Exchange: NYSE | Sector: Industrials | Industry: Business Equipment Supplies
Q2 2025
Published: Aug 1, 2025
Earnings Highlights
Revenue of $394.80M down 9.9% year-over-year
EPS of $0.31 increased by 124.8% from previous year
Gross margin of 32.9%
Net income of 29.20M
""To date, we have announced 2 strategic price increases while maintaining our competitive position, secured improved terms with third-party manufacturing partners and accelerated production shifts to cost-competitive countries for U.S.-bound products."" - Thomas W. Tedford, President and Chief Executive Officer, ACCO Brands
ACCO Brands reported Q2 2025 revenue of $394.8 million, down 9.9% year over year, with gross margin of 32.9% and an operating margin of 8.36%. Net income was $29.2 million, delivering $0.32 per share on a reported basis and $0.31 per share on a diluted basis. Management attributed the results to tariff-related disruption in the Americas and softer demand across multiple channels, offset by ongoing cost-reduction actions and price increases. The company has progressed its multi-year cost-reduction program, realizing $8 million in savings in the quarter and over $40 million of annualized savings to date. This, together with tariff mitigation efforts and strategic pricing, is positioned to support margin stabilization and modest sequential improvement into Q3 and beyond. Looking into the second half, ACCO expects pricing actions to partially offset tariff costs and currency tailwinds to contribute positively in the near term. Management reaffirmed a longer-term growth thesis centered on expanding higher-growth product categories, accelerating new product introductions (notably in computer accessories and gaming peripherals), and selective acquisitions (e.g., Buro Seating) to enhance footprint in Australia and New Zealand. The company continues to target a gross margin of 33%–34% and expects adjusted free cash flow of approximately $100 million for the year, with leverage guided to the 3.8x–3.9x range by year-end. Management also signaled ongoing operational discipline and leadership changes to accelerate transformation.
YTD performance reflects tariff-driven headwinds and volume deleveraging but benefited from first-quarter margin strength and cost reductions.
Cost structure and efficiency:
SG&A: $83.0 million; impact from cost-reduction actions and lower incentive comp.
EBITDA: $52.8 million; EBITDA margin about 13.37% (EBITDARatio 0.1337).
Multiyear cost reduction program: $8 million in cost savings in the quarter; cumulative annualized savings > $40 million; drivers include manufacturing footprint optimization, headcount reductions, and delayering.
Cash flow and balance sheet:
Financial Highlights
Revenue and profitability:
- Q2 2025 revenue: $394.8 million; YoY change: -9.92%, QoQ change: 24.39% (per ratiosInfo). Gross profit: $129.7 million; gross margin 32.85%. Operating income: $33.0 million; operating margin 8.36%. Net income: $29.2 million; net margin 7.40%. EPS: $0.32 (GAAP); diluted EPS $0.31.
- YTD performance reflects tariff-driven headwinds and volume deleveraging but benefited from first-quarter margin strength and cost reductions.
Cost structure and efficiency:
- SG&A: $83.0 million; impact from cost-reduction actions and lower incentive comp.
- EBITDA: $52.8 million; EBITDA margin about 13.37% (EBITDARatio 0.1337).
- Multiyear cost reduction program: $8 million in cost savings in the quarter; cumulative annualized savings > $40 million; drivers include manufacturing footprint optimization, headcount reductions, and delayering.
Cash flow and balance sheet:
- Net cash flow from operations: -$38.9 million; free cash flow: -$43.5 million for the quarter; year-to-date free cash flow is negative at $24 million (including $17 million cash proceeds from asset sales).
- Cash and equivalents: $133.3 million; total assets: $2.378 billion; total liabilities: $1.740 billion; net debt: approximately -$3.6 million (cash > debt).
- Leverage: 4.3x at quarter end; covenant amendment increased leverage covenants by 50 bps for 2025 and 25 bps for 2026 to provide additional cushion.
Segment and geographic mix:
- Americas: comparable sales down 14% in Q2; adjusted operating margin 17.4% below prior year due to weaker volumes, tariff impact, and fixed-cost deleveraging.
- International: comparable sales down 4%; adjusted operating margin 8.5% benefited from pricing, cost savings, and lower incentive comp; Asia growth positive, Europe softer (Germany, UK, France).
- Outside the U.S. (~60% of sales) not impacted by tariffs; management emphasized China plus one strategy and supply-chain optimization to protect margins.
Strategic updates and guidance:
- Nintendo Switch 2 related accessories (PowerA) launched June 5; expect stronger Switch 2 demand in H2 and into 2026 as adoption grows.
- New product introductions: Thunderbolt 5 docking station targeting Apple ecosystem; work lights in Europe under Repeat; ergonomic Sit Stand desktop solution; Buro Seating acquisition integrated in Australia and New Zealand.
- Full-year guidance: revenue down 7% to 8.5%; adjusted EPS $0.83–$0.90; adjusted free cash flow around $100 million; year-end leverage 3.8x–3.9x. Q3 guidance: revenue down 5% to 8%; adjusted EPS $0.21–$0.24. Outlook assumes pricing actions offset tariff costs and some FX tailwinds.
Market positioning and valuations:
- Current ratios and liquidity modestly constrained by seasonally high working capital needs; price-to-book ~0.52x; price-to-sales ~0.84x; P/E ~2.84x; dividend yield ~2.02%. Enterprise value multiple ~24.08x. These metrics imply a defensively priced stock with potential upside if demand stabilizes and margin recovery occurs.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
394.80M
-9.92%
24.39%
Gross Profit
129.70M
-8.14%
30.22%
Operating Income
33.00M
-37.97%
592.54%
Net Income
29.20M
123.32%
321.21%
EPS
0.32
124.81%
328.57%
Key Financial Ratios
currentRatio
1.85
grossProfitMargin
32.9%
operatingProfitMargin
8.36%
netProfitMargin
7.4%
returnOnAssets
1.23%
returnOnEquity
4.58%
debtEquityRatio
1.69
operatingCashFlowPerShare
$-0.42
freeCashFlowPerShare
$-0.47
dividendPayoutRatio
22.9%
priceToBookRatio
0.52
priceEarningsRatio
2.84
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management themes from the Q2 earnings call:
- Tariff environment and cost actions: Tom Tedford emphasized proactive tariff mitigation and ongoing cost-reduction progress. Quote: “To date, we have announced 2 strategic price increases while maintaining our competitive position, secured improved terms with third-party manufacturing partners and accelerated production shifts to cost-competitive countries for U.S.-bound products.”
- Cost reductions and leadership changes: Tedford noted the multiyear cost-reduction program delivering over $40 million in annualized savings and announced leadership appointments to accelerate transformation. Quote: "We continue to make excellent progress on our $100 million multiyear cost reduction program, realizing additional savings in the second quarter that brought the cumulative program total to over $40 million."
- Growth initiatives and product momentum: The call highlighted new product introductions and growth in gaming accessories, including Switch 2-related products via PowerA and other premium accessories. Deb O’Connor stated pricing actions will offset tariff costs and improve margins in the back half.
- Back-to-school dynamics and mix: Management discussed a delayed BTS season and cautious retailer orders, with expectations for a mid-to-high single-digit decline in BTS in the U.S./Canada and increased emphasis on price-appropriate assortments in Brazil and other markets.
- Balance sheet and leverage flexibility: CFO Deb O’Connor highlighted an amended leverage covenant and the year-end target leverage of 3.8x–3.9x, underscoring prudent capital management amid tariff-related uncertainty.
"To date, we have announced 2 strategic price increases while maintaining our competitive position, secured improved terms with third-party manufacturing partners and accelerated production shifts to cost-competitive countries for U.S.-bound products."
— Thomas W. Tedford, President and Chief Executive Officer, ACCO Brands
"Pricing was announced in the second quarter and takes effect in the third and fourth quarters. We anticipate our pricing actions will partially mitigate the continued softness in consumer and business spending with the rate of decline improving in the second half of the year."
— Deborah A. O’Connor, Executive Vice President and Chief Financial Officer, ACCO Brands
Forward Guidance
Management guidance reflects significant tariff-related uncertainty, particularly in the Americas, and an expectation that pricing actions executed in Q2 will partially offset tariff costs. The company anticipates a gradual improvement in the sales decline rate in H2 and expects FX tailwinds to positively influence Q3 and Q4. Key quantitative targets include: full-year revenue down 7%–8.5%, adjusted EPS $0.83–$0.90, and adjusted free cash flow around $100 million (including asset sale proceeds). By year-end, ACCO projects leverage at 3.8x–3.9x. The longer-term framework remains a modest organic and inorganic growth plan with a target gross margin of 33%–34% and steady cash generation. Investors should monitor: (1) the success and ramp of Switch 2 accessories and Kensington/other peripheral lines; (2) effectiveness and timing of price increases in offsetting tariff costs; (3) trajectory of BTS demand and retailer inventory management; (4) progression of the Buro Seating integration and expansion into additional markets; (5) currency effects and global trade policy developments; (6) debt/credit covenant status and annual capex progression.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ACCO Focus
32.85%
8.36%
4.58%
2.84%
ACTG
1.61%
-24.20%
-0.61%
-26.13%
EBF
30.10%
13.30%
2.88%
15.08%
HNI
42.90%
10.20%
5.94%
11.89%
SCS
34.50%
10.50%
6.76%
6.58%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ACCO Brands enters the second half of 2025 with a balanced risk-reward profile. The company appears to have laid the groundwork for a margin recovery through price increases offsetting tariff costs, ongoing cost reductions, and a shifting product mix toward higher-growth categories (gaming peripherals, premium computer accessories, ergonomics). The Switch 2 opportunity via PowerA presents a meaningful upside in H2 2025 and into 2026, supported by a diversified international footprint that reduces tariff exposure. Near-term risks include tariff volatility, currency headwinds, and retailer inventory discipline that could temper BTS seasonality. The guidance implies a mid-single-digit revenue decline for the full year with modest EPS progression and a path to roughly $100 million of adjusted free cash flow, assuming the tariff environment remains manageable and demand stabilizes. Improved leverage management and no debt maturities until 2029 provide financial flexibility for strategic investments. Investors should monitor: (1) the durability of BTS demand and retailer inventory management, (2) the ramp of Switch 2 accessories and other new product launches, (3) effectiveness of pricing actions in offsetting tariff costs, (4) integration progress of Buro Seating and geographic expansion, and (5) FX dynamics and any further tariff developments.
Key Investment Factors
Growth Potential
Growth potential centers on expanding higher-growth categories (gaming peripherals, premium computer accessories, ergonomics), accelerating new product introductions (Thunderbolt 5 docking station, Switch 2 accessories), and inorganic expansion through acquisitions (e.g., Buro Seating expansion into Australia and New Zealand with potential future markets). Management envisions marginal sales growth in the longer term supported by efficiency gains and a stable gross margin target of 33–34%.
Profitability Risk
Key risks include ongoing tariff volatility and potential further import-cost pressures, macroeconomic weakness in the Americas, competitive pricing pressures from low-cost entrants (notably China-origin products), channel inventory discipline by retailers, currency headwinds, reliance on BTS season for a meaningful portion of annual revenue, and integration risk from acquisitions like Buro Seating. Financial risk includes leverage covenant adjustments and a negative FCF trajectory in a challenging near term.
Financial Position
Solid liquidity with $133.3m cash versus ~$129.7m total debt; net debt near zero given cash position. Leverage at 4.3x at quarter-end, with management guiding 3.8x–3.9x by year-end after covenant amendments. The company maintains a diversified geographic mix with ~60% outside the U.S., aiding tariff resilience, and a long-term margin target that provides a clear path to cash generation through 2026 and beyond.
SWOT Analysis
Strengths
Diverse product portfolio across consumer, office, and gaming accessory categories with strong brand franchises (Five Star, Hilroy, Kensington, PowerA, GBC).
Tariff resilience: roughly 60% of sales outside the U.S. and ongoing tariff mitigation efforts; diversified manufacturing footprint.
Active cost-reduction program delivering >$40 million in annualized savings to-date, improving fixed-cost absorption and profitability.
Strategic partnerships in growing segments (Nintendo Switch 2 licensing via PowerA) and portfolio expansion (Buro Seating integration).
Weaknesses
Q2 revenue decline and margin compression driven by tariff-related demand disruption and volume deleveraging.
Negative free cash flow in the near term due to working capital needs and sharp declines in operating cash flow.
High current leverage and covenant amendments indicating financing constraints in a volatile environment.
Opportunities
Upside from Switch 2 accessories and expanded gaming ecosystem, potentially driving meaningful Q4/Q5 sales growth.
Expansion into higher-growth adjacencies (ergonomics, work lights, premium docking and electronics accessories).
Geographic expansion (Australia/NZ via Buro Seating) and potential further market entries leveraging existing distribution channels.
Threats
Prolonged tariff uncertainty and potential additional retaliatory actions affecting U.S. demand and input costs.
Macroeconomic softness and cautious retailer ordering affecting BTS and consumer spend.
Competition from low-cost imports and price-based competition in core BTS categories.