EDGEWELL PERSONAL CARE Co Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Execution was solid despite a challenging environment, with adjusted earnings per share and EBITDA in line with expectations.
• International business represents 40% of net sales and has delivered consistent mid- to high single-digit organic growth over 4 years.
• Innovation platform focuses on consumer-centric renovation and revolution, with examples like expanding Billie, Bulldog, and Hawaiian Tropic.
• Productivity and efficiency are cornerstones, with over 200 basis points of realized cost of goods savings.
• North America business is on a transformation path with new leadership, focusing on brand-building and portfolio strategy.
• Macro environment challenges include consumer uncertainty, poor weather impacting Sun Care, and tariff uncertainties.

Segment Performance:

• Wet Shave: Organic net sales down about 1%. International Wet Shave grew 3% with price and volume gains. In North America, Wet Shave organic net sales declined about 5% as gains in women's systems were offset by declines in other categories.
• Sun and Skin Care: Organic net sales were essentially flat. North America Sun declined due to Easter holiday timing and poor weather, while international had notable value and volume market share gains.
• Grooming: Organic net sales increased 9%, led by 20% growth in Cremo.
• Wet Ones: Organic net sales increased 15% for the second consecutive quarter.
• Fem Care: Organic net sales were down approximately 9%, driven by tampons and pads.

Guidance:

• Fiscal '25 organic net sales expected to be flat to 1%. Sequential improvement expected in Half Two with Q3 net sales estimated up ~1% and Half Two net sales up ~2%.
• Adjusted gross margin accretion for full year is 70 basis points, down slightly from previous outlook due to tariffs.
• Tariffs expected to have an incremental impact of ~$3 million to $4 million on COGS.
• Adjusted EPS range $2.85 to $3.05, adjusted EBITDA range $329 million to $341 million.
• Free cash flow expected ~$130 million to $140 million.

Risks:

• Macro-economic uncertainty weighing on consumer sentiment and spending.
• Escalating tariffs impacting cost of goods, with uncertain policy and potential retaliatory effects.
• Currency fluctuations affecting financial results.
• Volatile global environment requiring focus on execution and controlling variables.

Q: Lauren Lieberman asked about dimensionalizing tariff impact and mitigation efforts.

A: Dan Sullivan explained in-year tariff impact of $3-4M, with exposure of 3-4% of COGS, and teams working on sourcing alternatives.

Q: Peter Grom asked about second half organic sales growth confidence.

A: Dan Sullivan said Half Two has tailwinds from Easter shift and cycling supply disruptions, with international, U.S. Sun Care, and Fem Care contributing to growth.

Q: Chris Carey asked about squaring execution confidence with North America disappointment and investment.

A: Rod Little and Dan Sullivan discussed North America transformation, incremental investment in Q3 for Shave and Sun, and confidence in execution despite sales profile shortfall.

Q: Bill Chappell asked about tariffs mitigation, Sun Care category outlook, and private label.

A: Dan Sullivan talked about tariff mitigation levers, Sun Care category outlook affected by consumer sentiment, and private label being a competitive advantage with stable share.

Q: Olivia Tong asked about investment areas, tariffs, inventory, and private label.

A: Dan Sullivan discussed incremental investment in Q3, tariff annualized exposure, no meaningful destocking by retailers, and private label being strategic with stable share.