Prepared remarks
Ladies and gentlemen, welcome to Avery Dennison's Earnings Conference Call for the Second Quarter Ended on June 30, 2026. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a Q&A session. At that time, if you would like to ask a question, please raise your hand and enter the queue. As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website. I would now like to turn the call over to William R. Gilchrist, Avery Dennison's vice president of investor relations. Please go ahead, sir.
Thank you, Ellen, and welcome to Avery Dennison's second quarter 2026 earnings conference call. Please note that throughout today's discussion, we will be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified, and reconciled from GAAP on schedules A-4 to A-8 of the financial statements accompanying today's earnings release. I remind you that we will make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the Safe Harbor statement included in today's earnings release. On the call today are Deon Stander, President and Chief Executive Officer, and Gregory S. Lovins, Senior Vice President and Chief Financial Officer. I will now turn the call over to Deon.
Thanks, Bill, and good morning, everyone. We delivered strong second quarter results across the board. On a year-over-year basis, organic sales growth accelerated to 8%, adjusted EBITDA margins expanded, adjusted EPS grew by 19%, and adjusted free cash flow generation was strong at more than $360 million. While these results benefited from continued customer inventory stocking in Materials Group, excluding this tailwind, we continue to drive a step change in the pace of our sales and earnings growth. Our performance this quarter once again demonstrated the strength and resilience of our portfolio. Sales growth was balanced across both base and high-value categories, with high-value categories returning to mid-single-digit growth as we expected. Combining this improved organic growth with our commercial and operational excellence allowed us to expand adjusted EBITDA margins across both segments, even against a volatile and inflationary cost backdrop. Our priorities are clear. We are continuing to drive both earnings growth and business resiliency by leaning into our proven playbook. First, we are investing in innovation- and service-led differentiation to drive share gains and expand new business opportunities. The strength of this focus was evident in our second quarter performance where organic sales growth accelerated. Second, we are executing commercial and operational agility including productivity and pricing actions to mitigate inflationary pressures. And third, we are generating strong free cash flow and maintaining a healthy balance sheet. Our balance sheet strength and robust cash generation supported the increased pace of our share repurchases during the quarter and another increase in our dividend while continuing to invest in our long-term growth priorities. Turning to our segment results. Materials Group delivered organic sales growth of approximately 10%, driven by high-single-digit volume/mix growth as well as low-single-digit pricing realization as we began to pass on cost inflation. During the quarter, the business delivered solid performance across both base and high-value categories. Encouragingly, high-value categories grew mid-single-digits year-over-year, led by specialty and durable labels, as well as Intelligent Labels. Base categories grew low-double-digits driven by underlying market growth, continued share gains and the benefit of customer pre-buys. In Label Materials, customer pre-buying persisted longer into the quarter than we initially anticipated. This was driven by accelerating raw material inflation as well as customer concerns regarding surety of supply, particularly in Europe and parts of Asia. Looking forward, while it is difficult to predict the timing of when the unwind will happen due to continued geopolitical uncertainty, we anticipate the majority of the unwind in the third quarter with a smaller carryover into Q4. From a profitability perspective, Materials Group adjusted EBITDA was strong, growing in the high teens with margins expanding compared to prior year. In Solutions Group, organic sales grew 3%. The quarter was characterized by solid low-single-digit growth across both our high-value categories and base solutions. Within our high-value platforms, Embelex delivered robust low-double-digit growth driven by core market expansion and strong World Cup demand. Intelligent Labels grew low-single-digits while Vestcom was down slightly as we lapped a major customer rollout from 2025. In our base solutions, we were pleased to see sales return to low-single-digit growth. From a profitability perspective, execution on our productivity playbook more than offset higher employee-related costs. This allowed us to deliver strong EBITDA margin expansion. Pivoting to our enterprise-wide Intelligent Labels platform, sales were up low-single-digits compared to prior year, in line with our growth expectations for the quarter. As anticipated, this headline number reflects varying dynamics across our major end markets. In our largest category, apparel and general retail, we delivered another quarter of strong performance with sales up approximately 10%. This growth was driven by continued program expansion in apparel, alongside a solid recovery in general retail. Conversely, we experienced a headwind in logistics where sales were down double digits. This was driven by the difficult comparison of lapping outsized share gains from 2025 and softer overall customer demand in that segment. Looking ahead, we continue to expect 2026 growth for our enterprise Intelligent Labels platform to outpace 2025. In apparel and general retail, we expect to deliver strong full-year growth as adoption continues to deepen. In food, we are positioning the platform for an acceleration in the back half of the year driven by the beginning of the rollout with the largest U.S. grocery retailer and expanding activity across other customers. Finally, in logistics, we are managing through the normalization of outsized volume share gains from 2025 with the largest partner, while continuing to expand pilots with new logistics customers. As to our outlook, we are returning to providing full year guidance reflecting our team's strong execution through a dynamic environment and the challenges of precisely timing the second-half customer inventory destocking in Materials Group. For the full year 2026, we anticipate $10.00 to $10.30 in adjusted earnings per share on organic sales growth of 3% to 4%. In summary, our strong second quarter performance—delivering another quarter of accelerating sales and earnings growth—highlights the differentiation and underlying strength of our enterprise. We remain focused on the key secular tailwinds shaping our long-term strategy while continuing to execute the operational actions required to navigate cyclical dynamics and inflationary shifts with agility. The proactive steps we are taking to accelerate innovation-led differentiation, serve our customers, and ensure supply chain resilience further strengthen our competitive moat. Our proven strategies, market-leading resilient businesses, agile teams, and disciplined capital allocation approach give us confidence in our ability to deliver sustainable growth in 2026 and beyond. I am proud of the global Avery Dennison team. Their agility and operational execution continue to drive strong results, giving us momentum as we execute across the balance of 2026 and beyond. Now over to you, Greg.
Thanks, Deon, and hello, everybody. In the second quarter, we delivered strong adjusted earnings per share of $2.89, up 19% compared to prior year. Earnings growth was driven by higher volume and productivity, partially offset by higher employee-related costs and targeted growth investments. As Deon mentioned, customer inventory pre-buys were a contributing factor during the quarter, adding an estimated $0.25 to earnings. Second quarter reported sales were up 11% year-over-year, with organic sales growth of 8%, driven by strong volume/mix, and slightly favorable pricing. We estimate that roughly half of the organic growth was from customer pre-buy activity. Reported sales also benefited from approximately two points of growth from foreign currency translation and a point of growth from the Taylor Adhesives acquisition. Adjusted EBITDA margin was 17.1% in the quarter, up 50 basis points compared to prior year. And we generated strong adjusted free cash flow of $365 million in the quarter, primarily driven by earnings growth and working capital improvements. Our balance sheet remains strong, with a quarter-end net debt to adjusted EBITDA ratio of 2.3 times. Capital allocation during the second quarter remained consistent with our established framework. We returned over $210 million to shareholders through a balanced combination of $76 million in dividends and $138 million in share repurchases, an accelerated pace relative to the first quarter. This brings our year-to-date capital return to shareholders to roughly $350 million. These actions underscore our ongoing commitment to disciplined capital deployment while preserving our financial flexibility. Turning to segment results for the quarter. Materials Group organic sales were very strong, coming in 10% higher than the prior year, driven by high-single-digit volume/mix growth. Excluding our estimate of the year-over-year benefit from customer pre-buys, underlying organic sales growth remained strong at mid-single-digits. Turning to label materials, similar to the first quarter, we believe we successfully gained share and realized favorable year-over-year pricing as we acted to mitigate the impact of rising raw material costs. From a regional perspective, compared to prior year, volume/mix in North America was up mid-single-digits, Europe delivered strong mid-teens growth, and in emerging markets, both Asia and Latin America, grew high-single-digits. Organic growth across our Materials Group high-value categories grew mid-single-digits, led by low-double-digit growth in specialty and durable labels, and high-single-digit growth in Intelligent Labels. Industrial tapes grew low-single-digits; Graphics and reflective sales were comparable to prior year. Materials Group adjusted EBITDA was up 17% compared to prior year, with margins up 20 basis points. This margin expansion reflects strong volume, ongoing productivity actions, and the net benefits from pricing and raw material cost inclusive of cost-out reengineering. These factors more than offset an unfavorable product mix and higher employee-related costs. Regarding raw material costs, we experienced mid-single-digit year-over-year raw material inflation in the second quarter, representing high-single-digit sequential inflation, slightly above our expectation. Our teams continue to execute our proven playbook to navigate the current inflation environment through strategic sourcing actions, reengineering, and the timely implementation of pricing actions. Looking ahead for the remainder of the year, while the situation remains uncertain, we are currently anticipating high-single-digit year-over-year inflation in the second half. Shifting to Solutions Group. Organic sales were up 3% with both high-value and base categories delivering low-single-digit growth. Within high-value categories, Embelex delivered strong low-double-digit growth; Intelligent Labels grew low-single-digits, with particular strength in apparel and general retail categories, while Vestcom was down low-single-digits as we lapped new program rollouts from the prior year. Solutions Group adjusted EBITDA margin was 18.6%, expanding 150 basis points year-over-year and 220 basis points sequentially. This margin expansion was driven by continued execution of our productivity initiatives, the reversal of prior year tariff-related network inefficiencies, and a positive net price/cost impact inclusive of tariff-related costs. Together, these benefits more than offset higher employee-related costs and our targeted investments in growth. Turning now to our full year 2026 outlook, we anticipate reported sales growth of 5% to 6%. This includes organic growth of 3% to 4%, with approximately 1.5% from currency translation, 1% from the Taylor Adhesives acquisition, and a nearly half point headwind from the fiscal calendar change. We expect full-year adjusted earnings per share in the range of $10.00 to $10.30, representing 7% growth year-over-year at the midpoint. This full-year earnings growth is driven by benefits of organic growth, which is primarily volume/mix driven, a largely neutral impact from customer inventory management for the full year, productivity actions, including restructuring benefits of more than $60 million, offsetting headwinds from wage inflation, and the normalization of 2025 temporary savings which are largely incentive compensation-related. And a net benefit of approximately $0.30 from combined currency, share count, interest, and tax. Additionally, we remain committed to strong free cash flow, targeting roughly 100% conversion for the year, with fixed and IT capital spending of approximately $260 million. From a quarterly earnings cadence perspective, we are assuming the third quarter will see a larger than normal sequential earnings decline driven by our customer destocking timing assumption, which will represent an approximate $0.50 sequential headwind versus the benefit we saw in the second quarter. While we expect a sequential headwind in the second half as these customer pre-buys unwind, underlying earnings momentum remains strong across the balance of the year. In summary, we delivered a strong second quarter achieving 8% organic sales growth and 19% adjusted EPS growth. We generated very strong free cash flow, increased our dividend, and accelerated share repurchases while maintaining a strong balance sheet, with leverage coming down to 2.3 times. Our updated 2026 outlook anticipates 3% to 4% organic sales growth and roughly 7% EPS growth, demonstrating positive momentum toward our long-term targets. Overall, our resilient portfolio, agile execution, and disciplined capital allocation give us high confidence in our ability to deliver strong, long-term value to all stakeholders. With that, we will now open up the call for your questions.
Questions and answers
Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, please press 1 on your telephone keypad. If your question has been answered, and you would like to withdraw your registration, please press 1 again. To accommodate all participants, we ask that you please limit yourself to one question and then return to the queue if you have additional questions. Please stand by as we compile the Q&A roster. Your first question comes from the line of Ghansham Panjabi with Baird. Your line is open. Please proceed with your question.
Thank you, operator. Good morning, everybody. Can you just give us a bit more granularity as it relates to the growth outlook for Intelligent Labels for 2026, relative to the low-single-digits you generated in Q2? And in particular, how has your view on the major end market verticals such as apparel, general retail, food, and logistics changed, if at all, relative to the last time you reported three months ago? Thank you.
Thanks, Ghansham. Yes, our anticipation has always been that we would continue to see our growth ramp in the second half of the year. When I look at the individual segments, in apparel and general retail, we continue to expect solid growth as we go through the second half of the year, largely on the new program rollouts we are doing as well as the continued strengthening in some of the general retail execution. In logistics specifically, we are expecting a continued share and volume challenge relative to 2025 when we experienced outsized share and volume. We expect that to persist for the remainder of the year, while we continue to expand pilots with our existing customers and with new customers in the logistics pipeline. And in food, we are expecting a much more meaningful contribution from the food programs in the second half of the year, largely on the significant retailer rollout that we have discussed for some time, as well as increased activity across other customers in the food sector.
Your next question comes from the line of George Staphos with Bank of America. Please proceed with your question.
Hi, there. Thanks, everyone. Thanks for taking my question, and congratulations on the progress. I wanted to dig into the pre-buy effect in Materials. There are a couple components to it. I think you said that the effect of the pre-buy was more or less five points in the second quarter, and I recall the figure being one point in the first quarter and I think it was 1.5 points at the materials level. Did I relay those correctly? And does that mean in essence there is 6% or 6.5% that ultimately has to be destocked over the rest of the year? How should we interpret that? And why is there so much going on, especially in Europe? Thank you, guys.
Yeah, thanks, George. So in Q1, we talked about roughly a point of growth from customer inventory building. In Q2, we would estimate that roughly half of our organic growth was related to inventory build. So in total, closer to five points of growth in the first half, or net for the first half about 2.5% growth for the whole half of the year. We would expect to see that come out in the second half as we said, so you would see that change from first half to second half. At the same time, from an organic growth perspective that will largely be offset in the second half by more pricing activity versus prior year, whereas we still had carryover deflation in the first quarter. I think to your point, we are seeing that more in Europe and Asia; that is where we are seeing more of the inflationary pressures as well as more customer concern about surety of supply. As we moved through the second quarter, we continued to see inflation increase in the middle part of the quarter; it has been up and down since then. Customers remain in a pretty uncertain environment, which led to the continued stock build throughout the second quarter.
Your next question comes from the line of John McNulty with BMO Capital Markets. Please proceed with your question.
Yes. Good morning. Thanks for taking my question. A couple related points on the margin side. Can you help us think about price versus cost in the second half — will you catch up with pricing given your expectations for cost being up kind of high-single-digits? And then somewhat related on the margin front in Solutions, you are hitting a high-water mark. Anything special about that in terms of why you are at these levels? Or is this kind of the new baseline now that you are starting to see volumes stabilize and Intelligent Labels starting to grow again?
Thanks, John. When we look at the second quarter from a price/cost perspective sequentially, we saw high-single-digit inflation from Q1 to Q2 and we had mid-single-digit price increases from Q1 to Q2. To help mitigate that, in addition to material engineering and procurement actions, we largely mitigated the majority of that sequentially in Q2. Looking Q2 to Q3, we would expect low-single-digit sequential inflation, largely carryover from what we saw moving through Q2. That said, the environment continues to be uncertain with commodity prices moving around. Right now our expectation is low-single-digit sequential inflation and low-single-digit sequential price as well from Q2 to Q3. On Solutions margins, there are a couple drivers. That team has continued to drive significant productivity year-over-year, which benefits margins. It's also a nice volume rebound — our apparel business is growing mid-to-high-single-digits in the quarter as we lap some prior tariff implications, with strong growth in our Embelex platform. Overall, it's strong volume growth in apparel, productivity across the business, and a couple of small one-time benefits in the quarter. You may see a little moderation in that margin in Q3, but we still expect the second half to be above prior year.
Your next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.
Thanks very much. Two-part question. It sounds like you are gaining more traction with your customers in Intelligent Labels in the food category. Is it baked goods, frozen foods, or are there themes that are allowing you to expand your reach? And for Gregory, you have talked about inflation and employee costs. Is this one-time, or what is the rate? How large are your employee costs as a percentage of your cost base? Can you help frame the employee cost issue?
Thanks, Jeff. Let me address the first question and Gregory can take the second. We continue to have very strong conviction in the growth of the food segment as we move forward. We see the return on investment at the retail level to be strong across pilots and rollouts. The initial focus has been around bakery — it's simpler to implement — but we are working through protein now, which has been more technically difficult but an area where our innovation gives us an advantage. Beyond protein, the next category will be more perishable items, and we expect those to follow. Two thematic drivers are at work: retailers recognize the urgency to digitize stores to drive efficiencies and consumer connection, and technologies like Intelligent Labels play a significant role in enabling that. IL drives return on investment through labor productivity, gross margin expansion, and sales uplift. We've seen consistent results particularly in perishable foods. We are continuing to invest; the scale of our customers in pilot has expanded, our pipeline has grown, and it includes a number of U.S. and European retailers. There are also specific areas where DSD deliveries matter. So we have high conviction in food as a longer-term growth opportunity within our high-value category portfolio.
Jeff, on employee costs there are two areas where we're seeing a year-over-year headwind. One is normal wage inflation across the business, which is in line with recent years. The larger headwind this year is incentive compensation — last year incentive payouts were well below target because performance was below targets, and this year payouts are at or above target levels in many parts of the business. From an order-of-magnitude perspective, our productivity is largely offsetting wage inflation and incentive compensation, so that gives you a sense of the size of those headwinds versus our productivity benefits.
Your next question comes from the line of Joshua David Spector with UBS. Please proceed with your question.
Hi. I wanted to dig into the organic growth guidance. The 3% to 4% range — if we unpack that, pricing in the second half is up, call it, 3% to 4%, and you have that roughly 3% headwind in the second half from destocking. Therefore, volumes then at the base level, excluding destocking dynamics, might be flat. Is that how you would frame it? You sound positive on some higher-growth areas within Materials and RFID improving. Is there any offset we are missing?
Josh, when you look first half to second half, first half organic growth is around 4.5% on a full first-half basis, with a couple points from stocking as we've discussed. We had a bit of price down particularly in Q1 as we lapped deflation from prior year. Volume/mix growth in the first half was in the low- to mid-single-digit range. We expect the second half to be somewhat similar from a volume/mix perspective, but with the destocking headwind in the second half largely offset by the fact that price is now a positive year-over-year, as we're no longer lapping prior-year deflation. So underlying volume/mix trends are relatively similar — low to mid-single-digits in both halves — with a price differential and the stocking impact affecting the organic rate between halves.
Your next question comes from the line of Matthew Burke Roberts with Raymond James. Please proceed with your question.
Deon, I appreciate the comments you have given so far on food, but if I could dive a little deeper on the contribution in the second half. Specifically, how far has that rollout progressed? Is there still incremental from Walmart? I know that is a big beginning here in the second half, but what percent of that initial rollout should we be thinking about in 2026? Also, into 2028, how should we think about the shape? I believe a third grocer has announced a pilot, and you referenced other pilots in grocery. How material are those new programs in the second half, and how long would you expect them to be in pilot before any expansion given food is newer but broadening quickly?
You're breaking up, Matt. You're breaking up on us. Can you start again from the top? I missed the question. Is that better now? Yes. Try that.
Okay. Basically, I am looking to get a little bit more granular on the food contribution specifically. Specifically on Kroger, how far along has that rollout progressed? Is there anything incremental in the second half from that? And from Walmart, I know that begins to ramp in the second half. But any percentage terms you could frame around that rollout in 2026 and into 2028? And I believe a third grocer has announced a pilot, and you referenced some pilots in grocery. So how material are those new programs in the second half, or how long would you expect them to be in pilot phase before any expansion given that food is newer but broadening faster than other categories?
Yes. On Kroger, the rollout continues to go as planned. In the second half, the main additional work we are doing with them is protein piloting; if that is successful in the second half, we would look to roll that out further into the start of next year. Regarding Walmart, they remain committed to the technology; you can see it rolling out across their stores in general merchandise and apparel and increasingly in food. They typically proceed with large-scale deployments; our assumption is commercial rollout to begin in the second half of 2026 and we are working closely with them on deployment milestones. For other customers, pilots are accelerating; I won't detail specific customers, but we expect many of those to manifest in 2027 and beyond as pilots convert to broader implementation.
Your next question comes from the line of John with Jefferies. Please proceed with your question.
Hey, Deon, Gregory. Really appreciate all the details, and congrats on a good quarter. I want to go back to the customer inventory build. It sounded like there was some carryover from the inventory build in Q1, but did you see the stocking through the quarter? Has it progressed into Q3? Or are you already seeing some of that destocking? And related, was there any portion of the 10% apparel and general retail RFID growth that was tied to the customer inventory build? It did not sound like it from your comments, but I wanted to confirm. And one last clarification, Gregory — did you say Q3 EPS is expected to be $0.50 lower sequentially versus Q2?
Thanks, John. On stocking, as we said in Q1 we had about a $0.05 EPS impact that we estimated from stocking that started in mid-March. That continued through April and we thought it would reverse later in the quarter; however, inflation increased in the middle part of the quarter and we saw stocking continue through May. It's a bit different by region; Europe and Asia saw most of the stocking impact. We saw some of it continue into early June, but June began to normalize. We expect the majority of the unwind to occur in the third quarter and we have started to see signs of that in the first few weeks of July. None of that stocking impact is in Solutions; it is predominantly a Materials Group phenomenon. From a sequential headwind perspective, roughly a $0.25 benefit we got in Q2 from customer inventory increase would be roughly a $0.25 headwind in Q3, so that's the approximately $0.50 Q2-to-Q3 sequential headwind we discussed versus the benefit seen in Q2. That is our estimate today and we'll watch how the situation evolves through the quarter.
John, to reiterate, particularly in apparel and general retail, there was no impact from the inventory stocking we discussed. Most of that growth was driven by new program rollouts that are delivering through the second quarter into the third and fourth quarters.
Your next question comes from the line of Mike Roxland with Truist Securities. Please proceed with your question.
Thanks, Deon, Gregory, for taking my question. A high-level question: how should we think about volume growth in your base label business? A number of leading CPGs recently said they are done lowering prices and will focus on raising prices even at the expense of volumes. Could the materials business shift from GDP-plus growth to GDP or GDP-minus, particularly if CPGs more aggressively pursue pricing? Any color would be helpful. Thank you.
Thanks, Mike. We have seen cycles in CPG volumes; over the last couple years CPG volumes have been relatively flat to slightly down. We saw some encouraging signs in Q1 in certain segments such as Home and Personal Care. The continued inflationary environment means CPGs are balancing promotion-driven volume against pricing and consumer impact, and we don't expect that to change dramatically this year given the uncertainty. Our measures include GDP and retail sales; retail sales are roughly around 1% growth overall. Given our business is largely consumer-staples-led in base labels, we don't see a fundamental big shift in base label volumes. Gregory discussed low-single-digit volume growth expectations for the rest of the year. We also continue to take share in base labels. We've invested in servicing customers, innovation, and differentiation — for example, growth in filmic products where we have leadership, and innovations like AD CleanGlass and AD CleanFiber resonate with customers around sustainability and recyclability. Those factors drive durable share gains. Also, in uncertain times customers often gravitate toward market leaders for surety of supply, which benefits us.
Your next question comes from the line of Anthony Pettinari with Citi. Please proceed with your question.
Good morning. With the reinstatement of the full year guide, is it fair to think of that as a one-time action to help us understand the impact of the pre-buy and the reversal over the full year? Or would you anticipate sticking to full-year guidance going forward? How should we think about your guidance approach?
Thanks, Anthony. There are a lot of drivers in thinking about our guidance. First, our business has been operating well — delivering top-line growth, productivity and increased earnings momentum. Second, we have more uncertainty regarding the timing of destocking given geopolitical uncertainty, and it's hard to precisely allocate that between Q3 and Q4. We felt it was appropriate to provide full-year guidance at this stage. Our intention is not to flip between guidance time horizons in the future; we would prefer consistency in approach going forward.
Our final question comes from the line of George Staphos with Bank of America. Please proceed with your question.
Hi, everyone. A point of clarification and then a question on Intelligent Labels. Greg, you and John both asked about the $0.50 headwind assumption because the up $0.25 becomes a down $0.25. Since we had a $0.05 in Q1 that was going to reverse, should we worry instead that it is $0.30 that has to come out and therefore more like a $0.60 sequential downtick in Q3? And Deon, on Intelligent Labels, do you see AI as an enabler and accelerator for IL, or might it be a competing technology that reduces the total addressable opportunity?
Thanks, George. We estimate about a $0.30 impact in the first half from stocking at customers. We're trying to triangulate how that will come out between Q3 and Q4. Our current view is roughly $0.25 of that comes out in Q3 with a smaller hangover into Q4. It's tough to call given much of the stocking happened in Europe, where inflation impacts and the holiday period in August can affect volume timing. That's our best estimate based on what we are seeing in July and what customers are communicating today.
George, on AI and Intelligent Labels — yes, I believe AI is an accelerator for IL. The biggest secular trend over the next five years is digitization of industries and items. When items are tagged at source and have data about origin, supply chain movements, retail handling, consumer use, and disposal, you generate significantly more item-level data than ever before. AI will be an enabler to parse and infer insights from that data, which helps retailers make more surgical decisions about items, expanding ROI and creating a flywheel for more IL adoption. For Avery Dennison, AI is a driver for internal efficiency and productivity, accelerating innovation outcomes, and helping solve customer problems to accelerate our growth. We have invested in digital capabilities, added a chief digital officer, and dedicated teams to ensure these investments drive our growth and profitability.
Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
Thank you, Ellen. On behalf of everyone at Avery Dennison, I want to thank you all for joining today's call and for your continued interest in our company. As always, we are happy to address any follow-up questions you may have. Thank you again, and this concludes today's conference call.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.