Fortune Brands Innovations, Inc.

Total company sales were $1.2 billion, down 4% year over year. Consolidated operating income was $236 million, up 18.4%, with margin of 20.4%, up 390 basis points, and second-quarter EPS was $1.35. The quarter included $122 million in gross tariff refunds, of which $104 million reduced cost of goods sold in Q2; net of directly attributable variable compensation, this contributed $81 million of operating income, 700 basis points of operating margin, and $0.52 of EPS. Free cash flow was $179 million versus $119 million last year, and net debt was about $2.3 billion with net debt-to-EBITDA of 2.7x. For the full year, net sales guidance remains down low-single digits, but is now expected to land slightly below the midpoint of that range; EPS guidance is $3.22 to $3.52 including the tariff-refund benefit, or $2.70 to $3.00 excluding it. Q3 guidance is for sales down 1% to 2%, EPS of $0.72 to $0.76, and operating margin of 12.5% to 13%.

Jesse Singh struck a constructive but candid tone, saying he is “even more optimistic” after his first month and sees long-term growth and margin potential in Fortune Brands’ core businesses and adjacencies. He emphasized getting “back to basics,” simplifying the organization, improving customer focus, and addressing underperformance in Water through better service, supply chain stability, and new-product execution. He also said the company will streamline corporate costs, review the portfolio, and expects to have the business realigned by year-end, with more specifics over the next quarter or two and progress visible during 2027.

Ashley George laid out the quarter’s hard numbers and the tariff-refund impact in detail. She said the company recognized $122 million in gross tariff refunds in Q2, with $81 million flowing through to operating income, 700 basis points of margin, and $0.52 of EPS; cash inflow from refunds was $9 million in the quarter and about $56 million had been collected through July 31. She also noted $179 million of free cash flow, $2.3 billion of net debt, and 2.7x net debt-to-EBITDA, while reiterating a goal to get below 2.5x through free cash flow and debt reduction. On outlook, she said sales guidance is unchanged at down low-single digits, but the company now expects to be slightly below the midpoint; EPS guidance is $3.22 to $3.52 including tariff refunds, with underlying EPS of $2.70 to $3.00 excluding them.

Analysts pressed management on the size, timing, and location of incremental investments, the Water business shortfall, the service issue, and the portfolio/Fiberon review. Management said most of the new spending is aimed at Water service, new product commercialization, and organizational simplification, and that the bulk of the investment will flow through OpEx, mostly SG&A, with some possible COGS impact from sourcing changes. On Water, executives said the issue was a mix of expedited freight, sourcing changes, and an S&OP/process reset that failed to deliver enough inventory, and they characterized it as a fixable stability problem rather than a new structural issue. On Fiberon, management said advisers have been retained and the review is progressing, but no completion timeline was given.