Q2 2021 Edgewell Personal Care Co Earnings Call
[music].
Good day, and welcome to the Ed well Q2, 2020 one earnings call.
All participants will be and most of them only mode and you need assistance. Please signal and conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask you. A question you May Press Star then one on your Touchtone phone to withdraw your question. Please press star and too.
Please note. This event is being reported and now I'd like to turn the conference over to Chris Gough V. P of Investor Relations. Please go ahead.
Good morning, everyone and thank you for joining us this morning gradual second quarter fiscal year 2021 earnings.
With me. This morning are Rod Little our President and Chief Executive Officer, and Dan Sullivan, Our Chief Financial Officer.
Rod will kick off the call and he will hand, it over to Dan to discuss our results and we will then transition to Q&A. This call is being recorded and will be available for replay via our website www dot and <unk> dot.
Dot com.
During the call we will make statements about our expectations for future plans and performance. This might include future sales earnings advertising and promotional spending product launches savings and costs related to restructuring.
Changes to our working capital metrics currency fluctuations commodity costs category value future plans for return of capital to shareholders and more any such statements are forward looking statements, which reflect our current views with respect to future events. These statements are based on assumptions and are subject to various risks and uncertainties, including those described under the <unk>.
Caption risk factors and our and report on form 10-K for the year ended September 30th 2020.
As may be amended and our quarterly reports on form 10-Q.
These risks may cause our actual results to be materially different from those expressed or implied.
And our forward looking statements, we do not assume any obligation to update or revise any of these forward looking statements to reflect new events or circumstances, except as required by law.
During this call we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are shown in our press release issued earlier today, which is available at the Investor Relations section of our website.
<unk> believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business with that and would like to turn the call over to Rod.
Thanks, Chris Good morning, everyone and thank you for joining us on our fiscal second quarter earnings call.
Overall, I'm pleased with what we've been able to accomplish through the first half of our fiscal year. Despite COVID-19, and continuing to negatively impact consumption and our key categories and started the pandemic more than one year ago.
Encouragingly.
We are now seeing our key categories, particularly Sun care turn more and our favor.
We began to see post COVID-19, reopening and some of our key markets.
The supply chain environment remains challenging and volatile.
And as the purpose and values driven organization and our commitment to the safety and well being of our teams around the world remains the top priority.
All staying focused on this priority is paramount and our teams have excelled progressing.
Progressing a new company strategy enhancing.
Our digital and brand building capabilities.
Executing better at the shelf.
All of which has put our business on far more stable footing and positioned us well for stronger results. Both in the second half of fiscal 2021 and beyond.
Over the first half of the year, we have increased our investment and brand building new product innovation and digital activation.
We've expanded gross margin rates with project fuel, all helping to offset the impact of higher input costs and commodities and.
And our wet shave segment returned to organic sales growth in the most recent quarter.
We are beginning to see some signs of recovery and certain categories and geographies as vaccination rates increase and markets slowly began to open up.
We believe we are well positioned to deliver on our financial and operational goals for the full year.
Including accelerated organic net sales growth and the second half of this year.
Now let me take you through a few segment highlights and discuss the progress we're making against our strategic priorities, which as we've discussed are designed to transform <unk> into a growing sustainable consumer centric company.
Focused on delivering consistent top line growth and predictable profit and cash generation.
Our wet shave business returned to growth and the quarter with organic net sales, increasing 1% and importantly, marking another quarter of sequential improvement.
Our women's systems business grew over 22% in the quarter and gained market share.
In February we launched a complete redesign of our skin brand in North America.
Which included the national launch of our new sustainability focused system razor.
Refreshed packaging and redesigned prep products.
<unk> is now the second largest women's shave brand in the United States growing and more household than any other brand according to numerator consumer panel.
And the highly competitive men's systems business in North America.
Organic net sales increased 10% as we launched the new hydro skin comfort rebrand.
Releasing a new skin centric collection for men that speaks to the importance of shape comfort and credibility of the schick blade platform and underpinned by the your skin has feelings advertising campaign.
This relaunch is inclusive of new packaging product innovation, and a new marketing campaign.
And the lead innovation and the relaunch the stubble eraser, our first rates are on the market the shades of up to seven days worth of stubble with less tugging and pulling.
Products, whose design is derived from the unique consumer insight that men prefer to grow 5% to seven day stubble clean shave and begin the process again and.
And we believe this product is particularly relevant given the pandemic impact and men's shaving frequency.
Media support started in mid February ahead of plan O Gram reset and we continue to see velocities built.
Especially after activating the media campaign.
And the Sun and skin care segment organic net sales decreased by 9% and the quarter.
Primarily driven by category related declines in Sun care, both in North America and across key international markets.
And Sun care organic net sales decreased 12%.
Which was an improvement over the previous quarter. However, the business was still impacted by significant category declines and the United States and January and February and continued macro headwinds and international markets.
Consumption in North America began to turn positive at the end of March as we cycled peak locked down from a year ago and markets began to open up.
We are encouraged by the early development of the category and the United States, particularly and spring break and early holiday activity and we remain confident and the outlook for our son brands across the balance of the summer season.
The personal hygiene wet ones organic net sales decreased 10% against the 81% year over year increase and quarter two of last year.
Not surprisingly consumer habits have moderated and the category was further impacted by high levels of retail inventory, primarily driven by new non named brand entrance into the food and drug channel over the past several quarters.
Although the category is experiencing heightened volatility as it cycles last year's pantry loading activity and manages through short term congestion on shelf, we're confident both and the underlying category demand over the mid to longer term and the desire of both retailers and consumers to choose trusted category and doing.
Brands, such as wet ones.
Men's grooming organic net sales increased 8% and the quarter driven by strong e-commerce sales across all brands with notable strength and Jack Black.
Our criminal portfolio consumption grew 4% and the quarter gaming.
Gaining share as the overall grooming category declined in the face of continued COVID-19 headwinds.
I'm pleased with the progress we have made on the integration of the business highlighted by the fact that many of the commercial leaders from the organization will play an important leadership role for edge, well and we've made meaningful improvements on the brand's DTC site.
And improving content and the overall shopping experience.
We remain confident that our approach to brand building and omni channel retail will continue to drive share gains by our brands and an attractive category.
And feminine care organic sales decreased 21%.
Reflecting category declines as a result of last year's pantry load, which peaked in March a year ago and the previously discussed distribution losses, largely at Walmart related to last year's plan O Gram reset, which we are fully cycle as we enter the third quarter.
As I stated at the beginning of the call we're seeing the results and strong execution against our strategic initiatives and the impact of focused commercial investment and core brands and strategic markets.
We are also seeing the results of the improvements, we're making across areas like E Commerce brand building product innovation and design and sustainability.
Our digital and E Commerce business continues to strengthen providing accelerated growth and reflecting the investments and capabilities and resources. We've made over the last 12 months.
We successfully re platform our core DTC sites to our new Shopify platform and.
Proof copy and graphics and the sites, while bringing design and development responsibilities and house and.
And we have significantly improved the overall shopping experience for our customers.
Similarly, we are executing better on the Amazon platform directing increased levels of A&P dollars to digital activation and seeing solid share gains across our key categories.
We remain committed to incrementally investing behind our strategies and.
And in the second fiscal quarter, we made a meaningful increase and brand marketing to support our new brand campaigns and men and women's wet shave, including new product introductions focused brand building reinvestment behind our three grooming brands and continued reinvestment in our market, leading presence and wet shave.
And Japan.
This investment stance as a critical enabler of our expected top line growth profile and will continue into the third and fourth quarters.
Lastly, it's important to remind you that sustainability is embedded at the core of our strategy.
We are committed to being a positive force and the world with careful consideration for the well being of both society and our planet.
We recently launched the new Schick extreme III eco glide, the first and only disposable razor made from recycled plastic that's also fully recyclable.
And as part of the sustainable care 2030 strategy, our entire global portfolio and men's and women's disposable razors now has handles.
And with 100% Postconsumer recycled plastic.
We also announced the U S recycling program designed to help consumers reduce the amount of waste they are sending to landfills.
This new recycling program and the U S encourages consumers to package up their old razor and send the raise is back to the company.
And as an organization, we celebrated Earth day with locally led efforts across our manufacturing and distribution facilities that recognize the IR role and doing what's right for the planet.
These are just a few examples of the continued progress we're making and importantly, they are the direct result of having better capabilities across the company.
We've been through and extraordinarily difficult period over the past year with COVID-19 negatively affecting all of our key categories with complex and costly supply chain challenges occurring almost daily.
Without this period our teams have continued to work relentlessly to execute our initiatives to transform the company and I. Thank each and every one of them for their valuable contributions.
So in summary.
We sit at the halfway Mark of fiscal 'twenty, one with first half results broadly in line with our expectations and as we look to the rest of the year, we are confident and our full year outlook and believe we are well positioned to deliver the consistent top line and profit growth discussed at our Investor day.
The macro COVID-19 environment is showing signs of improvement and our key markets and our key categories are now turning in our favor, especially the all important sun season.
With that I'd like to ask Dan to take you through our fiscal second quarter results and provide detail on our full fiscal year outlook Dan.
Thank you Rod and good morning, everyone as Rob discussed we have made good progress against our strategic initiatives through the first half of the fiscal year <unk>.
Increasing investment and a targeted way and supportive brand equity building innovation and digital activation and continuing to strengthen our internal capabilities and again delivering against our fuel cost savings objectives. We.
We executed well against our framework for sustainable value creation.
And this framework is to generate consistent organic topline growth.
Efficiency and continuous improvement and core to how we run our business and a catalyst for investing and our growth objectives.
To strengthen our gross margin profile with focus on both cost and revenue management and.
And to direct our attractive free cash flow and a disciplined way to improve shareholder return.
With the first half of the year complete the progress we're making against these objectives is clear. Despite the reality that we continue to operate and are heavily COVID-19 impacted environment.
Organic net sales for the first half were down 3% inclusive of both the negative COVID-19 impact from cycling last year's pantry loading and the added impact of current year COVID-19 headwinds.
The men's grooming and wet ones components of our right to wind portfolio delivered growth in half one and importantly, we saw underlying improved performance and our wet shave category with consecutive quarters of share gains across the women's business and the U S and in both mens and womens and Japan.
And in the men's shave business and the U S. We delivered organic sales growth in Q2 fueled in part by the new Stubble Eraser launch and the new hydro skin comfort campaign.
These trends combined with the improved plant and ground and outcomes discussed last quarter <unk>.
And as well moving forward.
And half one we also delivered 40 basis points of adjusted gross margin accretion year over year and and.
And environment that is considerably more challenging unexpected both due to transitory and structural market headwinds.
Our fuel program continues to excel and is now coupled with added focus on effectively managing price promotion and mix.
Importantly, and the first half of the year, we remained in investment mode, and increasing our A&P year over year by $22 million and 230 basis points and rate of sale as we focused our investments on digital activation, new product innovation and brand Relaunches.
And strong cost discipline remains central to our business model with adjusted SG&A growth of 2% year over year, while we invested and enhancing organizational capabilities and integrating the criminal business.
And underpinning our results was continued seamless execution of our fuel program with gross savings to date and fiscal 'twenty one of approximately $33 million.
Importantly, while the categories and which we compete largely remained challenged due to lingering COVID-19 headwinds there are signs of underlying recovery as we enter the second half of the fiscal year and.
In North America, although the wet shave category declined in the quarter the rate of decline was less than Q1 and half the 52 week right and.
And we saw similar improvements in Japan, where category declines soften versus Q1, and the women's shave category turned to growth and March.
The Sun category showed structural improvement over the course of the quarter and exited Q2 with year over year growth.
Accelerated vaccine deployment easing of travel and community restrictions and consumer pent up demand fueled further category improvement and April where we saw triple digit weekly growth versus last year.
With approximately 80% of the season remaining this encouraging start to the some CS and further underlies our confidence and half to topline performance for the Sun care business.
And Fem care, which was most impacted by the comparison to pantry loading a year ago, we expect much more favorable consumption trends going forward with the cycling of prior year category declines.
And our international markets co.
And with 19 impacts and the quarter were greater than expected as we are still seeing the effects of ongoing lockdowns, particularly in Germany, France, Japan and across Latin American markets.
We saw some improvement and the U K with reopening and March and we're seeing further recovery in China, and Italy as well two of the earliest impacted countries.
Overall, we expect to see categories and most international markets recover modestly as the year progresses.
And at a slower pace than in North America.
Our teams remained focused on executing against the go forward strategy that we outlined at our Investor Day in November we.
We still have a lot of work to do we're encouraged by the progress, we're making and feel well positioned to deliver on our outlook for top and bottom line growth and the second half of the fiscal year.
Now turning to our supply chain.
First all of our global manufacturing plants and distribution centers remained open and fully operational.
And so like many others, we are seeing much tighter availability for both materials and labor and rising commodity and transportation costs as a result.
We believe we've addressed most bulk ingredient needs and have the balance of our 2021 raw material and input requirements covered.
Help manage the supply and distribution issues, we remain agile and have taken the necessary steps to ensure continuity of service.
The operational challenges experienced in Q2 were both transitory and structural and we do expect to be operating and a heightened inflationary environment for the remainder of the fiscal year.
The resulting incremental costs are fully contemplated and our full year outlook.
Now I'll turn to the detailed results for the quarter.
Organic net sales and the quarter decreased five 6%, reflecting the impact of pantry loading and the prior year quarter, which we had sized at about 240 basis points a year ago and.
And the in quarter impact of COVID-19, most notably on the Sun care and Fem care categories.
Organic net sales in North America decreased five 6% as declines in Sun and skin and Fem care were only partly offset by growth and wet shave and men's grooming.
International organic net sales declined 6% driven by a 33% decline and Sun care and a more modest one 5% decline and wet shave and as Rod mentioned, our ecommerce business grew organically by over 30% and the quarter with strong growth and all regions and all segments.
And our largest ecommerce channel Amazon consumption increased by 40% and we gained 150 basis points of market share and the wet shave category.
Our DTC performance was strong as well led by Jack Black and 19% online growth.
Looking deeper at our segments wet shave organic net sales increased one 1% and the quarter largely driven by strong performance and women's systems, new product launches and men's systems in North America, and strong growth and E Commerce.
And the U S. The razors and blades category was down three 4% and improvement from the previous quarter and a 52 week trend the.
The decline in the quarter was solely attributable to men's and disposables, reflecting continued transitory declines and shaving frequency and the work from home environment and a continued shift to e-commerce.
The women's category grew over 2% and the last 12 weeks, reflecting the cycling of last year's COVID-19 impact increased household penetration as a result of the continued shift away from salons and consumer trade up from disposables and part driven by the new skin to net systems launch.
For the 12 week period, our U S market share and razors and blades declined to 130 basis points with total share for the ship franchise essentially flat.
Women's branded systems delivered share gains for the second consecutive quarter driven by the skin to net systems launch.
Branded disposable share decreased 40 basis points and part as a result and increased brand to trade up.
And our men's branded system share declined to 140 basis points largely in line with the 52 week trend driven by increased competitive activity and the impact of previously discussed distribution losses at Sams club and Walmart.
Overall, we were pleased with the initial launch results of our stubble eraser innovation during the quarter.
And with trial at or above expectations.
The launch was reinforced with a full complement of commercial support including TV media heavy up online activation and broad product sampling efforts.
Sun and skin care organic net sales decreased 9% driven by soft Sun care sales, particularly in international markets.
And the U S, where the second quarter typically only accounts for about 12% of the full season, the Sun care category declined 2% as COVID-19, and unseasonably cold weather impacted store traffic travel and outdoor activities.
Hawaiian Tropic gained 60 basis points a share largely a result of new distribution in club and increased velocities at several key retailers.
Banana boat share declined in the quarter predominantly due to lapping of the aloe gel spikes from a year ago and strong competitive promotional activity.
Importantly, as I mentioned earlier consumption trends have meaningfully improved in April and we remain confident and both our outlook for the season and our portfolios relative performance and the U S.
Men's grooming organic net sales increased seven 6% and the quarter with solid growth and Jack Black and Bulldog and international markets.
The total men's grooming category and the U S ex razors and blades declined nearly 7% and the quarter.
Wet ones organic net sales declined 10% and the quarter as total hand wipes category sales saw significantly slower growth for the first time and a year.
Category growth was 12% versus a year ago compared to 320% growth and the first quarter as consumption lap the unprecedented spike in demand from the beginning of the COVID-19 pandemic last year.
However March sales are up significantly on a two year basis with an increase of 88% versus the same period and 2019.
And we remain confident and the durable demand for these products.
<unk> share in Q2, this year was impacted by heavy retail promotion of non branded competitive products and an effort to eliminate the high trade inventories.
Fem care organic net sales decreased 21% as compared to the prior year period, while the U S category declined 15% driven by last year's COVID-19 pantry loading.
And on a two year stack basis, Fem care sales declined mid single digits.
This quarter market share declined 160 basis points, driven by heightened competitive pressures and the previously discussed distribution losses, most notably related to gentle glide at Walmart.
Our online sales and the Amazon channel increased 11%.
Moving down the P&L.
Margin rate on an adjusted basis increased slightly compared to the prior year. Despite the challenging macro environment as further fuel savings and improved pricing and promotion and favorable mix offset rising commodity and supply chain costs.
A&P expense increased $21 million this quarter and was 13, 2% of net sales versus 9% a year ago, reflecting increased investments and focus on critical commercial efforts supporting the schick hydro relaunch stubble eraser, and skintight brand launches and men's shave and Japan.
Digital spending represented nearly 70% of overall advertising spend and the quarter.
SG&A, including amortization expense was $93 4 million or 18% of net sales adjusted.
Adjusted SG&A dollars were flat versus last year. Despite the inclusion of the operating costs associated with the criminal business investments.
Investments in key capabilities inflationary pressures and unfavorable currency translation were offset by project fuel savings and reductions in discretionary spending.
Adjusted operating income was $69 million compared to $92 million last year with the decline driven by increased investments and A&P and R&D.
GAAP diluted net earnings per share were <unk> 26, compared.
Compared to 36, and the second quarter of fiscal 2020, and adjusted earnings per share was <unk> 70.
Compared to 92 and the prior year period.
<unk> lower operating income and higher interest expense, partly offset by favorable foreign currency movement and hedge Remeasurement income.
Adjusted EBITDA was $91 million compared to $102 million and the prior year.
Net cash used by operating activities for the first half of the year was $18 $8 million.
This compares to cash inflows of $17 2 million from operating activities and the prior year quarter, which was in line with expectations.
This swing was largely attributable to higher inventory levels and lower net income.
Both our capital structure and liquidity position remains strong.
We ended the quarter with $282 million and cash on hand, and access to a $425 million credit facility.
At the start of the quarter, we successfully executed a $500 million high yield notes offering maturing in 2029 at foreign and eight well below the four 7% rate of the notes they replaced.
Our weighted average debt maturity is now over six and a half years with our next significant refinancing not until 2025.
Our net debt leverage ratio at March 31 was three times.
In terms of capital allocation and addition to investing in growth we remain committed to returning capital to shareholders, We announced another quarterly dividend this morning, and and the first fiscal quarter, we repurchase shares at a cost of $9 $2 million.
That brings us to our outlook for fiscal 2020 one.
As we discussed we remain comfortable with our previously provided full year outlook with organic net sales expected to increase low single digits adjusted.
Adjusted EPS expected to be in the range of $2 62.
To $2 82.
Adjusted operating profit margin expected to be largely in line with 2020 levels and.
And adjusted EBITDA expected to grow largely in line with organic sales growth.
The adjusted effective tax rate is now expected to be and the range of 23, and 5% to 24 and 5%.
We continue to be mindful that we are operating in an environment that has greater uncertainty than normal, making flexibility and agility a key focus.
In terms of phasing and the second half of the year, we expect largely similar rates of organic net sales growth in both the third and fourth fiscal quarters with year over year gross margin accretion and both the third and fourth quarters.
Sure.
Our first question today will come from Jason English with Goldman Sachs. Please go ahead.
Good morning folks.
And Jason.
A couple of quick questions I guess I was I was caught a little flat footed by the by the organic sales strikes and North America.
And that's a surprise, obviously all wet shave uhm.
Was there any pipeline Phil <unk>, my knee and some inundation out there abusing we got distribution uhm anything unusual.
But that we should contemplate will look at that number.
Yeah. So Jason good morning, Uhm, we did have some pipeline on the men's side and particular in the quarter as we launched the stubble eraser and the new hydro skin comfort ranges with that there was some some pikeville and the court.
<unk> on the men's side less so on women's and use it was.
He was a good quarter for us overall as you call out and the U S. Shook share was flat in the face very heavy competitive launch activity as you know and so it was a little bit down on men's but then we had the piping and on top and then women's grew nicely for the second quarter and a rug.
Overall.
A good to decent quarter for us on shaved, particularly and the U S.
And I think you guys mentioned a couple of times.
Trends and improving as the quarter progressed and can you you spoke upbeat obese around sun care on the what you're seeing and April Okay, and you put a finer point on that and <unk>. How are how are sales tracking through the quarter hour sales tracking so far into this quarter.
Yeah. So is.
And you look at the categories, we saw wet shave improve.
Improve in the quarter vs. The prior quarter right. So we're seeing a little bit of sequential improvement in the shade category.
As things start to to reopen a bit.
Aluminum chemical other chemicals et cetera, so it's slightly more inflationary environment hereon out certainly we anticipate that.
You also saw just transitory issues unique to the quarter, whether it was the weather events and Texas or the continued port congestion or even Suez canal related challenges. So I think what we're saying here is it's going to be more challenging rest of year, but what that really means to us is the net fee.
Low through a fuel will likely be absorbed that's maybe the best way to think about the back half of the year versus what we would've seen and the first half then you turn to price and promotion and our overall outlook and Youre right. We.
We do see price opportunities back half of the year, we do see continued benefits from promotional effectiveness. We have taken a price increase on the wet ones franchise, which is going into market and a Q2 now into Q3.
Those are tailwind and then what really reinforces our margin profile and the back half of the year. In addition to those elements as youre getting the benefit of leverage and.
And you're getting the benefit of mix remember, what we are cycling and mix year over year back half of the year is a pretty tough mixed.
Are you start to look at brands like Jack Black criminal and Bulldog potentially there is is some pricing power there.
Thank you both good luck and thank.
Thank you Thanks, Kevin operating next question. Please.
Our next question will come from called Chapelle with extra security. Please God.
Thanks, Good morning.
Good morning, Joe eight [laughter].
[laughter] sorry.
Question and just trying to understand you know as we walked through the the the wet shave category and and and really felt several categories. It's not the.
All play of just Gillette, and Gillette and July and it seems like there are a lot of smaller brands that are actually coming from July where others that are popping up both and grooming and and and the actual shaved so just.
Now how does that change your strategy your marketing and you know it does it make it so much noise and the space, where it's harder to differentiate just trying to understand how you grow from here with so many kind of new brands being introduced to to the various categories.
Yeah. So a good question bill that landscape is quite different and it was a few years ago no doubt.
With new brand offerings coming in and not not all brand offerings coming in and by the way, we'll we'll make it through and.
And and get into full distribution and some of them are at a retailer or specific to a channel.
But you've got to perform right to move out of that that channel space, where you start and so I think that that's still to play out and.
And how that plays out our focus has been step.
Step all the way back what we have is great shaved technology, and and IP portfolio too.
Deliver a very comfortable shave that's underpinned by sharp durable blades at last that are very consistent from packed a pack, we can do that very well and.
And you take that as a given and over time I think that that's it.
Durable peace you have to have.
To to compete and win and the category over time, we've been focused on a very different approach to brand building, an architect and our brands and it starts by working to eliminate sub brands simplify the portfolio and make our brand messaging better and make it significantly.
<unk> easier to shop at shelf and.
And so for example, you've seen us consolidate on the women's side.
And like we've got great capability around formulation regulatory safety and like the portfolio, we have with with room to add to the portfolio over time, so with that as a backdrop.
We are seeing very high levels of demand in domestic markets. So for example.
Where you don't have to travel to cross and international border within that market. So think the U S, Australia, Mexico and Continental Europe.
Within country, we are seeing very heavy demand theres pent up desire to be outside coming out of the winter season, There's pent up demand to put vacation travel back into the routine for friends and family groups.
And to go to warmer climates, and basically be around water to do that and when you do that being outside around water drives consumption and so what you're seeing play out and the scanner data right now as people are coming back online and doing that.
We have internally within our mix.
And we see potential upside and Sun care, and we have tried to position ourselves to be able to meet higher than expected demand within the year.
With pre buys and making sure we've got staffing in place, where we've had long supply chains and working to shorten the supply chain tighter power Skus SKU ranges that we can produce longer into the season. For example, so we are set up and prepared to hit.
Higher demand outcome across the summer and if frankly it goes later into the fall, which we do expect there's obviously a limit to how high you can go based on that tail.
And also then a balance that happens at the end of the year, we don't want to be shipped and anything and that we're just going to turnaround to take back or have to discount and flow through so we actually have pretty good analytics around that.
And I think a pretty robust capability to manage and execute in this category. We've got a direct store delivery team out in store that provides real time data feedback that beats anything you see in scanner data right. So we have that type of data coming back and to help inform our decisions there as well, but it's going to be and interesting summer here.
Great and so you don't see capacity constraints and near term.
Well there is bill there, there's there's a theoretical constraint out there anywhere again do do we hit that constraint, yes, or no. It just all depends on how and when.
And categories growing 2% to 300% week on week.
It can't do that all season and us none of our competitors would be able to meet that demand, but if you get to where we expect it to be we think we can hit the demand, but there are limits to it.
Great. Thanks, so much.
Thank you. Thank you Bill operator next question please.
And next question comes from Wendy Nicholson with Citi. Please go ahead.
And just wanted to follow up on that line.
Line of questioning or whatnot, and and Roger color that you offered was fantastic, but I can't.
I assume every sun care manufacturers and thinking the same thing and and going out there with a lot of inventory and I'm just wondering relative to your past summer. This feels like it could be a great opportunity from a kind of land grab perspective. So can you just talk about you know.
And your integration sort of pipeline and Sun care and your marketing program do you intend to spend more than usual.
Just just given how strong the category is going to be.
Can you remind us in the Sun care business, specifically, how much of that business is online.
Sure Daniel Yes, Andy I'll start and then I'll hand to Rod So just building on his comments earlier.
We feel really good about our position right now at the start of the season.
And we as Rod said pre bought prebuilt, we're sitting on even a slightly higher inventory level ourselves at <unk>, which you saw and the results. We've taken all of the necessary steps to be ready for the season. It probably played out a couple of weeks later than maybe we had anticipated and obviously, we've seen a really nice.
Really nice start to the quarter on RM, So feel really good about that in terms of advertising and promotion and one of the reasons. We spent slightly below the rate that we that we had thought we would spend and the quarter aside from managing COVID-19 and markets and.
Effectiveness was sun we pushed.
A fairly decent amount of our spend into <unk> that we had anticipated spending and <unk>. So we feel like we're in a really good place to start the season, we've got the inventory and the capacity we are absolutely spending.
<unk> behind the brands, probably and a more disproportionate way and <unk> than originally planned so from that standpoint feel really good about how we're prepared for the season and certainly liked what we saw in April where youre, saying, 100% growth week over week for four straight weeks. So that's our that's our overall outlook rod.
And ill throw it over to you to add any comments, yes, and Wendy I'd just add the online piece of the business is still relatively small but growing fast.
Just launched Hawaiian Tropic DTC site as an example, as a way to get the message out connect with the consumer.
And the retailer dot com the E tailor piece, we've got a good capability to drive growth through that channel and then at Amazon.
It's a growing part of the business as well so there's a good omni mix there, but it skews more traditional brick and mortar retail at this point from an innovation standpoint.
We're really excited about the pipeline what we have in the pipeline to come.
Is really exciting in terms of product forms.
The package form itself.
Product formulation around mineral mineral sprays.
Not only the efficacy, but the skin, Phil and ease of spread and and.
And how you get the product on your body. We've got we've got innovation around that as well and I think the marketing teams have done a great job with.
With the brands around the messaging the brand equity the positioning to pull Hawaiian Tropic and to more of a better for you range, where banana boat and all around protect the fund outside and the Sun more of a sport active type positioning and.
And so as we look at the pipeline the clarity of the messaging and what we can do going forward I think we are and the best position we've been in the category.
Certainly since I've been here and this is coming off of a base period last year, where we grew share and so we are healthy and the category at the moment and as the category improves we would expect to go with it.
Terrific. Thank you so much for all of that and I appreciate it.
Yeah. Thank you. Thank you. Thank you Andy Operator next question. Please.
Our next question will come from Chris Carey with Wells Fargo Securities. Please go ahead.
Hi, good morning.
Hi, Chris.
How are you guys doing so.
I guess I'm trying to understand this outlook for the back half of the year and that I have.
I have a follow up but I think you said.
Net organic sales growth in fiscal Q3 in fiscal Q4.
It should be about the same.
And I guess.
And part of that part of the problem with that our challenge. There is just the comp differential and I'm, taking also into account and the fact that the Sun care business seems to be off to a really good start and the quarter and comps are incredibly easy and so.
I guess, what I'm asking is are you implying that the wet shave business is going to reverse what happened this quarter perhaps.
After the pipe fill.
Not necessarily suggesting thats, what youre, saying, but but.
Certainly there is day.
There are pretty significant comp differentials between Q3 Q4, but the outlook is for both quarters about and light and I guess, what I'm just asking is I'm trying to reconcile those because it doesn't make a whole lot of sense to me on face value.
Thanks for just any clarification, there and I have a follow up.
Yes that was a lot Chris I'll try to make it simple we do you have the the outlook right we anticipate.
Largely similar rates of organic growth in Q3, and Q4, 6% to 7% range for both.
You have to remember the categories, we play and our lapping very different years last year and I wouldn't write to Sun category off completely you might recall the sun season actually extended into had a very strong and of the season for us and went much longer than a normal sun season would go.
And wet ones is cycling unbelievable growth.
It's really difficult I would encourage you to look category by category and go back and recall, how Q3 and Q4 played out because I think if you paint it with a broad brush of must be cycling COVID-19.
Come to the wrong answer we do not anticipate.
Wet shave will decline back half of the year, that's not our thinking.
<unk> heard US talk we're bullish on songs so we would expect growth in Sun.
And then of course, it's still growing and wet ones, although at a slower rate for obvious reasons. So hopefully that answers the question and I can get you a little more comfortable on the back half of the year.
Yes, no I appreciate that and then it's not necessarily questioning and the back half of the year as much as the cadence from Q3 to Q4, just given the comps are so much easier.
One quarter to the next but the organic sales growth as.
It's implied to be the same for both quarters. So.
And just didn't know if there was a.
Hi, Tal reversal dynamic going on or yeah. There was.
Other.
Underlying issues or not issues, but dynamics and one of the businesses to be mindful of.
But I suppose thats helpful.
And just as a.
Just as a follow up.
Can you, maybe just drill down a little bit on.
Kind of what Youre seeing and the.
The wet shave business.
Returned to organic sales growth is phenomenal.
From a maybe like a volume versus price and mix dynamic what are your general observations on channel mix between online and and.
And in store and then maybe just any developments that youre seeing on the private label business day.
General idea there is.
Nice to see that business returned to organic sales growth and just maybe what youre.
We're seeing a little bit more under the hood. So thanks, so much for all that.
Yes, Chris I want to I want to stay on Q3, Q4, because you don't sell them satisfied and it is not that complicated so I want to make sure we get it.
Wet ones is cycling massive tailwind from a year ago. So while we still see growth that is at a much slower rate for obvious reasons Fem care is sort of the opposite ends of the spectrum cycling a heavily impacted COVID-19 category. So.
That's what you're alluding to sort of growth on a negative comp having so you put those two to the side. We anticipate continued growth across wet shave not too dissimilar from what you saw and <unk> and we expect <unk> to be slightly growing as well and remember that cycling a very down in Q3.
But cycling a surprisingly strong Q4 the way the Sun season played out so that's what gets you to very different composition Q3 versus Q4 by category, but that's what gets you back to similar growth rates. So I'll leave it there I'll hand, it to rod for shape and Chris.
Okay, Thanks, Rod that the.
Dan and team have done good math on the quarters and the outlook.
We'll talk about it next quarter, but I think the guidance hopefully pretty clear and then if we need more time, we can do it and a follow up with Chris and Dan.
In terms of wet shave just in general the category remains very competitive here in the U S.
Across both men's and women's.
And that in fact is true.
The internationally.
While it's the less dynamic around just level of competition, it broadly and international markets.
There is a higher level of lockdown on balance right now internationally and so you are seeing.
Back what we saw in the winter months here and the states.
With that and the other markets Youre seeing the category recovery lag internationally, we still expect that to come as we get into the next couple of quarters, but its a very different profile between the us and some of the international markets.
The online channel.
Has grown over the last year and so via the lockdown.
And while the category has declined over the past year around fewer shaving incidents with the more remote work.
More casual.
Roche to the grooming habit, if you will through that period online has grown and brick and mortar has lagged, but as we now cycle.
A year into this and get to what are frankly easier comps and brick and mortar we're seeing that catch back up and we're seeing a return to a more normal not quite flat category, yet and our read but we think heading back there, which is where we were pre pandemic.
Yeah.
Thank you thanks, Chris.
Hey, thanks, everyone.
Alright. Thank you. Your next question please.
Thanks, David a question Thats Star then one next question will come from.
Yes.
And it was with book.
Bush and bank. Please go ahead.
Yes, hi, good morning.
Hi.
Yeah, and your comments earlier on the call regarding where you expect to be as it relates to EPS outlook for the year was really helpful. And then I'm wondering if you could talk about the organic sales growth and whether the composition of all right.
<unk> sales growth.
So the Euro has changed for you I know, we're still at low single digits, but it sounds like.
And you seem to be suggesting that there is upside and sun care and.
And I'm curious and.
The launch on the mens shaving side has gone better than expected. So just some comments around and then wet ones I don't know it feels like it so it's a little bit not as good as expected. So I'm curious if you're recalibrating sort of how you get to that low single digit number for the year.
Yeah, Hey, Faiza. Thanks for the question and I think youre spot on and you might recall when we when we developed the guide initially we said low single digit organic growth largely driven by wet ones was kind of the easiest way to think about it and now sitting here at the halfway point I don't know that I would.
Say what one's results are disappointing I think we knew at some point that the tailwind of if you can make it you can sell it was going to run its course, we still see growth for wet ones back half of the year. So we still certainly see opportunities, particularly as we gained distribution in grocery and drug which we werent able.
And to gain just due to product.
Product constraints, so there is growth and the profile, but maybe a bit less and what we thought it's probably contributing.
A half to a third of our growth for the year organic growth and thats being reinforced by absolutely.
Encouraging results on shave and you saw that this quarter and rod talked about it, particularly the womens side, where we are we've now gained share two straight quarters, while while still cycling through the distribution losses.
And or data can be a little misleading as we as we look at the online portion our market share online is typically higher than it is and retail brick and mortar.
And the other thing that's been true here more lately is not only is our share bigger, but we're gaining share online Vista V competition.
And that's true and shave as well and and so it's a it's a growth area for us that doesn't show up and the scanner data.
But over time look and brick and mortar retail scanner data.
We need to be positive right I mean, we've challenged the teams to success is not just delivering.
And annual budget number of successes delivering market share gains and winning and market visa V competition and and so is recycled through this.
What you should be looking at I think in the near term is are we hitting our numbers that we've committed to you.
Via the guidance dance put out and over time are we growing are losing share and and all outlet look.
And not just X AFC brick and mortar, but that's still a big component so.
It's a complicated answer to the question is it is kind of all of the above but I don't want to be losing share in and anything we track right over time and that's all we've been talking to other teams about this is recycle and the physical twenty-two.
Great that that's very helpful. Thank you.
Thank you have as as far as and the operator next question place.
Or a pair of there being no further questions. So this will conclude our question and answer session and I'd like to turn the call and such like over the Rod Buddle CEO credit closing remarks.
All right well. Thank you everybody for your time and your continued interest B C B, well and we will talk to you and three months.
Thank you.