IL growth expected above 2025 pace, back-half weighted
Avery Dennison delivered solid Q4 and full-year 2025 results with resilient margins despite tariff-related headwinds, especially in apparel. Management provided cautious Q1 2026 guidance with flat organic growth, emphasizing growth in high-value categories like intelligent labels, powered by key wins such as the Walmart rollout. The company is leveraging AI and automation to drive innovation and productivity. Q4 2025 adjusted EPS of $2.45, up 3% YoY; full-year adjusted EPS of $9.53 and free cash flow of $707M.
Buzzberg readIL growth expected above 2025 pace, back-half weightedAvery Dennison delivered solid Q4 and full-year 2025 results with resilient margins despite tariff-related headwinds, especially in apparel. Management provided cautious Q1 2026 guidance with flat organic growth, emphasizing growth in high-value categories like intelligent labels, powered by key wins such as the Walmart rollout. The company is leveraging AI and automation to drive innovation and productivity. Q4 2025 adjusted EPS of $2.45, up 3% YoY; full-year adjusted EPS of $9.53 and free cash flow of $707M.Read full analysisCollapse analysis
Avery Dennison delivered solid Q4 and full-year 2025 results with resilient margins despite tariff-related headwinds, especially in apparel. Management provided cautious Q1 2026 guidance with flat organic growth, emphasizing growth in high-value categories like intelligent labels, powered by key wins such as the Walmart rollout. The company is leveraging AI and automation to drive innovation and productivity. Q4 2025 adjusted EPS of $2.45, up 3% YoY; full-year adjusted EPS of $9.53 and free cash flow of $707M.
High-value categories now represent ~45% of sales; intelligent labels saw mid-single-digit growth in Q4 with food/logistics up high teens.
Announced major fresh grocery intelligent label rollout with Walmart, ramping in H2 2026 and generating high-single to low-double-digit value vs 2025 sales.
Revenue$2.2712B
reported
EPS$2.45
reported
Gross margin28.65%
reported
Op margin12.39%
reported
What changed this quarter
01
Guidance
IL growth expected above 2025 pace, back-half weighted
Guidance · revenue to 6%
02
Growth
Walmart fresh grocery rollout ramps in 2H 2026
Q4 2025 adjusted EPS of $2.45, up 3% YoY; full-year adjusted EPS of $9.53 and free cash flow of $707M.
03
AI
AI cuts inlay design cycle from 8-10 weeks to 2 weeks
Management discussed using AI to improve operational productivity and shorten innovation cycles, such as a proprietary AI model that reduced inlay design time from 8-10 weeks to about 2 weeks. They are leveraging AI across SG&A and operations, but see it as early stage.
04
Guidance
Q1 EPS to grow ~6%, organic sales 0-2%
Guidance · revenue to 6%
AI, capex & demand read
AI
Platform & monetization
Management discussed using AI to improve operational productivity and shorten innovation cycles, such as a proprietary AI model that reduced inlay design time from 8-10 weeks to about 2 weeks. They are leveraging AI across SG&A and operations, but see it as early stage.
Demand
Bookings & conversion
Apparel volumes fell ~7% in Q4, worse than expected. Management acknowledged challenges (soft organic growth, tariff uncertainty) and emphasized resilience and control, but stopped short of exuberance, providing only quarterly guidance and planning for no macro tailwinds.
Capex
Investment and capacity
Capital spending is set to increase to approximately $260 million in 2026, up from $200 million in 2025 (plus about $30 million of cloud technology investments). The increase supports productivity initiatives and prepares for future capacity, though still below levels from a couple years prior.
Tone · Measured
Management acknowledged challenges (soft organic growth, tariff uncertainty) and emphasized resilience and control, but stopped short of exuberance, providing only quarterly guidance and planning for no macro tailwinds.
Bottlenecks
Logistics & labor
Logistics or labor availability is delaying throughput
“In terms of the other pilots and trials, we're engaged in discussions that have been piloting and trialing with almost every other major logistics company, both in the United States and in Europe, And what we see this year is an expansion o”
Avery Dennison's intelligent label design cycle for new inlays has been cut from 8-10 weeks to roughly 2 weeks via a proprietary AI model.
“We built with a partner a proprietary AI model that takes all of our learnings around the physics of designing inlays and what it takes. And now we're able to reduce that cycle down to roughly two weeks.”
“Recall we said that the rollout, if it took place over the next couple of years, 26 and 27, would be worth, for us, somewhere between low double digits to, sorry, high single digits to low double digits in value for us based on our 2025 sa…”
Avery Dennison's work with Inditex on loss prevention expands the use case of intelligent labels, potentially driving increased adoption and volumes.
“We continue to see significant interest in leveraging the technology, not just for inventory accuracy, but also for loss prevention. The work that we did with the proprietary work with, for example, the Inditex Group.”
Thank you, Dionne, Greg, Gilly, for taking my questions. Deon, in your comments, you mentioned not being happy with the organic growth and that you intend to drive better growth, especially in the high value categories. Can you share what you started to do or what you're looking to do early this year to drive that growth and what type of incremental growth you're expecting in 2026 from higher growth in the high value categories? And then just following up quickly on the apparel and general retail comments that you made about your confidence in that accelerating, what are your customers telling you about their plans for 2026? And is it a matter of new adoption continuing to increase, or is…
… example of that. Another example would be using AI and IoT sensors When we apply them to some of our large, for example, coating assets, we're able to make real-time in-line coat weight adjustments across the web, which allows for less downtime and is able to save us more money in that regard and that we're able to use to seek new customers as well. And then the third one really is we've actually started to use a lot more AI to shorten some of the actual innovation cycles. I'll give you a real example of that. It historically has taken us anywhere from eight to 10 weeks to design a new inlay in Intelligent Labels. We built with a partner a proprietary AI model that takes all of our learnings around the physics of designing inlays and what it takes. And now we're able to reduce that cycle down to roughly two weeks. That allows us to produce new products and new solutions much quicker than our previous capacity had the ability to do. And then finally, I think Greg touched on this as well. We're certainly taking all the learnings we're seeing both on automation and increasing on AI to how do we actually leverage and automate some of the more manual tasks across our SG&A that our business. We've got multiple examples. Now, I will say we're at the start of the journey in that regard, particularly from the AI perspective. But I think we've learned a lot over the last year or so. that I think has really allowed us to see the value that we can create. In addition, we've also recruited and added to our leadership a chief digital officer because I fundamentally believe that capability will also be an accelerant to the way we move forward. And to your second question around apparel and general retail, The way I think about that overall is that we continue to see new apparel customers adopt IL. We went through the late stages of a rollout, so early stages of a rollout in the fourth quarter with a large apparel retailer. We continue to see significant interest in leveraging the technology, not just for inventory accuracy, but also for loss prevention. The work that we did with the proprietary work with, for example, the Inditex Group. And in addition, I continue to see a pipeline where we get new apparel customers continually wanting to use. So overall, those rollouts, as I mentioned earlier, will fall apart as we go through the year and ramp through the year as well.
Walmart's fresh grocery rollout is expected to generate value equivalent to high single digits to low double digits of Avery Dennison's 2025 sales. — The Walmart contract represents a significant revenue ramp for Avery Dennison, with meaningful volume expected in the second half of 2026 and accelerating into 2027.
“In food, adoption is set to accelerate through our major fresh grocery rollout with Walmart, with revenues ramping in the back half of 2026.”
… year 2025. Looking ahead to 2026, We continue to anticipate growth in this platform above the pace we achieved in 2025. We expect the pace of growth to be stronger in the second half than the first half as we lap a stronger first quarter 2025, which was largely unaffected by tariffs and as new programs roll out. In apparel and general retail, we expect to return to growth as we continue to navigate the impacts of tariff policy uncertainty. In food, adoption is set to accelerate through our major fresh grocery rollout with Walmart, with revenues ramping in the back half of 2026. Finally, in logistics, we are focused on expanding pilots with new customers, following a year of outsized growth with our largest customer. Pivoting back to the enterprise level, while I am pleased with our ability to protect margins and earnings in this environment, I am not satisfied with our organic revenue growth. While much of this is due to cyclical challenges we are taking decisive action to inflict this growth trajectory. As you can see on slide 10, our high-value categories, which have secular tailwinds, remain a key enabler of enterprise growth and portfolio strength, growing at a …
SHEIN
Private company
Supply chain
Tariff-related uncertainty and supply chain shifts from China impacted general retail volumes, potentially affecting companies like Shein that rely heavily on China-based manufacturing.
“Most general merchandise was orientated out of China and the surrounding areas, and so there was quite a drop off in demand, at least from retailers for that product as they were thinking through the supply chains.”
Hey, good morning, Dion, Greg, and Gilly. If I could try to dig just a bit deeper into some of the non-apparel intelligent labels category. First, on general retail in 2025, I believe there were some positive and compliance rollouts at a major customer. Is that compliance enforcement coming back in 2026, or are you expecting any incremental volumes from that customer with further category rollouts? And then on logistics, again, you talked about the major customer and their revenue outlooks and puts and takes there, but any benefit from them rolling out automation to further facilities, or are you fully deployed there? and the pilots you mentioned in logistics, is that new pilots or…
Sure, Matt. Let me go through those sequentially. So in general retail, we saw general retail impacted last year, as we called out, quite significantly by really the tariff environment. Most general merchandise was orientated out of China and the surrounding areas, and so there was quite a drop off in demand, at least from retailers for that product as they were thinking through the supply chains. The second piece in this is because there was such difficulty in that, we do sense that some of the compliance that was in those categories is probably held back a bit to make sure that they could work through the supply chain issues, all things being equal. That should return and that should be partly a tailwind for us in that regard as we look forward. Again, that's with the caveat that we don't see any other changes on tariffs as we move forward. I think in terms of logistics, we've seen the benefit that has come from automating effectively their last mile fulfillment centers and we're actually fully automated across those over here. What we're in discussion with that particular customer around is how do they extend that to some of their international operations as we work through that during this year. And then the secondary piece is, is there other opportunities they think about moving to what we call the first mile, the shipper side of it as well. In terms of the other pilots and trials, we're engaged in discussions that have been piloting and trialing with almost every other major logistics company, both in the United States and in Europe, And what we see this year is an expansion of some of those pilots being, again, from a certain limited number of fulfillment centers or inbound fulfillment centers to a broader range, and also looking at different use cases they think through, for example, dangerous goods and managing highly valuable goods as well. So we'll keep you all updated on that. Our anticipation is those pilots will expand as we go through the year.
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