What is the timeline for moving marketing and advertising teams back into business units?

The company expects to make good progress in the coming months and be in a "really good position by the end of the year" with the realignment. The goal is to bring resources closer to the business units to increase execution and efficiency. “I would expect that we'll continue to refine that, and we'll make really good progress in the months to come. And we would expect to be in a really good position by the end of the year.”

How should investors think about the timing of reinvestments and the realization of benefits from cost streamlining efforts?

It's too early to give a precise cadence, but the current guidance acknowledges investments may be needed before costs are fully realigned. The company hopes to make progress against this balance during 2027. Investments are being made regardless of tariff refunds to protect revenue and accelerate performance, setting up for success in 2027. “I think with our current guidance, there's an acknowledgment that, that balancing act may require some investment before the costs are fully realigned. Without being too specific, we'd be hopeful that we could make progress against that balance sometime during 2027.”

What are the key drivers behind the updated full-year EPS guidance of $2.70-$3.00 (excluding tariff benefit) from the prior $3.00-$3.30?

The $0.30 drop in EPS at the midpoint is attributed to approximately $0.20 from incremental investments (in service, new product development, and growth acceleration) and about $0.10 from volume impact directly due to service constraints. “I think of it as $0.20 or so of investment that Jesse outlined and then, call it, $0.10 or so of volume, but really volume directly attributable to service constraints.”

FBIN

Fortune Brands Innovations (FBIN) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Aug 4, 2026

Source: earnings call transcript

Executive summary

Fortune Brands Innovations Q2 FY26 — Strategic Reinvestment and Operational Streamlining

Fortune Brands Innovations is undergoing a strategic realignment under its new CEO, focusing on improving execution, customer experience, and product development. The company is leveraging tariff refunds to make incremental investments in service and innovation, while also streamlining its corporate cost structure and reviewing its portfolio. While these actions impact near-term profitability, management is confident they will drive long-term growth and margin expansion, with initial progress expected in 2027.

Highlights

Consolidated operating income increased 18.4% to $236 million, with a margin of 20.4%, benefiting from tariff refunds.
Security segment sales grew 3.8%, with new products contributing almost 200 basis points to growth.
Free cash flow for the quarter was $179 million, a significant increase from $119 million last year.
The company is on track to achieve an annualized run rate savings target of $70 million by Q1 2027, with $15 million expected in 2026.
New product launches, including Moen's SwivelControl faucet and Master Lock's Elite padlock, are receiving positive initial responses and exceeding sales expectations.

Concerns

Total company sales were down 4% to $1.2 billion, primarily driven by underperformance in the Water segment.
Water segment sales declined 6.5% (5.4% excluding China) due to service level challenges, discrete share losses, and softness in new construction demand.
Full-year EPS guidance (excluding tariff benefit) was updated to $2.70-$3.00, reflecting incremental investments and slightly lower sales growth.
Water segment's underlying operating margin decreased by 700 basis points (excluding tariff benefit) due to unfavorable price/cost, volume deleverage, and higher costs to serve customers.
The R&R end market is expected to be down low single digits, and single-family new construction down mid-single digits for the year.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year net sales	down low-single digits high materiality	FY26	High
Full-year EPS	$3.22 to $3.52 high materiality	FY26	High
Full-year EPS (excluding tariff benefit)	$2.70 to $3.00 high materiality	FY26	High
Full-year free cash flow	incorporates net cash proceeds of $56 million from the tariff refunds received to-date, partially offset by the reduction in our forecasted operating income in the second half of the year medium materiality	FY26	High
Q3 net sales	down between 1% and 2% medium materiality	Q3 · FY26	High
Q3 EPS	$0.72 and $0.76 medium materiality	Q3 · FY26	High
Q3 operating margin	between 12.5% and 13% medium materiality	Q3 · FY26	High
Second half margins	up approximately 100 basis points versus the first half medium materiality	H2 FY26	High
Net debt-to-EBITDA	below 2.5x high materiality	Near-term	High
Annualized run rate savings target	$70 million medium materiality	Q1 · FY27	High
Annualized run rate savings target (2026 portion)	$15 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Water Sales impacted by service level challenges, carryover of discrete share losses from H1 2025, and softness in new construction-related demand in wholesale channel, partially offset by e-commerce growth. Underlying margin decline driven by unfavorable price/cost, volume deleverage, and higher cost to serve. Luxury segment (House of Rohl) outperformed Moen. Operating income: $179 millionOperating income growth: up 7.9%Sales excluding China: down 5.4%Operating margin benefit from tariff refunds: 1,090 basis pointsUnderlying margin decline (excluding tariff benefit): 700 basis points	$605 million	down 6.5%	—	29.5%
Outdoors Sales driven by softer new construction-related demand in wholesale, partially offset by retail growth and positive pricing. Larson performed well. Improved operating performance, partially offset by lower volume and higher tariff, commodity, and freight costs. Operating income: $56 millionOperating income growth: up 14.2%Sales excluding Fiberon: down 1.5%Operating margin benefit from tariff refunds: 130 basis points	$365 million	down 3.8%	—	15.2%
Security Growth in commercial, retail, and e-commerce channels. Benefited from new product launches (Yale, Master Lock) and Master Lock retail packaging refresh. Improved operating performance, partially offset by higher tariff, commodity, and freight costs. Operating income: $50 millionOperating income growth: up 88.2%New products contribution to sales growth: almost 200 basis pointsOperating margin benefit from tariff refunds: 1,030 basis points	$184 million	up 3.8%	—	26.8%

Product announcements

Product	Type	Timeline	Details
Moen's SwivelControl faucet	launch	recently launched
Master Lock Elite padlock	launch	recently launched

Deals & partnerships

Fiberon Strategic review underway to allocate capital and resources to highest return opportunities.

The strategic review of Fiberon is a deliberate step to concentrate investment and management attention on core brands where the company has a clear right to win.

Risks & headwinds

Service level challenges and supply chain disruption in Water segment Ongoing through H2 FY26

Impacted Water segment sales by 2.5 percentage points and underlying operating margin by 200 basis points in Q2.

Mitigation:Incremental investments in operations, premium freight, DCs, and potentially higher-cost suppliers to improve service levels and accelerate new product development. Resetting S&OP processes.

Inflation in input costs (oil, derivatives, freight, brass, copper, aluminum) Ongoing through FY26

Commodity and freight inflation increased by $10 million to $90 million for FY26. Price/cost unfavorable in Q3, favorable in Q4.

Mitigation:Monitoring geopolitical backdrop; assessing commodity increases against pricing for 2027 planning.

Softness in new construction and R&R end markets FY26

R&R end market expected down low single digits for FY26; single-family new construction down mid-single digits for FY26.

Mitigation:Focus on resilient luxury categories in R&R; prioritizing volume where winning; expanding into R&R oriented side of the business for Water and Doors.

Tariff exposure Ongoing

Overall ongoing tariff exposure remains largely unchanged despite new Section 232 and 301 tariffs replacing expiring IEPA and Section 122 tariffs. $100 million year-on-year increase in tariffs hitting P&L in FY26.

Mitigation:Recognized tariff refunds used for investments; assessing impact for future pricing.

What to watch in Q3 FY26

Water segment service level improvement

Early 2027

Current Service challenges impacted Q2 sales and margin.

Target Sustainable fixes implemented, reduced premium freight/costs to serve.

Why it matters

Critical for Water segment's top and bottom line recovery and customer satisfaction.

While we are making progress in improving our capabilities, we are not where we need to be, and we are prioritizing investments in our operations to improve service levels and accelerate new product development.

Find out whether FBIN delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the primary strengths and weaknesses identified after one month in the CEO role?

CEO Jesse Singh expressed increased optimism about long-term growth and margin potential, citing diverse portfolio, strong brands, talented people, and growth opportunities in material conversion and market expansion. Challenges include improving service levels, simplifying the complex organization, and addressing underperformance in parts of the core business.

“I came into the role assuming that this business had long-term sustainable growth potential and margin potential capacity. I'd tell you coming in, after the first month, if anything, I'm even more optimistic about that long-term opportunity.”

asked by Keith Hughes · answered by Jesse Singh

2 min read 6 chapters

Detailed narrative

New Leadership and Strategic Focus

Jesse Singh, the new Chief Executive Officer, outlined a strategic vision focused on returning to core principles: better service, better products, and a simpler, customer-focused organization. He emphasized leveraging strong brands like Moen, Therma-Tru, and Master Lock, while nurturing adjacencies such as Moen Flo and Yale connected locks.

The strategy aims to streamline corporate costs and reallocate resources to customer-facing businesses, addressing underperformance in segments like Water and capitalizing on opportunities for material conversion in Doors and expansion in connected businesses.

Operational Improvements and Investments

The company is making incremental investments to enhance execution and service, particularly in the Water segment, which has faced service and supply chain challenges. These investments are partly supported by anticipated tariff refunds. Efforts include reinvigorating the new product pipeline, with recent launches like Moen's SwivelControl faucet and Master Lock's Elite padlock showing positive early results.

Management acknowledged that past systems and organizational changes led to supply chain disruption and service issues, and they are now resetting to proven processes to restore stability.

Cost Structure Optimization and Organizational Realignment

Fortune Brands is actively optimizing its cost structure, including moving brand, marketing, and advertising teams back into business units to improve efficiency and decision-making closer to the customer. The company is on track to achieve its previously announced annualized run rate savings target of $70 million by Q1 2027, with $15 million expected to be realized in 2026.

This realignment is part of a broader effort to create a more efficient and higher-performing business.

Portfolio Review and Capital Allocation

A strategic review of Fiberon is underway, aiming to concentrate investment and management attention on core brands that offer the highest return opportunities. The company plans to prioritize organic investment over M&A while balancing share repurchases with achieving a near-term net debt-to-EBITDA target of below 2.5x. This disciplined approach to capital allocation is intended to drive long-term value creation.

Market Conditions and Input Costs

The repair and remodel (R&R) end market is expected to be down low single digits for the year, showing resilience in luxury categories. Single-family new construction is anticipated to be down mid-single digits, with no recovery contemplated in 2026 guidance.

Input costs, particularly for oil, derivatives, and freight, continue to accelerate, and no relief from commodity inflation is assumed before year-end. Despite new Section 232 and 301 tariffs replacing expiring ones, the overall ongoing tariff exposure remains largely unchanged.

Tariff Refunds and Financial Impact

In Q2, Fortune Brands recognized $122 million in gross tariff refunds, with $104 million reducing cost of goods and $18 million reducing inventory. This resulted in an $81 million benefit to operating income and a $0.52 benefit to EPS in the quarter.

The company received $9 million in cash from refunds in Q2, with total gross proceeds of $56 million collected through July 31, and expects to receive the majority of remaining refunds before year-end 2026.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.