• Sales Growth: 5% for the year.
• Adjusted EBITDA Margin: Expanded by 130 basis points.
• Adjusted EPS Growth: 19% for the year.
• Fourth Quarter Adjusted EPS: $2.38, up 10% compared to prior year.
• Fourth Quarter Sales Growth: 3.5% excluding currency, 3.3% on an organic basis.
• Fourth Quarter Adjusted EBITDA Margin: 16.4%, up 40 basis points compared to prior year.
• Fourth Quarter Adjusted Free Cash Flow: $280 million.
• Full Year Adjusted Free Cash Flow: $700 million.
• Shareholder Returns in 2024: $525 million through dividends and share repurchases.
• Intelligent Labels Revenue: $900 million in 2024, 9% organic growth.
• 2025 Adjusted EPS Guidance: $9.80 to $10.20, up roughly 10% excluding currency.
• 2025 Organic Sales Growth Expectation: 3% to 4%.

• Warning! GuruFocus has detected 2 Warning Sign with AVY.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Avery Dennison Corp (NYSE:AVY) reported a 5% sales growth for the year, with adjusted EPS growing 19%, reaching the high end of their original guidance.
• The company achieved a 130 basis point expansion in adjusted EBITDA margin, demonstrating strong productivity-driven margin expansion.
• High-value categories now represent almost half of Avery Dennison Corp (NYSE:AVY)'s portfolio, contributing significantly to organic sales growth.
• The Materials Group delivered strong top-line growth in 2024, driven by significant volume growth and margin expansion.
• Avery Dennison Corp (NYSE:AVY) signed a new partnership with CVS Health to launch Vestcom shelf edge solutions chain-wide, expecting strong growth in 2025.

Negative Points

• Vestcom sales were softer than anticipated in 2024, primarily due to lower volume in the drugstore channel driven by store closures.
• Sales in the logistics segment were lower in 2024 due to a year-on-year comparison with a large RFID program rollout in 2023.
• The Solutions Group's high-value solutions were down mid-single digits, below expectations, impacting overall margins.
• The company anticipates a $30 million headwind to operating income from currency translation in 2025.
• Avery Dennison Corp (NYSE:AVY) expects slight declines in the logistics segment between 2024 and 2025, impacting growth projections.

Q & A Highlights

Q: Can you talk specifically about what your assumptions are for growth and logistics within Intelligent Labels (IL) for 2025, and how a large customer's volume pullback might affect your IL growth plans? A: We anticipate a slight decline in the logistics segment between 2024 and 2025. The impact from the customer you mentioned has already been factored into our 10% to 15% IL growth range. We have aligned volumes with this customer for 2024 to 2025 and are not assuming further adoptions during 2025, with more likely adoptions in 2026.

Q: What are you embedding for core sales growth in the materials segment for 2025, and how does that break down between volume and price? A: Our assumptions for 2025 are based on a stable GDP forecast, with retail volumes slightly up in 2025 versus 2024. We expect 3% to 4% organic sales growth, with mid-single-digit volume growth and a little bit of price within that.

Q: Can you talk about raw material cost inflation or deflation for 2025? A: We are seeing a stable environment with slight deflation in Q4 and expect slight deflation in Q1 2025. Overall, we anticipate a stable environment into 2025. We expect some negative raw material pricing in our model for 2025 due to the time lag in passing prices, with stabilization expected after Q2.

Q: What drove the acceleration in general retail IL from 20% to 40% in Q4, and how should we think about apparel growth in 2025? A: The acceleration in general retail IL was driven by a large retailer driving compliance in various categories. For apparel, we expect low double-digit growth in IL for 2025, based on existing customer rollouts and new customer adoptions planned throughout the year.

Q: Can you provide more details on the logistics customer and the cadence of volume declines in 2025? A: It's difficult to predict the exact cadence of volume declines for this customer. We have aligned volumes for 2024 and 2025, and their commitment to us remains strong. We have factored this into our guidance and continue to hold a significant majority share in that account.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.