Avery Dennison Q1 2026 Demand Signals Highlight Resilience During Inflation

Avery Dennison (AVY) — Q1 2026 demand and backlog signals for resilience during inflation

Based on Avery Dennison’s Q1 2026 earnings call commentary, the company’s demand and “backlog-like” signals during an inflationary backdrop point to resilience driven by (1) offsetting demand pockets across end markets, (2) customer prebuy timing that cushions near-term volumes, and (3) visible future program ramps—especially Intelligent Labels (IL) in the second half. The net picture is: inflation pressure exists, but management believes it can be absorbed via pricing/material engineering and productivity, while demand is not breaking.

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1) Demand signals: Q1 demand wasn’t uniformly weak—evidence of “pockets of strength” that offset inflation-impacted caution

Materials Group shows resilience through mix and base-category support

• Management reported first-quarter organic sales up 1%, driven by mid single-digit volume/mix growth, and noted adjusted EPS up 7% year over year—an outcome consistent with demand holding up despite inflation uncertainty.¹
• In Materials Group specifically, reported sales grew 11% YoY and organic sales grew ~2%, driven by mid single-digit volume and mix growth despite deflation-related price reductions.²
• Within Materials Group’s category mix, management described base categories up mid single digits providing “a critical offset” to high value categories down low single digits.²

Interpretation for resilience: Even though some demand segments were pressured (notably parts of high value), management indicates overall demand strength in base categories and mix supported results—i.e., inflation didn’t create a broad-based collapse in purchasing.

Customer behavior under inflation: prebuying + cautiousness (but not demand destruction)

• Management explicitly linked inflation regions to customer caution and described prebuying, particularly in Europe, some in Asia, and a little emerging in North America.³
• In label materials, management observed customer prebuying during March that persisted into April, while expecting the volume largely to unwind during the second half of Q2.²
• Management also stated that retailers/brands were considering consumer confidence and that CPG volumes have been muted for the last couple of years, but they saw CPGs indicate some volume growth at the start of the year—a potentially constructive demand signal.³

Interpretation for resilience: Prebuying is commonly associated with anticipated price increases and uncertainty. Here, it serves as a near-term demand cushion, while management expects normalization later—suggesting demand is timing-shifted rather than structurally broken.

Apparel and retail demand: stable-to-positive despite inflation concerns

• Management characterized apparel demand sentiment as soft long term, but provided a counter-signal: apparel inventory-to-sales ratios are at the lowest since 2021, and they anticipated some upside as things normalize.⁴
• In the company’s largest apparel/general retail area, despite a difficult pre-tariff comp, sales were up low single digits, driven by successful program expansions.⁵
• They also cited that apparel imports remain low and that they continue working on back-to-school and holiday sourcing, indicating ongoing customer planning rather than churn.⁴

Interpretation for resilience: Inflation appears to change how customers time purchases and manage inventory, but management’s evidence suggests commercial momentum continues.

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2) “Backlog-like” / forward demand signals: IL program ramping + pilots indicate future order visibility in the back half

Avery Dennison’s clearest “backlog/resilience” signal is the program cadence skewed to the second half, particularly in Intelligent Labels (IL).

Q1 showed less favorable logistics execution, but management doesn’t see IL demand reversal

• Management said Q1 played out slightly lower than anticipated, “mostly on the logistics volume” tied to customers managing inventory for a new chip transition.⁶
• Importantly, they stated they did not really see any giveback in Q1 regarding the prior year logistics share gains headwind (question from an analyst), with management’s broader commentary supporting that the IL story remained intact and program-driven.⁷⁸

IL is expected to grow and is weighted to 2H 2026

• Management described confidence in earnings growth trajectory partly because high value categories will continue to expand through the year, including IL growth ramping in the second half.³
• They also said they “feel good” about driving new programs such that growth rate expands as you go through the year,” with the biggest ramp in the second half (particularly food).⁶
• In addition, management said they continue to expect 2026 growth for enterprise IL to outpace 2025, with performance more heavily weighted toward the second half as major programs scale.⁵

Evidence of ongoing pipeline: food ramp (Walmart) + inbound interest + international pilots

• Management stated that the largest part of IL in 2026 is the food program rollout with Walmart in the second half.⁹
• They highlighted that because of this rollout announcement they had seen more inbound from other food retailers and supply chain players wanting to leverage the technology.⁹
• They cited two pilots running (one in North America and one in Europe) with large grocery retailers, plus additional deployments/expansion use cases.⁹

Interpretation for resilience: While management doesn’t explicitly publish backlog numbers in the excerpt, their repeated emphasis on scheduled program ramps, pilots already running, and 2H scaling functions as a practical proxy for future demand visibility. It also suggests inflation is being managed without losing the forward pipeline.

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3) Why inflation hasn’t impaired the core demand signal: pricing power + sourcing/material reengineering and productivity

Even though your question focuses on demand/backlog signals, management’s resilience narrative is tightly linked to how they handle inflation that threatens demand.

• Management acknowledged that inflation is higher than planned and economic indicators are lower, but emphasized scenario planning to prepare for volume uncertainties.³
• They stated they are implementing price increases and driving material reengineering to offset inflationary raw material pressures.¹
• They also said they have “high confidence” based on a history of managing through inflation cycles and on maintaining security of supply to meet customer demand.¹
• In Q1 they experienced low single-digit raw material deflation year over year, but inflation re-emerged “as we went through March,” with commodities linked to petrochemical prices, and they anticipated high single-digit sequential inflation in Q2.¹⁰

Interpretation for resilience: This combination—demand timing shifts plus a forward program ramp plus active inflation defense—supports the conclusion that Q1 signals reflect resilience, not a demand break.

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4) Bottom line: what Q1 2026 demand/backlog signals indicate about resilience during inflation

The signals collectively indicate:

1. Demand is being re-timed rather than structurally removed (prebuying in March/April with expected unwind in 2H Q2).²
2. Overall performance is supported by category offsets (base label materials/base categories up, high value softer temporarily, with expectation of return to growth).²
3. Forward demand visibility is stronger in the back half—especially IL—via scheduled program ramps and pilots (food/Walmart in 2H; IL growth expected to outpace 2025).⁵⁶⁹
4. Inflation risk is actively managed through pricing, reengineering, productivity, and security of supply—reducing the probability that inflation translates into lasting demand loss.¹¹⁰

How this answers “resilience during inflation in Q1 2026”

Avery Dennison’s Q1 2026 demand and backlog-like signals suggest resilience because customers continued to engage with programs (including prebuying and expansions), and management can point to structured future ramps (IL 2H weighting, Walmart rollout, and active pilots) even while acknowledging temporary softness in some segments due to logistics/inventory timing and inflation-region caution.³²⁵⁶⁹

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