In fact, it's not really magic at all. And it's not luck. Exciting a consumer with great products is the result of a methodical, disciplined and highly repeatable process. That process is brought to life each day by thousands of Newell Rubbermaid employees who are passionate about understanding consumer needs and skilled at translating those insights into innovative solutions to drive best-in-class results.
For shareholders, the payoff from this ongoing commitment to innovation is growth: growth in sales, growth in market share and growth into new global markets. In 2010, with the most severe impact of the economic recession mostly behind us, core sales growth resumed in all of our business segments. We earned increased benefits from the consistent implementation of the three strategies that underpin our success: leveraging the portfolio for growth, building Brands That Matter™ to drive demand and fueling growth through margin expansion and scale synergies.
In the last five years we have honed our portfolio; today it comprises fewer, but more tightly focused business units that compete in more global, more profitable and faster-growing product categories. Our business model is more consumer-centric, innovation-driven and structured to generate the gross margins necessary to invest in building brands. And we've restructured our supply chain and leveraged the scale benefits of one Newell Rubbermaid to drive best cost and efficiency.
With most of our transformation initiatives now implemented and gaining traction, we are positioned to leverage these operational improvements to drive sustained growth going forward.
Meeting Our Growth Objectives
Despite economic conditions that remained less than ideal, in 2010 our teams met the challenge to create our own momentum and grow core sales and earnings. The Company expanded gross margins even as we increased investments in product innovation, consumer research, advertising and other brand-building initiatives essential to growth. We delivered improvements across three important performance metrics: top-line sales, gross margin and normalized earnings.
For the year:
- Net sales increased by 3.3 percent to $5.8 billion, while core sales (which exclude the impact of foreign currency and our 2009 product line exits) grew by 4.7 percent.
- Gross margin expanded by 100 basis points to 37.7 percent of sales, strengthened by product and business mix and productivity gains. We made significant progress towards our 40 percent gross margin target.
- Normalized earnings grew from $1.31 to $1.52 per share, a 16 percent increase.
Good Ideas Travel
In 2010, sales increases were led by our international businesses, which grew 7.9 percent in constant currency for the year. We saw particular strength in the fast-growing, emerging markets of Asia and Latin America, where we generated double-digit constant currency sales increases. High-priority targets are markets such as China and Brazil, which enjoy rapidly expanding middle classes and robust growth in personal incomes.
There is substantial room to accelerate growth in global markets. Only five of our fifteen largest brands generate more than half their sales outside of North America. Our opportunity goes beyond simply doing business in geographies where we have not had a presence in the past. It's a compelling story that speaks to the fact that our products are highly transferable across markets. Experience tells us quite clearly that innovations are appreciated not just in mature markets, but in developing ones as well. And while there are differences in language, culture and purchasing power, there are similar needs among consumers across the globe.
Consider a young mother in São Paulo, Brazil. Her needs to keep food fresh and have a home that is orderly and well organized are much the same as those of a mom in St. Louis or Toronto. That's why Rubbermaid Consumer has expanded distribution of Easy Find Lids™ food storage products to the growing Brazilian market.
Across all categories in all the geographies we reach, our results demonstrate that consumers are willing to pay for innovation that addresses everyday needs.
Growing Share, Delivering Value
Innovation and brand building enable Newell Rubbermaid to grow market share. During the last two years, the majority of our businesses increased share despite a challenging market environment. Notably, those gains were not achieved through offering less expensive products, but by delivering innovation and value.
Translating good ideas into products that perform and connect with consumers is essential to our ability to grow share. Every successful new product begins with a deep understanding of the consumer, the shopper and the marketplace. Ideas are vetted and filtered by multidisciplinary teams of designers, engineers and marketers. Only the very best advance from concept to design to launch. And at each step, decisions are guided by the voice of the consumer.
Research and consumer insights also guide how we reach, inform and persuade those considering a purchase. For example, we know that expectant mothers get most of their information from the Internet or from other moms. That's why Graco, one of the world's best known and most trusted juvenile products companies, is a leader in the use of extensive social media to connect with and educate these consumers in a robust, interactive fashion.
We employ a common language and brand-building framework throughout the Company that help leverage our scale. Initiatives that broaden and deepen our training programs and that provide internal consulting expertise have strengthened our marketing capabilities and built a platform for brand-building success. Our research has become more sophisticated to better understand concepts like power users, shopping behavior and the effectiveness of our branding and activation efforts. Because we have the right products and processes, our portfolio responds to the investments we make in brand building. That is a key differentiator for Newell Rubbermaid that we expect to continue to fuel growth in 2011 and beyond.
The changes we've made to our manufacturing and supply chain also support these growth opportunities. Over the past several years we have reduced our manufacturing footprint by more than 60 percent, significantly increased the use of strategic sourcing partners and streamlined our distribution and transportation network. By achieving greater efficiency and best cost while maintaining top quality we enhance the value proposition underlying all of our products.
A Playbook For Sustained Growth
Newell Rubbermaid's culture, processes and people are all aligned to fulfill our objective of achieving best-in-class performance and, in so doing, build shareholder value. Throughout the organization we have outstanding leaders who are creating robust growth strategies, and display the talent and energy to translate plans into performance.
This is my concluding message to my fellow shareholders after five-and-a-half years as leader of Newell Rubbermaid. I approach my retirement later this year with absolute confidence that the Company has the right strategy, the right business model and the right team in place to compete effectively and achieve its objectives for profitable growth in the years ahead. For this great Company and for the thousands of talented employees who are committed to its success, the best is yet to come.
Sincerely,