WD-40 Company (WDFC) Q4 2026 earnings review
WD-40 spray sales rise 9%, but costs cut profit
WD-40 Company, the maker of the blue-and-yellow lubricant spray, kept sales growing in the fourth quarter while higher chemical and bonus costs cut profit by a third. Constant-currency sales of maintenance products rose 8%, holding up well even after distributors bought stock early in the third quarter. However, gross margin dropped nearly 2 percentage points to 52.8% on specialty chemical costs, and a jump in staff bonuses and ad spending pushed operating income down 32% to $19 million. Chief executive Steve Brass said the fourth quarter marked the low point for gross margin, and every full-year figure finished inside the company's own plan.
| Maintenance product sales (constant currency) | +8% from a year ago ($168.8M) |
|---|---|
| Gross margin | 52.8% -1.9 percentage points from a year ago |
| Operating profit | $19.1M -32% from a year ago |
| FY27 gross margin outlook | 54.0–55.5% middle of the range: 54.8% vs 55.3% in FY26 |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because the fourth-quarter profit drop matched what the prior full-year plan pointed to, while the new 2027 outlook leaves the margin recovery incomplete. On the positive side, collecting $27 million of unpaid customer bills turned cash flow back up and paid off credit line debt, and spray demand absorbed the third quarter's early buying. The bad news is that the 2027 gross margin plan of 54.0% to 55.5% sits below this year's 55.3% at the middle of the range, and constant-currency sales growth slows to 4% to 7%.
The question now is whether summer price increases will lift gross margin back above 55% or whether chemical costs and customer stockpiling in China will hold it down. If the price hikes stick without hurting volume, the 2027 margin range will prove cautious; if chemical costs stay high or distributors work down inventory, earnings growth will stall near the 5% bottom of the plan. First-quarter gross margin and Asia-Pacific sales will tell.
🐂 Bull Case
Maintenance Spray Sales Held Up After Early Buying
WD-40 gets 96% of its revenue from maintenance products, led by its blue-and-yellow multi-use lubricant cans. Last quarter, distributors in Europe, India and China bought about $3 million of stock early to beat price increases, which raised the risk of a fourth-quarter sales drop.
Instead, maintenance sales grew 9% to $170.5 million, or 8% excluding currency swings. Europe, India, the Middle East and Africa (EIMEA) grew 14% to $69.2 million on strong demand in Southern Europe and India, while Asia-Pacific maintenance sales rose 9% in constant currency. China gained $1.8 million, though WD-40 Company noted that China again included "some customer purchases ahead of a planned price increase".
What to watch: constant-currency maintenance sales in Asia-Pacific and EIMEA in the first quarter. A drop below the 4% to 7% full-year target range would show that distributor stockpiling in China and Europe is now hurting new orders.
Collecting Unpaid Bills Reversed the Cash Drain
Through the first nine months of the year, operating cash flow fell even as profit grew because unpaid customer bills piled up after a big spring promotion. That forced the lubricant maker to borrow $14.5 million on its credit line to help fund dividends and share buybacks.
Customers paid those bills in the fourth quarter. Accounts receivable dropped by $27.4 million from the third quarter to $122.7 million, lifting fourth-quarter free cash flow to $46.7 million by our math, up 65% from a year ago. The company used the cash to pay off all $14.5 million of short-term credit line debt, leaving total debt down $14.6 million at $86.0 million.
What to watch: short-term borrowings as the new $100 million share buyback plan starts in the first quarter. Rising credit line debt would mean cash from operations is once again falling short of shareholder payouts.
WD-40 Specialist Sales Grew 18% on Wider Retail Placement
WD-40 Specialist is the company's line of higher-priced sprays for specific tasks like degreasing and rust removal. Management relies on this line to grow faster than the original multi-use can and lift overall profit margins.
Specialist sales rose 18% from a year ago to $26.2 million in the fourth quarter, and finished the full year up 21% at $99.1 million. That outpaced the 8% fourth-quarter growth of the flagship WD-40 Multi-Use Product, as large retailers in the Americas and Asia-Pacific added more Specialist cans to their shelves and online stores.
What to watch: Specialist sales growth in the first quarter of fiscal 2027. A slowdown into single digits would show that recent shelf-space wins have run their course.
Positives this quarter didn't test
Four standing growth drivers from earlier in the year were not broken out in the fourth-quarter press release and await the annual report or conference call.
- Premium can formats: sales of Smart Straw and EZ-REACH nozzle cans, which grew 19% in the first nine months, were not disclosed in the release.
- E-commerce sales: online growth, which ran at 22% through the first three quarters, got only a general mention inside regional bullets.
- US promotional campaigns: the release gave no update on follow-up retail promotions after the third quarter's Home Depot and Disney display.
- Internal leadership appointments: the effect of moving the finance chief to run the Americas commercial unit is not yet visible in segment numbers.
🐻 Bear Case
Chemical Costs Cut Gross Margin Below the 55% Target
Chief executive Steve Brass said "Higher costs for specialty chemicals and other inputs pressured gross margin" in the fourth quarter, and added: "Based on what we know today, we believe our fourth quarter of fiscal year 2026 marked the low point for gross margin, and we anticipate sequential improvement beginning in the first quarter of fiscal year 2027."
Gross margin fell 1.9 percentage points from a year ago and 3.8 points from the third quarter to 52.8%, as the cost of making the products rose to 47.2% of revenue. While that beat the worst of what the prior outlook implied, the new fiscal 2027 forecast puts gross margin at 54.0% to 55.5%. The middle of that range is 54.8%, down from 55.3% in fiscal 2026 and below the company's 55% long-term target, assuming "crude oil prices remain near current levels through the first half of fiscal 2027 before moderating in the second half".
What to watch: first-quarter gross margin against the 52.8% fourth-quarter level and the 54.0% bottom of the full-year plan. A reading near 53% would show that mid-year price increases are not yet covering chemical costs.
Higher Bonuses and Ad Spend Cut Operating Profit 32%
WD-40 wants operating profit to grow faster than revenue, as it did in the third quarter when overhead fell to 34% of sales. In the fourth quarter, spending went the other way and wiped out the revenue gain.
- Selling, general and administrative expense: $58.2 million, up 19% from a year ago and up 3.0 percentage points of revenue to 32.9%
- Advertising and sales promotion: $15.8 million, up 26% from a year ago and up 1.3 percentage points of revenue to 8.9%
- Operating profit: $19.1 million, down 32% from $28.0 million a year ago, as operating margin fell 6.4 points to 10.8%
Brass said overhead rose "primarily due to performance-based incentive compensation earned by every employee, along with higher freight costs to keep products available for customers". Because fourth-quarter ad spending also jumped to 8.9% of sales, full-year advertising hit 6.5% of sales, half a point above the company's 6% plan.
What to watch: selling, general and administrative expense as a share of sales in the first quarter. If overhead stays above 33% of sales after annual bonus accruals reset, freight and staffing costs are eating into the 2027 profit plan.
Risks this quarter didn't answer
Three standing concerns from our prior review were not settled by the fourth-quarter earnings release.
- Third-quarter 2027 comparison: the 4% to 7% sales plan for 2027 must lap a 24% third-quarter jump that had $7.3 million of currency help and a one-off Home Depot promotion.
- European retailer pushback on pricing: EIMEA grew 14% in the fourth quarter, but the release did not separate volume from summer price increases.
- Finance chief transition and annual-only cost reporting: the release did not name a new chief financial officer or report the quarterly cost-of-doing-business ratio.
💲 Other KPIs
Reported sales of cleaning brands like 2000 Flushes and Spot Shot fell 18.4% from a year ago. However, last year's quarter included $2.0 million from UK brands that WD-40 sold off in August 2025. Excluding those sold UK brands, sales of the remaining cleaning products rose 10.1% by our math, after management took the Americas brands off the sale block.
The chemical group bought back 30,895 shares for $7.0 million in the fourth quarter, bringing full-year buybacks to $29.6 million — more than double the $12.3 million spent in fiscal 2025. That trimmed the diluted share count by 0.8% from a year ago, and the 2027 plan assumes it falls another 0.4% to 13.4 million.
Stock on hand rose 4.3% from a year ago and 2.9% from the third quarter, growing at about half the pace of fourth-quarter revenue. Higher-cost specialty chemicals bought during the spring price spike have now mostly passed through warehouse inventory into cost of goods sold.
🔮 Guidance
Lower than the long-term target at the bottom end. The new plan calls for 4% to 7% growth in constant currency, down from 11% reported and 7% constant-currency growth in fiscal 2026. By our math, the $725 million middle of the range is 5.4% above fiscal 2026 reported sales, as the company laps this year's large third-quarter promotion.
Below the 55% long-term floor at the middle of the range. The 54.8% middle of the range sits 2.0 points above the fourth quarter's 52.8% low, but half a point below fiscal 2026's 55.3%. The forecast assumes crude oil prices stay near current levels through the first half of the year before easing in the second half.
New. The plan calls for 5% to 10% growth over fiscal 2026's $108.9 million GAAP operating profit (or 3% to 9% over the $110.2 million figure excluding one-offs). At the $117 million middle of the range, operating margin would be 16.1% by our math, up slightly from 15.8% in fiscal 2026.
New. The forecast calls for 5% to 10% growth over fiscal 2026's $6.08 GAAP earnings per share, or 4% to 8% over the $6.18 figure excluding one-offs. The calculation assumes 13.4 million diluted shares, down about 100,000 shares from fiscal 2026.
New. Management plans to bring marketing spend back to 6.0% of sales, down from 6.5% in fiscal 2026 and 8.9% in the fourth quarter.
New. The 23.0% middle of the range is slightly above fiscal 2026's 22.7% effective tax rate.
❓ Key Questions
How much of EIMEA and China growth was price versus volume?
The release gave no split between volume and selling prices for the fourth quarter. Knowing how much of EIMEA's 14% maintenance growth came from summer price hikes will show whether European retailers are cutting order volumes in response.
How large was the pre-price-hike buying in China?
WD-40 noted that China's $1.8 million fourth-quarter sales gain benefited from customer purchases ahead of a planned price increase. Investors need the dollar size of that early buying to judge how much demand was borrowed from the first quarter.
Why did overhead jump by $9.4 million in the fourth quarter?
Selling, general and administrative costs rose 19% to $58.2 million, which management blamed on employee bonuses and freight. A breakdown between one-off year-end bonus true-ups and ongoing freight inflation will clarify whether overhead drops back in the first quarter.
Will WD-40 still report its cost-of-doing-business ratio each quarter?
The fourth-quarter release omitted the non-GAAP cost-of-doing-business percentage and Adjusted EBITDA table ahead of the shift to the Enduring Business Model in fiscal 2027. Stopping quarterly disclosure would hide overhead creep between annual reports.