WD-40 reported rising costs for certain petroleum-based specialty chemicals, a trend CFO Sara Hyzer told investors was partly due to recent geopolitical developments in the Middle East. The impact of higher raw material costs typically takes 90 to 120 days to appear in the company's COGS (Cost of Goods Sold), Hyzer said, citing WD-40's production cadence and inventory life cycles as factors for the lag. "We do not expect that our gross margin will be significantly impacted until the fourth quarter of fiscal year 2026 based on current inventory levels," Hyzer said.
For WD-40, direct exposure to the conflict is limited to about 3% of the company's global sales for fiscal year 2025, which ended last August, CEO and President Steven Brass said. The company's Middle East presence includes one manufacturing partner and third-party distributors that also handle sales. Despite added cost pressures, WD-40 expects to achieve its FY2026 guidance for net sales growth of 5% to 9% year over year, based in part on crude oil prices ranging between $95 and $115 per barrel. Earlier guidance assumed a $65 to $85-per-barrel range.
The Iran war's ripple effects have begun to spread across several spokes in supply chains. French fry maker Lamb Weston reported it expected international volumes to decline in the second half of the fiscal year, in part due to the evolving Middle East conflict. The war has also upended packaging supply chains and raised costs across the CPG industry, which is still contending with uncertainty from tariffs imposed by the Trump administration. In addition, delivery costs are rising as escalating fuel costs prompt higher surcharges and rates from FedEx, UPS and other parcel carriers.
Key Takeaways:
1. WD-40 reported rising costs for petroleum-based specialty chemicals.
2. Raw material cost increases take 90-120 days to flow into COGS.
3. Gross margin impact not expected before Q4 FY2026.
4. Crude oil assumption raised from $65-85 to $95-115 per barrel range.
5. Iran war also affects CPG packaging supply chain and delivery costs.
