WD-40 Company (WDFC) ended fiscal 2026 with a quarter that split cleanly between sales and profitability. Fourth-quarter earnings of $1.06 per share missed the $1.11 consensus by 4.5% and fell 32.1% year over year. Revenue rose 8.1% to $176.78 million and beat the $170.0 million consensus by 4.0%. The central tension is that demand held up and pricing stuck, but inflation in specialty chemicals and a heavy dose of operating expenses landed in the same quarter. Operating income fell 32% to $19.1 million even as sales grew.

The gross margin is the key number. It fell to 52.8% from 54.7% a year earlier and from 56.6% in the third quarter. Margins had already been sliding from 56.2% in the first quarter and 55.6% in the second. The call attributed about 370 basis points of pressure to specialty chemical and raw material inflation. Below gross profit, SG&A rose 19% to $58.2 million on incentive compensation earned across the workforce and about $1.5 million of elevated freight tied to Middle East disruptions. Advertising and promotion jumped 26% to 8.9% of sales. Some of that spending was timing rather than structure, which matters for the outlook. On the full year, the picture is cleaner. Net sales grew 11% to $688.0 million, or 8% in constant currency, near the top of the revised range. Non-GAAP EPS rose 6% to $6.18. GAAP EPS of $6.08 declined only because fiscal 2025 included an $11.9 million tax benefit. Free cash flow of $97.6 million and a 28.6% ROIC show the business model was not impaired.

The revenue story is slowing but still healthy, and the quality of the beat deserves some scrutiny. Fourth-quarter growth decelerated sharply from 24% in the third quarter. Roughly $3 million of demand had been pulled into the prior quarter, and China benefited from customer buying ahead of a planned price increase. Strength was broad otherwise:

• EIMEA maintenance products grew 14%, led by India, the Middle East and Southern Europe.
• Asia-Pacific grew 13%.
• Specialist rose 18% in the quarter and 21% for the year.
• Premium formats grew 17% for the year, and e-commerce grew 19%.

The Americas was the laggard at 5%, and management expects only modest single-digit U.S. growth in fiscal 2027.

The fiscal 2027 guidance is the forward-looking crux:

• Net sales growth of 4% to 7%, or $715 million to $735 million in constant currency.
• Gross margin of 54.0% to 55.5%.
• Operating income of $114 million to $120 million.
• EPS of $6.40 to $6.70, implying 5% to 10% growth.

This is a deceleration from fiscal 2026, and the margin range sits below both the original fiscal 2026 guide of 55.5% to 56.5% and the company's 55%-plus long-term target. The recovery assumes crude stays near current levels through the first half and then moderates, so bears have legitimate ammunition if oil does not cooperate. Against that, management said it believes the fourth quarter marked the gross-margin low point. It also reported that September sales grew double digits across all three trade blocks, with margins improving sequentially. That is an early read, not a quarter, but it supports the trough argument.

The longer-term catalysts got more interesting. Japan converts to a direct market, the first such move in Asia-Pacific since China in 2006, and management expects first-year sales of two to four times fiscal 2026 levels. The company raised its attainable-market estimates to about $2.2 billion for multi-use, from $1.9 billion, and to about $962 million for Specialist, from $665 million. It also framed a premiumization growth target above 10%. Other developments include a bio-based Specialist launch in the Americas, a cost-savings pipeline said to match the $7 million-plus delivered in fiscal 2026, and a new $100 million buyback. The CFO transition and broader leadership reshuffle add execution risk at an awkward moment.

The market had already priced in much of the damage. Shares opened at $292.09 after the July report, near the $298.90 inter-earnings and 52-week high. They had fallen 31.0% to $201.41 by the day before this release. The stock sits 7.9% below its 200-day moving average and just 7.3% above its September 18 low of $187.78. Price and AVWAP trend readings are negative, though momentum has turned positive. Investor sentiment slipped from 0.55 to 0.51, remaining positive with only a modest softening. That suggests holders were bruised but not capitulating.

The bottom line is that WD-40 missed on earnings because of a cost squeeze, not a demand failure. Revenue beat, maintenance products grew at the top of the long-term range, and cash generation stayed strong. The investment setup now hinges on whether fourth-quarter gross margin truly was the bottom. That depends partly on crude prices outside management's control, and the guidance leaves little room for error. A stock already down roughly a third since July has lowered the bar, but the margin recovery must show up in the reported numbers before the story fully repairs.