Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prestige Consumer Healthcare Inc (PBH, Financial) exceeded its sales and earnings expectations for Q1 2025, despite supply chain challenges.
- The company experienced strong international growth, particularly with the Hydralyte brand, contributing to overall performance.
- Free cash flow increased to $54 million, enabling debt reduction and share repurchases, enhancing shareholder value.
- The Hydralyte brand continues to grow at a mid-teens CAGR, with strong market presence in Australia and potential for geographic expansion.
- The company maintained a leverage ratio of 2.8 times, indicating strong financial management and stability.
Negative Points
- Q1 revenue declined by 4.4% compared to the prior year, primarily due to supply chain issues affecting the Clear Eyes product line.
- Gross margin was impacted by higher air freight costs, resulting in a lower margin than forecasted.
- Adjusted EPS decreased to $0.90 from $1.06 in the prior year, affected by lower revenues and increased costs.
- The women's health and cough-cold categories faced continued pressure, impacting overall sales performance.
- The company anticipates ongoing supply chain challenges, particularly in the eye care segment, which may affect future sales timing.
Q & A Highlights
Q: Can you confirm if the supply chain issues for Clear Eyes are being resolved as expected, and have there been any shelf or share losses in the eye category?
A: Ronald Lombardi, CEO: The Clear Eyes supply chain is on track as discussed in May. We used air freight to expedite shipments, which helped meet demand. Clear Eyes remains well-positioned at the shelf, focusing on ensuring product availability to meet consumer demand.
Q: Are there any concerns about inventory destocking in the pharmacy channel due to store closures and supply chain rationalization?
A: Ronald Lombardi, CEO: We haven't seen significant headwinds from inventory reductions. While some channels have activities, growth in others offsets this. The impact is more on cough-cold categories, which we are not heavily involved in.
Q: Are you seeing any shifts to private label products or new consumer dynamics in your categories?
A: Ronald Lombardi, CEO: Consumers are shifting where they buy for better value but not changing what they buy. Health care is a priority, and consumers prefer trusted brands over saving a few pennies.
Q: Can you provide details on the decline in North America sales, specifically regarding Clear Eyes, women's health, and cough-cold categories?
A: Christine Sacco, CFO: Women's health and cough-cold categories were down about $5 million each. Cough-cold trends are expected to be flat to slightly down. Eye care saw strong performance from TheraTears, Debrox, and Sty brands, offsetting declines.
Q: How is the manufacturing situation for eye care, and will air freight continue to impact margins in the second quarter?
A: Ronald Lombardi, CEO: Production levels are as expected, with suppliers ramping up output. We anticipate using air freight in Q2 to maintain service levels, which is included in our guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
