Avery Dennison's third-quarter 2025 financial results revealed adjusted earnings per share of $2.37, underscoring the company's ability to navigate a challenging economic landscape through enhanced productivity and a strategic product mix. Despite facing flat organic sales primarily due to price reductions, the company made significant strides in its Intelligent Labels division, notably through a groundbreaking partnership with Walmart. This collaboration, focused on integrating RFID technology into fresh food categories, is expected to be a pivotal moment for the industry. The upcoming fourth quarter is anticipated to see continued sales growth of 5% to 7%, driven by organic expansion, currency benefits, additional operating days, and contributions from the recently acquired Taylor Adhesives. Avery Dennison remains committed to its strategic focus on high-growth, high-margin opportunities and a robust capital allocation strategy, which includes substantial shareholder returns and targeted acquisitions.
Avery Dennison Navigates Dynamic Market with Strategic Growth and Innovation
On Wednesday, October 22, 2025, Avery Dennison leadership, including President and CEO Dion Stander, Senior Vice President and CFO Gregory Lovins, and Vice President of Investor Relations William Gilchrist, convened to discuss the company's third-quarter 2025 performance. The call highlighted adjusted earnings per share of $2.37, a 2% increase year-over-year, surpassing internal expectations. Reported sales saw a 1.5% rise, though organic sales remained flat due to volume improvements being offset by deflationary pricing. The adjusted EBITDA margin improved by 10 basis points to 16.5%, reflecting significant productivity enhancements.
The Materials Group experienced a 2% organic sales decline, with both high-value categories and base businesses seeing low single-digit reductions. However, the adjusted EBITDA margin for this group rose by 50 basis points to 17.5%, driven by efficiency gains and a positive volume mix in specialty durable labels and adhesives. Conversely, the Solutions Group achieved a 4% organic sales increase, with high-value categories growing in the high single digits. Despite this, the adjusted EBITDA margin for the Solutions Group decreased by 90 basis points to 17%, primarily due to increased employee costs and operational inefficiencies stemming from tariff policy changes.
A major announcement during the call was a strategic partnership with Walmart to integrate RFID technology into fresh food departments, including bakery, meat, and deli. This initiative is viewed as a critical industry milestone for Intelligent Labels (IL) adoption, particularly in the food sector. Enterprise-wide IL sales grew approximately 3% year-over-year, with mid-single-digit growth in apparel, food, logistics, and industrial segments.
Financially, Avery Dennison closed a $390 million acquisition of Taylor Adhesives, expected to contribute about 1% to reported sales in the fourth quarter. The company also demonstrated a strong commitment to capital returns, repurchasing $454 million in stock and increasing dividends by 7% year-to-date, totaling approximately $670 million in shareholder returns. Adjusted free cash flow reached nearly $270 million, with full-year conversion anticipated to be around 100%.
Looking ahead, Avery Dennison provided fourth-quarter 2025 guidance, projecting reported sales growth of 5%-7% and adjusted earnings per share between $2.35 and $2.45. This outlook factors in moderate organic growth, favorable currency translations, additional operational days due to a calendar shift, and the impact of the Taylor Adhesives acquisition. Restructuring savings are expected to increase to approximately $60 million for the full year, a $10 million increase from previous estimates, reflecting accelerated productivity efforts. Management remains optimistic about the long-term growth potential of high-value categories, despite ongoing trade policy uncertainties.
The discussions during the earnings call highlighted the importance of innovation and strategic partnerships in driving growth and efficiency in a volatile market. The collaboration with Walmart is a testament to Avery Dennison's advanced RFID technology and its potential to revolutionize inventory management and supply chain visibility across various sectors. This strategic move, coupled with ongoing investments in high-value segments and disciplined capital allocation, positions the company for sustained success and reinforces the belief that its long-term growth trajectory will outweigh cyclical market fluctuations.
