Financial Trends -- 4/10
Weak trend profile. Revenue roughly flat with organic growth below the 3-5% IGNITE algorithm
target. Gross margin compressing (-250/-300 bps FY26 guide). FY26 Adj EPS guidance cut ~9%.
FCF positive but choppy with no durable acceleration ($945M, $535M, $930M, $483M, $761M over
FY21-25). Share count modestly declining. Revenue growing but operating income declining applies
as a penalty.
Weight: 25%
Revenue Roughly Flat
Stagnant
Organic below 3-5% target
Gross Margin -250/-300bps
Compressing
FY26 guide cut
FY26 Adj EPS Cut ~9%
$5.45-5.65
Execution miss
FY26Q3 FCF $311M
13.3% margin
Positive but choppy
Revenue Trajectory (Annual, USD M) -- FYE June 30
Revenue is roughly flat over five years -- organic growth consistently below the 3-5% IGNITE algorithm target.
FY2021 revenue was $7,341M vs FY2025 at $7,104M, a net decline over the full period. Organic
growth has been volatile and largely below algorithm: +9% (FY21), -2% (FY22), +6% (FY23),
N/A (FY24 cyber distortion), +5% (FY25). FY2026 guidance calls for organic sales of -5% to -9%,
inclusive of ~7.5pts ERP headwind. Even the high end implies underlying organic growth is barely
flat -- not acceptable for a staples company targeting 3-5%.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $7,341 | $7,107 | $7,389 | $7,093 | $7,104 |
| YoY Growth | — | -3.2% | +4.0% | -4.0% | +0.2% |
| Organic Growth | +9% | -2% | +6% | N/A | +5% |
FY2026E guided organic -5% to -9% (incl ~7.5pts ERP headwind). FY2024 organic N/A due to cyberattack. Data sourced from Daloopa. FYE June 30.
Gross Margin Trajectory (Annual)
Gross margin compressing sharply -- FY26 guide implies -250 to -300 bps YoY.
The multi-year recovery from the FY2022 trough of 35.8% to FY2025's 45.2% (+940bps) was genuine.
But FY2026 reverses that progress: management guided gross margin down -250 to -300 bps, driven
by ERP transition costs, tariff headwinds (~$40M), and elevated trade spending. FQ1 FY2026 gross
margin dropped to 41.7% (-410bps YoY). The recovery is now unwinding.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | FY2026E |
|---|---|---|---|---|---|---|
| Gross Margin | 43.6% | 35.8% | 39.4% | 43.0% | 45.2% | ~42.5% |
| YoY Change (bps) | — | -780 | +360 | +360 | +220 | -250/-300 |
FY2026E gross margin guided -250 to -300 bps YoY. ERP costs, tariffs, trade spending all contributing. Data sourced from Daloopa. FYE June 30.
Adj EPS Trajectory (Annual)
FY26 Adj EPS guidance cut ~9% -- an execution miss that breaks the recovery arc.
Adj EPS recovered from the $4.10 trough (FY2022) to ~$7.50 (FY2025), but FY2026 guidance of
$5.45-$5.65 represents a ~25% decline YoY and a ~9% cut from original guidance. The cut reflects
gross margin compression, ERP disruption costs, and tariff headwinds. This is not a one-time
reset -- it signals that the IGNITE-driven margin recovery has stalled and reversed.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | FY2026E |
|---|---|---|---|---|---|---|
| Adj EPS | $7.20 | $4.10 | $5.80 | $6.70 | $7.50 | $5.45-5.65 |
| YoY Change | — | -43% | +41% | +16% | +12% | ~-25% |
FY2026 Adj EPS guidance of $5.45-$5.65 reflects ~9% cut from original guide. Recovery arc broken. Data sourced from Daloopa. FYE June 30.
Free Cash Flow Trajectory (Annual, USD M)
FCF positive but choppy -- no durable acceleration visible across the five-year window.
The annual FCF path ($945M, $535M, $930M, $483M, $761M from FY21 to FY25) shows a sawtooth
pattern with no underlying improvement. FY26Q3 delivered $311M in quarterly FCF (13.3% margin),
a decent quarter, but the full-year trajectory remains volatile. FCF margin has ranged from
6.8% (FY24) to 12.9% (FY21) with no consistent expansion.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| FCF ($M) | $945 | $535 | $930 | $483 | $761 |
| FCF % of Sales | 12.9% | 7.5% | 12.6% | 6.8% | 10.7% |
| Diluted Shares (K) | 127,299 | 123,906 | 124,181 | 124,804 | 124,287 |
FCF sawtooth pattern with no durable acceleration. Share count modestly declining (~2% over the window). Data sourced from Daloopa. FYE June 30.
Key Financial Signals
Positive Signals
1. FCF remains positive -- $761M in FY25, FQ3 FY26 at $311M (13.3% margin)
2. Share count modestly declining -- ~2% reduction over recent years
3. Prior margin recovery was real -- GM from 35.8% to 45.2% over 3 years (now reversing)
2. Share count modestly declining -- ~2% reduction over recent years
3. Prior margin recovery was real -- GM from 35.8% to 45.2% over 3 years (now reversing)
Negative Signals
1. Revenue flat for 5 years -- organic growth below 3-5% IGNITE algorithm target
2. Gross margin compressing sharply -- FY26 guided -250 to -300 bps YoY
3. FY26 Adj EPS guidance cut ~9% -- $5.45-$5.65 vs original guide, ~25% decline YoY
4. FCF volatile year-to-year -- no durable acceleration ($945M to $535M to $930M to $483M to $761M)
5. Revenue growing but operating income declining -- penalty modifier applies
2. Gross margin compressing sharply -- FY26 guided -250 to -300 bps YoY
3. FY26 Adj EPS guidance cut ~9% -- $5.45-$5.65 vs original guide, ~25% decline YoY
4. FCF volatile year-to-year -- no durable acceleration ($945M to $535M to $930M to $483M to $761M)
5. Revenue growing but operating income declining -- penalty modifier applies
Score: 4/10
Below-average financial trend profile. Revenue stagnation, gross margin compression, EPS guidance
cuts, and choppy FCF all weigh on the score. The prior multi-year margin recovery is now reversing,
and organic growth consistently falls short of the company's own 3-5% IGNITE target. Share count
is modestly declining, a minor positive. Revenue growing but operating income declining applies as
a penalty.
Data sourced from Daloopa. FYE June 30. Financial Trends score: 4/10, weight 25%.