The iconic maintenance product company WD-40 has posted a mixed start to its fiscal 2026. A modest sales increase was overshadowed by a significant contraction in earnings, putting a spotlight on the firm’s operational efficiency. The key question for investors is whether planned supply chain improvements can restore profitability in the latter half of the year.
Earnings Under Pressure Despite Revenue Gain
For Q1 of fiscal 2026, WD-40 reported net sales of $154.4 million. This figure represents a mere 1% increase compared to the same period last year. More concerning was the bottom-line performance, which moved in the opposite direction. The company’s operating income fell by 7%, while net income saw an 8% decline.
Management attributed the earnings drop primarily to escalating operating expenses. These costs now account for 40% of net sales, a notable rise from the 37% recorded in the prior year.
Silver Linings: E-Commerce, Margins, and Shareholder Returns
Amid the challenges, several positive indicators emerged from the quarterly report:
* E-Commerce Growth: Sales through digital channels surged by 22%.
* Gross Margin Improvement: The gross margin expanded to 56.2%.
* Dividend Increase: The board approved an 8% hike in the quarterly dividend, raising it to $1.02 per share.
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Full-Year Outlook and Strategic Logistics Overhaul
Looking ahead, WD-40’s leadership maintained its full-year guidance. The company anticipates net sales for fiscal 2026 to land between $630 million and $655 million, which would equate to year-over-year growth of 5% to 9%. Management also forecasts diluted earnings per share (EPS) in the range of $5.75 to $6.15.
Confidence in a second-half recovery stems from expected efficiency gains. A central component of this strategy is a comprehensive review of the company’s distribution network. WD-40 is evaluating the locations of its distribution centers, aiming to structurally change its supply chain to lower long-term delivery costs. Since these facilities are operated by third-party logistics providers, the company does not anticipate this review will materially impact its capital expenditure (CapEx).
This logistics initiative is part of a broader operational excellence program that also includes packaging enhancements and strategic sourcing. However, the financial benefits from these supply chain optimizations are not projected to materially affect results until fiscal 2027 and beyond.
All eyes are now on the upcoming earnings release scheduled for April 2, 2026. The Q2 report, due after the U.S. market close, will be scrutinized for early signs that the rise in operating costs is being successfully curtailed.
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