Q4 2021 Edgewell Personal Care Co Earnings Call
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 is shown in our press release issued earlier today, which is available at the Investor Relations section of our website.
Management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business with that I'd like to turn the call over to Rod.
Thanks, Chris Good morning, everyone and thank you for joining us on our year end earnings call.
As you saw in the results we posted earlier today, we closed fiscal 2021 on a strong note with clear momentum.
Year ago amid the ongoing pandemic and with much uncertainty around the globe. We press forward with an aggressive set of objectives and launched our new growth strategy.
Providing a financial outlook that called for a sustained top line growth margin expansion commercial reinvestment and earnings per share growth.
I am pleased to report that we are tracking well against all of those objectives.
Exceeding our financial commitments for the year.
Executing on the strategic initiatives that are vital to driving sustainable long term growth for our company.
This performance is a testament to our team members, who have executed with excellence in a challenging environment and it also reflects meaningful investments in our brands.
A strengthened innovation pipeline and increased digital engagement and capabilities.
This was evident in our fourth quarter results and contributed to organic net sales growth of more than 8%.
Our top line strength was broad based with growth in both our North America and international markets as well as across all segments.
With strong sales momentum and disciplined operational execution.
Adjusted operating profit increased 41% and adjusted earnings per share increased 71%, providing for a strong finish to a very good year.
Now, let me turn to the full fiscal year.
In a year in which first half sales were heavily impacted by ongoing COVID-19 restrictions in many regions around the world in the second half was impacted by severe macro supply chain challenges.
We grew organic net sales by nearly 4%.
We benefited from improving consumption across all categories and our results were underpinned by strong execution and accelerated growth in Sun care women's shave and men's grooming.
For the year adjusted operating profit increased 8% adjusted.
Adjusted EPS increased 11% and adjusted EBITDA increased 7% this project fuel gross savings of $68 million.
Bind with improved revenue and overhead cost management help mitigate significant inflationary pressures that increased as the year progressed.
By all of these measures we exceeded our initial full year outlook as well as the financial targets outlined in our long term financial algorithm that were discussed during our analyst day, one year ago.
Before we review our segment results I want to comment on the broader operating environment.
As was evidenced in our results. This quarter, we are seeing a healthier demand environment across many of our categories, particularly in the United States and we are encouraged that we will likely see further improvement over time in regions of the world that have yet to experience a full recovery from.
From COVID-19 peak levels.
With the improving demand environment, we are committed to investing in our brands and our teams remain focused and agile even as a challenging operating environment persists.
We also continue to see heightened cost pressures across many commodity categories as well as higher wages and transportation costs.
In 2021 gross savings from project fuel and enhanced revenue management efforts enabled the business to offset many of these unprecedented increases.
As seen by the success with project fuel, we have built a strong core competency of continuous improvement.
And this discipline is embedded in our go forward plans.
Our teams will continue to execute on productivity and efficiency efforts and those savings will be one of the levers at our disposal in 2022 to help offset some of the expected cost headwinds.
As discussed last quarter in.
In the spring, we took a double digit price increase across our wet ones business and last month, we implemented a mid single digit increase across our fem care business.
Over the last few weeks, we have also announced to retailers in the U S that we will increase prices across additional areas of our portfolio.
With these increases more surgical in their approach and the ultimate amount and timing specific to the category and brand.
Outside of the U S. We are also taking price actions to help offset the rising inflationary pressures being felt by all.
Dan will discuss this in more detail.
Now let me take you through a few of our segment highlights.
Our right to win portfolio of Sun skin and grooming brands was the catalyst for topline performance in 2021, delivering 13% organic sales growth and strong market share gains.
Our Sun and skin care segment was a bright spot for the quarter and the year reinforcing our son category leadership position here in the United States.
Organic net sales increased by 25% for the quarter and 13% for the year.
<unk> led the way with organic net sales, increasing more than 55% for the quarter and 16% for the year.
Driven by strong consumption and share gains in North America.
We gained share in the quarter the year and on an adjusted two year basis.
And despite the difficult supply chain, a regulatory environment. Our teams rose to the challenge meeting the increased demand from both retail customers and end consumers in the quarter with our <unk> Beach, Florida facility, producing at a rate, 90% above expected run rate levels.
Organic net sales in our men's grooming business, driven by Jack Black and criminal increased by nearly 21% for the quarter and nearly 15% for the year.
And personal hygiene wet ones organic net sales decreased 7% against an 85% year over year increase in the fourth quarter last year.
While category consumption is down compared to a year ago, we regained significant share in the category.
We are benefiting from our price increase in the spring as well as the introduction of wet ones plus the.
Stronger in stock position and less secondary brand inventory on shelf.
<unk> now makes up nine of the top 10, selling skus in the category.
Our wet shave business delivered another quarter of growth with organic net sales, increasing nearly 4% reflecting strength in both the North America and international markets as.
Sales rose in women's systems, disposables and private label.
Wet shave organic net sales increased 2% for the year.
In feminine care organic net sales increased nearly 10% in the quarter.
Reflecting increased consumption compared to a year ago as well as an improving share trends led by share gains and playtex sport.
Although organic net sales decreased four 5% for the full year, we've now posted two consecutive quarters of growth and we have stabilized our share position is the solid number two player in the category.
Almost exactly one year ago, we outlined a bold path forward for edge well.
And one year into our strategy, we have delivered and beaten our ambition.
The progress we've made in 2021 has now positioned us to deliver an outlook for 2022 that calls for another year of top line growth.
While maintaining an investment stance for the business.
Although ongoing cost headwinds are.
Projected to negatively impact gross margins for the year, we will not veer from our investment mindset and.
And we still expect another year of adjusted EBITDA and EPS growth in 2022.
Finally, the strength of our financial performance demonstrated operational progress strong balance sheet and free cash flow profile, coupled with our commitment to maintaining a balanced and disciplined approach to capital allocation to drive shareholder returns has led to our announcement today of our <unk>.
Tent to repurchase approximately $300 million of.
Common stock over the next three fiscal years.
Reinforcing our pledge to increase our return to shareholders.
And now I'd like to ask Dan to take you through our fiscal year results and also provide details on our outlook for fiscal 'twenty to Dan.
Thank you Rob good morning, everyone as Rob discussed we're pleased with the strong sales and profit growth for both the quarter and full year as we continue to make good progress against our strategic initiatives outlined at our Investor day, a year ago.
By executing on our objectives. This year, despite increasing supply chain challenges and cost headwinds, we see the impact that predictable topline growth committed and disciplined commercial investment and strong cost control can have on our results and on our overall business model.
For the year organic net sales increased three 7%.
Adjusted gross margin increased 30 basis points.
A&P spend increased $25 million, and 50 basis points and rate of sale.
Adjusted SG&A improved 30 basis points in rate of sale adjusted EBITDA increased over 7% adjusted.
Adjusted EPS increased 11%.
And net cash from operating activities was $229 million and through our newly initiated dividend, we returned $26 million to our shareholders.
Before reviewing our detailed results I would like to provide some additional color on our operations and the continuing inflationary environment.
As our industry grapples with supply chain disruptions and unprecedented cost increases there has been increased pressure on gross margin as we saw in the fourth quarter.
Tight labor markets remain challenging and supply and demand imbalances and overall capacity constraints remain broad and sustained across the supply chain importantly.
Importantly, we're taking meaningful steps to offset these persistent headwinds and we will rely on the inherent capabilities that this organization develop and evidenced during the successful execution of our fuel program over the last few years.
So that ends all of our global manufacturing plants and distribution centers remained open and fully operational in.
In the face of meaningful labor constraints, we've increased and diversified our efforts to secure the labor pool needed to support our growth objectives. We continue to see sporadic supply shortages across the business, but our teams are taking aggressive actions to mitigate the potential impact going forward.
Including broadened sourcing efforts.
Creased upfront raw material buys stag.
Staggered production scheduling and overtime utilization.
And alternative transportation strategies in the U S and across Europe.
We also aim to systemically build inventory levels through the first half of the year to ensure product availability and improved service levels to our customers we.
We expect these actions will likely have some impact on working capital and free cash flow in fiscal 'twenty, two and we will continue to monitor it closely given the dynamic nature of the environment, We're operating in.
Now I will turn to the detailed results for the quarter.
As mentioned organic net sales in the quarter increased eight 4% with growth across all geographies and categories.
Our right to win businesses collectively grew 25% driven by Sun care and men's grooming.
This portfolio has now grown 20% organically on a two year CAGR with at least double digit growth across all three core categories are.
Our right to play portfolio organically grew by about 5% in the quarter versus the same period last year and on a two year stack is down just under 1%.
Our ecommerce business again saw strong results, increasing by 36% in the quarter on top of over 100% growth a year ago.
On a two year CAGR total company organic net sales increased two 3% in the quarter versus the same period last year.
Looking deeper into our segments wet shave organic net sales increased three 6% in the quarter largely driven by double digit growth in women's systems and solid growth in disposables and private brands are women's systems business continues to be the primary catalyst for growth with organic net sales increasing <unk>.
<unk> percent driven by our key brands, including hydro silk intuition and skin summit as well as private label, which grew 45% in the quarter cycling of 115% growth last year in Q4.
Disposables organic net sales increased 8%.
<unk> Systems' organic net sales decreased two 2% in the quarter and in the highly competitive north American market decreased by about 6%.
For the second consecutive quarter U S razors and blades category consumption increased growing seven 2%.
The category growth in the quarter was seen across men's and women's systems and disposables and for the first time since the pandemic began total category dollars surpassed 2019 levels.
For the 12 week period market share for the Schick franchise declined 140 basis points, driven mostly by declines in men's branded shave and disposables, while private label grew share slightly.
In branded women's systems transitory supply chain challenges continued to negatively impact our hydro silk and silk touch up brands on shelf and directly contributed to share loss in the quarter.
We continue to take steps to improve product flow to shelf as we worked through network wide supply chain challenges and anticipate a more normalized in stock position as we cycle through fiscal Q1.
Sun and skin care organic net sales increased 24, 6% driven by strong Sun care and men's grooming sales.
Sun care organic sales in North America increased about 55% in the quarter cycling, 37% growth last year in Q4.
In the U S Sun care category sales increased 16% for the quarter in part benefiting from cycling last september's low off season travel and cooler temperatures.
Ryan Tropic in Banana boat, both outperformed the category with 24% growth and collectively gained 180 basis points of market share.
Our strong execution at Walmart drove 440 basis points of share gains in the quarter and complemented sequentially improved results across both drug and grocery.
We also saw heightened share gains.
Banana boat gained 130 basis points of share, making it the number one in Sun care brand in the U S. During the quarter led by kids and sport and benefiting to some degree from competitive out of stocks.
For the season, our Sun care portfolio reinforced its leading position in the U S with consumption growth of 21% and 20 basis points of share gains while cycling last year's 100 basis points of market share gains all of which serves us well for 2022 distribution outcomes, where we have already secured.
Meaningful new distribution in club and anticipate further gains in mass and drug.
Men's grooming organic net sales increased 21% in the quarter led by strong growth across both Jack Black and criminal as the category was up 1%.
<unk> organic net sales decreased 6% in the quarter as compared to an increase of over 80% in Q4 of last year, representing a two year stack growth of over 30%.
Category consumption declined 51% versus a year ago lapping the fall 2020 peak of Covid driven sales.
Once consumption, however, increased 17%, mostly due to a strong back to school season.
Importantly, we are seeing continued brand consolidation on shelf as retailers cycled through high levels of alternative brand inventory.
<unk> has again regained the number one sales position and makes up nine of the 10 top selling skus in the category.
Fem care organic net sales increased 9%, while the U S category increased 9% as well.
This quarter market share held steady a marked improvement from last quarter and 52 week trends.
Playtex sport continued to gain share in the quarter reflective of new product launches and stronger advertising support offsetting declines in carefree and legacy brands now.
Now moving down the P&L gross margin rate on an adjusted basis decreased 30 basis points compared to the prior year.
As expected we felt the full impact of rising commodity wage and transportation costs this quarter, creating a 320 basis point inflationary headwinds.
This was partially offset by project fuel gross savings of about 260 basis points and the benefits from our springtime price increase on wet ones.
A&P expense decreased $10 $6 million this quarter and was nine 2% of net sales, which was in line with our expectations and reflects the cycling of Covid phasing of commercial activity last year.
Digital spending represented over 60% of overall advertising spend in the quarter.
SG&A, including amortization expense was $107 2 million or 19, 7% of net sales.
Adjusted SG&A as a percent of sales was essentially flat versus last year as sales leverage and product fuel savings, partially offset increased costs associated with the chromo business and higher incentive costs, some of which were onetime in nature.
Adjusted operating income was $80 1 million compared to $56 $8 million last year as increased sales higher gross margin and lower A&P costs were only partially offset by higher SG&A costs.
GAAP diluted net earnings per share were <unk> 80.
Compared to 38 in the fourth quarter of fiscal 2020, and adjusted earnings per share were $1, one compared to <unk> 59 in the prior year period, primarily reflecting increased operating income and a lower effective tax rate.
Adjusted EBITDA was $102 3 million.
Compared to $80 3 million in the prior year.
Now, let me turn briefly to a review of our full year results.
Organic net sales for the year increased three 7%.
The increase was largely driven by improving consumption across all categories and strong growth in Sun care women's shave and men's grooming.
Organic net sales increased in North America by five 2% and international markets by one 4% and on a two year stack basis total portfolio organic net sales were essentially flat.
Our ecommerce business continued to progress with sales increasing 25% for the year on top of 82% growth a year ago and now represents about 9% of total company sales.
We drove increased digital engagement and activation across the business added resources to enhance critical internal capabilities and successfully re platform our core DTC sites to our new shopify platform, while launching seven new or re platform sites during the year.
Adjusted gross margin rate increased 30 basis points year over year as project fuel savings and strong revenue management, including wet ones price actions helped to mostly mitigate heightened inflationary pressures, which increased as the year progressed.
We generated $68 million in gross savings from project fuel in fiscal 'twenty, one slightly above expectations and this was a key catalyst for our margin accretion.
A&P expense was $25 million above last year, or 50 basis points as a percentage of sales as we incrementally invested in wet shave new product launches suncor execution, and new campaigns across our women's branded shave portfolio.
Adjusted operating profit increased $20 million and seven 7% and operating margin for the year was 13, 3% flat with the prior year as.
As we navigated gross margin pressure with project fuel savings efficient A&P deployment and disciplined overhead cost management.
Our business model is characterized by strong operating cash flow generation and efficient free cash flow conversion, which we demonstrated again this year.
And net cash from operating activities for the full fiscal year was $229 million down.
Slightly from prior year.
Free cash flow was $175 million down $14 million from prior year.
Higher earnings in fiscal 'twenty, one, partially offset increased investments in capital expenditures and an outflow for working capital versus our working capital reduction in fiscal 2020.
And we continue to strengthen our balance sheet.
During the year, we further solidified our capital structure by successfully refinancing our $500 million 2022 notes, while continuing to focus on liquidity given the turbulent operating environment.
These efforts greatly strengthened our capital structure, which now has no long term debt maturities until 2028, and a weighted average interest cost of 5%.
We ended the year with $479 million in cash on hand.
Full access to an undrawn $425 million credit facility and a net debt leverage ratio of about two times.
This brings me to the topic of capital allocation.
In addition to our expected quarterly dividend payout. We are also announcing that we plan to begin buying back shares on a more proactive and consistent basis.
More specifically, we intend to put our healthy excess cash to work and repurchase approximately $300 million in shares over the next three fiscal years.
We've always maintained a disciplined multi dimensional approach to capital allocation and while we will continue to prioritize investing in the sustained growth of this business. We remain equally focused on providing strong returns to our shareholders.
With our strong liquidity and credit position and outlook for continued healthy free cash flow generation now is the time to implement a more systemic approach to share repurchase to complement the dividend that was initiated earlier in the year.
Of course, we will continue to monitor other external factors, which may affect the rate and pace of our share repurchases.
Turning to our outlook for fiscal 2022.
As Rod mentioned earlier, we are encouraged by the improving demand environment across many of our categories, but also recognize that we face a challenging marketplace with ongoing supply chain disruptions and significant cost inflation likely remaining in place well into fiscal 2022.
Despite the near term macro inflationary pressures, we will remain in an investment stance, while appropriately balancing the short term need to manage this challenging environment by increasing our reliance on accelerated productivity and cost savings programs.
Against this backdrop, we feel confident in our ability to sustain topline growth, while accelerating our project productivity and efficiency efforts to deliver year over year, adjusted EPS and EBITDA growth.
For the fiscal year, we anticipate low single digit organic net sales growth with similar growth rates in half one and half two.
As we look to gross margin, we anticipate between 80 and 100 basis points of year over year decline with accelerated declines in the first half of the year before moderating in half two.
As productivity programs scale and price realization increases.
Our outlook contemplates approximately 350 to 400 basis points of inflationary headwinds, partially mitigated by further productivity gains and the benefit of price increases and further revenue management efforts.
We will remain in investment mode with respect to A&P in support of our growth outlook with A&P, increasing $1 and remaining largely flat to 2021 levels as a percent of sales.
Adjusted operating profit margin is expected to be largely in line with 2021 levels on a full year basis.
However, we expect significant operating margin rate contraction in the first half of the year as a result of these net inflationary headwinds.
We expect that income from operations will sequentially improve as price increases take effect and productivity programs scale.
Adjusted EBITDA is expected to be in the range of $365 million to $385 million quarterly.
Quarterly interest expense is expected to be about $17 million.
Other financing income is expected to be approximately $6 million to $7 million for the year, reflecting estimated hedging gains that offset FX translation impacts in gross margin as well as favorable pension income in fiscal 'twenty two.
Adjusted EPS is expected to be in the range of $2 98.
To $3 26.
We expect to generate about two thirds of our full year adjusted EPS in half two of the fiscal year.
With respect to our share repurchase our outlook only includes the expected share repurchases required to offset dilution.
The benefit to EPS from additional share repurchases transacted over the course of the year have not been contemplated in our outlook and will be additive to EPS and.
And finally free cash flow conversion is expected to be approximately 100% of GAAP net earnings.
For more information related to our fiscal 'twenty two outlook I would refer you to the press release that we issued earlier this morning.
And with that I'd like to turn the call back over to the operator to begin the Q&A session.
We will now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Wendy Nicholson with Citi.
Please go ahead.
Hi.
Morning, Congratulations on the great numbers.
I actually have two questions. If it's okay. Just first on the share repurchase program.
I know you said youre going to have a balanced approach to capital allocation, but my question is sort of with regard to the M&A outlook, you've done a great job with the acquisitions that you've made.
Still as big of a priority can you comment on what Youre seeing in terms of additional targets.
Just want to make sure that we shouldnt read.
The share repurchase authorization as a statement that maybe additional acquisitions is less of a priority.
Yes, Hi, Wendy Stan good morning, Thanks for the question, Yes, no absolutely our M&A strategy is 100% unchanged. We remain really focused on our primary goal of investing in the growth of this business and M&A is a super important lever there also a really important.
Piece of how we think about diversifying our portfolio over time and gaining a meaningful foothold in growing categories. So that is unchanged for us and as we've been saying I think our capital allocation approach if you will.
Is multi dimensional and so.
As we think about the M&A component of that are highly focused on it still thinking about tuck in type acquisitions that are less complex and easily <unk>.
For us to integrate in terms of the market there, yes, there's quite a bit of activity in the market. There is certainly a high degree of supply right now and.
And we are super busy looking across all categories for interesting assets brought anything you would add.
Yes, good morning, Wendy I would just add we've been looking at this capital allocation.
Policy for a while now and throughout the pandemic. We felt was important first to get the dividend in place, which we did a year ago, we've always had our eye on share repurchase.
And I think just waiting for us to have the level of confidence in our business plan going forward.
Commit to a meaningful program, which we've now put in place. So we're lapping that and to Dan's point. It does not take M&A off the table arguably it raises the bar for M&A, which I think is a good thing actually.
Got it great that sounds great and then I actually had a totally unrelated question I hope that's okay.
You talked about the strong growth in the private label business, which is great, but I'm just wondering in mist.
Sort of operating environment.
Huge headwinds, we're seeing from a cost perspective is there anything we need to think about in terms of the margins on private label that you are generating or the private label.
Selling prices going up sort of in concert with the branded price of the price gaps staying the same or anything we should think about that because you are one of the few guys out there who actually does a meaningful amount of private label manufacturing. Thanks.
Sure Yes, no look I think you have to really think about private label not just through the entry price point filter, but also.
Branded retailer programs.
High growth online businesses Theres quite a rich balance there within private brands and we obviously are the supplier of choice high growth business for us and I think as interesting high contribution margin business for us on par with what you would see on our on our branded business. So again, we're super excited given our.
Our capabilities here to be growing a big piece of the business by the way private brands as big and in Fem care. If you just kind of think about it in size and spits off some really interesting economics.
Terrific. Thanks for the color.
Sure. Thank you Wendy operator next question please.
The next question comes from Jason English with Goldman Sachs. Please go ahead.
Hey, good morning folks.
Echo Wendy's sentiment congrats on good results a good year.
A couple of questions first just for clarity Dani. Thank you kind of hinted at this in.
Closing remarks, but.
Your guidance is not predicated on share repo should we interpret that to mean like hey, the repo options out there, but unlikely to be deployed anytime soon.
No absolutely not Jason I think the way we thought about it was just complexity of modeling right because the repurchase algorithm is always going to be subject to market conditions and our ability to go out and buy we do intend to put <unk> in the market somewhere in the quarter. So we are we are.
Committed to the program, we just didn't want it to become a distraction. If you will from the modeling of the core business.
Got it that makes a lot of sense. Thank you and I'm sorry I was.
Distracted a bit I missed the comments that you made on inflation headwinds for next year. So two part question here. One can you just recap what inflation was how much pressure. It was this past year. How much you expect next year and then with project fuel now behind US how should we think about productivity programs going forward.
Yes, so the inflationary outlook that we have for the year I think we said it in our prepared remarks was in the neighborhood of $3 50 to 400 basis points to think about it as around 7% of Cogs.
Sort of how we're seeing the picture.
And not surprisingly it's made up of the same ingredients that we've been talking about first and foremost as commodity pressure, where we're anticipating double digit year over year inflation, and then to a lesser degree labor and warehousing distribution probably in the mid single digit range. So if you put all of that in together.
It will get you back to your 7%.
Total inflation as far as.
Fuel becoming productivity.
The way that we're thinking about it. This year is we have a really good line of sight to somewhere in the neighborhood of 175 to 200 basis points of cost reduction in Cogs. So we may not be calling it fuel and we may not be talking about a formal three year program, but as we've as we've said consistently.
Lee This is in the DNA of edge well now to.
Continue to execute on and Youll see it in the year are ranging from further automation, which obviously helps on the labor line expansion of our global procurement business, so bigger and bolder getting into more designed to value savings, which which lead to really interesting structural reductions and then.
Lastly, just a complete sort of intolerance for waste within our manufacturing facilities to process excellence and relentless on overheads. So that's our view of it. In addition, we have identified another 60 to 75 basis points of cost reduction in SG&A structural cost take.
Mostly across global functional businesses.
That's great stuff. Thanks, a lot I'll pass it on.
Thanks, Jason Thank you Jason Operator next question please.
The next question comes from Nik Modi with RBC capital markets. Please go ahead.
Thanks, Good morning all.
Dan maybe you can just provide some.
Prospective on what Youre embedding.
In guidance in terms of consumer behavior, but also on the input cost inflation you have some companies are using spot rates all of those are actually using forecastle just wanted to get your thoughts around how you guys are thinking about that.
Yes, sure and good morning.
So our procurement team is looking mostly at 12 and 18 month forecast across all commodity areas that we by now the degree to which we buy on spot versus have more multiyear contracts. Some of those contracts have have fundamental indices in them that bring them.
Back to some degree to market. So theres a lot of puts and takes but we're as we've always been we're focused on a 12 to 18 month timeline. It is a highly fluid environment as I'm sure you all are hearing in your other calls.
And for every day, that's something like resins get stronger, which is where it is now we're seeing a little bit of.
A slowdown in inflation, we're seeing availability increase.
You can turn on you get a little more pressure in things like Sun chemicals, which are sourced out of China. So it is highly fluid changes quite frequently but we're taking a more long term view on it Rob do you want to you want to comment on how we thought about the categories and consumer.
I think the demand picture Nick for US moving forward. We think is net positive versus 'twenty. One you have some care business that I think has <unk> in it for US internationally in particular is those markets, where later to reopen are still in the.
Process of reopening.
Arisen travel to a certain extent will come back online in fiscal 'twenty. Two that was that was effectively zero in 'twenty, one and so I think there is some net tailwind.
The Sun care business as well.
On shave.
The big business, we've grown our wet shave business three quarters in a row.
Behind some level of recovery of the category, improving and we expect that to continue as we continue to reopen more people get back to the office here in the U S. But also globally.
We're seeing that happen as well and so I think in those categories, where we're pretty optimistic.
Then if you look at men's grooming, we've continued to see growth there and I think we continue to be optimistic around the demand in fem care as well coming out of the trough of 'twenty one.
Great. Thanks, guys I'll pass it on.
Thanks, Nick Thank you Nick Operator next question please.
The next question comes from Bill Chappell with <unk> Securities. Please go ahead.
Thanks, Good morning.
Hey, Bill Hey, Bill just a thought on pricing I mean.
Certainly.
Positive here that Youre now kind of more on the surgical pricing versus kind of broad based but kind of wondering where you are versus competition, especially within wet shave.
You've seen the the leaders who are the competitors.
Go ahead of you go further than you or is everybody kind of moving at the same pace and the same rate.
Yeah. So on wet shave built specific to your question I don't think were in a leadership position here.
Where we're at a point, where others have made some statements about what they intend to do.
We would follow where it makes sense.
In some cases, we want and we'll just look at it segment by segment SKU by SKU.
As we kind of assess what we're going to do we know what we're going to do but some some of it is still not clear on some of the segments yes.
Throw it to Dan for a little more specificity because its very different market by market. The U S versus Japan. For example, yeah, Yeah, Great point, So I would say, we're combining both a broad brush strategy, where that makes sense in a surgical strategy where that is required. So the broad brush element, you've actually already heard about wet ones.
Double digit price increase last spring, so we'll get about a half year run rate out of that.
We've talked about fem care with a 6% to 7% increase.
That has now been executed through the trade. So we'll pick that up in 'twenty, two and then I would say international wet shave while it is absolutely being executed on a category by category brand by brand market by market basis, It's broad brush, especially where we have market leading positions like Japan.
I think where you see more surgical application for US is certainly around Sun care, both U S and international and U S branded shave. So that's how I would think about pricing for us in 'twenty two.
That's helpful. And then just on the U S kind of wet shave as we look at the <unk> resets for the spring.
You'll be comping.
Obviously, I think it was dollar shave and Harry's expansions at math at the same point this will be your first.
Kind of full ownership for listings of Primo as you go into the to the planning on any kind of color or do you see for the U S market there.
Yes, it's early right we're still not.
Closed here so to speak but early signs are really encouraging for us I'll start with the headline in club, where we are super excited we've gotten full distribution across Sam's and Costco for banana boat, we have gotten new distribution in Sam's for wet ones. We've got.
Online distribution with Sam's and Costco for intuition on the women's side of the business. So club is proving to be a really exciting channel for us as we look at shave still a lot of work to be done we like where we are on both men's and women's particularly in drug we've gotten strong execution at walgreen.
<unk>, we've gotten hotspot shelf designation at Cvs on our hydro silk brand you might recall that was flamingo last year enjoy the year before so again, there's work to be done here team is doing a phenomenal job and our early read is positive.
Okay.
Just to build on this beyond.
Just individual outcomes, which are now net positive in total is dan's laying out versus the past.
Not only is that being driven by great brand building work by the by the marketing teams, but we are working at a strategic level with our retailers in a better and different way than we were historically and it starts with <unk>.
Whats the pricing gap is the one with the consumer get the pricing right. What's the margin structure with the retailer the retailer margin right just get those fundamentals in place.
And once those are in place then the brands have a chance to do their thing and compete versus whatever else is out there and so I think it's a it's a strategic structured layered approach as we work with the Big U S retail partners to strengthen those relationships to set the ground for the brands to do their things and Thats taken a couple of cycles.
To get that right and you're now seeing the fruits of that labor.
Come through.
Got it thanks for the color I appreciate it.
Yeah. Thank you Bill.
Operator next question please.
The next question comes from Kevin Grundy with Jefferies.
Please go ahead.
Hey, good morning, guys and congratulations on the continued progress.
Question, probably for both of you actually just the building blocks for the low single digit organic sales growth guidance.
If you can do it we'll look great, particularly on a two year stack basis, it'll be a number that the company has not put up in quite some time. So the question is really around visibility and the building blocks to get there the year over year comps going to be more difficult consumer behavior sort of normalizing, but still a little bit of flux, we see.
Colgate dealing with this in hand soap right now.
As an example pricing elasticity as had been good is that kind of holds.
<unk> opinion is probably not to the degree that it is at least at the moment.
And I guess, Rob what I heard you say earlier that the guidance is predicated on continued growth in wet shave and fem care.
Progress is good but be that as this.
Sort of unique and we haven't seen the company there in a long time in either one of those businesses at least on a sustainable basis.
And relative to the company's long term algorithm, which is 10% to 15% growth and the right to win and flat to down and the right to play. So it seems like the guidance is predicated on.
Improvement that you haven't seen in a while and the some of the troubled businesses. So.
A big Windup for your visibility on this and your confidence to deliver on this algorithm, which is a little bit different than how you kind of put together the longer term algorithm, so a little bit verbose, but I. Appreciate your insights there. Thank you.
Yes, Thanks, Kevin Good morning, you're right. It is a bit different I think I'll start at a high level and I'll turn it to rod on the specifics by category, but.
It's always going to be a factor of.
What each category is cycling.
Covid recovery that we've contemplated the role of price by category.
So with that as the backdrop I would say look our line of sight here is low single digits. We've modeled 3% just to be super clear on that we think about half of that comes from price and half of that comes from volume.
We think that the growth rate sort of half one and half to a reasonably consistent and the growth rates.
International and North America are reasonably consistent so.
Then you get into the sort of category by category play and you are right. We are looking for continued.
Growth in wet shave, we saw that in certainly in Q4 and for the full year. So we will we will grow on top of growth and then in Fem care. Yes, we are calling for growth coming off of mid single digit declines and obviously that 6% to 7% price increase that we put through is a big is a big driver of that.
So those are those are the headlines in terms of how we see it brought any color you want to add by category.
Kevin I think your question's a good one.
The knowledge of our strategy is recognized in the question and.
So we're not changing our strategy.
Youll see I think as the year plays out.
Is in those right to win categories, we're going to have accelerated growth that growth will still be ahead of what we see in right to play with wet shave and fem, but what's very important.
It's in all of the above strategy now every category every segment of the business is contributing to the growth, albeit at different rates and in the past we've had portions of the business that have either been sick or needed some attention and where the bigger leaky buckets, we've now addressed that with.
Brand health generally I talked I touched on the retailer relationships earlier.
And you start to then put on increasing capabilities around activating digitally better with consumers and we grew in E comm, 87%.
Two years ago. The year. Just finished 21, we grew 25% on top of that 87% we have growth projected in that category again that channel again and now suddenly you are looking at that being gone from what was three or 4% of sales a couple of years ago to nine last year going up from there.
So we've got better brand building better retailer relationships better channel mix, and frankly, a better portfolio positioned for growth and we had a couple of years ago. So with all of those things coming through in the building blocks.
Very good I appreciate the color. Thank you.
Thanks, Kevin Thank you Kevin Operator next question please.
The next question comes from Olivia Tong with Raymond James. Please go ahead.
Thanks, and congrats on the quarter and outlook.
Hey, can we talk a little bit about Sun care, obviously thats been on fire can you just help us quantify how much of that you think is a benefit from the issues that some of your peers and can you talk about what youre doing to.
Maintain sustain.
What I assume it's a fair number of new consumers when competition.
Eventually it comes back in those categories and then I've a follow up thank you.
Yes, Olivia I'll start and then throw it over to <unk>.
Dan So we love the Sun care category, we've said that before we love the brands, we have in the category and their positioning.
As we as we went through 'twenty one what's.
What you saw is demand for people to be outside outside safe right in a COVID-19 environment and there was pent up demand certainly this past summer season for people to do that more than ever can be safe doing that I think there is also at the same time.
Consumer.
Behavior and learning around long term health and wellness, one of which is taking care of your song the number one thing that ages skin is exposure to sun.
Skin care skin cancer incident rates are going up not down and so you put all that together and structurally.
It's a it's a growth category as we look at it and see.
So you have that going on in the season were up on a two year stack basis.
Our relative performance vis vis competition this past year, whether it be this year. The two year stack period, we've grown share with our brands and out competed the competition part of that is around just being available at shell with products that are safe and meet FDA standards.
And so you saw some others struggle with that.
We benefit from that obviously now going forward I think we remain bullish that the underlying trends around people wanting to be outside more protect their skin more sets up well for continued growth Dan referenced some of the distribution outcomes. We have we like the.
<unk>.
Profile in terms of number of points quality of distribution in the year to come in 'twenty two.
Then we liked it in 'twenty one 'twenty two it was pretty good and so it sets up well and so while there is always going to be competition.
Think we're in a position where we like our position and we feel really good about the category.
Great. That's helpful. And then on share repurchase you mentioned earlier, you know not to read too much into the share repurchase authorization as of you on the deal environment, but how are you thinking about the timing on that share repurchase given that.
You were kind of out in the market for the last few years do you think that is it more of a.
It's sort of an equal equal equal over the next three years or is it more catching up for lost time.
And just how youre thinking about the timing of that.
Yes, it's a good question look I think it's difficult to say over a three year period, how will that play out right.
Simply because of the unknowns, but our intent here is to is to put a <unk> five in the market in the quarter and begin and begin to actively buy back shares. The other factors will ultimately impact at what pace.
Over the time period, but we.
We think $300 million over the three years.
Is the right amount for us certainly digestible with our excess cash how that plays out between the years difficult to say at this point other than we intend to be super consistent here in that ambition.
Great. Thank you and best of luck.
Thank you. Thanks, Olivia operator next question please.
The next question comes from Chris Carey with Wells Fargo Securities.
Please go ahead.
Hi, good morning.
Good morning.
Good morning.
Just wanted to follow up on.
Kevin's question just on the algorithm for next year.
So fem care, just sounds like pricing offsets potential volume declines.
On skin feel.
Feel good about share gains innovation distribution availability.
So I guess it comes back to the.
The wet shave business.
And I guess, what im trying to understand is just a bit more.
Subcategory level or whatever you want to call it.
Clearly the <unk>.
The women's business has driven growth.
Mobility is probably a factor there.
Private label driving growth I mean should we expect.
A similar.
Shape of that business going into next year or are you concerned about some of the comps.
And the businesses that have been doing well are you factoring or.
Relying on I guess.
The return of the office in the men's business is international versus U S. You can see what I'm getting at just.
Overall, how would you dimensionalize the shape of that business in order to drive growth next year conscious.
Yes, it's been a while since you did positive two year stack. So thanks for that.
Sure, Yes, good morning, Chris.
Total wet shave we.
We think we will likely grow in line with with total algorithm right. So in that 2% to 3% range.
It was a pretty even distribution of volume and price as I mentioned in the in the earlier question.
While we have been somewhat broad brushed and our price thinking internationally on shave given our market strength, we've been more surgical here in the U S. So there is a lot of puts and takes that.
That factor into your question on how we thought about it I'm not going to get into the subcategories of that the thing that I would say, though is.
Obviously, good line of sight here in the U S. We've got some interesting new products coming to market. We've got a complete rebranding of the hydro brand back to a ship leading name here, which we're super excited about it we have we have some really exciting news for the trade in mens continued.
Growth in women's and then lastly, remember international markets still have much more of a.
Sort of puts and takes around Covid recovery and Choppiness, particularly in our stronghold like Japan. So again, good line of sight to that for us.
Overall looking at a shave category growth that's largely in line with total company algorithm.
Thank you thank you Chris.
Operator next question please.
Currently there are no further questions.
So this would conclude our question and answer session I would like to turn the conference back over to Rod little for any closing remarks.
Thank you everybody for your continued attention.
Those that own us your support we appreciate it take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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