currency, share count, interest and tax.
We've also outlined key contributing factors to our full year 2026 on Slide 14 of our supplemental materials. We expect an approximate $0.25 EPS benefit from the combination of favorable currency and a lower share count, partially offset by higher adjusted tax rate and interest expense. We expect restructuring savings of approximately $50 million as we continue to execute our productivity playbook, and we expect the normalization of a majority of the 2025 temporary savings, which was largely related to lower incentive compensation costs.
We remain committed to strong free cash flow, again, targeting roughly 100% conversion with fixed and IT capital spending of approximately $260 million. And we anticipate a sequential increase in earnings throughout the year, in line with our recent historical seasonal patterns.
In summary, we delivered a solid fourth quarter, achieving adjusted EPS of $2.45, which was up 3% compared to prior year. And this capped off a year where we leveraged our proven playbook to protect bottom line results. We generated over $700 million in full year adjusted free cash flow and returned approximately $860 million to shareholders while maintaining a strong balance sheet.
For the first quarter, we expect at the midpoint, an improvement in organic sales and earnings as we continue to deliver actions to increase the pace of our earnings growth, and we remain well prepared for a variety of macro scenarios. We're positioned to execute our profitable growth and disciplined capital allocation strategies to deliver superior long-term value for our stakeholders.
Now we'll open up the call for your questions.
[Operator Instructions] Our first question comes from George Staphos, Bank of America Securities Inc.
2. Question Answer
My question will be on materials. You called out a few things that made comparisons difficult this fourth quarter versus last fourth quarter, so we appreciate that. But I was wondering if you could parse a bit further, the puts and takes, the pluses and minuses behind the 40 basis point drop in margin? It was a little bit worse than we were expecting. In that regard, the higher employee-related costs, we can guess what that is, but if you could provide a bit more color? And last thing, was there any impact from higher raws in that number? I know you said there was deflation, particularly though around paper, paper pricing and the like.
Thanks, George. This is Greg. So I think there is, of course, a number of factors. We talked about our base volumes were a bit soft in the quarter. And when we look at -- every year, we have wage inflation year-over-year, and we need a bit of volume growth to offset that wage inflation. So when our base volumes are down, a lot of our productivity actions are going in to offset wage inflation and some of those headwinds.
At the same time, we did have a little bit of small onetime items last year. Nothing major, but a couple of items that added up to a few cents that were a headwind in year-over-year for us as we look at prior year Q4 '24 to Q4 '25. And then in addition to that, we did have the extra calendar days this year. And those were 4 extra calendar days that come with fixed costs for those days, but pretty soft shipping days because they are the days right before New Year. So the flow-through on those is typically well below our average as well. So it's a number of impacts there.
Now when I look at our sequential margins from Q3 to Q4, I think it's largely in line with our historical seasonality. Historically, we do see a 60 basis point or so drop in Q3 to Q4 margins in materials, largely due to the holiday impacts as well as mix of our VI labels in the fourth quarter versus the third quarter. And in addition to that, as I said, we had the calendar shift impacts in the quarter. So overall, pretty much in line, historical seasonality from a margin perspective. And year-over-year, had some onetime items in prior year that impacted the year-over-year comparison.
Your next question comes from Ghansham Panjabi, Robert W. Baird.
I guess on Intelligent Labels and the low single-digit growth during 2025, how are you at this point thinking about growth for 2026? And related to that, can you share your view on growth expectations for some of the other high-value categories, Vestcom, Embelex, et cetera?
And then Deon, on your decision to only give quarterly guidance for now, where do you lack specific visibility in context of a portfolio that's relatively diverse both by business and geographically? And what would need to change for you to kind of go back to that annual guidance construct?
Yes. Let me start with the first question on IL. We had low single digits in 20 -- growth in 2025, and we're anticipating our growth rate in 2026 to be above what we delivered in 2025. In 2025, I'd say, largely, the biggest impact was really on apparel and general merchandise, really tied in tariff activity that was happening. And I still fundamentally continue to believe in the significant growth opportunity this platform has. Just to restate -- and this is a 300 billion unit plus opportunity, $8 billion-plus opportunity, and we're really at the nascent stage and what gives me that level of confidence that we're going to continue to see that growth during 2026 and beyond.
The fact that we are already seeing, as you've seen, more adoption in these individual sectors, more apparel customers continue to adopt the technology as well as extend the use of the technology, for example, in loss prevention. We now have -- and we're working through the planning and the execution as we go to the second half of the year on the second grocery customer, which I think itself will be a significant inflection point for that segment.
And then -- and I think then in logistics, we're going to continue to really lean into more pilots, expanded pilots with a number of our other customers and with our large customer, where we drew -- we drove outsized growth in 2025, largely on our execution as some of the other competitors struggled and we gained some share. We're anticipating that large customer has also provided lower outlook for volume guidance in this year, and we're going to factor that in, we'll see how that goes in logistics overall.
As it relates to the other high-value categories -- and we just reinforce again, for us, high-value categories are critical because they provide both a growth catalyst and acceleration for growth. Most of our high-value categories are typically higher growth in our base business, and they have a typically high margin profile. So as we accelerate that portfolio mix, we're going to get natural mix accretion both on our growth and on our margin profile as well.
Typically, we expect, Ghansham, the majority of these high-value categories to be at kind of mid-single-digit plus. They vary by individual ones across materials and solutions. In Vestcom and Embelex, as you asked specifically, we're anticipating kind of mid-single-digit growth, all things being equal, assuming no fundamental change in environment for those two categories. As we continue to see new customers for Vestcom, the rollout of their Storelink software, that really will enable in-store productivity for their existing customer base.
And then on Embelex, while we are up against a headwind as related to World Cup last year, we also believe that depending on how the in-arena execution goes during World Cup, we could benefit from some of that as well. So we'll wait and see to how that plays out overall.
To your final question around quarterly guidance, I think Q4 demonstrated that we continue to see a very dynamic environment which limits our visibility really on the market side of the growth piece. I just want to remind everybody, over the last 5 years, we've seen a number of largely one-off cyclical events negatively: Pandemic, inflation, supply chain, destocking, tariff consequences. And as a short-term cycle business, it makes having a long-term perspective during these type of events very challenging. I remain really confident, very high confidence in our strategies, the actions we're taking to drive growth and differentiation to deliver value creation. But I'm not planning for any macro tailwinds in 2026. And so for the foreseeable future, we're going to continue to provide updates and outlooks on a quarterly basis.
Our next question comes from John McNulty, BMO Capital Markets.
Yes. And I appreciate some of the color and the historical perspective around the high-value categories. Maybe digging into that a little bit more deeply, I guess, can you help us to think about the margin differential for the high-value categories versus kind of the core? And also, has that shifted or changed much as we've progressed from, say, 2019 to 2025, either gotten higher, or has it contracted at all? How should we be thinking about that?
Yes. Thanks, John, for the question. I think we haven't talked specifically about margins by specific category. But in general, of course, as we talked about for a product category to be a high-value category, it's got to have higher variable margins than the rest of the portfolio. And that's a big part of our focus there is as we grow faster in these high-value spaces, it allows us to continue expanding margins as well. So typically, they are a number of points above our average, certainly above -- significantly above the base categories as well.
When you go back and look over the last few years, you can see our gross profit margins over the last few years have gone up a couple of points. And a big part of that is the shift towards high-value categories that you can see on the slide that we laid out, in addition to the productivity actions and other things that we've been driving as well. But the shift towards more and more high-value category growth is definitely showing up in our gross profit margins as we've expanded those over the last few years.
And John, I'll just add that our high-value categories right across the business I think really enable us to have a resilient portfolio, allows us to pull multiple levers, should things happen. I'll also say from a high-value category perspective, which you saw grow more than 6% since 2019 on an organic basis really resonates with customers because we're providing differentiation at the point that a solution or a problem is being solved. These examples include what we do with adhesive tapes in the automotive industry, not just to bind things together, but for example, to provide additional noise and sound vibration dampening. So they provide utility beyond the simple application.
That extends also then to some of the examples we quoted on our Intelligent Labels platform, where we brought new innovation, for example, in food to enable protein. But it extends also to other areas, for example, our Materials Group, where we've really launched new innovation on our Cleanflake portfolio, which enables recyclability not just historically on, for example. PPE for PE, with HDPE, now glass and other packaging as well.
And so for us, a final constituent component of our high-value categories is the need for constant innovation outcome acceleration because that continues to bolster margins. Typically, when we bring a new product that's highly differentiated, we're able to extract more value from that because we create more value. And that's been a very big part of the focus over the last couple of years, and it will be so moving forward as well.
Our next question comes from Jeff Zekauskas, JPMorgan.
Two-part question. Since you signed your agreement with Walmart, have you had more inquiries from other sellers of grocery items? And secondly, on Slide 14, you talk about the majority of 2025 temporary savings, including incentive comp, being a headwind. How large is that headwind?
Yes, Jeff, I think the Walmart -- the Walmart announcement with our partnership, I think it's added an additional catalyst to interest and inquiry within our pipeline. We've always known that bringing a digital identity to a physical object, particularly, for example, in the grocery space, will be able to allow you to reduce waste because you're able to manage your best before expiry date in a much better way, reduce labor, efficiency -- reduce labor and increase efficiency that goes with it, and finally also provide a better consumer experience. At the end of the day, freshness is one of the biggest drivers in Net Promoter Score in the grocery environment. And the fresher items are, the more they're available. Typically, grocers [ to bend grow ]. And that's the basis of Walmart's expansion with us on it.
Since we've seen that announcement, our pipeline has actually grown with a number of other grocers or -- and/or both on the bakery and protein side continuing to approach us. This is both domestic in Europe as well as in -- sorry, domestic in the United States as well as in Europe. And so I'm confident that as we go through this year, we're going to see more pilots and trials through that. I'm not anticipating another rollout during the start of this -- during this year, but certainly setting the framework and the groundwork for us to be able to do so as we move forward.
Yes. And on your second question, Jeff, those temporary savings, again, which is largely an incentive compensation impact year-over-year. Obviously, incentive comp in 2025 as we performed below our original expectations was -- a tailwind in '25 will be a headwind in 2026. That is on an order of magnitude basis probably pretty similar to the size of the restructuring actions, that $50 million that I highlighted there.
Now on top of that restructuring, that isn't the only productivity we're driving. We continue to drive ongoing productivity all the time in terms of ELS savings, looking at reducing scrap, being more efficient in our operations. Deon touched on digital investments to continue to get more efficient in our G&A type of functions as well. And then in prior year, we talked about in 2025, having some network inefficiencies related to some of the tariff, shifts of production in parts of our portfolio as well. So we would expect other productivity actions on top of that restructuring to help give us a benefit in 2026 versus '25.
Our next question comes from Josh Spector from UBS.
I wanted to ask on just the apparel market in general. I think the declines that you saw in fourth quarter were more than we expected. And as you show in your appendix, the sellout from apparel has been semi resilient, your volumes have been down. I guess, how are you thinking of the trajectory from here? I guess our view is it's probably a tough comp in 1Q, but then easier comps in 2Q. But you have a better ear to the ground on how apparel producers are going to be producing and if that's going to be a tailwind or not at this point.
Yes, Josh, let me just spend a bit of time just digging into that. At the high level, I still say there's a high degree of tariff uncertainty. So while largely, tariff rates are assumed to be in place, as you've seen, I think everybody has seen, that can pretty dramatically change depending on what the administration decides to do with the broader tariff policy. And that can have an impact at any one point in time until all these tariffs are actually formally ratified.
That said, as we went into the fourth quarter, we anticipated to see sort of low single-digit apparel-based volumes. We actually saw greater than that, around about 7% decline. I think a couple of factors played into that. I remember saying last time on this call that what we've seen is a change in the way apparel retailers have been managing their supply chains given this volatility and uncertainty. Historically, apparel retailers would typically place a season's orders 60% in advance and then typically chase 40%. As this concern around how much tariff policy would impact end retail prices and the likely impact on consumer demand, they we're starting to have less forward placing and chasing more.
Our anticipation as we ended the third quarter, given what we saw during that -- sequentially during the quarter was that, that volume would slightly continue to do that. As we know now, it was a case of I think some of that volume in Q3 was in anticipation of the holiday season, a slight stock up. But then they didn't chase as much volume as they went into the fourth quarter. I think focusing -- what we heard from our customers, focusing much more on protecting margins on overall lower volumes, so not as much price discounting.
The growth that you saw in retail is largely price related, not necessarily unit related. And that's also underpinned -- if you look at one of the attaching schedules we have, if you look at the inventory sales ratios, for example, in the United States, they're one of the lowest points ever since the pandemic as well.
As we look forward, given that performance, I would anticipate seeing growth during this year -- certainly not the -- and the first quarter will be challenging because we lap against that non-tariff impacted first quarter '25. But as we move forward, all things being even, we should see some growth. I caveat that only with -- I think there's going to be continued uncertainty and continued caution on our apparel retailers' part. They're going to continue to watch how post holiday consumer spending and the consumer sentiment relates to discretionary items like apparel and the price impacts that they had to put up on those garments overall.
And so I think it's going to be a watch and see. If that plays out with more volume, then we'll certainly sort of be benefited by that. But I'm not yet certain that's going to be the case, and we'll give an update as we get to the end of the first quarter and what we're seeing from apparel customers generally.
Our next question comes from Matt Roberts from Raymond James.
If I can try to dig just a bit deeper into just some of the nonapparel Intelligent Labels category. First, on general retail in 2025, I believe there were some pauses in compliance rollouts at a major customer. Is that compliance enforcement coming back in 2026? Or are you expecting any incremental volumes from that customer with further category rollouts?
And then on logistics, again, I know you talked about the major customer and the revenue outlook and puts and takes there. But any benefit from them rolling out automation to further facilities? Or are you fully deployed there? And the pilots you mentioned in logistics, is that new pilots or expanding pilots that have already been in place?
Sure, Matt. Let me go through those sequentially. So in general retail, what we -- we saw general retail impacted last year, as we called out, quite significantly by really, the tariff environment. Most general merchandise was orientated out of China and the surrounding areas. And so there was quite a drop-off in demand, at least from retailers, for that product as they were thinking through the supply chains.
The second piece in this is because there was such difficulty in that, we do sense that some of the compliance that was in those categories has probably held back a bit to make sure that they could work through the supply chain issues. All things being equal, that should return, and that should be partly a tailwind for us in that regard as we look forward. Again, that's with the caveat that we don't see any other changes on tariffs as we move forward.
I think in terms of logistics, we've seen the benefit that has come from automating effectively, last mile fulfillment centers. And Matt, we're actually fully automated across those over here. Now what we're in discussion with that particular customer around is how do they extend that to some of their international operations, that -- as we work through that during this year. And then the secondary piece is, is there other opportunities as they think about moving to what we call the first mile, the shipper side of it as well.
In terms of the other pilots and trials, we're engaged in discussions and have been piloting and trialing with almost every other major logistics company, both in the United States and in Europe. And what we see this year is an expansion of some of those pilots being, again, from a certain limited number of fulfillment centers or inbound fulfillment centers to a broader range. And also looking at the different use cases they think through, for example, dangerous goods, managing highly valuable goods as well.
So we'll keep you all updated on that. Our anticipation of those pilots will expand as we go through the year.
Our next question comes from Anthony Pettinari from Citigroup.
Understanding you're not giving full year guidance, is there a way to think about the quarterly cadence of the timing of the $50 million restructuring benefits throughout the year? And then, I guess, as well, the roll-off of the temporary benefit headwind that Jeff asked about.
And then just, I guess, while I'm at it, you talked about Walmart sales benefiting really in the second half of the year. Should we think of that as like a step-up from 3Q to 4Q with kind of a stronger exit rate into '27? Or is there anything you can kind of say about the cadence of that rollout?
Yes. Thanks, Anthony. So I think restructuring, a good chunk of that, about 2/3 of that would be carryover projects we executed at some point during 2025 or at least kicked off near the end of the year in 2025. So I would expect from that perspective to be somewhat balanced across the year on that restructuring benefit as we have carryover savings in the first part -- or first few quarters of the year and then new programs kicking in as we move through the remainder of the year. So overall, largely balanced across the quarters.
From a headwind perspective, I think when you look at incentive comp, we're really starting to see bigger impacts on that, I would say, in the second quarter and beyond. There's a bit of a headwind in the first quarter, but I think that picks up a little bit as we go into the middle quarters of the year.
And Anthony, on the Walmart question specifically, recall, we said that the rollout, if it took place over the next couple of years, '26 and '27, will be worth, for us, somewhere between low double digits to -- sorry, high single digits, low double digits in value for us based on our 2025 sale. Our working assumption has always been that we would start this roughly in the third quarter, it would ramp up in the fourth quarter and then continue accelerating during 2027 as you go through both the departments, this is bakery, protein and deli, as well as geographically rolling out through the stores. And that's current -- still our current working assumption.
Our next question comes from Mike Roxland of Truist Securities.
Deon, in your comments, you mentioned not being happy with the organic growth and that you intend to drive better growth, especially in the high-value categories. Can you share what you'll start to do or what you're looking to do early this year to drive that growth? And what type of incremental growth you're expecting in 2026 from higher growth in the high-value categories?
And then just following up quickly on the apparel and general retail comments that you made about your confidence in getting -- in that accelerating. What are your customers telling you about their plans for 2026? And is it a matter of new adoption continuing to increase? Or is it more related to existing customers extending their use?
Okay. Let me see if I can cover all that, Mike. Yes, from a -- I'm not happy with the way our organic growth trajectory has been over the last couple of years. I know that we can -- and we've demonstrated this repeatedly -- manage through any environment, and we've demonstrated our ability to manage and deliver margin and earnings in that regard. But we fundamentally need to make sure that we're going to continue to significantly outperform the market. And that's our focus as we've gone through the back end of last year into this year.
And I touched on really, 4 elements I think that -- sorry, 3 elements that will really deliver on that. The first is, clearly, our high-value categories, when they are able to solve customer issues, have an ability to accelerate growth. They typically deliver higher growth rates, and as Greg said, at higher margins. And we're focused on making sure that a broader range of new customers understand the value they can bring, whether it's in our tapes business, getting new tapes distributors and end customers, whether it's in apparel, getting new loss prevention customers, whether it's in our materials business benefiting from our Cleanflake portfolio. Our focus there is generating new customers and then also identifying new segments that we can move the technology, and food is just one example of that, that we've done during the back end of last year and moving forward. So there's a focus on new customer acquisition for high-value categories.
The second area for me is actually a more important one will be less visible as we -- over the, let's say, this near term, but certainly more visible as we go longer term, which is accelerating our innovation outcome. So this is not just having more new products and solutions, but actually commercializing them quicker. And in that regard, I listed a whole number of those whether they are around our IL solutions, our Digital Solutions, Materials Group. Our ability to leverage our material science capability and our digital identification capability with the insight that we have through the supply chain, whether it's at a retailer, at a manufacturer, at converter allows us to ultimately be able to really design more innovation at a quicker rate that solves problems for customers.
And then the third element which I touched on was, in addition, is can we leverage the progress we made in our own digital journey and the more automation we put in to the business, as well as our learnings that we've had over the last year or so on artificial intelligence and the use of that technology. And I see those actually being able to provide even more differentiation that we could then ultimately express in driving new customers and getting into new segments. I think the application of those three combined in different ways will allow us to, for example, drive more automation in some of our manual finishing that we currently have across our businesses, automate finishing, automate packaging, a small example of that. Another example would be using AI and IoT sensors when we apply them to some of our large, for example, coating assets, we're able to make real-time in-line coat weight adjustments across the web, which allows for less downtime, and that will save us more money in that regard and that we're able to use to seek new customers as well.
And then the third one really is we've actually started to use a lot more AI to shorten some of the actual innovation cycle. I'll give you a real example of that. It historically has taken us anywhere from 8 to 10 weeks to design a new inlay in Intelligent Labels. We built with a partner, a proprietary AI model that takes all of our learnings around the physics of designing inlays and what it takes. And now we're able to reduce that cycle down to roughly 2 weeks. That allows us to produce new products and new solutions much quicker than our previous capacity had the ability to do.
And then finally, I think Greg touched on this as well. We're certainly taking all the learnings we're seeing both on automation and increasing on AI to how do we actually leverage and automate some of the more manual tasks across our SG&A in our business. We've got multiple examples. Now I will say we're at the start of the journey in that regard from -- particularly from the AI perspective. But I think we've learned a lot over the last year or so that I think it's really allowed us to see the value that we can create. In addition, we've also recruited and added to our leadership, a Chief Digital Officer because I fundamentally believe that capability will also be an accelerant to the way we move forward.
And to your second question around apparel and general retail, the way I think about that overall is that we continue to see new apparel customers adopt IL. We went through the late stages of a roll -- so early stage of rollout last -- in the fourth quarter with a large apparel retailer. We continue to see significant interest in leveraging the technology not just for inventory accuracy, but also for loss prevention. The work that we did with the -- proprietary work with, for example, the Inditex Group. And in addition, I continue to see a pipeline where we get new apparel customers continually wanting to use. So overall, those rollouts, as I mentioned earlier on, we'll part as we go through the year and ramp through the year as well.
Our next question comes from the line of John Dunigan from Jefferies.
I wanted to start off with -- just looking at your inventory levels. I mean, you touched on some of your customers in response to Josh's question and how they're managing their inventories. But I noticed that your inventories to sales ratios are elevated compared to where they were at pre-pandemic levels. So with the modest demand, at least starting off here in 2026, is there an ability to drive inventories lower to better match to the current demand environment?
And then just kind of building on that, I noticed that you had stepped up your CapEx to about $260 million here in 2026. Just wondering if that's more tied to growth projects, maybe some delayed maintenance since you kind of pulled it down a little bit in '25 or cost savings initiatives? Just how that money is being spent would be helpful.
Sure. Thanks for the question. So if I look at our -- our inventory turns over the last few years have been fairly steady, at least at the end of the year with where we've been. I think part of what's happening across the businesses, we do have a little bit of a mix impact as we grow faster in the high-value categories, where typically, those categories are a bit more working capital intensive. And similar in emerging markets where we have a little bit higher working capital percent as well than we do in the U.S. businesses, for instance. So typically, we're seeing a little bit of upward pressure on working capital driven by the growth in those areas.
Now we're driving a lot of productivity elsewhere to help offset that as we've gone across the years. And that's been a focus, and we saw that even from the middle of this year. I think we talked about our working capital being a bit high and driving that down by the end of the year. And I think we did a good job delivering that. So we've got some kind of mix pressure that we're offsetting through a number of initiatives there.
I think when we look at CapEx, as you said, in 2025, it was $200 million. I will say there's another about $30 million of cloud technology-related investments that shows up in the operating section of the cash flow statement. So it's about $230 million when you add that to the rest of the CapEx for 2025. We pulled that down from our original guidance for 2025 as we saw the softer volumes. So we're increasing that a bit in 2026. Still, I think, below where it was a couple of years prior to that. But continuing to drive productivity initiatives as well as continue to prepare for capacity for the future as well.
Our next question comes from George Staphos from Bank of America Securities Inc.
Deon, you mentioned, I think in answering Mike's question, in trying to accelerate innovation that you're trying to spend more, if you will, capital at acquiring customers and getting them to try the products. Obviously, that's -- there's a mix benefit from HVC. But do you see the customer acquisition cost being at such a rate over the next couple of years where it sort of dilutes the impact of HVC on your margin and mix on a going-forward basis? How should we think about that as a way to parse that at all?
Separate question, just in general, paper supply. Any concerns on that for this year relative to the materials business as capacity has been coming out of the market? Or do you feel relatively comfortable with your supply position for 2026?
Thanks, George. Yes, just on the sort of the customer acquisition costs, I don't anticipate -- I'm not expecting any increase in customer acquisition costs as we move forward. We already have go-to-market teams are prepared and ready, and I could argue that they've been somewhat underutilized as we went through the last year relative to volume. So as we step up in some of the learnings that we've taken, they've helped sharpen our mechanisms for customer acquisition, shorten the cycles for both proving our benefits, shorten the cycle of how we position and print. And then on the back of that, we continue to leverage a little bit of automation to help improve that as well, George. So I'm not anticipating an increase in customer acquisition costs moving forward. It should have no real impact on margins.
Second piece is to paper supply. We've continued to make progress in making sure, following that significant supply chain disruption that we had a couple of years ago, that we are as appropriately balanced from a risk perspective in terms of paper supply overall. And so we have made sure that our supply, particularly as it relates to paper glassine and [ free ] stock, we have multiple sources that we can use. Largely geographically centered, but not exclusively. And we continue to make sure that what we've done in that regard with our procurement team, which has been -- we've put a lot of focus over the last couple of years is making sure we've driven from somewhat transactional approach of the smaller suppliers to much more strategic, where we now have much more certainty about the capacity we have available to us that we can call them as we need as well, George.
Our final question today comes from the line of John McNulty from BMO Capital Markets.
In the past, it seems historically that pricing was pretty much used to offset raw material-related inflation. It seems like right now, your employee costs are kind of a new level of inflation that we really haven't seen before. And I know in the past, you've largely tried to offset that with efficiency. Do we get to a point if the inflation around employee cost continues the way that it has where you start trying to work that through as part of your pricing ask as well? And how should we think about that in 2026?
Yes. Thanks, John. So to your point, typically, our pricing is following our raw material input cost. And obviously, as we've talked about, is we've seen some deflation in 2025. We've had price down to go with that, largely in sync with the deflation that we've seen there. And really, we're continuing -- or I guess, I should say as we've also talked about with our material reengineering in a period where we have an inflationary period, we used that to help offset the inflation in addition to price. In a deflationary period, we're typically looking at that productivity from material reengineering to help offset things like wage inflation, as an example. So I think we look at that material reengineering is a bucket that helps over a cycle, especially in a flatter or more deflationary period to help offset some of those costs like wage inflation that come into the business.
Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
Thanks, Miriam. To wrap up, we navigated a dynamic 2025 to deliver solid results for the fourth quarter and full year. Our focus and execution on our strategic priorities drives our confidence in returning to stronger growth and underscores our ability to deliver superior value across the cycle. Thank you, all, for joining today. This now concludes the call.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
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Avery Dennison — Q4 2025 Earnings Call
Avery Dennison — Q3 2025 Earnings Call
1. Management Discussion
Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the second quarter ended on September 27, 2025. [Operator Instructions] As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website.
I'd now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.
Thanks, Karina, and welcome to Avery Dennison's Third Quarter 2025 Earnings Conference Call. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified and reconciled from GAAP on schedules A-4 to A-8 of the financial statements accompanying today's earnings release. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release [indiscernible] Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Deon.
Thanks, Willy, and hello, everyone. We delivered a solid third quarter with earnings up 2% year-over-year and above the midpoint of expectations, while continuing to execute in a dynamic environment. This outcome underscores the strength and durability of our franchise, demonstrating our ability to activate multiple levers in our portfolio to deliver across a range of macro scenarios. As expected, our business continues to be impacted by ongoing trade policy changes. Encouragingly, we fully mitigated direct cost increases through strategic sourcing adjustments and select pricing surcharges. Moreover, while base apparel volumes were still impacted in the third quarter, we did see improvement sequentially relative to the organic growth headwind in the second quarter.
In Materials Group, operational excellence was key to margin expansion during the quarter. Our sustained focus on productivity and benefits from modest volume mix growth drove margins up 50 basis points year-over-year. Modest revenue declines in high-value categories were primarily driven by low single-digit declines in graphics and performance tapes, which faced headwinds from isolated customer and distributor inventory management adjustments. This is partially mitigated by continued strong growth in specialty durable labels and adhesives. We expect the inventory adjustment impact to be short-lived and to see high-value categories return to growth in the fourth quarter.
Overall Materials Group and base label materials volumes were up slightly compared to prior year. Importantly, we continue to see growth in our differentiated films volumes, which is a positive mix driver for the business. Solutions Group delivered organic sales growth of 4%, driven by high single-digit growth in high-value categories. Vestcom continued its momentum, growing over 10% and Imbelix delivered more than 10% growth as well. Overall, apparel sales exceeded expectations, rising low single digits in the quarter.
As you can see on Slide 7, our apparel business is seeing divergent trends. High-value category apparel sales grew high single digits, benefiting from strength in Imbelix, with strong growth related to next year's World Cup and mid-single-digit apparel IL growth. While base apparel sequentially improved as expected, it remains down low single digits, reflecting soft retailer and brand demand as they continue to navigate the impacts of tariff policies. Solutions margins performed better than typically sequential declines, but were down 90 basis points compared to prior year. Profitability was impacted by higher employee costs, continued growth investments and network inefficiencies stemming from tariff policy changes.
Turning to enterprise-wide Intelligent Labels. Sales grew approximately 3% compared to prior year, in line with our expectations. We are encouraged by the sequential improvement in the business, which was driven by key growth market segments. Specifically, apparel and food, logistics and industrial grew at mid-single digits rate. In apparel and general retail, both market segments are still being impacted by tariff policy changes. However, apparel partially recovered in the quarter, while general retail remains soft. Strong growth continued in food is our strategic collaboration with Kroger ramps up as expected.
Longer term, our conviction in this large addressable market continues to grow. This morning, we jointly announced a major partnership with Walmart to leverage Avery Dennison's RFID innovation and solutions in their fresh grocery categories of bakery, meat and deli, this adoption of IL and fresh food in the second large grocer is a key industry milestone and reinforces our conviction in the growth potential of this large addressable market.
In logistics, the business expanded sequentially but was down slightly compared to prior year. Our share in this market segment remains strong, and we have a robust pipeline of opportunities. As we highlighted on the second quarter call, we're executing initiatives to reduce identified network inefficiencies and associated costs created by the tariff policy changes. These improvements will help drive profitable growth while maintaining high quality and reliability for our customers. Looking forward, we anticipate the fourth quarter will deliver an improved rate of year-over-year growth versus what we saw in the third quarter.
While growth will likely continue to remain constrained by trade policy uncertainty, particularly in apparel and general retail market segments, we view this as a temporary headwind. Our conviction in the long-term growth of this high-value category platform remains strong given the value we are creating for our customers and the adoption we see across new segments.
Turning back to the total company. Taking into account the continued dynamic environment, we are anticipating both overall sales and earnings per share growth in the fourth quarter. We remain prepared for a range of scenarios, leveraging our proven playbook to safeguard earnings in the near term while accelerating initiatives to drive differentiation and growth over the cycle.
Shifting to our core strategies. I am confident that we have the initiatives innovation, capital allocation framework and team in place to consistently deliver strong profitable growth and top quartile returns across the cycle. Progress in each of these strategies was evident in the fourth quarter further cementing our conviction. Our business is positioned for success with secular growth tailwinds that fundamentally outweigh cyclical events over the cycle. Key trends, including item-level digitization enhanced consumer engagement, product customization and business productivity needs are aligned with a growing portion of our business.
The drivers in our high-value categories are clear and our exposure to them continues to expand. These categories now represent 45% of our total business year-to-date, an increase compared to prior year, underscoring our strategic shift towards higher growth and higher-margin opportunities. Intelligent Labels adoption is accelerating with our largest addressable market segment in food, now gaining significant traction. Our focus on innovation outcomes and commercial excellence is creating differentiation across our businesses.
Examples include introducing new RF innovation in food, our stalling software in Vestcom and expanding our team flake adhesive adoption in filmic labels for recycling purposes. Finally, we continue to harness the power of our disciplined capital allocation approach and balance sheet strength to return capital to shareholders and strategically expand our presence in high-value categories where we hold competitive advantages. Year-to-date, we repurchased approximately $454 million in stock and have grown our dividend by 7%. Concurrently, we closed the $390 million tailored adhesive bolt-on immediately strengthening our Materials Group high-value category adhesives franchise with clear cost synergies and strong growth potential.
In summary, while the current backdrop has muted our overall growth in 2025, we have further strengthened the resilience of our franchise, deployed capital into attractive opportunities and advanced our strategic priorities. This underpins our confidence in returning to strong growth and maintaining top quartile returns for our business and shareholders. I want to extend my gratitude to our entire team for their unwavering focus on excellence, dedication to overcoming the challenges at hand and relentlessly focusing on executing our strategic priorities.
Over to you, Greg.
Thanks, Deon, and hello, everybody. We delivered adjusted earnings per share of $2.37, up 2% compared to prior year and above the midpoint of our expectations. Results were driven by productivity and higher volume mix, partially offset by higher employee-related costs and investments. While trade policy uncertainty continued to present a headwind to our results, the impact improved sequentially. Compared to prior year, reported sales were up 1.5% and sales were comparable to prior year on an organic basis as positive volume mix was offset by deflation related price reductions.
Adjusted EBITDA margin was strong at 16.5% in the quarter, up 10 basis points compared to prior year. And we again generated strong adjusted free cash flow of nearly $270 million in the quarter. Our balance sheet remains strong with quarter end net debt to adjusted EBITDA ratio of 2.2. During the quarter, we issued a EUR 500 million note to pay down some commercial paper and to fund the Tailored Adhesives acquisition, which closed earlier this week. We continue to effectively execute our disciplined capital allocation strategy, successfully balancing significant cash return to shareholders with strategic M&A. In the first 9 months of the year, we returned roughly $670 million to shareholders through the combination of share repurchases and dividends, and we allocated $390 million to the Tailored Adhesives acquisition.
Turning to segment results for the quarter. Materials Group sales were down 2% on an organic basis as modest volume mix growth was more than offset by low single-digit deflation related price reductions. Organically, both high-value categories and the base businesses were down low single digits.
Turning now to regional label materials organic volume mix trends versus prior year in the quarter, continued soft consumer product demand led to roughly comparable volume in both North America and Europe, offset by continued growth in emerging markets with Asia Pacific up low single digits and Latin America up mid-single digits. High-value categories declined at low single digits compared to prior year.
Graphics and Performance Tapes declined low single digits and were impacted by customer inventory adjustments, which we expect to normalize in Q4. The Materials Group once again delivered strong margins with an adjusted EBITDA margin of 17.5% in the quarter, up 50 basis points compared to prior year. Regarding raw material costs, including the cost of tariffs, we experienced modest sequential global raw material cost deflation in the third quarter. We mitigated tariff costs through strategic sourcing adjustments and the implementation of select pricing surcharges. Overall, including tariffs or outlooks for relatively stable sequential material cost in Q4.
Shifting to Solutions Group. Sales were up 4% organically and high-value categories were up high single digits and base solutions were down low single digits, improving sequentially from down mid-single digits in the second quarter, but still impacted by tariff-related uncertainties. Within high-value categories, Vestcom was up more than 10%, driven by the continued benefit from new program rollouts. Embelex was also up more than 10%, and as we saw a ramp ahead of the World Cup next year, and apparel intelligent label sales recovered to mid-single-digit growth. Enterprise-wide Intelligent Label sales expanded approximately 3% compared to prior year.
In addition to apparel improving to mid-single-digit growth, food, logistics and industrial categories combined were also up mid-single digits. General retail categories continued to experience tariff-related softness with sales down mid-teens, which impacted both Solutions Group and Materials Group intelligent label sales. Solutions Group adjusted EBITDA margin was 17%, and relatively flat sequentially but down 90 basis points compared to prior year as benefits from productivity and volume were more than offset by higher employee-related costs, such as wage inflation and growth investments.
Shifting to our outlook. For the fourth quarter, we expect reported sales growth of 5% to 7%, with the following contributing factors. Sales growth, excluding currency of 1% to 3% with organic growth of 0% to 2%, with approximately 2% from currency translation, approximately 2% from extra days in the quarter due to the shift to the Gregorian calendar next year and approximately 1% from the Tailored Adhesives acquisition. We expect adjusted earnings per share to be in the range of $2.35 to $2.45, above prior year at the midpoint, as benefits from organic growth, productivity and share count are partially offset by wage inflation, investments and higher interest expense.
Our Q4 guidance incorporates typical seasonality and incremental productivity which is partially offset by higher interest expense and less favorable currency. We've outlined some contributing factors to our full year results on Slide 14 of our supplemental presentation materials. To highlight a few of the key drivers, we now anticipate a $5 million currency translation benefit to operating income, slightly below our previous projection of a $7 million tailwind. We now expect restructuring savings net of transition costs of approximately $60 million, up $10 million from our previous expectation as we continue to ramp our productivity efforts. And we continue to expect strong free cash flow, targeting roughly 100% conversion for the year. We now expect interest expense to be approximately $135 million an increase of our prior outlook, largely driven by interest expense from the EUR 500 million notes we issued in September.
And finally, we expect Taylor Adhesives will have an immaterial impact on Q4 earnings per share due to the timing of the close in the quarter and expected intangible amortization expense. In sorry, we delivered a solid third quarter achieving EPS above the midpoint of our expectations through a continuing dynamic environment. We expect slight improvements in our organic sales growth and continued year-over-year EPS growth in the fourth quarter. And we remain well prepared for a variety of macro scenarios. We're strongly positioned to execute our profitable growth and disciplined capital allocation strategies which we expect to deliver exceptional long-term value to all of our stakeholders.
And now we'll open up the call for your questions.
[Operator Instructions] Your first question comes from the line of Ghansham Panjabi from R.W. Baird.
2. Question Answer
Can you hear me okay?
Yes, we can Ghansham.
Sorry, just getting use of the new system. First off, as it relates to the Materials segment, is it your sense that volumes are starting to -- how are volumes progressing on a sequential basis, just given the macro uncertainty and tariffs and so on and so forth. I know you called out the impact on apparel as you have over the last couple of quarters. But is it your sense that materials are starting to sequentially weaken as well?
No. Ghansham, in the third quarter, volumes while positive overall was less than our expectation and pretty much across all regions. I think there's a couple of factors playing into that, one of which is certainly -- we see -- we continue to see lower retail volumes overall, particularly in North America and Europe. And our scanner data also suggests that there's lower muted demand coming from CPGs overall and when they think about volume. And the second thing is, in our high-value categories, we also had a couple of episodic events that happened really run our Graphics and Reflective business, which we know will remediate as we get into the fourth quarter.
Our outlook for the fourth quarter is actually to see kind of similar growth as we move forward. I think the final thing I'll say is it's certainly clear in certain pockets that where emerging markets have had exposure to tariffs those economies and the consumers in those economies are more cautious as they look into the impact of what those tariffs don't mean for those countries. And so we're seeing slightly lower volume in those areas as well. I think fundamentally for us, as we look forward, I'll just remind everybody our materials business is really anchoring consumer staples. And so typically, over time, it's been a GDP-plus business. And I don't anticipate that changing once the trade environment, the trade policy normalizes.
Your next question comes from the line of George Staphos from Bank of America.
Getting used to the new technology here. Thanks for the time, the details. I guess, with 1 question at a time, I'll go with the Walmart news today. If you can talk a little bit about that and what it might mean for you over the next couple of 3 years, we were doing some quick searching over the last hour or 2. Would it be fair to say that the opportunity here. I recognize you're not going to get that next quarter or the following would be roughly maybe [ $1.5 billion ] packages when you think about the Walmart protein cabinet and other related end markets, how would you help us size that?
Yes. Thanks, George. I think it's -- for us, we see this as twofold. First of all, I think it's critical validation of the effectiveness of our technology and solutions to solve challenges that all grocers really have, which is around freshness of perishable products, labor effectiveness gross margin expansion and Net Promoter Score increases because consumers are getting the products that they want, which are the freshest they need. And we saw that start in Kroger and now it's been manifested in Walmart and our partnership announcement this morning. So we see it both strategically important because we believe it will further capitalize the largest growth segment there is which is in food, which we estimate to be about in that order of 200 billion units.
And the second large grocer going really sends a signal that the technology has application the returns are there and the rollout now will commence. In terms of Walmart, specifically, while we don't necessarily always comment on the exact details of the partnership, perhaps I can just frame the scale of what we think it could be -- our estimates are -- and this will be subject to typical rollout timing, what will happen intra-quarter, the number of stores that goes, the individual pieces of those departments of bakery, daily and protein -- sorry, meeting when they go. But we would typically see this across a 2-year period being in the order of sort of high single digit to low double digits growth on our total 25 enterprise IL revenue. And we typically would see that ramping as we go through the couple of years. One other point I'd make on this is we are driving this partnership because we continue to provide differentiation in the market.
A lot of our differentiation over here is anchored in what we've been able to do from an innovation perspective as it relates to activating proteins and meats, particularly for intelligent labels, something that had been very challenging in the past that we've been able to solve for. And so we look forward to seeing the results of that partnership and the results of our efforts that we've been leading for very long in the market to make sure that we continue to drive activation.
Your next question comes from the line of John McNulty, BML Capital Markets
Can you speak to what you're seeing in the IL pipeline right now? Obviously, there's been a lot of chaos around tariffs and delays in certain programs. And yet it seems like there may be some acceleration. So in other areas as people try to get better understanding supply chains, et cetera. So I guess can you speak to that? And also just given the size and scale of the Walmart program that's being added in, do you have to start thinking about putting new capital to work around intelligent label capacity, et cetera. I know you put some in a while ago. I guess, where do we stand on that need now?
Thanks, John. So in terms of pipeline, we continue to see our pipeline grow actually both by a number of opportunities and by dollar value across all of the key segments. I'm just once again reinforcing that when the benefits are obvious and they're implementable, then we tend to see good traction because it fundamentally solves a challenge about supply chain visibility, inventory accuracy. And then when you're into the store, specifically labor productivity, fresh produce, waste reduction and employee and associate experience is much better as well. So from a pipeline perspective, we continue to see good progress overall.
In terms of Walmart size and scale, yes, it's a substantial add to the adoption now within the overall food and more broadly, the IR market. I'll remind you that in terms of capital allocation, we typically, from a roof line perspective of added capacity from an infrastructure perspective. Typically, 3 to 5 years out. Hence, why we added our Korea facility in Mexico -- we started that 2 years ago. When it comes to individual assets for production, we tend to be investing 12 to 18 months ahead of the curve.
So in the initial phases of this, I don't anticipate us needing additional capacity as we get through to the end of the second year, we'll revisit that and adjust accordingly. And for us, that's much more of a modular approach. These are assets where we've improved reduced our capital intensity per 1 billion units produced over the last 5 years. And so I'm looking forward to that continuing to take advantage of the scale manufacturing that we have in this regard.
Your next question comes from the line of Jeff Zekauskas, JPMorgan.
In the press release that came out over the Walmart announcement, there was a phrase about joint sensor technology. Is there something about the technology that you're using with Walmart that's really unique to your relationship with them or maybe another way of saying this is what you're doing with them something that would constrain you in being able to use the same technology with other customers.
No. Jeff, what we've done with Walmart is we've really focused on the 3 areas that in much of our pilots and trials up until this point. And those are around bakery, which are very similar to what we do with some other customers as well. Protein specifically is where we've had to lean into our innovation capability, both on our material science side, think about adhesive technology required in cold environments and then cut the environment that ultimately will be defrosted and even migrated at that stage.
So from material science have put a lot more effort into solving some of those problems. And then more specifically from what we call the RF side of things, radio frequency side of things is how do we make sure that our uniquely designed antennas are capable of being able to sense within very, very densely packed items that are very high dielectrics met has those properties. And so how do you make sure that you're able to read everything even within a freezer container or a fridge container as well. Those have presented significant challenges in the past. So our ability to generate innovation in this area, I think, is going to help us unlock not just the Walmart partnership but also more broadly across the market as we look forward as well, Jeff.
Your next question comes from the line of Matt Roberts, Raymond James.
If I may, in regard to intelligent labels, so I understand you not going to give the 2026 guide here and understanding visibility is limited. '25 certainly had its unique headwinds from tariffs, but we're starting to see some momentum that you referenced for Walmart and others. So maybe more broadly in intelligent labels, how much of the initial 5 points that you expected in 2025 from new programs have shifted into '26? How many incremental points could you get from new program rollouts other than Walmart that you just gave. And given weak comps in apparel and general retail and some of the headwinds you've seen there, do you believe 2026 could support at or above the long-term growth rate? Or if you only want to give 1 quarter ahead, any color on 4Q could be helpful as well.
Yes, Matt, specifically, we talked to remember those are incrementally about those 5 basis points that we come through sort of program rollout largely, those actual rollouts are on track through this year. And they came really in a couple of buckets. One bucket was in apparel and sell some new rollouts, new technology deployments. The second bucket was really in some of our food rollouts, which we've talked about. And the third bucket was also in some of the additional general merchandise rollouts that were happening as part of the compliance programs for some of our customers. Across all 3 of those, if you exclude the impact of tariffs, we're actually roughly on track.
Now in apparel, we haven't seen any to roll out delay, but what we've seen is some of the volume being a little bit more muted than we would have expected given as I'm sure, as you recognize the tariff implications. It's a little early for us to look at currently to 2026 as well. And I'd say that in the context, I think the environment remains highly uncertain. I just call every his attention to the fact that the tariff policy changes have only impacted India more recently by up to 50%. And as all you know, we're on the road currently with China being currently 100% again. And so I think that uncertainty certainly limits our near-term visibility. What I am confident in is our continued ability to drive not only innovation that secures our differentiation but drive adoption, particularly with things like Walmart, that will certainly help deliver growth as we go through next year. And we'll characterize and wrap it all together when we get to the January outlook as well, Matt, for you.
The other thing I would just add to Dan's earlier comments in his prepared remarks, Matt, is that we talked about Q4, expecting our growth rate in IL to be better than what we grew in Q3 versus prior year.
Your next question comes from the line of Anthony Pettinari, Citigroup.
Just another question on the Walmart partnership. During the quarter, they had a press release talking about deploying IoT technologies with Wiliot and Avery has a strategic partnership with Willett. And I'm just -- from a big picture perspective, can you talk about how RFID and maybe other IoT technologies coexist in an environment like Walmart? Are you kind of agnostic to what wins in the market? Or how do they interact with each other? Or how should investors think about those 2 sets of technologies?
Yes. Anthony. I think I've always said from the start, we fundamentally believe that UHF RFID is the most ubiquitous best-placed sensing technology for item-level identification visibility through supply chain and in a store environment. But we've also said that there are other sensing technologies, particularly when it relates to ambient issues, things you want to monitor temperature, pressure and so forth that will also have a specific use case.
Now Willett is a strong part of ours. We have strengthened our strategic partnership, we're going to be supporting them in their rollout that they have. In fact, we're going to be managing part of the rollout for them with Walmart as well overall. And that is really orientated around pallet and case level. So at a high level, think about UHF RFID being applied at an item level, most likely broader sensing devices like Willett technology we provide a pallet case level. and we're involved in both of those areas. I think they present a suite of solutions that in the long term are going to continue to drive to what I think will be the end outcome, which is digital identities on all physical objects in time.
Your next question comes from the line of Mike Roxland, Truist Securities.
Getting used to the new technology as well. And congrats on all the progress and the new Walmart deployment. Just 1 question for me in terms of logistics. Obviously, it was a little bit weaker in this quarter, as you mentioned. Any potential for new deployments in the near term? Any comments you may have potential like share gains, obviously, there was some share loss last year. Any insights as to whether maybe you're going to regain some share from that business. I think could help regard around logistics and what's happening with deployments and potential share gains on the horizon?
Yes. Sure, Mike. We continue to do really solid work in our partnership with UPS and that fact that partnership continues to grow. My sense is through the end of this year, we'll actually expand our share with UPS. It's a good performance by both our team, both on service, quality, delivery and some new innovation we've even brought to UPS as well in terms of how they can drive higher speed application to their packages relative using our technology as well. If I think more broadly about the logistics environment, I think we've been very clear.
We didn't anticipate another rollout during '25. And we're going to be assessing what the likelihood of that will be during '26. We'll give more color on that as we get to the start of January. But I'd say, overall, we continue to make really good progress with a number of the key logistics providers. Our pilots and trials have expanded with almost all of them. And we spent a lot of time engaging around all the various use cases that could come out of not just managing a mile fulfillment accuracy, but also how do you originate parcels. They go back to source at shipper and what role can we play in that.
So as always, I'm encouraged by what I see when I look across the business and our relationship we have with all the large logistics providers. And for me, it's just going to be a case of when we're able to get them to a drop at scale, and we'll be able to give a broader update, I think, by the time we get to January, Mike.
Your next question comes from the line of Josh Spector from UBS.
Can you hear me?
Yes, we can, Josh.
So I wanted to ask kind of a technical 1 around the quarter and the guide here. I think from a sales perspective, you're guiding sales up about $100 million, maybe a little bit more sequentially. But from an EPS perspective, you're close to flat. I think historically, there's some accretion in margins in the fourth quarter. So I know with the M&A piece of it, that maybe creates a little bit of noise as Meridian layers in, but are there other factors that we need to consider like some lagged price downs or some other costs that maybe mute the accretion Q-on-Q?
Yes. Thanks, Josh. So when we look at sequentially, there's a number of puts and takes, of course, seasonality, as you mentioned, historically, has been a little bit positive. I would say this quarter, we're probably expecting a little bit less than typical since we saw apparel have a bit of a catch-up in Q3 from the tariff impacts that we had in the second quarter. We'll still have some positive logistics volume improvement sequentially into Q4. Materials is usually a little bit of a headwind, Q3 to Q4 given the holiday periods on the biggest parts of that business in North America and Europe.
So sequentially, we'd expect seasonality to be relatively flat this year, I think. When we looked in, we have some slight positives from share buyback that we've been doing across the year and continuing to do as we entered the fourth quarter here. We've got some slight favorability from restructuring, and I talked about ramping that up as we're moving through the back half. And then we've got a little bit of a slight headwind quarter-over-quarter. I think Deon talked about our network inefficiencies we've had related to some of the tariff moves and our sourcing moves, our production moves accordingly with that. we've got a little bit higher inventories in the system over the last few quarters. And as we're bringing that down, we'll have a little bit of an inventory absorption impact on the P&L in the fourth quarter sequentially. Otherwise, price deflation somewhat a material sequential impact. So those are kind of the big puts and takes when we look Q3 to Q4.
Your next question comes from the line of John Dunigan from Jefferies.
I just want to ask a quick one on the Walmart collaboration and then I have one other here. So the collaboration, when will that start flowing through? Is that more of a 2026 event? And then just looking at Embelex, I mean, the inflection in volumes was pretty impressive, not something that you were necessarily expecting. I get that it's related to the World Cup, but is that kind of trend kind of high single digit, low double-digit expected going into 4Q 2026, kind of what your expectations are for that business would be helpful.
Sure, John. Yes, on the Walmart collaboration, we've been piloting a trial, as I'm sure you sense for a while now. And the full -- the rollout will start sequentially at a very small amount in the fourth quarter, really, and then we'll go from there as we go through '26 and '27. That's the current plan. Again, that may be subject to change into quarter shift depending on what stores roll out at what pace and which depart sequence in order.
In terms of Embelex, I'm being very pleased with our Embelex performance in the third quarter, largely on the performance that we have is related to the World Cup. So we do a lot of preparation for the key World Cup teams and the brands that support them in advance. And that typically happens a little bit in the second quarter, the majority in the third quarter and the smaller amount will happen in the fourth quarter. That's what we call happening at source, the garments are produced at source, the decorated at source.
And then as we get into next year when the actual World Cup happens, there will be a smaller opportunity for us to do what we call on in-stadium than new customization, the names and numbers that you can do when you go there. necessarily given a perspective on how that decides that, but it's an opportunity certainly for us as we get into next year. Aside from that, on our base Embelex business, we continue to see improvement, which is largely anchored in our performance brands as they start to ramp up as well. And then separately, in our Embelex business, we continue to make progress in what we call our in-venue and consumer customization applications.
I'll give you an example of that. We've recently launched an NFC connected device in a garment for a Turkish football club, we've done the same thing again for the San Francisco 49 and this really helps clubs and fans engage more directly on a one-to-one basis. So leveraging our technology with some of adhesive science into our Embelex business overall. And in the long term, we continue to see this as a kind of mid- to high single-digit growth segment for us as we move forward.
Your final question comes from a follow-up from Jeff Zekaukas from JPMorgan.
Another question about the Walmart arrangement. Different RFID tags have different prices in that apparel tags tend to be priced higher than logistics tags. Where do tags-on meat fall? Are they in the middle or higher or lower? And then for Greg, what calendar are you switching over to for next year?
Jeff, let me address the atone then Greg can take on the calendar question. Yes. I mean, typically across our estate, we have -- I'd characterize our products as kind of good, better, best and arranging and differentiation from good all the way through to bet. There's also unique circumstances, which certain products or certain inlays are put into more complex tags or format. So an inlay that goes on to, let's say, a plan like label has less complexity and typically a lower price point than something that goes into a highly decorated graphic tag omega apparel. So you can see a range of ASPs across them.
As it relates to meet, given some of our proprietary innovation, we would see these as typically products that are in the best range and our ASPs, there will probably be a little higher. But there's also a mix in with the bakery products that we have and some of the deli products. And so overall, I'd anticipate our ASPs across that program to really reflect our portfolio largely at an aggregate level and with profitability to be in a similar aggregate range we currently see across our IL portfolio as well.
Yes. Thanks, Deon. And Jeff, on your question on the calendar, we are moving from our historical 44, 5 calendar to a fiscal calendar that aligns with the actual counter, the Gregorian calendar. So we're making that shift at the end of this year. So this year, we'll extend to the 31st of December. And then from now on, heading into 2026, we'll be following the Gregorian calendar. And if I go back to Josh's question a little bit earlier, that does add about 2 points of growth in our fourth quarter sequentially and versus prior year by adding those extra days into the fourth quarter.
There are not really high-quality days. We had 4 days to the calendar this year that includes a Sunday, and it includes New Year's Eve, so they're not really high-quality days, but nonetheless, we'll get some incremental revenue from that not a huge flow-through because we'll have 4 or so days of fixed cost with less than that of actual revenue given the softness of those typical days. But that's the impact we're shifting to the good goring counter next year.
Your final question comes from the line of George Staphos from Bank of America.
2-part one, and again, thanks for all the details. First of all, can you talk a bit about where you're seeing deflation in materials such that prices or a touch lower -- and kind of where you sit right now, how would you gauge what is normal deflation versus price competition given the macro related point, the last couple of quarters, again, third quarter was nice to see the improvement. But apparel's weakness in base was one of the reasons that IL is having some difficulty growing. This quarter, with apparel being up 3% on IL base is down. Why is it -- why are we getting a positive disconnect this quarter that we were not getting prior quarters with IL relative to apparel.
Thanks, George. I'll start with your deflation question. Overall, what we've been seeing, and we've talked about from a year-over-year perspective, I think the biggest drivers we've seen are in paper particularly in Europe and Asia, where overall, we've got low single-digit deflation year-over-year in the third quarter. Paper is a little bit more than that, specific to a couple of regions and we saw pulp kind of coming down through the quarter in those areas as well. And we've got a little bit of year-over-year benefit on chemicals and films as well, also primarily in Europe and Asia. And then in the U.S., we've got some tariff-related inflation that we've put surcharges through as we talked about. So we do have a little bit from a price perspective then. We've got a little bit of a low single-digit impact on pricing as well. And net-net, we've got a slight headwind between price inflation. And I think some of that is still over the cycle. When we look over a multiyear horizon, we had a lot of inflation a few years ago. That's been slightly deflationary for a couple of years now, and prices have come down to go with that. So that's something we expected as we've gone through the quarters this year. we'll probably have another quarter or so as that continues from a year-over-year perspective in Q4.
George, on your second question, even in the second quarter, our base apparel performance was lower than our apparel IL performance, both were down. And as you saw, our best apparel performance has improved. It's still low single digits the base apparel piece. And our IL performance is now sort of low single digits around. The difference there really is in rollouts, not necessarily relative to the absolute volume of the base apparel. It's new rollers. For example, we extended our rollout with the Inditex Group leveraging our new proprietary loss detection technology that [ Dave ] introduced -- and separately, we've also got continued rollout in new apparel customers, a couple of them small, one of them large that are rolled out through the third and then the fourth quarter increasingly as well.
Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
Thank you, Carina. Just to recap, we delivered a solid third quarter in a dynamic environment. We are well prepared for a variety of macro scenarios and well positioned to deliver superior value through the cycle. We want to thank you for joining today's call. This now concludes our call.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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Avery Dennison — Q3 2025 Earnings Call
Avery Dennison — Jefferies Mining and Industrials Conference 2025
1. Question Answer
All right. Well, thank you all very much for attending today. Last meeting of the day, so I appreciate you being here. We are lucky to have Deon Stander. Stander come with us from Avery Dennison, CEO and President. He's going to start off with a few minutes of slides and commentary to update us on the business. And then I will kick it off with some questions, but if anybody in the audience has anything that they would like to ask, please feel free to raise your hand, and I'll get you a mic. I appreciate it. Deon, over to you.
Thanks, John. Thank you, everybody, for being here. Looking forward to the session with everybody. Let me just give you a quick overview of our business for those of you who may not be completely familiar, and I'll spend maybe 5 or so minutes then we get to Q&A really. So Avery Dennison is an $8.8 billion business. And what we do is material science and digital identification. Those are the 2 focus areas for our business overall. The whole thrust of our business is really focused on how we help customers solve branding and information challenges they have, largely anchored in solving problems around supply chain efficiency and waste, connecting brands and consumer circularity and where necessary, optimizing labor as well.
Our 2 largest businesses are our materials business and our Solutions business. Materials is about 70% of our portfolio, and our solutions business is about 30% of the business overall. When you step back, you look at our business, it's really exposed to a very broad and growing set of end markets -- and as well -- geographies as well. And so as you can see, around about 60% of our business overall is anchored in consumer staples, less cyclical overall. And we have a wide range of applications we've provided to all these end markets.
We have 2 growth catalysts really at the macro level. One is -- and I'll talk about this a bit more later on, is what we call our high-value categories. These are businesses in our portfolio or product lines where they are higher than average growth, typically GDP plus-plus, and have very strong margin profiles representing they are more differentiated in their market spaces. And they're a key part of our portfolio mix moving forward.
The second growth catalyst we have is we have very large exposure to all emerging markets, and that gives us, particularly in our base business in some of our high-value categories, just the growth that typically comes with those higher than Western or North American GDP markets as well. Our overriding aim still remains the same. We're focused on driving GDP-plus growth and top quartile returns, which we believe is a recipe for superior value creation through cycles and across cycles as well.
Our 2 largest businesses are the market leaders in their space. One way to think about our materials business is that it is a very steady GDP plus business that grows earnings and free cash flow and strong EVA returns over cycles and through cycles. On the other side, we have the solutions business, which has a number of significant growth catalysts and opportunity for both growth acceleration and margin improvement as well.
And then because we fundamentally believe in a more digitized world that every physical item in time is likely to have a digital identity in life. So that you can track an item from its start to when it was born, made, procured. How it worked through the supply chain, through to retail and ultimately the consumer into end of life. And I think in that more digitized future, we believe that Avery Dennison has somewhat of a unique capability to continue to drive outside leadership in helping connect physical and digital items.
Think about it this way, in our materials business, we provide most of the labeling materials that decorate most of the world's items. Everything that you think of in a bottle or can or something like it that has got labeling around it, we provide those labeling materials. On the other side, in our solutions business, but now increasingly across both businesses, we are the world's leader in what I think is going to be the most ubiquitous sensing technology when it comes to digital identities, which is UHF RFID, and we have a market leadership position there that we've had for a long time.
So we're uniquely positioned for the secular trends in the industry that we move forward to take advantage of them. Let me just skip forward. One of the reasons for our success over time has not just been our market-leading positions and the vibrant markets and end markets that we serve, as well as our team, our team around the world of 30-plus thousand employees, but also the fact that we've been very consistent in the execution and application of our strategies. And you can see them up on screen over here.
I do want to touch on at least 1 of them because I think it makes the point around how we're able to make progression. When I think about high-value category business, these that grow outsized growth and higher margins and greater differentiation. We've been actively working to make sure we expand our position in those. And these are in our businesses that would be, for example, our Intelligent Labels platform. I touched on that already. It would be our Vestcom business, our Embelex business on the material side. These would be things like our graphics business, our tapes business, even some of our adhesive business, industrial and durable tapes businesses as well.
And as you can see, over time, since 2014, we made significant progress in driving our high-value category penetration of our portfolio to where it is now roughly about 44%. You'll also note that during that time, high-value categories typically outgrow GDP by about 2 to 2.5x. And because of the higher margin mix we've been able to elevate not exclusively because of the high-value carriage, but also because our productivity margins by over 500 basis points since 2014. That is the recipe for continued creation as we move forward as well.
If I look forward, what's our growth algorithm as we look forward. The way we think about this is we're anticipating over this next cycle to grow in the order of 4.5% to 5%. Some of that will be M&A, and I'll talk a little bit about that just now. But largely, the algorithm is made up about 1 point from our base businesses across both divisions, 1.5 points from our largest single high-value category platform, which is intelligent labels, but actually 2 points from our other high-value categories. That's important because it shows that across our portfolio, we have multiple levers that we can pull in certain environments to continue to drive earnings and compound earnings as we move forward as well.
And then clearly, that we'll also see continued M&A opportunities. And I make this point very importantly because for us, the fact that we have such a resilient portfolio of products and solutions gives us the levers to be able to pull no matter what the environment is. That has allowed us to deliver on our 5-year targets that we set over the last 3 cycles and into the fourth 1 as well.
Finally, I'll say we have maintained a very strong balance sheet. Our leverage ratio is in the low 2s. We did that deliberately because we make sure that we have available capacity should we need to lean forward to take advantage of any market dislocations or where we see our share price is intrinsically below what we think it value. But our approach to capital allocation has been disciplined, is unchanged in the last decade and will not change moving forward. Roughly 25% to 30% of it is in internal growth or productivity and also restructuring, roughly 20% on dividends, which have been compounding at 10% over the last decade. And the last bucket is about 50%, which is a fungible bucket between share buyback and M&A. And we always think about that in terms of where we can create most value.
So I've spoken about share buybacks this year, we've already done in the first half of the year, $360 million. It's a fairly high run rate of share buyback because we saw an intrinsic difference in our valuation, but we also maintain an opportunity to, based on a -- particularly on a strategy to drive incremental M&A. And recently, during last week, we announced a small acquisition, a bolt-on acquisition. It is a high-value category business in the adhesive space. And I can speak a little bit about that. I suspect during some of the questions. But overall, for us, any acquisition has to be rooted in our strategies. This 1 happens to be -- it's a high-value category business. We have to be the logical high-value owner in a sense that we have to bring some core capability to that.
We're a very large adhesives manufacturer. We make our own adhesives ourselves. It has to be a business that can generate value over time. Post synergies, this business will be at a lower multiple than our current multiple and it also has to align with the approach we take, which is a highly application-led business that provides and solves problems for customers. In this instance, has to be in the liquid flooring adhesive space as well. So with that, I'm going to open up to questions, John. Maybe we can get some perspective from the audience as well.
Absolutely. And thank you for all the details there. So just to start off with that acquisition of the Meridian adhesive flooring business. Can you walk us through how that business fits within the materials segment, high-value categories -- what gets you comfortable increasing your exposure to the building and construction end markets? And maybe talk about some of the reasons why you feel that business is actually a little bit more defensive in its niche category?
Sure, so as I said, for all of our acquisitions that we look at, they have to be on strategy, in this instance, the high-value category business. This flooring adhesives business part of the Meridian business, which we will call tailored adhesives have been growing at roughly mid-single digits for the last 5 years and very high margins. That's in a segment and a sector that has not seen much growth. If you think about the broader building construction points to their differentiation. It has to leverage a core capability of ours. We make most of our -- we make almost all of our own adhesives, not just blend them, but we actually design polymers.
We take monomers, we crack them and we polymerize them, and we make our own adhesives, specifically for applications across all of our portfolio, all of our pressure centered products, tapes products, even our IL products where we have to attach chips to inlays. And this acquisition can leverage our -- particularly our acrylic adhesive technology for in-sourcing and significant synergies. We see real post-synergy values on that basis. The multiple post-synergy will be lower than our current multiple.
And then finally, this is a business which has a distinctive position in the market. It services the flooring industry and specifically, adhesives again to the flooring industry and their approach has been a couple of ways that they've generated real value and demonstrated that growth. So first of all, they focused much more on the repairs and renewal segment of flooring, which is typically less cyclical than you see in the building construction industry. More than 50% of their business is focused on what's called resilient flooring or luxury vinyl tiling which is the biggest growth trajectory you see in flooring.
And the third element is they spend most of their time focused on the actual flooring companies. So they engage directly with flooring companies like Mohawk and Shaw, and they work with them to say what is the particular resilient flooring you're trying to implement, what's the substrate that needs to go on, what the contract is looking to do? And they provide adhesive specifically formularized to make sure it stays down and doesn't lift. And then Shaw and Mohawk take those theses we provide or that a tailor provides, and own brand and own label them, it helps improve their warranty rates as well.
So overall, a very strong business. The only thing I'd say is, well, there's a couple of external references to adhesives. The one that I'd point to you at is probably one of the more external bodies where they've got engineered adhesives. That business is in the low 20% EBITDA margins. This business is above that. And on top of that, we will see mid-single-digit synergies.
So you can see how we get to the lower post-synergy multiple overall. I think it has significant resilience because not only is it exposed to the most growth-orientated part of flooring, which is resilient flooring, but it also has been able to maintain and grow share in a market relative to its competitors because it's focused on OEMs as well. So we feel good about that. We haven't factored in any change in the trajectory of the broader building construction industry. Should that happen and when that happens, I don't know, we will also see some upside to that as well.
That's great. And then you mentioned the mid-single-digit synergy capture. I believe that's all on the cost side. Can you talk to us about where that synergy is and how you're generating it? What gives you confidence in it? And then maybe what some of the upside is, if I remember correctly, it's U.S.-based companies. So maybe there's some opportunities given Avery's global footprint for taking that business on and expanding it to various international markets.
So the synergies we factored in are largely based on our ability to take the products that they buy before they blend them effectively, which is largely acrylic adhesives. We actually make and formulate acrylic adhesives. So we'll be able to in-source that. In addition our capability in that area to create specific acrylic adhesives that are really formularized to work very well in certain environments, we'll be able to add to their breadth of portfolio as well. So there's the both procurement and in-sourcing strategies. That's largely where that synergies are based on.
We also know because we have a small business in tapes that's focused on broader building and construction as well. We also know there's some cross-selling opportunities. Where we're able to provide either liquid adhesives in this or tapes. We've not factored those in, but there's a possible upside to that as we move forward as well.
Great. And then in 1 of our earlier meetings, you had mentioned that Avery also sells some of the adhesives that you make internally into the open market. I'm not sure if you've disclosed it before, but how much are you selling into the open market, maybe as a percentage? Or how does this internalize some of the adhesives that you were currently selling to the market?
We make a significant amount of adhesives across, acrylic adhesives, solvent adhesives, UV warm melt and even some hot melt adhesives. We use them across all our applications. The vast majority of which we use for ourselves and our products that go in our different businesses. We have a small trade adhesives business. This is largely focused on selling adhesives to the tapes business out in the markets. And for each 1 of those customers, we specifically work to say what's the application they're trying to address and we formularize that for it. We don't typically disclose that. It's relatively small, de minimis, but it's growing, and it has high margins. And that gives us the confidence that when we bring in another liquid adhesives business, we're able to be able to get cross fertilization of capability as well.
Great. And then just switching over to more of a macro view, trade policy. Apparel is 1 of your biggest end markets. And we've had a lot of trade policy uncertainty. Inflation has created a lot of headwinds here in '25 and apparel being one of those end markets that was down kind of mid-single digits here in the last quarter. Maybe you can give us an update about how the apparel market is doing for Avery quarter-to-date and what actions you've taken to optimize your Intelligent Labels business in the wake of some of these disruptions?
Sure. Apparel being a discretionary purchase was significantly affected by the tariff environment. And it's not necessarily the tariffs per se, it's more the uncertainty that tariffs has generated. So in the second quarter, we saw the start of the second quarter, apparel volumes being down for us, at least in our apparel business, high single digits. And as the quarter progressed, getting slightly better. We ended the -- exit the quarter, with still low single-digit run rate. I would say the environment for apparel overall still remains highly uncertain.
Although there is general alignment that most of the sourcing countries that were apparel sourced now have a similar tariff rate, somewhere in the 20s to 30s, depending on where it is. There is still no certainty about what the impact of that's going to be as most of our apparel retail customers and brands are looking to decide how they manage that net pricing impact particularly as they look towards the holiday season. So some of them are choosing to raise prices, some of them are choosing to raise prices in certain categories.
Some of them are choosing not to do so. The biggest challenge all of them debating as we think towards holiday, which is sourcing, while it starts really for us and the brands September and October is if they are going to raise prices no matter what they are on a discretionary item, what's the volume impact going to be at the consumer level. And there's, I think, going to be more caution in that regard overall.
So that's what we see. In terms of our IL impact to that, clearly, more than 60% of our Intelligent Labels business is still anchored in apparel, which as a consequence has been affected by that. Some of the actions we're taking relate to some of the other segments. We continue to double down and driving pilots and trials towards rollouts in food and logistics. And at the same time, we're step changing some innovation to make sure we're bringing new innovation to the market quicker so we can help customers get to that adoption very quick. And I can talk about that a bit just now.
Yes, that would be great.
Okay. So the way I think about our ability overall from an intelligent label perspective is we want to make sure we are the market leader, more than 50% of the share we've had in both apparel and these new segments. And our job is to maintain that share moving forward. These are segments both in food and logistics outside of apparel with significant growth runway. By comparison, I'll give you an example. Apparel's total market is in the order of 45 billion to 50 billion units, and we're only 40% penetrated. Logistics is 65 billion to 70 billion, and we have one customer that's just gone, UPS.
Food is 200 billion units, and we have 1 customer in Kroger that's gone. So we have high conviction in the likely adoption in these segments. Our focus has been how do we accelerate new customers now that the first 2 have gone in those segments, and at the same time, bring new technology -- innovation to technology level to bear. Some of these new categories, particularly in food, require some innovation things around more difficult to read items like proteins, those are following what will happen in bakery.
Some of it is innovation at the manufacturing level and the rest of it is how we continue to lean forward in making sure we're having market-leading teams, which we're the go-to-market leader in to help customers as they adopt that. And our view is, if we maintain our share through innovation and our service and value proposition, as these markets grow, then we will disproportionately benefit. And that's the reason we can continue to lean forward and invest in them.
Great. And maybe, I guess, just kind of on that point, can you give some examples on how you're accelerating the adoption. I mean I don't think a lot of people who are new to the story necessarily understand some of the complexities of adding an RFID label onto something with -- like produce that has some wet applications or like the microwavable capabilities. Maybe just if you could explain like why there needs to be innovation that continues the adoption?
Yes. Let me just say, at the end of the day, driving a new technology like RFID to adopt in new segments is really only anchored in the fact that it can generally deliver return on investment for those customers. Otherwise, it's just technology for technology sake. And that's not what we're about. For each 1 of these segments, we've looked at, we have a view, initially hypothesis now backed up by data that there is real demonstrable benefit from a retailer perspective or the brand perspective.
So in apparel that was clearly around inventory visibility and accuracy, which led to greater sales lift and gross margin expansion. That's proven, it's out there in multiple cases. In logistics, it was solving for labor in the last mile fulfillment centers and making them more accurate. This is also public knowledge, UPS. We're shipping 1 in 400 parcels, will be mis-shipped at the last mile fulfillment center to the wrong destination. Each one to correct is north of $15 to correct that. So we've helped them move that through accuracy down to 1 in 800 or 1 in 1,000. The scale of that is significant. Again, applicable across the logistics industry.
In food, it's all around labor productivity, freshness, so less waste because these are perishable categories and ultimately sales lift. And with Kroger, we're currently 700 stores in the rollout with them. It's on track. It's actually showing for them better results than they had anticipated. We have a number of pilots and trials going on with other grocers, where we've been able to demonstrate similar returns for them. Typically across almost all these segments, the return on investment is within a year, and now it's really down to how do we accelerate the adoption of these customers as we move forward.
Great. And then as you approach some of these new markets for intelligent label like food and logistics, where the margins may be a little bit lower relative to some of the other higher-margin apparel categories. How do you maintain the margin profile in these markets?
Yes. I think 1 of the things that we've learned over time, I think it's a bit of a misnomer, but the belief that you have to have a high-priced item to afford an RFID tag that was historically true 10 years ago. That's no longer true. If you go into a Walmart store right now where they're rolling out RFID use across many categories, they're tagging items as less than $1.
If you go to a customer of ours called Decathlon in Europe, they're tagging protein bars in their stores at $0.50, not because that item economically made sense to tag. But because when you tag the whole store, you then have 1 standard operating mechanism for running a store. It's highly automated. You can also allow for self-checkout and you ultimately get into theft detection and loss prevention as well.
So for us, as I think forward in these segments, we're going to continue to bring innovation to bear in this regard because I think that is what helps differentiate us and drives greater value for these customers in these segments. Even in apparel, where we've been doing this for more than 10 years, we recently launched some new innovation last year. That takes the RFID device and embeds it in the garment or in the woven label, which then acts as a loss detection device for Inditex, the largest fast fashion retailer in the world, they own the ZARA group. And that allows them to do 2 things. It allows them to not only identify when things have left the store through theft and replace them, but also allows for customer checkout and fraud prevention, return fraud prevention as well.
Great. And then in some of the lower penetration categories for Intelligent Labels, how can Avery maintain its share, its leadership share, which you pointed out is one of the shares? And just to be quite open, I mean, that is something that has been pretty impressive as when I covered the company 5, 7 years ago, same amount of size, above the nearest competitor as it is today. So how are you able to continue to take that leadership and opportunity and not necessarily have to worry about other new technologies that may come into the market or other competitors. What gives you that advantage?
I think first and foremost, we remain, and I remain as a leader paranoid about both competition and innovation because that's what keeps us agile and moving forward. How we stay ahead of competition is really threefold. Number one, it is really around innovation. The new innovation, I've spoken about a couple of examples that we bring to bear. We've actually got in food, some new innovation coming out in the second half of this year that's proprietary. Gives us more pricing advantage as well and greater margins as we move forward. These are products that will help make more complex products to tag and read, things like proteins more visible, easier to do.
So innovation is key for us. That's innovation at the product level, but it's also innovation in the process and how we manufacture. We're the world's largest manufacturer, the world's largest inlay designer in that regard in that piece. And maintaining our low-cost leadership is critically important because it brings scale when volume comes that very few other people have.
The final 1 is kind of innovation. When I think about how we go to market and our teams. We are typically the single company that people go to when they want to adopt the technology, not just because we do one element, but across the nodes, outside of chip manufacturing. That's not us. We do almost everything else. We maintain and drive inlay production, design, integration into some form of label, data management, including and then on top of that software as well. We've invested a lot to make sure that whole node of solutions and services is possible, and that gives us often the position where people look to somebody with the global stature of Avery Dennison, with the capability of Avery Dennison to say, we need you to help us to drive the technology adoption first.
Great. And as an industry leader, I mean, Avery's historically done a good job showcasing its pricing power. A lot of volatility, as I mentioned in the market earlier, a lot of different trade policies, tariffs in and out of effect. How has Avery been able to -- or if you've been able to successfully push through pricing in the current environment and uncertainty, especially around tariff surcharges to cover some of the incremental costs that you've seen throughout the supply chain.
Most of the direct -- I'd segregate between indirect tariff impacts, which are largely apparel demand related from direct tariff impacts, which mostly are really on our materials business. Now we make buy and sell in every region around the world, in our materials business. So we have very little direct tariff exposure. In fact, in total, it's probably low single digits inflationary impact from our current procurement and manufacturing expense overall. And we've done 2 things. So 1 is we have implemented some pricing surcharges when we see that, and we've also leveraged our global scale and sourcing footprint to change sourcing routes if we need to.
And so as we do typically in our materials business, if we see an inflationary environment, we tend to pass that through to our customers. And then when there's a deflationary environment, we tend to withdraw that across the cycle. I always think about inflation being -- or net price inflation being sort of neutral across that time period, depending on where we are.
As it relates to tariff, we'll see how long they endure. We are using it as a surcharge at the moment. Should they endure longer, we'll have a different decision? Should they be withdrawn, we will withdraw them at that point.
And the tariff surcharges, that is something that doesn't have a pricing lag to it. That's something that...
Typically not. When we see the impact to us, we put that through in terms of pricing because there's a very large degree of immediacy. If we see an impact, our products on that part of our business typically go to our customers pretty quickly at that stage. So we tend to act with urgency. And there may be a small lag, but it's not very big at all.
Got it. So Intelligent Labels takes up a lot of time from a lot of your conversations, but I do want to touch on a lot of the other high-value categories that you have, particularly those that have been in focus as of late, Vestcom has had a rollout with CVS that's been relatively sizable. Can you just give us an update on Vestcom, how it's performing, maybe some of the things that you've learned with the CVS rollout?
For us, this has been a significantly good business to have, not only in itself, a high-value category business, really strong margins, uniquely positioned. It's a data composition engine. It takes pricing, planogram, point-of-sale promotional data from retailers, whether they be drug dollar or grocery. And the output of that into that data composition engine is a shelf-edge label, mostly for pricing, but that same real estate can also be sold as a media selling opportunity.
So if you're a CPG, wanting to advertise a national campaign, a regional campaign, you can use that shelf-edge label we produce to promote buy one, get one free, whatever the context be. So we have two parts. One is the productivity solution and one is the media solutions, a really strong business and highly proprietary as well. The rollout with CVS has been, as we expected, excellent and on time, has been really accretive. It's great to have them as a customer. And I think we've done a lot for them in terms of the value we brought to them. And I continue to see this business as a mid-single-digit growth potential moving forward with a very strong margin profile.
Great. Embelex is another high-value category and it's done very well over the past several years. Did slower this year. It's tied a lot to discretionary spending in apparel. But what's the growth outlook for this business? And where do you see the greatest opportunities for this business maybe going into 2026?
We see typically this business to be mid- to mid-single to high single-digit growth over the cycle. That mirrors where the market is growing. Think about this business as providing names, numbers and decoration on garments that are largely in the performance segment. So I think about the big performance brands, mostly in team sports. So we provide the names and numbers for most of the team sports that you see both in Europe started in football, soccer, depending on your vernacular, and now in the United States, we anchored in most of the professional sports as well. And what we see is the growth trajectory is really secular.
People want to decorate, when people want to engage as fans. That growth industry is going to continue to be the me and the product and then supporting the fans. And so we see a lot of opportunity for us to continue to live. It's highly fragmented. We're probably the largest player, so we see opportunities for further growth for us in that regard. And particularly outside of that, outside of performance sports, team sports, also have a small part of the laundry business, where you're using digital identities to manage laundry, and we added digital identities even to our team sports stuff.
And then finally, when we are in stadiums, so any professional stadium that you see or professional sports in the United States, we are actually often the hardware, software and consumables provider that will largely go and decorate that shirt, put your name and number on and so forth. That's also equally true. Most stadiums are used for, for example, live concerts, and there's a huge demand for that. And so we see opportunity there. It's not within our growth formula, but we can clearly see adjacent opportunities that will give us more growth if we needed to.
Great. I'll ask 1 more and then if anybody has any questions, please raise your hand. There are other high-value categories, obviously get less attention than the last 3 that we talked about. Are there any particular ones that you wanted to highlight that you're maybe most excited about or you see the greatest opportunities going forward for the business. I mean taking on Meridian is also now a high-value category. Is there anything else that you care to highlight?
We touched on a lot of the solutions group, high-value categories. But in our materials business, if you go back to that growth algorithm, I talked about 2 points of our growth will come from high-value categories outside of IL, one point is in solutions, one point is material. So they're significant. And those ones, we have a very strong specialty and durable label business, a high-value category growing mid-single digits. These are things that you'd imagine the labels that have to be really durable going into oil drums in harsh conditions, not -- scratch resistant, et cetera. That's 1 example.
Another example of that would be specialty labels when you buy fresh produce and sometimes in the clamshell with peel and reseal, we provide that peel and reseal capability, leveraging our technology for adhesives. And clearly, within that, we also have labels that are around wines and spirits, highly decorative, different substrates and so they stand on the shelf.
I'd say the area that I also continue to have, a lot of enthusiasm and beyond adhesives as well is our graphics business. We -- following again, a secular trend of personalization, we provide highly customized films that allow for paint protection in the auto industry or window protection or even color change. So as people choose to protect their cars, change the color on their cars, we provide cast films for those. And that has a lot of share opportunity for us as we look into that market as well.
Great. Are there any questions. If not, I can ask one last one before letting you go here. So admittedly, 1 of the areas that I'm less familiar with is the cloud platform that Avery has the -- I think you say atma.io. How does this differentiate your intelligent label offering? And can it be further monetized? What specific capabilities? Does the data management ecosystem provide sustainable competitive advantages as a physical and digital convergence accelerates?
I think if you think about if every physical item has a digital identity and you capture the first event during the supply chain when that item was made, born, grown, whatever the case may be. You need to capture that information somewhere. Typically, at the moment, it's captured largely on the chip, the semiconductor chip. That's part of the intelligent label device.
Moving forward, our view is that in time, that will all migrate to the cloud. And so as a consequence, what we deemed necessary 2 or 3 years ago is we thought we need a digital identity platform that could house each digital identity and all the episodic events that happened with it. And so we built atma.io from scratch because we saw nothing in the market. It forms the backbone of much of the solutions that we provide. It also is a key part of how we provide software, highly customized software for the apparel industry, for the food industry as it relates to tracking digital identity.
So we have a set of apparel solutions called Optica that we released at the end of last year. These allow brands, apparel brands, not only to understand what's happening in sourcing, but also to track each item that comes through their supply chain, even allows the [ garment ] manufacturers to track back to raw materials as well. We have a similar 1 coming out called Optica for food, which we're using in the food industry, similar dynamics as well.
So selectively, we will invest in building or acquiring specific pieces of software.
Our approach currently is to monetize those largely at the item level as we charge for the tag or the label, but we do have small pieces where we also have SaaS models that are running, and we're still understanding exactly how best to leverage that capability. At the end of the day, we're going to be able to generate significant amounts of data through all these items. And then that will allow us to be able to solve problems for customers, but also leverage that capability for further digital -- pure digital solutions as we move forward.
Fantastic. All right. Well, 1 minute to spare. Thank you very much.
Thank you very much, everybody. Appreciate it.
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Avery Dennison — Jefferies Mining and Industrials Conference 2025
Finanzdaten von Avery Dennison
Umsatz
Der Umsatz stellt die Summe aller Einnahmen eines Unternehmens z. B. für dessen Produkte oder Dienstleistungen dar.
Umsatz (TTM) einfach erklärtDirekte Kosten
Direkte Kosten sind die Kosten, die direkt im Zusammenhang mit der Herstellung des Produkts oder der Dienstleistung entstehen.
Bruttoertrag
Der Bruttoertrag gibt an, wie viel vom Umsatz nach Abzug der direkten Herstellkosten im Unternehmen verbleibt. Berechnet man den prozentualen Anteil vom Umsatz, spricht man von der Bruttomarge (engl. Gross Margin).
Brutto Marge einfach erklärtVertriebs- und Verwaltungskosten
Die Vertriebs- & Verwaltungskosten (engl. Selling, General & Administrative expenses, kurz SG&A) beinhalten alle Aufwände für Marketing und den Verkauf sowie die allgemeine Verwaltung des Unternehmens.
Forschungs- und Entwicklungskosten
Die Forschungs- und Entwicklungskosten (engl. research & development costs, kurz R&D) geben Auskunft darüber, wie viel das Unternehmen in die Forschung und die Entwicklung seiner Produkte investiert. Vor allem prozentual vom Umsatz und im Vergleich zu direkten Wettbewerbern sind die Kosten interessant.
EBITDA
Das EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ist der Gewinn des Unternehmens vor Zinsen, Steuern und Abschreibungen. Berechnet man den prozentualen Anteil vom Umsatz, spricht man von der EBITDA-Marge.
Abschreibungen
Abschreibungen stellen Wertminderungen von Vermögensgegenständen des Unternehmens dar (z.B. durch Abnutzung von Maschinen).
EBIT (Operatives Ergebnis)
Das EBIT (engl. Earnings Before Interest and Taxes) ist der Gewinn des Unternehmens vor Zinsen und Steuern, das auch als operatives Ergebnis bezeichnet wird. Berechnet man den prozentualen Anteil vom Umsatz, spricht man von
der EBIT-Marge.
Nettogewinn
Der Nettogewinn stellt den Gewinn oder Verlust nach Abzug aller Kosten dar.
Nettogewinn einfach erklärtaktien.guide Premium
| Jun '26 |
+/-
%
|
||
| Umsatz | 9.248 9.248 |
6 %
6 %
100 %
|
|
| - Direkte Kosten | 6.568 6.568 |
5 %
5 %
71 %
|
|
| Bruttoertrag | 2.680 2.680 |
7 %
7 %
29 %
|
|
| - Vertriebs- und Verwaltungskosten | 1.493 1.493 |
9 %
9 %
16 %
|
|
| - Forschungs- und Entwicklungskosten | - - |
-
-
|
|
| EBITDA | 1.530 1.530 |
7 %
7 %
17 %
|
|
| - Abschreibungen | 343 343 |
9 %
9 %
4 %
|
|
| EBIT (Operatives Ergebnis) EBIT | 1.187 1.187 |
6 %
6 %
13 %
|
|
| Nettogewinn | 705 705 |
1 %
1 %
8 %
|
|
Angaben in Millionen USD.
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Firmenprofil
Avery Dennison Corp. beschäftigt sich mit der Bereitstellung von Kennzeichnungs- und Verpackungsmaterialien und -lösungen. Sie ist in den folgenden Segmenten tätig: Etiketten & Grafische Materialien, Einzelhandelsmarken & Informationslösungen und industrielle & Materialien für das Gesundheitswesen. Das Segment Etiketten- und Grafikmaterialien produziert und vertreibt Haftmaterial für Etiketten und Verpackungen der Marken Fasson, JAC und Avery Dennison, Grafiken der Marken Avery Dennison und Mactac sowie reflektierende Produkte der Marke Avery Dennison. Das Segment Retail Branding and Information Solutions entwirft, produziert und verkauft eine Vielzahl von Marken- und Informationslösungen für Einzelhändler, Markeninhaber, Bekleidungshersteller, Händler und Industriekunden. Das Segment Industrial and Healthcare Materials Segment produziert und vertreibt Klebebänder und Befestigungselemente der Marken Fasson und Avery Dennison, medizinische Haftklebematerialien und -produkte der Marke Vancive sowie Hochleistungspolymere. Das Unternehmen wurde 1935 von R. Stanton Avery gegründet und hat seinen Hauptsitz in Glendale, Kalifornien.
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| Hauptsitz | USA |
| CEO | Mr. Stander |
| Mitarbeiter | 35.000 |
| Gegründet | 1935 |
| Webseite | www.averydennison.com |


