Greg Lovins
Thanks, Deon, and yes, a big thanks to Danny for stepping in while I was out. And I also want to thank everyone in the investment community who reached out while I was gone, and it's definitely great to be back. So in the first quarter, we delivered adjusted earnings per share of $2.30, up 4% excluding currency translation compared to prior year, as benefits from higher volume and productivity were partially offset by the net impact of pricing and raw material costs as expected.
Compared to prior year, sales were up 2% on an organic basis, as higher volume was partially offset by deflation-related price reductions. And adjusted EBITDA margin was strong at 16.4% in the quarter, up 10 basis points compared to prior year, with strong margins in both segments. Free cash flow was roughly negative $50 million in the quarter and in line with our expectations. You may recall that free cash flow in the first quarter has historically been negative, driven primarily by the timing of customer rebate and employee incentive payments.
Our balance sheet remains strong, with the net debt to adjusted EBITDA ratio at quarter end of 2.3, which includes paying down EUR500 million of debt, which matured in March. We continue to execute our disciplined capital allocation strategy, including returning cash to shareholders. In the first three months of the year, we returned $331 million through the combination of share repurchases and dividends, and it reduced our share count by 2.3 million shares compared to the same time last year.
So turning to segment results for the quarter, Materials Group sales were up 1% ex-currency and on an organic basis, driven by low single-digit volume and mixed growth, partially offset by deflation-related price reductions. Organically, high-value categories were up high single digits, including strong growth in our Intelligent Labels inlay channel, and the base business was down low single digits.
In the first quarter, we reclassified roughly $10 million of Intelligent Labels sales from the Solutions Group to the Materials Group to better reflect our unique advantage in providing RFID materials to our strong converter network to further drive growth of Intelligent Labels in new categories. Overall, label materials volume was in line with the expectations.
Looking at regional volume growth versus prior year in the quarter, North America was up low single digits. Europe was down low single digits as we left a strong Q1 2024, which included the pull forward Deon noted earlier. Asia Pacific was up low single digits, and Latin America was also up low single digits. Compared to prior year, both graphics and reflectives and performance takes in medical delivered strong results and were up high single digits organically.
Materials Group delivered a strong adjusted EBITDA margin of 17.7% in the quarter, up 70 basis points sequentially and down 60 basis points compared to prior year, as benefits from productivity and higher volumes were more than offset by the net impact of pricing and raw material input costs due to the timing of deflation-related price reductions through 2024.
Regarding raw material costs, globally, we saw modest deflation sequentially in the first quarter. Our current outlook is for modest inflation sequentially in the second quarter, with higher tariffs impacting us by mid-Q2. We're applicable. We're implementing surcharges to account for these higher costs. Shifting to Solutions Group, sales were up 5% on an organic basis, with base solutions up high single digits, and high-value solutions up low single digits.
Within high-value solutions, Vestcom was up high single digits, driven by strong growth with both existing customers and new program rollouts. Embelex was down in the quarter, as Deon noted, and we expect a return to strong growth in this platform as we move through the year.
Enterprise-wide Intelligent Labels sales were up mid-single digits in the first quarter and in line with our expectations, with strong growth in our converter channel, mid-single-digit growth in apparel, and strong growth in food, partially offset by a decline in logistics, as expected. Solutions Group delivered strong adjusted EBITDA margin of 17.2%, up 110 basis points compared to prior year, as benefits from productivity and higher volume were partially offset by growth investments.
Now shifting to our outlook, we're working to mitigate the direct impacts of the recent tariff announcements while also activating our proven playbook to manage throughout various scenarios. As it relates to the direct impact of tariffs, in both the current-rate scenario as well as the scenario where the previously announced tariffs revert after the 90-day pause, a relatively small proportion of our material purchases are impacted, less than 10% globally.
It's also important to note that the vast majority of our imports and exports between the US, Canada, and Mexico, including RFID inlays, are USMCA compliant. The overall direct cost impact will likely represent low single-digit inflation on our total raw material purchases. In order to mitigate the potential impact, we're implementing some sourcing adjustments and pricing surcharges.
The indirect impact of trade policy on macro demand is more uncertain. The majority of our portfolio is anchored in consumer staples, but we also serve some more discretionary markets such as industrials, durables, and apparel. In apparel, retailers and brands serving the US market are assessing sourcing, supply chain, and pricing strategies, especially for garments produced in China. We estimate our apparel label sales in China for garments to be exported to the US are roughly $350 million annually, which represents just 4% of total company revenue.
Taking all of this into account, our visibility for Q2 is currently stronger than for the back half of the year. For the second quarter of 2025, we expect adjusted earnings per share to be up sequentially in the range of $2.30 to $2.50 with sales growth in the majority of our businesses to be offset by a mid-single-digit decline in apparel, resulting in overall sales roughly comparable to prior year.
We expect a sequential increase in earnings will be driven by our traditional seasonality, as both the calendar and Lunar New Year's impacted our Q1, as well as ongoing business momentum in some of our high-value categories, such as Vestcom, and a sequential currency benefit assuming current rates. This growth will be partially offset by our annual wage inflation cycle that started on April 1 and the impacts of tariffs on apparel revenue that we've discussed.
We've also outlined some contributing factors to our full-year results on slide 13 of our supplemental materials. To highlight a few of the key drivers, we now anticipate a roughly $7 million headwind to operating income from currency translation, assuming recent rates, which is better than the roughly $30 million headwind we expected at the beginning of the year. And we now expect restructuring savings net of transition cost of more than $45 million, which is up $5 million from our expectations a quarter ago. And we continue to expect strong free cash flow across a wide range of scenarios.
In summary, we delivered a strong quarter in line with our expectations through a dynamic environment. And we are well prepared for a variety of macro scenarios and expect to grow earnings sequentially in the second quarter. And we're well positioned to continue to deliver exceptional value to all of our stakeholders through our disciplined strategies for long-term profitable growth and disciplined capital allocation.
And with that, we'll open up the call for your questions.
Operator
(Operator Instructions) Ghansham Panjabi, Baird..
Ghansham Panjabi
Hey, guys, good morning. Greg, welcome back.
Greg Lovins
Thank you.
Ghansham Panjabi
It's good to hear your voice again. I guess first off as it relates to the first quarter, maybe give us a frame of reference as it relates to how you think tariff pre-buying, et cetera, might have impacted the first quarter. I think apparel was up mid-single digits, and then you're calling out 2Q as down mid-single digits, so just any more color on there would be great.
And then I know you're staying away from annual guidance, but for RFID specifically, apart from just the tariff uncertainty, is there anything good or bad, plus or minus, versus your outlook three months ago as it relates to 2025 in terms of new programs and so on and so forth? Thank you so much.
Deon Stander
Hey, Ghansham. Let me address that. In the first quarter, we actually didn't see on aggregate any really pull forward because of tariffs overall. If you recall the sequence of events that led through each announcement and somewhat of the retraction of the announcements, we were anticipating seeing some of our customer base adjust as they went through. But we didn't actually see any material impact at all in the first quarter.
What we did see in the really last few weeks of March, if you recall, post the 20% announcement of tariffs to China, we did see some retail brands, apparel brands, look at their sourcing decisions, their pricing decisions in that last couple of weeks. So we saw a slightly more muted demand there.
If you then look in the second quarter, our anticipation, as you said, is we're expecting sort of mid-single-digit declines for apparel. And what we're seeing so far at the start of the quarter is roughly about high single-digit declines. And that's based on the discussions we're seeing with brands and retailers really anchored around what are they trying to do to resolve the significantly high tariff rates they see currently in place with China.
And they're really focused on three actions. So one is what sourcing decisions can they make to move goods? And we're actively involved with them in that. That's actually one of our inherent strengths because of our global network. We see advantage for us in that regard. The second is, are they thinking through how do they leverage supplier partnerships and the whole ecosystem to help offset some of those additional costs? And then the third element is really, as they think through, what are they going to do in terms of pricing strategy?
And there's this area where they're actually holding largely on some of their pricing decisions. Because if you think through the supply chain, a lot of what we provide them is price ticketing, for example, that has a particular price point, retail price point, some couple of months typically in advance of when it hits the market. They have to make decisions to determine what they're actually going to price these garments at. And that's really why there's a bit of a slowdown.
We anticipate that as they make these decisions in the very, very short term that we'll continue to see orders rise. Still anticipating, given the visibility we have, that apparel will be sort of mid-single-digit decline for the quarter. On our material side, for what it's worth, we haven't seen really any impact of tariffs so far. We've not seen really any pull forward of orders either in the first quarter. And order patterns for the first three weeks so far are as expected. Perhaps a little bit of elevated volume in North America. That's probably because we have been discussing potential price surcharges. We don't expect that to be material anyway.
Turning to your second quarter on RFID, I will say that absent the tariffs and the macro uncertainty, the underlying business is on track with what we thought it was going to be. And you recall that 10% to 15% range that we gave. Again, one of the reasons why we're actually only focused on the second quarter is because even in that 10% to 15% range, apparel still makes up roughly 60% to 65% of our overall sales.
And given the uncertainty over there, we thought it better that we focus on the second quarter and what we know now. If I look across the rest of the segments, Ghansham, I don't see any change in the growth programs that we have planned, which as you recall we said would scale during the year. They're all on track in the way that we anticipated and remain very confident in those overall.
Operator
John McNulty, BMO Capital Markets.
John McNulty
Yes, good morning. Thanks for taking my question. So a question on the working capital front. It had a relatively decent jump, and I know normally that happens in the first quarter, but it seems bigger than usual. Is that a little bit of repositioning your own products and building up inventory kind of ahead of tariffs? Or if not, can you help us to understand maybe why we saw that ramp up the way that it did?
And then just another somewhat related issue on the low single-digit impact from tariffs. How do you anticipate dealing with that? Is it -- again, some of it may be moving working capital around ahead of it. Do you expect to be able to get it all through in pricing? I know you mentioned a little bit of price, a little bit of efficiency improvements, but I guess how quickly can you get that pricing through to help offset some of the tariff headwinds?
Greg Lovins
Yes, thanks for the questions, John. So on working capital, I wouldn't say there's anything really specific to call out. I think when we look at DSOs and turns and DPOs, each of them had slight increases or decreases from a DPO perspective versus prior year but nothing really significant across the businesses. I would say that we had some purchases in the fourth quarter of inventory that got us future rebates that had some impact on our inventories as we exited last year, and the payables went out in the first quarter here this year. So there's a little bit of an impact for that, but nothing really major that I would look at there.
As I talked about in the prepared remarks, we had incentive compensation payments this year, obviously significantly higher that went out in Q1 of this year than it was in Q1 of '24, given the destocking and things we had in '23 and the impact it had on incentive comp for that year. So that was a big piece of it, as well as just higher customer rebate payments that went out in the first quarter of this year, given the improvement in '24 versus '23 as well. So both of those things, higher order of magnitude this year than they were a year ago in Q1.
I think when we talk about the tariffs, as you said, our expectation is if everything as of right now and if they go back toward the higher rates in a few months, both of those scenarios result in basically low single-digit impact on us from a tariff perspective. And we're looking at pricing surcharges, as we talked about, as well as looking at wherever we can shift sourcing to mitigate some of the tariff impacts.
So it will be a combination of those things that we're looking at, not 100% pricing, but certainly in the US, looking at pricing surcharges that we would expect to go out relatively soon. Now we do have some inventory in the second quarter, so we don't really start to see a big impact from that until we get kind of midway through the second quarter here.
Operator
Jeff Zekauskas, JPMorgan.
Jeff Zekauskas
Thanks very much. So I just want to see if I can describe what you said about the change in apparel demand from positive mid-single digits to negative mid-single digits in the second quarter. Is this mostly a China event, or does it have to do with other Asian countries? That is, do you see it more as a tariff event rather than an economic event?
And then for Greg, the company bought back a lot of stock in the first quarter. You spent $260 million, which is more than you spent for the entire 2023 and '24. But at the same time, what you did is you stopped providing earnings guidance for 2025 and can only see a quarter ahead. Why did you buy so much stock even though the outlook seems to be cloudier?
Deon Stander
Thanks, Jeff. Yes, the change in from mid-single digits to sort of negative mid-single digits overall is based on what we can see at the moment. I talked roughly about what we saw initial order demand looks like as we're working with our customers to determine how best we can help them make sourcing changes, think through the entirety of how to help them offset some of these costs, but also thinking through where we can help them do pricing changes for garments, whether it's in-country or actually through the supply chain, even back into the United States.
And largely, this is really a China tariff issue at the moment. That's the way I'd characterize it. I think Greg made the point of saying we have about $350 million, roughly 4% of the company's revenue, is on apparel tags and labels that get attached to garments that get exported to the United States. And what we're seeing with customers over there is trying to determine how much they can move to other sourcing locations. We've done that historically for them for a very long time. We're their prime partner in that. We actually see advantage for us in that.
And the second piece is then how do they then also make decisions on what they're going to price point these into the markets ultimately when they arrive Stateside? I don't see it very easy to distinguish between if it's a tariff issue or if it's an economic issue, because ultimately, any high tariffs of that order of magnitude will have likely consumer volume impact at some point. Again, it's on a very small part of our business overall, and that's the way I'd characterize it.
I think it also highlights, at least for me, Jeff, just the broad strength of the franchise that we have. This is a smaller part, and we have a significant opportunity in some of our high-value category growth areas. Our base businesses across the world outside of apparel in China continue to do well with competitive advantage over there. We have a strong balance sheet that we're going to leverage and move as we move forward through the cycle as well.
Greg Lovins
All right. Thanks, Deon. Jeff, on your question on share buyback, nothing's really changed from our approach to capital allocation. I think you've heard us talk about that many times and how we think about capital allocation. Specific to share buybacks, our focus there over the years has been on and focused on generating a return on our share buybacks.
I think when you look at -- we started to increase purchases in late fourth quarter as well as Q1, coincident with the share price decline that we saw at that point in time with continued confidence in ourselves in the intrinsic value of the company and the stock. So from that perspective, we increased the pace of our buybacks accordingly as we think we can then generate a strong return.
So that's been our focus in how we think about buybacks. Of course, we use a grid-based approach, and we're disciplined in that. But when we think the share price is in a period where it's declining and well below our intrinsic value, then we'll look to accelerate our purchases. So that's what we've done here in the last few months.
I think the uncertainty that we're talking about with 2025 and full-year guidance really came about in the last two or three weeks with the increased pace of tariffs and the changes that have happened there. So that's a little bit different than, I think, our approach. We'll continue our approach on buyback, I should say. We'll continue with our capital allocation strategies. We always had. I wouldn't say that we're necessarily going to buy $250 million of shares every quarter, but of course, we're going to continue executing our strategy the way we have in the past.
Operator
George Staphos, Bank of America.
George Staphos
Thanks, everyone. Good morning. Great to hear you back, Greg, and also congrats to Danny. My question's on, again, solutions and apparel tags. And so if we think about the amount of volume or revenue that is looking to move from China to elsewhere, I recognize there's going to be some inertia. Would you be able to satisfy that from your existing locations in other countries right now, or would there be some leakage, i.e., either because you don't have the capacity in place or for some other reason? And if so, would there be a way to quantify that?
Related question, and we totally understand that the uncertainty might lead to delays in some of the pilots, but I just want to make sure that I'm understanding it correctly. Coming into the year, the outlook for IL growth was 10% to 15% with the lower end of that range, Deon, seemingly being relatively baked in based on what you knew right now. So can you help us understand how that may have changed or what the outlook should be as we sit here today given, again, so much volatility in the last few weeks? Thank you.
Deon Stander
Sure. On your first question, George, what we've historically seen in time is, and this has probably been for the last decade, is we've helped customers move their sourcing for apparel into other countries, Bangladesh, Vietnam, Cambodia, Thailand, Latin America, Eastern Europe, is that we've actually, over that time, built up a fairly robust network. It's one of the things -- I keep reiterating, it's one of the advantages we have. It's one of the reasons partners work with us in that regard.
I will also say that there is still a substantial amount of garments still being sourced in China. Its vertical supply chain that it has in that country, combined with highly efficient manufacturing, still makes it an attractive destination to source apparel in, even relative to some of the lower-cost environments. And particularly, because in some of those other countries, there's not still yet the full value chain established domestically, there's not every piece of componentry that you will need to make garments. And so you're still having to export in those countries as well.
Typically, when we see movements, we have more-than-ample capacity to be able to deal with that. And we do that both through a typical approach in terms of productivity, improving our own processes, but also just in terms of shift management and as we continue to invest in assets where we see higher returns as well.
In the scale of the magnitude, if the existing tariffs stay at the same rate, we anticipate roughly 10% or so of what remains now in China to still be probably exported back out to some other regions. This is largely as it relates to US volume. And we know within our network, we can manage it across our network.
Again, I'll point to whether the industry has enough garment manufacturing and vertical capacity to absorb that approach. And there's probably a question mark there. It will also take time to stand up factories for garment manufacturing to stand up those supply chains. So I think there's an advantage for us there and we're involved in conversations with all of those customers.
Just turning to IL, I was very clear when we talked through this last time. I saw that 10% is really strong certainty around that, largely because it was based on existing market for existing customers where they were either growing or they had new programs that were already in rollout, and we were just fulfilling those programs. And then the additional 5% we talked about was for new program rollouts, not speculative, but planned for a specific time. And the variability could come if those timings changed.
In that 10%, clearly, we still have a very large portion of apparel, George, that's anchored at roughly 60% or 65% as still apparel. And so any volatility or uncertainty as it relates to apparel, particularly the applicability of tariffs now, makes it more difficult to understand. And that's why I made the point: absent the tariff implications, our IL business, the underlying IL business is on track.
The programs that we plan to roll out are rolling out. The programs that we are destined to roll out yet from a timing perspective still look to be on that case. We're seeing significant increased interest from our food channel on the strength of what they've seen at the Kroger rollout, which, so far, we're in 25% of their stores on track for the rollout over there. And we continue to see really strong interest from the pilots that we have in food have actually expanded even further.
In logistics, we continue to see further interest as well, although I will still say that's more likely to be a '26 application rather than a '25 application. And in general retail, we've seen high levels of retailers wanting to drive compliance, and it's one of the reasons we've stood up our Materials Group channel program because we access all of those channel partners. And we've made it a clear focus for ourselves to enable them to be a mechanism for activating industry adoption from which we will benefit significantly as well.
Operator
Mike Roxland, Truist Securities.
Mike Roxland
Yes, thank you, Deon, Greg, and John for taking my questions. Greg, nice to have you back and wishing you continued good health.
Greg Lovins
Thank you.
Mike Roxland
Just two quick ones for me. Just in terms of Intelligent Labels supply globally, it seems to be increasing. Competitive dynamic obviously has negatively impacted the logistics vertical with the potential for further negative impacts. I want to get a sense, Deon, what are you doing to try to mitigate any further share erosion in logistics?
And then, yes, just also following up on a comment you just made in response to George's question about deployments for 2026. It sounds like there is something in the pipe with respect to -- with logistics. So any additional color you could give us around deployments that could potentially happen next year? Thanks.
Deon Stander
Sure. So Mike, yes, I think I've spoken previously about where we see the overall competitive landscape to be for IL. I'll just remind everybody that it's not just in a singular node; it's a series of nodes. The chip manufacturing, that's not us. There has been taking that chip and putting it onto an inlay specifically designed and attenuated for its applicability, whether it's food, logistics, apparel, whatever the case may be. We are world leaders in that with much of our intellectual property centered there.
Then you're going to have to manage data on that device. Again, we're world leaders in that. Then you have to have some form of hardware or software or hardware that reads it, and we play partner in that area. And then on the software side, there's a whole stack of software options that enable you to make sense of what that data means, whether it's applications for reading, whether it's ERP systems. And we selectively play, have bought, and have stood up applications, including our app and data I/O.
So I'd say across that ecosystem, Mike, we remain the go-to person to enable large-scale rollout and adoption. It is also typically when that rolls out that we tend to be the only or largely predominant supplier. And then in time, as sourcing decisions change within brands, retailers, and customers, they may bring on a second real service supplier, but we tend to remain the majority supplier. That's what we've seen in every instance in apparel. We've seen this in logistics. And I know, I suspect in time as the other segments roll, it will be similar.
So our aim is to make sure we're maintaining our majority share because we will disproportionately benefit then as these new segments roll out. And we're doing that really in three things. We're content to really lean into our innovation capability. And during this year, we will see new innovation, proprietary innovation, that we bring to market that is going to help unlock some of these new segments even further. And we will benefit from that.
We lean into our process engineering, roll-to-roll manufacturing capability in producing billions of items to maintain our low-cost leadership in the world in this area. And that also provides us competitive advantage. And I think the final thing is that we've learned over time, as the team that most people call for the first time out, how to position the value creation that this technology will provide. And then we back that up with support throughout the network, whether you're at source; wherever you're in garments are sourcing, food sourcing; whether you're in the supply chain; or even in retail where we help retailers do cultural adoption.
So we continue to see that as a predominant and key focus for us is maintaining our advantage in that area. I think on the color as it relates to '26 and logistics, all I will say, and I'm not going to comment on individual programs, Mike, is that in the extended pilots that we currently have going outside of UPS, which is our largest customer, every one of those pilots is actually extended slightly, some of them fairly largely.
And they're still in the pilot phase where they're testing the returns that they will see largely anchored on labor efficiency or routing accuracy. They're all directionally there, and there's not one of the large logistics providers that we're not engaged with now. If things continue in the progress in the way they are, then I don't see why that we'd not see another progress moving forward as we go through the next year or so. But again, that will be subject to how that particular customer sees it as a priority within all of their other strategic priorities.
Operator
Mike Leithead, Barclays.
Mike Leithead
Great. Thanks. Good morning, team. I wanted to follow up on the raw material side. I think you talked about inflation going into 2Q. You obviously flagged some of the tariffs impact. But we've also seen chemical prices like propylene come down quite a bit of late. So can you just walk through the broader raw material basket and what you're seeing in the key areas and how that's sort of all netting out to inflationary in 2Q? Thanks.
Greg Lovins
Sure. So yes, I think when we look at our pure raw material basket, we've got kind of sequentially looking forward, relatively stable. Maybe we had low single-digit inflation in the first quarter from Q4 to Q1, mostly paper, a little bit on our films and chemicals, deflationary as well.
I think when we look forward to Q2, we see relatively stable outlook, a little bit of -- maybe a little bit of deflation from our raw material basket, potentially offset by some of the tariffs that I talked about earlier that probably started impacting us here in the middle of the quarter. So I think from that perspective overall, it's probably relatively stable is how we're thinking about it right now. Most of our dynamics over the last few quarters have really been on the paper side more so than on the chemicals or film side for us.
Operator
Matt Roberts, Raymond James.
Matt Roberts
Hey, good morning. Greg, welcome back. Glad to hear all is well. Deon, you sound confident in the new program rollout, and I don't want to belabor questions already brought up too much. But thinking about the RFID supply chain more broadly, what type of cost impacts or tariff exposures are your suppliers or partners in the RFID value chain facing that could drive costs higher for the end retailer, whether that be wafers for circuits made in China and whether those are exempt or not or anything on the reader or printer side?
And do any cost increases there add uncertainty into your partner's own planning and the timing of those rollouts? Or have those investments really already been made from retailers that makes the timing somewhat immune to ongoing uncertainty? Thanks for taking the question.
Deon Stander
Matt, let me see if I can best address that. To the best of our knowledge, we're not anticipating substantial tariff impacts on the predominant pieces that make up the RFID supply chain. I'm deliberately excluding semiconductors out of China at the moment, those chips. Because most of what happens from a semiconductor perspective that we use and that the industry uses at the moment doesn't come out of China.
There are some local-for-local China pieces, and they get dressed over there. There may be very small elements where they're using chemicals or other substrates to make those that may be subject to some of the limited tariffs, but they're very opaque to us and I suspect very low impact overall.
In terms of hardware, there are certainly hardware players that have got manufacturing based in Asia. And there may be some incremental costs associated with that. But I suspect like we are doing, all other companies are trying to make sure they're mitigating those large lease resourcing changes. And so overall, I would suspect that the increased tariff costs to retailers or customers will be very, very limited. And in that regard, I would also say that typically, if you have such a small order of increase, it's not a deterrent.
The way we've seen the return on investment for these RFID programs, it typically pays back within a year. The returns are so strong that they would typically offset any of those. Now in discussions that we've had with our existing planned rollouts that we have currently, this has come up a couple of times, but there's been no indication from any customers that suggest they will pull back.
I put that in the context of some of our apparel customers who are wanting to roll out. They're clearly looking at their sourcing strategy, but they see still the value of doing this overall. And that may change as the environment changes over the next 60 to 90 days. And we'll see. And once we know more, we'll come back and let all of you know.
Operator
Josh Spector, UBS.
Chris Perrella
Hi, it's Chris Perrella on for Josh. I want to follow up on the capital spend. As you follow or work with your customers to relocate them, is there -- how much flexibility do you have in the capital outlays, or how much more of a step up is required to shift production or serve customers in a new region? And then I have a follow-up question on US demand. Given it's 30% of the revenue, what are your US-based customers seeing?
Deon Stander
So on the capital spend, I think I may have touched on this, John -- sorry, Chris. We don't anticipate really a significant step up in capital because we actually have available capacity. We have available shift mechanisms. We continue to work on productivity. I think the things are outlined overall. And we will, and we always do, continue to invest in capability and capacity in all of these regions but always returns based. And we look at that from an EVA perspective. I can't remember your specific second question. Maybe, John, you can help me on that.
John Eble
Just color on US demand right now.
Deon Stander
US demand or overall US demand? Okay, overall US demand, we are seeing at least on the Materials business, no change to overall US demand. I think for retailers and brands and apparel, certainly, I think I've indicated there is a current slowdown in orders specifically for China as they think through their pricing strategies and their procurement strategies. But largely for the rest of where they source from, those volumes continue to be steady as we expect.
Operator
Anthony Pettinari, Citi.
Anthony Pettinari
Good morning. On the last earnings call, you talked about expecting negative debt price in 1Q and then I think a little bit in 2Q and then stabilizing. And I'm just wondering, is that kind of broad cadence still applicable, or does it get pushed out a quarter as you implement surcharges, or is the visibility just kind of out the window? I'm just curious how you kind of think about the progression of net price given the kind of cost environment that you talked about in 2Q.
Greg Lovins
Yes, I think when we look at, as you said, versus last year, we had price down in the quarter in Materials business to go with the year-over-year deflation as we worked through that kind of final part, I guess, of that cycle of inflation and deflation we had for the last few years. So some price down in Q1 versus prior year; we'd have a little bit more in Q2 versus prior year. And when we look sequentially, we had price down in the first quarter to go with that low single-digit deflation that we had sequentially in the first quarter.
And I'll put the tariff impacts aside for a second; but otherwise, we would expect relatively stable environment from a pricing and raw material perspective from Q1 to Q2 sequentially. Now with the tariffs, as we talked about, we'll look to implement some surcharges to manage part of that. So you would expect some benefit as we move through the second quarter from a price perspective, depending on what happens with the tariffs overall and everything, of course. But you would expect some increase in price as we move through the second quarter to manage that tariff surcharge.
Operator
John Dunigan, Jefferies. Please go ahead.
John Dunigan
Thanks for taking the question, and I'll echo others in welcoming you back, Greg. Glad to hear you're healthy and back in the seat.
Greg Lovins
Thanks.
John Dunigan
I just wanted to start off with slide 15. You gave a nice, detailed sales breakout by end markets there. But it doesn't seem like you guys are considering every logistics exposure as maybe a bit more cyclical in the current environment. If that's accurate, can you provide some details around why that end market should be a bit more stable and maybe how you can touch on some of the logistics businesses and how much of that would be more for international transportation that could be impacted by tariffs, trade wars, and ongoing uncertainties?
Deon Stander
John, the way we think about the logistics piece, which is largely a function within our Intelligent Labels platform, but we also have some base business as well. And on the material side, where we've got a lot of VI labels that go into box shipments, let me break those into two pieces. So on our Intelligent Labels side, we actually see less variability, even though there may be some economic impact to overall logistics if there is a lower volume environment; and less and largely because we have aligned with that significant customer what our absolute volume will be for this year, whether that is affected by volume changes or not.
So it's largely, I'd say largely, secure in terms of where we -- hence why we see less variability. I think as it relates to if there is more volatility in the volume -- broader volume environment that impacts logistic shipments, domestically in the United States, for example, or internationally, then some of our VI label growth that we typically see, which goes on this, will be slightly impacted. But again, it's a smaller part of the overall business for us. And so we see it as largely mitigatable within our control.
Greg Lovins
Yes, I would just add to Deon's points on much of that logistics slice of that pie outside of the Intelligent Labels portion that goes to logistics is really the majority of that is within our Materials businesses. And I think if you look over past recessionary periods, our Materials business has been pretty stable.
Certainly, it's not immune to the impacts of a downturn, but it's been pretty stable throughout recessions. We've been able to hold or even grow margins in recessionary periods in that Materials business. So we feel good about -- overall, within Materials, our ability to withstand a downturn is pretty strong. And we've demonstrated that, I think, over the last number of downturns that we've seen globally.
Operator
Jeff Zekauskas, JP Morgan.
Jeff Zekauskas
Thanks very much. In the quarter in Intelligent Labels, how did the general retail category do? And given that you expect a change in apparel dynamics in the second quarter, what do you expect for Intelligent Labels' growth in the second quarter?
Deon Stander
Okay, Jeff, yes, our general retail in the first quarter was up very low single digits and as we saw compliance continue to be driven by some of these particularly large general retailers who's focused on additional categories they brought in overall. Our outlook for apparel IL in the second quarter had originally been high single digits. Sorry, our outlook for overall IL had originally been high single digits for the quarter, our expectations when we started the year.
And we know now that if the apparel impact that we're seeing, which we're saying is mid-single-digits decline for the whole business, we anticipate the range of our IL growth to be probably in the mid-single-digits growth. Again, highly variable, could move quite a lot, but that's currently where we see it at the moment. I will say that if, again, if you extract the apparel piece out of this where there is the uncertainty, all the other programs that we have and our expectations for them during the second quarter are on track.
Operator
George Staphos, Bank of America.
George Staphos
Thanks very much. I'll ask a couple questions in sequence here. So you talked about the trigger points for additional structural actions. Deon, Greg, can you talk a little bit about what you mean by that? Directionally, we know, but if you could put some detail around that or timing or what the trigger points might be, which would then drive the actions.
Second question, back to the earlier comment on sourcing and China. And I think I heard you, Deon, say that based on current tariffs that roughly 10% of what you were seeing of your volume would look to be move to other countries from China. Correct me if I was incorrect in the interpretation of your answer there. What happens if we go back to the prior tariffs? Is there a way to scale what that movement might look like and whether you would still have the capacity to take on that volume if it moves in a new tariff regime? Thanks very much, and good luck in the quarter.
Deon Stander
Thank you, George. In terms of the way we think about -- let me address the sourcing piece first, then we'll get to the trigger points after. And between Greg and I, we'll handle that. When I laid out what I thought is around 10% movement from the existing piece that's left in China, it's probably at the upper end of what we would see possibly from a supply chain capacity perspective. I'm talking broader supply chain, not ourselves.
What we know in previous tariffs, when they went up, I think, during the first administration, prior to the Biden administration, was that we saw tariffs increase. And we saw more of a steady but slow migration over time. They weren't substantial enough to drive diverted action straightaway, and we were able to respond as we were.
If there's more of a substantive requirement, so let's say over the next nine to 12 months, people want to move by season substantial portions, then the gating factor is first going to be, can they get the capacity at apparel, garment, or shoe manufacturing in those countries? Does the supply chain stand up to support all of that? And then they typically turn to us and say, can you help make that possible? And generally, even in an extreme situation like that, I think we will have the capacity to be able to address that.
Greg Lovins
Yes, and, George, to your other question about trigger points, I think when we look at various trigger points, of course, the landscape on what happened with tariffs as we move across this quarter clearly will be one thing we're keeping an eye on in terms of how that evolves. And hopefully, we end up with some negotiations when we get to a few months from now that they don't go back up, or even the China ones hopefully come down as we start to hear something about it last night.
So hopefully, we see some improvement there, but that's something we'll keep an eye on and how that evolves, and then from that perspective, where that puts projections for GDP in the macro environment for this year. So we know that projections over the last couple of weeks have come down a little bit from a number of sources. So we'll continue to monitor that and see how that evolves.
And of course, we'll continue talking to our customers, particularly in apparel, given the China dynamics there and understanding how they're looking at things, whether they're shifting manufacturing to other regions like we just talked about, et cetera. So there's a number of different trigger points we'll keep an eye on as we move through the quarter.
We're following a similar table as to how we've done in recent downturns. We look at 2020 or even in 2023 when we had the destocking. We'll look at temporary savings buckets, whether that be volume-driven actions or belt tightening and discretionary spend reductions, things like that. And then we'll look at, are there other structural actions that will accelerate or not? We already increased our restructuring savings expectation for the year here in our numbers we provided you this morning as well.
Deon Stander
George, the only thing I'd add to what Greg said is as you know, we will actually tend to probably see any changes in the macro environment prior to many other companies because of the role that we play in the supply chain. So whether it's in our Solutions business or our Materials business, we're probably likely to see demand soften ahead of many other people as well. And part of that advantage then allows us to pull into play the playbook that Greg was talking about.
I think, for me, it just constantly underlines the fact that the strength of the franchise we have is really resilient. We've gone through down cycles. And when they have happened in the past, we've actually been able to not only maintain margins in our Materials business, slight decrements in our Solutions business, but actually come about overall stronger, both from a share perspective and a market perspective overall. And I don't see that changing as we move forward.
This time around, I think we also have other levers that we are able to pull, not least our high-value categories, some of which are somewhat immune to even cyclicality. And I'll call out Vestcom as an example. This is a business for us where we're seeing significant growth because of some of the new customers we brought on board.
But typically, in downturns, when either pricing changes or there is less volume, you need more promotional activity. And actually, somewhat counter-intuitively, our Vestcom business will actually thrive more in a downturn economic cycle. Again, highlighting the resilience of our Solutions Group, is actually different to what it was even in 2020 when we saw the last real significant change overall.
So I think -- overall, I think we're well positioned. Should growth continue, we have all the innovation we bring to the market, we have the strength of our base business, but these great high-value categories differentiate, including IL. And should things change, we have a really robust playbook that allows us to take action, protect earnings, and take advantage of market dislocations where we see opportunities well.
Operator
And that concludes our question-and-answer session. Mr. Eble, I will now turn the call back to you for any closing remarks.
John Eble
Thanks, Regina. To recap, we delivered a strong first quarter in a dynamic environment. We are well prepared for a variety of macro scenarios. We expect to grow earnings sequentially in the second quarter. Most importantly, we are well positioned to continue delivering superior value through this cycle for all of our stakeholders. Thank you for joining today. This now concludes our call.
Operator
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
