WD-40 Halts Home-Care Divestiture, Debuts 'Enduring Business Model' as Growth Accelerates

A Blowout Quarter, with a Twist

WD-40 Company's fiscal Q3 (period ended May 31, 2026) delivered a headline-grabbing 24% net sales jump to $195 million, with maintenance products up 26% to $190 million, marking a record quarter. The growth was broad-based—The Americas +29%, EMEA +17%, APAC +24%—and driven by strong promotional activity, expanded distribution, and a high-impact collaboration with Disney and The Home Depot. CEO Steven Brass framed the Home Depot campaign as “1 of the largest promotions we have ever run in our history,” noting it was “about 75% incremental” after just one month.

Yet beneath the top-line strength, a strategic change was brewing. The company formally pulled its Americas home-care and cleaning brands off the market, reclassifying them from held for use after a failed divestiture effort. “It became clear that the current macro environment was not conducive to divest of these brands as a bundle,” CFO Sara Hyzer said on the call. Instead, management will run them as “harvest brands”—expecting gradual decline but continued cash generation. This reversal, coupled with the introduction of a new “enduring business model,” signals a durable shift toward margin and return discipline over portfolio reshaping.

The New Playbook: EBITDA Growth Ahead of Revenue

The new framework, unveiled on the call, targets mid-to-high single-digit maintenance product growth, gross margin above 55%, and—critically—adjusted EBITDA growing faster than net sales. It also commits to an asset-light model, ROIC above 25%, and balanced capital allocation. Brass explained the rationale: “Over the past few years, we have had to make significant investments in things like IT and sustainability... those big investments are now incremental. So we are in a position to really drive the bottom line faster than the revenue.”

This is a notable pivot from the previous “55/30/25” model, which focused on gross margin, cost of doing business, and adjusted EBITDA as a percentage of revenue. The new model places a greater emphasis on cash generation and shareholder returns. Sara Hyzer added, “We will continue to report under the 25 model through fiscal year 26 and transition to the enduring business model in fiscal year 27.”

Cost Pressures and the Pricing Response

The quarter’s gross margin rose 40 basis points to 56.6%, though the company flagged that Middle East-driven cost increases are about to bite. Input costs for specialty chemicals and base oils spiked well beyond the 40% upward move in oil prices, with some inputs nearly doubling. Hyzer noted, “We did experience decoupling... in some cases, it was 50. In some cases, it was double.” The company has responded with price increases across Asia-Pacific and Europe (mid-to-high single digits) and cost-saving initiatives, with most benefits expected in FY27.

“We will vigorously defend our gross margins and may need to take further action in this year, 2027 as required.” — Steven Brass

Guidance was updated to incorporate the held-for-use assets (adding ~$12M in sales and ~$2.9M in operating income) and to reflect a 40-basis-point drag from reclassification plus an additional 60 basis points from higher costs. Full-year non-GAAP EPS is now expected at $6.05-$6.35, implying 6-11% growth—a narrower range with the bottom end raised.

Leadership Transition and the Stock’s Reaction

Adding to the strategic shift, WD-40 announced a leadership transition: Sara Hyzer will become President of the Americas division while continuing as CFO until a successor is named. New roles—Chief Strategy & Innovation Officer and Chief Brand & Marketing Officer—were created to “proactively harness AI and digital technologies.” This is a bet on internal talent and a more agile organization.

Notably, the stock has not rewarded the strong quarter. The 90-day price tape shows a flat trend (+1.4%) but a recent drawdown of -18.1% from the July 10 peak, suggesting investors may be focused on the margin headwinds and the halted divestiture, which removes a potential cash catalyst. The valuation has de-rated: price-to-revenue now sits at 4.3x, down from 9.4x at the 2021 peak, and price-to-operating income has halved to 26x. This mirrors the market’s skepticism about the durability of growth and margins amid input-cost volatility.

Still, the strategic shift is coherent. With the home-care divestiture shelved, WD-40 can reinvest in its core enduring business without the distraction of a sale process. The advanced buying that pulled ~$3M from Q4 into Q3 is a timing issue, not a demand problem. As Brass noted, the company sees “a very, very significant runway for growth” in Specialist and premiumized products, with e-commerce up 22% year-to-date.

The real question now is whether the company can execute on its new model's promise. If it can deliver EBITDA growth ahead of sales while defending gross margins, the current de-rating could prove a dip-buying opportunity. But with geopolitical costs still volatile, the market’s skepticism is justified. The next few quarters will reveal whether WD-40's perpetual compounder identity is a renewed reality, as management now claims, or an aspirational label.