Avery Dennison Corp. Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the fiscal first quarter ended March 31, 2026. Avery Dennison Corporation is a large accelerated filer incorporated in Delaware, operating globally with approximately 69% of net sales originating outside the U.S. The company operates through two reportable segments: Materials Group and Solutions Group.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $2,298.5 million | $2,148.3 million |
| Gross Profit | $664.8 million | $621.5 million |
| Net Income | $168.1 million | $166.3 million |
| Diluted EPS | $2.18 | $2.09 |
| Operating Cash Flow | $136.5 million | ($16.3 million) |
| Adjusted Free Cash Flow | $104.4 million | ($53.1 million) |
| Total Debt (Carrying Value) | $3.79 billion | $3.73 billion (approx.) |
| Cash and Equivalents | $255.1 million | $195.9 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 7% year-over-year. Organic sales growth was 1%, driven by higher volume partially offset by raw material deflation-related price reductions and unfavorable mix. Foreign currency translation had a favorable impact of 5%.
- Profitability: Net income rose slightly by 1.1%. The increase was driven by higher volume, favorable currency translation, productivity savings, and a reduction in losses on venture investments compared to the prior year. These gains were partially offset by higher employee costs, restructuring charges, and a higher effective tax rate (30.1% vs. 26.7%).
- Segment Performance:
- Materials Group: Net sales increased 11% (organic growth of 2%). Adjusted operating income rose to $254.2 million from $230.3 million.
- Solutions Group: Net sales decreased 3% (organic decline of 1%). Adjusted operating income fell to $58.5 million from $68.2 million due to higher employee costs and unfavorable volume.
- Restructuring: The company recorded $15.9 million in restructuring charges in Q1 2026, primarily for severance related to 370 positions and asset impairments, compared to $4.9 million in Q1 2025.
Guidance, Outlook, and Risks
- Outlook: Management anticipates a favorable impact from foreign currency translation on full-year 2026 net sales and operating income. However, this is expected to be offset by higher interest expense and the normalization of prior-year temporary cost savings (specifically lower incentive compensation). The full-year effective tax rate is projected to be in the high-twenty percent range.
- Capital Allocation: The quarterly dividend was increased to $1.00 per share in April 2026 (up from $0.94). The company repurchased approximately 0.3 million shares in Q1 2026. A subsequent minority investment of approximately $75 million in Wiliot Ltd. was completed in April 2026.
- Risks: Significant risks include global economic conditions, geopolitical instability (including conflicts in the Middle East and Russia-Ukraine), trade policy uncertainty (tariffs), and foreign currency fluctuations. The company notes that indirect impacts of tariffs resulted in a low single-digit sales decrease in apparel categories in late 2025.
Investor Verification Checklist
- Organic Growth Drivers: Verify the sustainability of volume growth in the Materials Group given the offsetting impact of raw material deflation and price reductions.
- Restructuring Execution: Monitor the realization of cost savings from the 370 position reductions and the impact of transition costs on future margins.
- Tax Rate Volatility: Review the specific foreign jurisdiction court ruling that increased tax reserves and assess the likelihood of similar discrete charges in future periods.
- Geopolitical Exposure: Assess the potential impact of ongoing trade negotiations and tariffs on the 69% of sales generated outside the U.S., particularly in Europe and Asia Pacific.
- Working Capital Efficiency: Note the increase in Days Sales Outstanding (65 days vs. 64 days) and monitor collection trends.