Edgewell Personal Care(EPC) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 19% year-over-year growth in adjusted EBITDA and over 50% growth in adjusted earnings per share, both exceeding expectations [34] - Adjusted gross margin increased by 320 basis points, driven by productivity savings and price management strategies [44][47] - Adjusted EPS was $0.88 compared to$ 0.56 in the prior year, with currency movements having an unfavorable impact of approximately $0.02 per share [45] Business Line Data and Key Metrics Changes - Organic net sales growth was 0.1%, with strong performance in international markets and double-digit growth in Sun Care and Grooming offset by declines in North America Wet Shave and Fem Care [40] - Grooming organic net sales increased over 18%, led by over 26% growth in Cremo in the U.S. [17] - Wet Shave organic net sales were down 4.5%, with declines in men's and women's systems offset by slight growth in disposables [15] Market Data and Key Metrics Changes - North America organic net sales declined by 2.8%, with double-digit growth in Sun and Grooming offset by declines in Wet Shave and Fem Care [40] - International organic growth was just under 6%, driven by both price and volume gains, with notable growth in Japan and Europe [39][40] - The overall U.S. category consumption declined by 0.4%, a significant drop from the previous quarter's growth [39] Company Strategy and Development Direction - The company aims to return to pre-COVID level gross margins over time and is focused on executing productivity programs and investing in innovation across various product lines [34][11] - The strategy includes a focus on international markets, with expectations for continued growth in mid-single digits [64] - The company is also launching the Carefree master brand, which is expected to drive growth in the Fem Care category [67] Management's Comments on Operating Environment and Future Outlook - Management noted challenges in the drug channel due to declining foot traffic and competitive pressures, which are expected to continue impacting performance [25][50] - The company anticipates a more promotional environment in the second half of the year, which may affect margins but is confident in its ability to manage costs and maintain profitability [62][122] - The outlook for fiscal 2024 includes expectations for organic net sales growth in the range of 2% to 4%, with adjusted EBITDA projected between$ 348 million to $360 million [21][22] Other Important Information - The company returned$ 23.5 million to shareholders during the quarter through share repurchases and dividends [46] - The company is experiencing a shift in consumer behavior, with indications that consumers are using products longer due to economic pressures [57] - The company is leveraging advanced analytics to optimize advertising and promotional spending, focusing on ROI [106] Q&A Session Summary Question: Comments on shelf resets and drug channel recovery - Management indicated that delays in shelf resets are due to labor shortages and that the drug channel is expected to remain a drag on business in the coming quarters [50][67] Question: Early indications for Sun Care and inventory levels - Management expressed optimism about the Sun Care season, noting good distribution and inventory levels, but emphasized the need for favorable weather to drive consumption [52][81] Question: Outlook for North America versus international business - Management expects North America to grow at a lower rate than international markets, with a focus on maintaining profitability despite challenges [64] Question: Fem Care sales outlook and new launches - Management anticipates a recovery in Fem Care sales in the second half of the year, with new product launches expected to drive growth [89] Question: A&P spending levels and strategy - Management stated that A&P spending will be adjusted based on market conditions, with a focus on driving ROI and supporting new product launches [104][106]