Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Edgewell Personal Care Co (EPC, Financial) reported a 160 basis point increase in gross margin, driven by productivity initiatives and strategic revenue management.
- The company achieved 7% year-over-year adjusted EBITDA growth and 23% adjusted earnings per share growth, exceeding expectations.
- International businesses sustained momentum with over 6% organic net sales growth, driven equally by price and volume gains.
- The Grooming segment saw double-digit organic net sales growth, supported by new product rollouts in Cremo and Billie in North America.
- Edgewell Personal Care Co (EPC) raised its full-year adjusted EBITDA and EPS outlook, reflecting strong financial performance to date.
Negative Points
- North American sales declined by over 2%, primarily due to underperformance in the Feminine Care business.
- The Wet Shave and Feminine Care segments in North America faced challenging category dynamics and heightened promotional levels, impacting growth.
- Persistent sluggishness in Sport tampons and delays in the Carefree pads rollout negatively affected Feminine Care sales.
- The macro environment in the US remains challenging, with persistent inflation, labor supply-demand imbalances, and higher interest rates.
- The company anticipates further headwinds in the fourth quarter due to ongoing supply challenges in the shave preps business in North America.
Q & A Highlights
Q: Can you discuss the durability of growth, particularly in Shave and Feminine Care, and the investments needed to achieve this?
A: Dan Sullivan (CFO) explained that international growth has been strong, driven by both price and volume. In North America, they expect volume growth in Fem Care and Sun Care in Q4, driven by the Carefree launch and a stronger sun season. Rod Little (CEO) emphasized that leadership changes aim to accelerate performance and innovation, with a focus on better execution and gross margin accretion.
Q: Can you provide more color on the updated top-line growth expectations for Q4, especially in Shave and Sun Care?
A: Dan Sullivan (CFO) stated that they expect double-digit growth in Sun Care and mid-single-digit growth in Grooming. Shave is expected to be slightly down, while Fem Care is anticipated to grow low single digits. He also mentioned that July shipments were in line with expectations, setting a solid base for Q4.
Q: How are you thinking about the ability to drive productivity at current levels looking into next year?
A: Dan Sullivan (CFO) noted that a combination of productivity, price, and revenue management has been a good proxy for their business. He emphasized the team's focus on cost discipline and productivity savings, which they plan to double down on going forward.
Q: What profile are you looking for in the next head of North America, given the current macro challenges?
A: Rod Little (CEO) stated that they are looking for someone who can balance brand building and marketing with strong commercial execution. The new leader should be consumer-focused and commercially savvy to accelerate performance in the competitive North American market.
Q: How confident are you in delivering the raised profit guide despite increased promotional activity?
A: Rod Little (CEO) and Dan Sullivan (CFO) expressed confidence in their guidance, noting that promotional spend levels required to be competitive are already contemplated in their outlook. They have a good line of sight on productivity savings and promotional intensity.
Q: With the organizational changes, should we expect greater productivity?
A: Rod Little (CEO) explained that the changes aim to accelerate performance and innovation. Dan Sullivan (CFO) added that the focus on productivity savings will continue, and the changes will help unlock more value and dry powder for investment.
Q: How do you view your marketing levels, given that A&P spend has been down?
A: Dan Sullivan (CFO) emphasized the need to balance A&P with other investments like R&D, innovation, and trade spend. The leadership changes aim to unlock more value and allow for better investment in all aspects of the business.
Q: Are you seeing increased private label competition in razors?
A: Rod Little (CEO) mentioned that private label razor shares have been relatively stable. He noted that well-architected value brands like Billie are also benefiting in the current environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
