Fortune Brands Innovations Q4 2024: Diverging Views on Security Segment, Connected Product Growth, and Margin Sustainability

These are the key contradictions discussed in Fortune Brands Innovations' latest 2024Q4 earnings call, specifically including: Security Segment Performance Expectations, Growth Contributions from Connected Products, and Gross Margin Sustainability:



Sales and Market Performance:
- Fortune Brands reported net sales of $1.1 billion for Q4 2024, a 5% decrease versus the fourth quarter of 2023.
- Adjusted for impacts from a third-party software outage and natural disasters, the fourth quarter organic sales were down 1%.
- The sales decline was primarily due to a third-party software outage in their security distribution centers and natural disasters, particularly in the Southeastern United States.

Digital Product Growth:
- The company's digital business, including digital products in both Water and Security segments, saw a significant growth with sales reaching $214 million in 2024.
- At the end of 2024, their digital business had 4.7 million users, with a strong point-of-sale trajectory into 2025.
- The growth was fueled by successful partnerships in insurance and the strong performance of the Moen Flo Smart Water leak detection system.

Operational Efficiency and Margin Improvement:
- Fortune Brands achieved a 16.4% operating margin for the fourth quarter, a 60 basis point improvement over the fourth quarter of 2023.
- The strong margin results were attributed to strategic alignment of operations and a focus on the most profitable parts of their business.

Challenges in Security Segment:
- The Security segment experienced a 17% decline in sales for the fourth quarter, with 10% adjusted for a third-party software outage.
- The challenges included supplier destocking and the impact of the software outage, affecting customer satisfaction and sales.