Fortune Brands Innovations Stock

Fortune Brands Innovations, Inc. (Fortune Brands) operates as an innovation company focused on creating smarter, safer and more beautiful homes and lives that competes in attractive long-term growth markets in the company’s product categories.

The company sells its products through a wide array of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, ‘do-it-yourself’ remodeling-oriented home centers, showrooms, e-commerce and other retail outlets.

Strategy

The company’s strategies include building on leading business and brand positions in attractive growth and return categories; developing innovative products and processes for customers and consumers; and building an aligned organization using the fortune brands advantage to drive results. Safety is a critical element to Fortune Brands’ growth strategy.

The Fortune Brands Advantage consists of four critical pillars:

Category Management - Partnering with the company’s channel partners to drive optimal performance and best serve the company’s consumers through actionable category insights.

Business Simplification - Simplifying workstreams to be even more efficient. As part of the company’s reorganization and shift to a more aligned operating model under one leadership team, the company expect to continue to prioritize activities that are core to brand, innovation, and channel.

Global Supply Chain Excellence - Leveraging the company’s robust, global supply chain to strategically drive scale efficiencies with cutting-edge capabilities.

Digital Transformation - Supporting the company’s products of the future with best-in-class services, technology, data and analytics and using data science to unlock valuable consumer and business insights. The company is advancing its digital strategy to fuel growth and aim to become a digital leader in the company’s industry. The company continues to invest in its digital capabilities to leverage the company’s scale across technology, data and talent to further drive sustainable productivity and efficiency, enhance employee development, satisfaction and retention, and accelerate and sustain growth in e-commerce and connected products, sourcing and data science. This includes integrating the company’s digital organization to improve speed to market and further develop a culture that fosters innovation, collaboration and value creation, and developing products supported by service technology, data and analytics.

Business Segments

The company has three business segments: Water Innovations (‘Water’), Outdoors, and Security.

Approximately 20% of 2023 net sales were to international markets, and sales to two of the company’s customers, Lowe’s Companies, Inc. (‘Lowe’s’) and The Home Depot, Inc. (‘The Home Depot’), accounted for 10.9% and 10.2% of the company’s net sales, respectively, in 2023. Sales to all U.S. home centers in the aggregate were approximately 25% of net sales in 2023.

Water

The company’s Water segment manufactures or assembles and sells faucets, accessories, kitchen sinks and waste disposals, predominantly under the Moen, ROHL, Riobel, Victoria+Albert, Perrin & Rowe, Aqualisa, Shaws, Emtek and Schaub brands. Although this segment sells products principally in the U.S., China and Canada, this segment also sells in Europe, Mexico, Southeast Asia and South America. Approximately 28% of 2023 net sales were to international markets. This segment sells directly through its own sales force and indirectly through independent manufacturer's representatives, primarily to wholesalers, home centers and mass merchandisers. This segment is increasingly investing in digital trends and ‘smart’ home capabilities. In aggregate, sales to The Home Depot and Lowe’s comprised approximately 18% of net sales of the Water segment in 2023. This segment’s chief competitors include Masco, Kohler, LIXIL Group, InSinkErator (owned by Whirlpool Corporation), Huida, Hgill, and Jomoo.

Outdoors

The company’s Outdoors segment manufactures and sells fiberglass and steel entry door systems under the Therma-Tru brand, storm, screen and security doors under the Larson brand, composite decking, railing and cladding under the Fiberon brand, urethane millwork under the Fypon brand and wide-opening exterior door systems and outdoor enclosures under the Solar Innovations brand. This segment sells products principally in the U.S. and Canada. This segment’s principal customers are home centers, hardware and other retailers, millwork building products and wholesale distributors, industrial distributors and specialty dealers that provide products to the residential new construction market, as well as to the remodeling and renovation markets. In aggregate, sales to The Home Depot and Lowe’s comprised approximately 29% of net sales of the Outdoors segment in 2023. Therma-Tru, Larson, Fiberon, Fypon and Solar Innovations compete with Masonite, JELD-WEN, Andersen, Trex, Azek, Plastpro, Pella, and various regional and local suppliers.

Security

The company’s Security segment’s products consist of locks, safety and security devices, and electronic security products manufactured, sourced and distributed primarily under the Master Lock, American Lock, Yale and August brands and fire resistant safes, security containers and commercial cabinets manufactured, sourced and distributed under the SentrySafe brand. This segment sells products principally in the U.S., Canada, Europe, Central America, Japan and Australia. Approximately 23% of 2023 net sales of the Security segment were to international markets. This segment manufactures and sells key-controlled and combination padlocks, bicycle and cable locks, built-in locker locks, keyed and keyless smart locks, door hardware, automotive, trailer and towing locks, electronic access control solutions, and other specialty safety and security devices for consumer use to hardware, home center and other retail outlets. In addition, the segment sells lock systems and fire resistant safes to locksmiths, industrial and institutional users, residential and multi-family housing hardware and service providers, and original equipment manufacturers. In aggregate, sales to The Home Depot and Lowe’s comprised approximately 17% of the net sales of the Security segment in 2023. Master Lock, American Lock, Yale and August competes with Abus, W.H. Brady, Hampton, Kwikset, Schlage and various imports; and SentrySafe competes with First Alert, Magnum, Fortress, Stack-On and Fire King.

Seasonality

All of the company’s operating segments traditionally experience lower sales in the first quarter of the year (year ended December 2023) when new home construction, repair and remodel activity, and security buying are at their lowest. As a result of sales seasonality and associated timing of working capital fluctuations, the company’s cash flow from operating activities is typically higher in the second half of the year.

Research and Development

The company’s research and development expenses were $64.6 million in 2023.

History

The company was founded in 1988. It was incorporated as a Delaware corporation in 1988. The company was formerly known as Fortune Brands Home & Security, Inc. and changed its name to Fortune Brands Innovations, Inc. in 2022.