Avery Dennison reported a strong Q2 with 8% organic growth and 19% EPS growth, but a significant portion of the growth was driven by customer inventory pre-buys that are expected to reverse sharply in Q3. The company provided new full-year guidance, signaling confidence in the underlying momentum of its high-value categories. Q2 organic sales grew 8% y/y, but ~half was driven by customer pre-buys ahead of raw material inflation.
Avery Dennison reported a strong Q2 with 8% organic growth and 19% EPS growth, but a significant portion of the growth was driven by customer inventory pre-buys that are expected to reverse sharply in Q3. The company provided new full-year guidance, signaling confidence in the underlying momentum of its high-value categories. Q2 organic sales grew 8% y/y, but ~half was driven by customer pre-buys ahead of raw material inflation.
Management expresses confidence in the momentum of the business, highlighting strong growth, margin expansion, and a reinstated full-year guidance despite acknowledging near-term inventory destocking uncertainties.
Guidance · revenue to 8.5%
Guidance · revenue to 8.5%
Q2 organic sales growth accelerated to 8%. Management expresses confidence in the momentum of the business, highlighting strong growth, margin expansion, and a reinstated full-year guidance despite acknowledging near-term inventory destocking uncertainties.
Management views AI as an enabler and accelerator for Intelligent Labels, believing it will help make sense of item-level data and create a flywheel for more AI adoption, while also driving internal efficiency and faster innovation.
Q2 organic sales growth accelerated to 8%. Management expresses confidence in the momentum of the business, highlighting strong growth, margin expansion, and a reinstated full-year guidance despite acknowledging near-term inventory destocking uncertainties.
Capital expenditure is not discussed in detail, but management reiterates committed fixed and IT capital spending of approximately $260 million for 2026.
Management expresses confidence in the momentum of the business, highlighting strong growth, margin expansion, and a reinstated full-year guidance despite acknowledging near-term inventory destocking uncertainties.
“The roughly 25 cent benefit we got from our customer's increase in their inventory in Q2, our outlook would be that assumes that roughly 25 cent headwind then in the third quarter. So that's the 50 cents Q2 to Q3 sequential headwind that w…”
“customer concerns regarding surety of supply, particularly in Europe and parts of Asia.”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 | $10.00–$10.30 | $10.15 | INITIATED |
| Free cash flow | FY2026 | 100% | 100% | GUIDED |
| Revenue | FY2026 | 8%–9% | 8.5% | INITIATED |
| Issued | Metric | Target | Guide | Actual | Outcome |
|---|---|---|---|---|---|
| FY2026 Q1 | EPS | FY2026 Q2 | $2.43–$2.53 | $2.89 | Met / beat |
| FY2025 Q4 | EPS | FY2026 Q1 | $2.40–$2.46 | $2.47 | Met / beat |
Walmart's commitment to RFID technology is deepening, with expansion into food following prior rollouts in general merchandise and apparel. This signals continued volume growth for Avery Dennison's intelligent labels platform.
“And they continue to see their return on investment of the technology as well, both in those areas as well as in food.”
Yes, try that. Okay. Basically, I'm looking to get a little bit more granular on the food contributions specifically. Kroger. How far along that rollout has progressed? Is there anything incremental in second half from that? Walmart, I know that begins to ramp in second half, but any percentage terms you could frame around that rollout in 26, in 27, and into 28? And I believe a third grocer here has announced a pilot, and you referenced some pilots and groceries. So How material are those new programs in second half, or how long would you expect them to be in pilot phase before any expansion, given it seems like food is certainly newer, but perhaps broadening faster than other categories?…
Yeah, let me end part of your question, Matt, and I'll address the rest. Yes, I think there is certainly much more accelerated interest from customers. They can clearly see the benefit, the returns they get, as I said, on labor productivity, gross margin expansion, and sales uplift as well. Specifically on Kroger, the rollout continues to go as they planned. And the second half of the year, the only thing that is different that we said we'd be working on, which we are, which is really the protein piloting. And as that goes successfully in the second half of the year, we'll be looking to roll that out as we go into the start of next year. On Walmart, I think my observation on that customer that continues to be that they are really committed to the technology. You can see it roll out across all of their stores in terms of both general merchandise in apparel and increasingly now in the food area as well. And they continue to see their return on investment of the technology as well, both in those areas as well as in food. Typically with kind of large-scale deployments, timelines can vary slightly, but our current assumptions for the commercial rollout, we discussed them to begin in the second half of 26, and we're working very closely with them now on key deployment milestones to ensure a successful implementation. As it relates to the other customers, yes, the pilots are accelerating. I won't go into detail, but which specific customers they are. And we anticipate that largely those will manifest in 27 and beyond. And that's when you'd see the benefit of those positive pilots turning into broader implementation and rollouts.
Kroger's RFID rollout is proceeding as planned, with the next phase involving protein piloting. A successful pilot could lead to a significant expansion next year, benefiting Avery Dennison.
“Specifically on Kroger, the rollout continues to go as they planned. And the second half of the year, the only thing that is different that we said we'd be working on, which we are, which is really the protein piloting.”
Yes, try that. Okay. Basically, I'm looking to get a little bit more granular on the food contributions specifically. Kroger. How far along that rollout has progressed? Is there anything incremental in second half from that? Walmart, I know that begins to ramp in second half, but any percentage terms you could frame around that rollout in 26, in 27, and into 28? And I believe a third grocer here has announced a pilot, and you referenced some pilots and groceries. So How material are those new programs in second half, or how long would you expect them to be in pilot phase before any expansion, given it seems like food is certainly newer, but perhaps broadening faster than other categories?…
Yeah, let me end part of your question, Matt, and I'll address the rest. Yes, I think there is certainly much more accelerated interest from customers. They can clearly see the benefit, the returns they get, as I said, on labor productivity, gross margin expansion, and sales uplift as well. Specifically on Kroger, the rollout continues to go as they planned. And the second half of the year, the only thing that is different that we said we'd be working on, which we are, which is really the protein piloting. And as that goes successfully in the second half of the year, we'll be looking to roll that out as we go into the start of next year. On Walmart, I think my observation on that customer that continues to be that they are really committed to the technology. You can see it roll out across all of their stores in terms of both general merchandise in apparel and increasingly now in the food area as well. And they continue to see their return on investment of the technology as well, both in those areas as well as in food. Typically with kind of large-scale deployments, timelines can vary slightly, but our current assumptions for the commercial rollout, we discussed them to begin in the second half of 26, and we're working very closely with them now on key deployment milestones to ensure a successful implementation. As it relates to the other customers, yes, the pilots are accelerating. I won't go into detail, but which specific customers they are. And we anticipate that largely those will manifest in 27 and beyond. And that's when you'd see the benefit of those positive pilots turning into broader implementation and rollouts.