Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Energizer Holdings Inc (ENR, Financial) reported 1.2% organic net sales growth for the third quarter.
- The company achieved an adjusted gross margin expansion of 270 basis points.
- Adjusted earnings grew by 46%, reflecting strong financial performance.
- Energizer Holdings Inc (ENR) has paid down debt for the eighth consecutive quarter, totaling $150 million year-to-date.
- The auto care segment saw a 19% organic sales increase internationally, demonstrating strong growth.
Negative Points
- Despite overall growth, the U.S. battery category saw a 1% decline in value due to pricing and promotional investments.
- Adjusted SG&A expenses increased by $5.1 million, driven by higher labor and benefit costs, travel expenses, and depreciation.
- The company recorded a one-time non-cash $111 million impairment charge on certain intangible assets.
- Organic revenue for the full fiscal year is expected to be down roughly 2%.
- The company anticipates flat organic net sales for the fourth quarter, indicating potential challenges in maintaining growth momentum.
Q & A Highlights
Q: Can you provide some perspective on the health of the consumer and your expectations for category growth in the coming years?
A: We anticipated consumer caution and made strategic promotional investments to engage them. We expect to deliver financial growth in the back half of the year and are optimistic about future growth due to our strategic initiatives, including market expansion, digital commerce, and innovation. We aim for consistent 1-2% top-line growth going forward. β Mark Lavigne, President, Chief Executive Officer, Director
Q: Can you discuss the recent acquisition in Brazil and its impact on your international expansion strategy?
A: The Brazilian acquisition, along with the earlier Belgian acquisition, strengthens our platform by providing local manufacturing and resonating brands. This positions us for growth in both batteries and auto care in Brazil, enhancing our strategic advantage and scale in the market. β Mark Lavigne, President, Chief Executive Officer, Director
Q: What are your expectations for pricing and promotional activity in the upcoming holiday season and into next year?
A: We expect the current levels of pricing and promotional investments to remain consistent through the holiday season and into next year. We plan for a normal holiday season with typical early shipments and displays, and we are prepared to respond to retailer needs as they arise. β Jon Poldan, Vice President, Treasurer & Investor Relations
Q: Can you provide more detail on the distribution gains and their impact on your results?
A: The distribution gains are broad-based across international markets, recovering from last year's price increases. This effort has restored growth in the international battery business, contributing to our overall positive performance. β Mark Lavigne, President, Chief Executive Officer, Director
Q: How are you managing the promotional environment by channel, and are you seeing a shift to more value channels?
A: We tailor our promotional investments to meet retailer objectives, with a focus on driving top-line growth and gross margin improvement. Consumers are more value-conscious, particularly in lower-income segments, which influences our strategy in online, club, and dollar channels. β Mark Lavigne, President, Chief Executive Officer, Director
Q: Given your leverage reduction progress, how does this impact your capital allocation plans?
A: We prioritize debt paydown and aim for a leverage target of around 4 times. While we evaluate other opportunities, our focus remains on reducing debt. Any M&A activity would be leverage-neutral and closely aligned with our existing categories. β Jon Poldan, Vice President, Treasurer & Investor Relations
Q: How do consumer behaviors shift in periods of economic weakness, particularly in terms of battery pack sizes?
A: Consumers tend to migrate to both larger packs for better value and smaller packs for lower price points. Currently, the migration to larger packs is slightly greater, but we offer options to accommodate both behaviors. β Mark Lavigne, President, Chief Executive Officer, Director
Q: What are your expectations for the home center channel in Q4 and fiscal 2025?
A: We see improving trends in home center, B2B, and OEM channels. Our outlook for Q4 is flat, but we expect growth in fiscal 2025, driven by healthy volume growth in measured channels and strategic initiatives. β Mark Lavigne, President, Chief Executive Officer, Director
Q: How sustainable is the gross margin recovery, and what are the key drivers?
A: We expect continued gross margin improvement due to ongoing Project Momentum savings, favorable raw material input costs, and stable freight rates. These factors should provide a positive trend into fiscal 2025. β Mark Lavigne, President, Chief Executive Officer, Director
Q: Can you provide more details on Project Momentum and its impact on your financial performance?
A: Project Momentum has delivered significant efficiencies, with expected savings increased by $20 million to a total of $180-$200 million. The program focuses on optimizing our network and driving gross margin improvements, which will continue to benefit our financial performance. β Jon Poldan, Vice President, Treasurer & Investor Relations
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
