Q4 2023 Energizer Holdings Inc Earnings Call
$340 million and debt paydown of $225 million.
We also delivered adjusted earnings per share and adjusted EBITDA within our original guided ranges, despite the impacts of persistent inflation and macroeconomic pressures.
I would like to thank our teams across the globe. As these results are a reflection of their dedication execution and focus on fundamentals.
As we look ahead there are several areas, which are influencing our plans for 2024 <unk>.
First we have a macroeconomic backdrop for higher interest rates resumption of student loans and the end of emergency pandemic benefits are just a few of the areas, which have taken a toll on consumer sentiment.
That shift in consumer confidence has been exacerbated by persistent inflation, forcing consumers to shop more cautiously and to reallocate their household spending across discretionary and non discretionary products.
In terms of the impact on our category, so let's start with batteries.
It is important to look at the category over the long term to understand the impact that the pandemic and broader inflationary trends have had on value and volume.
On a global basis, the battery category experienced a spike in volume growth over the course of the pandemic as consumers spend more time at home and with their devices.
As consumers return more closely to their pre pandemic routines volume normalize from the peak levels experienced in 2020 and 2021.
In addition inflation across the store as well as several price increases within the battery category added to the volume decline.
As we have begun to lap these impacts we have seen category volume growth resume in the U S. In recent periods.
The end result is a category, which is 5% larger today than pre pandemic at roughly 20 billion cells versus 19 billion cells in 2019.
Since 2015 global category volume has experienced compounded annual growth of approximately one 5%.
Over that same time period U S category volume grew roughly a 1% annually.
The strength and stability of the category stems from device ownership, which is a primary driver of consumption.
The number of devices per U S household has increased by more than 5% since 2015.
Corporation of the smartphone into our daily lives has enabled a world of connected devices with over 50% of those taking primary batteries.
Including connected home devices, such as security cameras, doorbell, and smart tags, and health devices, including blood pressure monitors and pain relief devices.
The future pipeline of devices is also strong.
Where we anticipate global consumer devices will continue to grow with many of those taking primary batteries as they do today.
Our long term outlook for the category remains at flat to low single digit volume growth supported by these healthy category fundamentals.
Moving to auto care.
The auto care category remains an attractive area for growth supported by strong category dynamics.
Miles driven exceed pre pandemic levels over 6% higher than 2019, the age and size of the car Park is also increasing.
The average age of vehicles in the U S has steadily increased and now exceeds 12 years.
And the size of the fleet has grown by over 3 million vehicles over the last year.
As vehicles continue to age and consumers feel the impact of economic pressures more of them are stating that they are performing car care of themselves versus do it for me options.
With that as the general landscape in our categories here is how we're thinking about FY 'twenty four.
The continuation of our strategic priorities underpins our plan continued margin recovery.
<unk> free cash flow and pay down debt.
Those objectives and ensure we can invest in our business and achieved the financial algorithm, both of which drive significant value for our shareholders.
Project momentum is a key driver with $50 million realized in fiscal 'twenty, three we will add an incremental $80 million to $100 million of savings over the next two years, which provides the flexibility to operate in this environment.
We will look to accelerate investments throughout this downturn with a focus on innovation and brand building to drive consumer engagement and long term consumer preference and.
In batteries, we will be disciplined in balancing our pricing and promotion strategies with the need to engage consumers deliver topline and take advantage of the improving volume trends.
When balancing these factors, we focused primarily on driving overall health of the category and continuing to improve the earnings power of the business.
In a healthy category with improving earnings we will not prioritize share at the expense of those two objectives.
In auto care, we are proud of the growth. We have achieved top line is up over $90 million. Since 2020. This represents a 6% compounded annual growth rate and is consistent with our low to mid single digit growth expectations over the long term as.
As we look ahead, we have an exciting slate of innovation launching this year and will continue to invest behind new product development and launches.
Fiscal 'twenty three was a pivotal year for auto care, we made tremendous progress restoring profitability, increasing operating margins by almost 500 basis points over last year, while maintaining stability in the top line.
Focus on pricing innovation and cost control will generate further margin improvement over the course of fiscal 2024.
Now, let me turn the call over to John to provide additional details about our financial performance in fiscal 2020 for guidance.
Thanks Mark.
I will provide a more detailed summary of the quarter and full fiscal year before turning to our 2020 for outlook.
As a reminder, we have posted a slide deck, highlighting our key financial metrics on our website.
The fourth quarter was another solid performance by the organization and the culmination of a year in which pricing and savings from project momentum offset continued macro headwinds and we delivered adjusted earnings per share and EBITDA within our original guided ranges.
Reported revenue grew two 6% with organic revenue up 2%.
The organic growth was driven by a 150 basis points of pricing across the both the battery and auto segments.
In addition to pricing, we generated roughly 100 basis points of volume due to earlier holiday shipments in batteries, partially offset by underperformance of non tracked channels as well as channel shifting which favors value offerings and loss battery distribution in a few international markets.
Adjusted gross margin in the quarter increased 380 basis points to 40% due to pricing the continued benefits of project momentum and lower transportation costs.
Adjusted SG&A as a percent of net sales was 14, 2% versus 15, 1% in the prior year.
Current year decrease was primarily driven by project momentum savings.
A&P as a percent of sales was four 1% up 60 basis points and consistent with our plans to focus A&P spending in our first and third quarters.
We delivered adjusted EBITDA and adjusted earnings per share of $185 4 million.
And $1 20 per share.
We also generated $78 million of free cash flow in the quarter and paid down $25 million of debt.
As noted in our press release. This morning, we recorded a onetime noncash $50 million settlement charge during the quarter related to a partial buyout of U S pension liabilities for.
For the full year.
Organic revenues decreased 1% as the benefits of pricing actions were largely offset by lower volumes due to higher retail pricing and general economic conditions. In addition to volume declines related to the planned exit of lower margin business and loss battery distribution and international markets.
Adjusted gross margin was up 170 basis points as pricing actions and savings from project momentum were partially offset by higher input costs.
Adjusted EBITDA grew to $597 3 million and earnings per share of $3 nine were both driven by significant gross margin improvement and the benefits of project momentum.
Looking forward to our coming fiscal year, we anticipate operating in an environment, where input costs have stabilized, but remain elevated consumers remain financially stretched and pricing and promotion in our categories will remain strategically important.
As such we expect organic revenues to be flat to down low single digits.
And at current rates for FX to be modestly negative.
Input costs, beginning to turn positive a full year of freight rate savings and continued momentum improvements more than offset the cost of targeted promotional activity, resulting in expected gross margin improvement of roughly 100 basis points, reaching 40% for the full year.
We expect A&P and SG&A levels on a dollar basis to remain relatively consistent with fiscal year 'twenty three.
Due to debt Paydown and a largely fixed debt capital structure, we expect interest expense to be favorable by $8 million to $10 million for the full year.
We also projected tax rate of 22% to 23% for the year.
Primarily through gross margin improvement and continued leveraging of project momentum for savings, we expect to grow our earnings next year, resulting in an outlook for adjusted EBITDA in the range of $600 million to $620 million and earnings per share in the range of $3 10 to $3 30.
Project momentum is expected to benefit 2024 by 55% to $65 million and has been included in the outlook ranges we provided today.
Over the next two fiscal years, we expect project momentum to generate $80 million to $100 million in savings with roughly 70% of those benefits impacting gross margin and the remainder are recognized throughout the rest of the P&L.
Due to continued investments in our underlying operations project momentum and our digital transformation, we are projecting capital expenditures for 2024 to be between 95 and $105 million.
We anticipate that continued strong cash flow aided by working capital management will allow us to cover capital expenditures and onetime momentum cost, while still delivering free cash flow consistent with our goal of 10% to 12% of net sales, albeit at the lower end this year.
I would like to provide additional context on the first quarter, given our expectations for a challenging start to the year.
Despite continued category volume improvement, we expect impacts from the earlier holiday shipments channel shifting which favors the value segment and weaker performance in non tracked channels to impact the first half of the year.
As a result, we expect organic sales to be down 6% to 8% in the first quarter and improve as we move through the year.
Gross margins should be roughly comparable to the prior year quarters.
And due primarily to the lower net sales, we expect to deliver adjusted EPS in the first quarter of 50 to 60 per share.
And finally, a few comments on our debt capital structure and capital allocation priorities.
Our debt is currently 91% fixed at an average interest rate of four 8% with no meaningful maturities until 2027.
Looking ahead debt Paydown and deleveraging continues to be our primary capital allocation priority and we expect to end 2024 below five times leverage.
We believe that consistent free cash flow generation as one of the most important factors impacting our business today.
Turning this cash to shareholders through our quarterly dividend and paying down debt provides energizer shareholders with a compelling opportunity to benefit from consistent returns combined with capital appreciation potential.
Now I would like to turn the call back over to Mark for closing remarks.
When we began the year, we embarked on a multi year transformation, which will streamline our operations improve our financial performance and ultimately shape the future of Energizer.
We have made significant progress over the last 12 months and in fiscal 2024 will focus on the same strategic priorities restoration of gross margin.
Top tier free cash flow generation and debt reduction ultimately driving sustainable earnings growth and shareholder value over the long term.
Now I'll turn it back over to the operator to open up for questions.
We will now begin the question and answer session to.
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Our first question today is from Bill Chapell with <unk> Securities. Please go ahead.
Thanks, Good morning.
Morning Bill.
Mark just to talk a little more color on kind of the state of the battery category.
And international and I'm, just trying to understand.
I understand that you believe that kind of consumer demand is fairly stable. After a few years, but im trying to understand where.
Where the promotional levels might be both especially in the U S. But also internationally in terms of do we need to go back to 2019 levels are we need to go higher than 2019 levels to kind of spur demand. Even further are you seeing kind of competitive.
Promotional levels that are different than what you were expecting just kind of talk more about the environment, there and what you need to do or what the category needs to do to kind of get back to that zero to low single digit kind of annual volume growth.
Sure Bill is a lot in there let me I'll kick it off kind of how we built 24 from a framework perspective, and then John can maybe give you. Some details on how we're how we're framing up the year I mean, it really starts with how we approach the plan for the year, which is staying consistent to the strategic priorities. We have in 'twenty three we want to continue to improve margin, which gets to a little bit of your promotion question.
But we want to improve margin, we our outlook provides a 100 basis points improvement over the course of fiscal 'twenty four we want to continue to generate free cash flow for the second year in a row consistent with our historical levels.
And we want to continue to pay down debt and our plan is to be below five times at the end of fiscal 'twenty for us from a strategic priority standpoint, our outlook achieves all of those of those objectives, but then when you take a step back to your point look at.
Consumers generally and then our categories. So if you look at consumers generally even beyond our category certainly theyre feeling pressure, there's some mixed data points out there I think it's mixed because consumers are very engaged in categories, but they're rotating around a lot of ever shifting priorities for them and that resulted in delayed purchasing.
And some trade down either in terms of from premium to value or even pack size and then some brand switching activities. All of that is based on temporary priorities and needs that our consumers are experiencing a relatively pressured environment for them, but then when you.
Delve deeper into our categories our categories, we're in solid shape.
Batteries have been on a process of coming down from normalized levels from the pandemic. The spike in demand we saw during the pandemic Youre also seeing the impact of pricing and elasticity, we've achieved sort of volume stability over the last couple of quarters, which has been a nice plateau to see in the volume trend.
<unk> roughly the same maybe a little bit more discretionary than batteries. So when you combine our strategic priorities that we want to achieve from our business with stable category trends and then a cautious consumer.
It comes down to pricing and promotion to your question in pricing and promotion discipline is critical to what we want to do it was critical for us restoring gross margins. It will be critical for us to continue to preserve gross margins and then from a promotional side I think the questions.
We constantly push as we are promoting to bridge consumers to a higher price point and keeping them engaged with our brands, we're not promoting to prime them for sort of permanently lower prices and so we're going to continue to lean in to the former not the latter.
And that's how we built the <unk>.
Four plan to make sure that we can continue to achieve the results that we laid out today, John who will go through the details to 'twenty four yes, maybe I'll just come back at some of our planning assumptions I'll start with the full year and then move to Q1, because I know that's part of what we came out with US This morning.
So on the top line flat to down low single digits for the full year and as Mark just said and battery we've seen category volumes recover we project those to be relatively flat for the rest of the year.
We're protecting auto volumes in the category to be modestly positive and in that environment, we expected reinvest some of our gross margin recovery and the pricing and promotional activity at both online and in store and as we've mentioned on top of that we will start the year with some headwinds as we saw some holiday volume shift into the fourth quarter of last year, which we don't expect to comp again.
This year.
Kind of moving on to gross margin, we continue to see improvement, we're expecting 100 basis points for the full year project momentum a great source of efficiency for us we expect that to continue generating improvements something like 100 to 120 to 140 basis points, we have seen raw material input costs kind of come back our direction, we see that being about an eight.
80 basis point improvement next year.
We continue to see transportation rate savings be beneficial and we get a full year of those this year. So we should see another 70 basis points of improvement.
After two years of significant pricing, we're expecting some of that pricing and promotion to be invested back in and we're probably going to be about 100 to 150 basis point headwind and then we've seen a lot of inflationary impacts on conversion costs utilities and wages and that should be another 50 basis point drag as I kind of talked about on the prepared remarks, we expect.
SG&A to be roughly flat and that's really project momentum offsetting some of the inflationary costs that we're seeing as well as digital transformation investment.
A&P, we want to increase that.
Our A&P dollars and probably see as kind of more in that 5% range for the year.
Interest based on our debt pay down and being 90% fixed rate debt, we expect to get about $8 million to $10 million better on interest expense next year.
And then the tax rate is going to go up a bit that's going to be between 22%, 23% next year, so that should be a little bit of a drag on our EPS all in EBITDA kind of in that 600 to 620 in EPS of $3 to three time, I'm, sorry, 310 to $3 30, and then for the Q1 outlook.
We expect our first quarter to start the year down top line about six months to 8% and that's really half of that decline is related to the shift in holiday volume in the just completed fourth quarter.
As we mentioned previously we are still seeing weaker performance in some non tracked channels.
And then we've also seen a slight shift to channels favoring some value offerings, which hasnt been of a share impact on us as well as trade down impact, we expect gross margin to be a little bit better this year than last year in the first quarter and all and we're going to see EPS kind of in that $50 to $60 range.
We threw a lot out there bill.
We didn't answer.
No I think.
My model for the next year perfect.
Just one quick follow up you did allude to the weakness in the non tracked channel and I guess thats. The DIY channel is that tougher comps year over year or has lost share or is there something else going on or is that just the way those retailers are kind of kind of asking right now in terms of store traffic.
It's a general store traffic trend.
Non tracked channels, depending upon the information that you may get so thats DIY.
Online you are seeing growth. So I would think about this way brick and mortar traditional brick and mortar down a little bit on volume.
On lines up.
Non tracked including home center is down.
Got it thanks, so much.
Thanks Bill.
Next question is from Lauren Lieberman with Barclays. Please go ahead.
Great. Thanks, good morning.
I guess one question I had does as you think about and talk about some of the trade down in the value seeking behavior, you're seeing from consumers now that you've got this broader portfolio than you did.
From time to time five years ago or so.
How does that play and what can you do with rayovac, what can you do in terms of your merchandising sacks.
Saturation fluid enough that you can leverage that broader portfolio a bit more to position yourself well for changing consumer behavior.
Kind of number one and then just number two is on <unk>.
On pricing pricing is moving negative with volumes up in tracked channels and then it looks like the same dynamic in the slides. So just curious what you can tell us a little bit more maybe on the promotional conversation, where we stand versus maybe 2019 in terms of normalized promotional levels.
And we expect that to settle out.
Thanks Lauren.
On the last point and Bill asked that as well I think on the promotional levels, we would not see a situation, where we would exceed promotional levels from 2019 on your question on value brands. I mean, the short answer is yes, we have the full portfolio. We have several value brands that can fill a need particularly in times that are consumers or experience.
Now a little bit easier to do that online because its a little bit easier to cut in than it is in our brick and mortar environment, but it is something we're leveraging we're having some encouraging discussions with retailers on that front and that's one that we'll continue to leverage as long as the <unk>.
The macro environment is what it is today.
Anything I missed on that one loren.
No I think.
That's great.
And then can I just switch for a second to auto just thinking about long term.
Margin goals for that business kind of maybe what you are willing to share on where gross margins in that business are now kind of where you think you can go to jail.
I think on that one let me take a step back on what we've experienced the last couple of years as an organization. So the first thing you have you dealt with the pandemic that tested your ability to manage supply chain disruptions, which required a greater insights proactive management of bottlenecks in greater resiliency.
We not only at the time they made the decision to solve the issues of the day, but we invested to improve sort of that operational excellence on a go forward basis and really enhance the visibility we had across our supply chain. There's been tremendous progress there than we did on auto care in terms of inflation, we got hit, particularly in auto care with with higher inflation, which.
Acquired pricing.
<unk> launched project momentum to drive sort of cost out of our supply chain you've seen some stabilization on some of the inflation rates and we've really leaned into our pricing and revenue management teams, which.
As we sit here today, our visibility across our network is dramatically better than it was pre pandemic our fill rates are at or above targeted levels. Our margins are steadily improving we've made tremendous progress in auto care up nearly 500 basis points as we talked about in the prepared remarks, so beyond the financial results from our supply chain margin management standpoint is.
The organizational muscle, we've built to be able to work through these issues and more real time basis than we have in terms of auto care, we've seen great foundational macro trends with the three main factors that drive.
Volume demand in that category and we've really.
Retrenched and refocused on margin levels, which we continue which we expect to continue to improve this year. The first target is to get back to where that business was pre pandemic and then from there continue to improve the margins, but we are always going to push to improve margins and grow that business going forward.
Okay, Great that's perfect. Thank you so much.
Thanks Lauren.
The next question is from Nik Modi with RBC capital markets. Please go ahead.
Yes. Thank you good morning, everyone.
I was hoping you hey, good morning, I was hoping you can just give some more clarity perspective on some of the international distribution.
Distribution losses that you cited is that just a competitor.
Getting hyper promotional or any any perspective around that would be helpful and then.
Just as you think about the first quarter, obviously the holiday season to some degree is very important for at least the battery business given.
Device trends et cetera.
What are you kind of baking in in terms of your assumptions on how the holiday season progresses.
In your in your guidance. Thanks.
So on the international distribution, we were again, a priority last year and this year is restore margins to our business, which requires pushing pricing in some international markets.
We were aggressive on our pricing in that.
Cause some loss distribution it wasn't overly promotional it was simply just a pricing discussion, where we were very disciplined and that caused some distribution losses, we still believe thats absolutely. The right approach to take we would do exactly what we did from a pricing standpoint, if we had to do it all over again, because we needed to restore our margins, which will allow us to <unk>.
Back in the business and then ultimately regain that distribution through healthy category management, which were always which we're always focused on.
And then the second question the holiday on holiday, Okay on holiday right now we have great support from our retailers going into holiday.
We're planning for success.
There's going to be some caution with both from us and from retailers in terms of how does the early holiday season play out.
As consumption look and thats going to drive sort of replenishment discussions as you get further into holiday. So I would say there was some caution as we planned for Q1, and we've heard a little bit of caution.
From retailers as they hit at all because they want to see how it plays out but that will play itself out sort of as you get closer towards Christmas.
Excellent Super helpful and disclosure on guidance in the release and the presentation was also very helpful. Just wanted to pass along that feedback right.
<unk>.
The next question is from Adrienne <unk> with J P. Morgan. Please go ahead.
Yes, good morning, Mark John you mentioned that.
Half of the 6% to 8% declining sales in the first quarter.
It's actually it's related to.
To the.
To the shifting the holiday sales like pull forward.
The other part is yes is the other part more of a consumption impact for <unk>.
<unk> product can you bridge the other half if its the loss of distribution you mentioned now for international or it should really consumption at this point that's moved to your pointing the non tracked channels.
And I was wondering I was wondering if you can also breach that from E. Commerce perspective, if youre seeing that kind of tracking.
Two more promo add your key partner e-commerce. Thank you.
Yes.
Start from a digital standpoint, and John can breakdown some of the the sales differential I would say from as Youre seeing consumers shift online theres, a natural share shift from us from brick and mortar from online we don't have as high of a share and online as we do in some of our brick and mortar retailers. So that's causing some of the shifting.
Dynamics I would say right now you're seeing.
Promotional levels that are a little bit higher than last year, but theyre lower than what we had seen in 19, I think youll continue to see promotional levels be around those levels and to the earlier questions. I don't think youll see it exceed 2019, I think the importance for promotion right now is bridging consumers to those higher price points and continue to sort of train them up the value scale.
As you work your way through what is a tougher macro environment for them in China on the breakdown Andre Youre right half of the decline is related to that shift in holiday volume into the fourth quarter.
The other parts of your kind of equal measure for the rest of the difference, but I would say half of that difference is consumption and it's really in the non tracked channels that we talked about and thats foot.
Foot traffic and things like that and then as Mark just mentioned, we have seen a shift to when we talk about those channels favoring value offerings that does have that share impact on us as well as some of the trade down in which hits the top line.
No that's super helpful. And then if I can just squeeze one clarification so.
If we put in the first quarter rate of <unk>, 8% decline so midpoint of minus seven and then the balance of the fiscal <unk>.
Im assuming when you said flat volumes right. So that implies flat volumes and batteries for next year, so that implies a bit of a.
Well first of all that that those volumes will be flat for the remainder of the of the year the fiscal year.
And then second you have some.
<unk> is that fair that you're going to see organic sales organic sales and <unk> as well as your volumes in <unk> in your embedded outlook for.
For the nine months remaining of the year.
Yes, so so volume should be relatively steady we think for the category over the rest of the year, we do expect our own performance to still be probably challenged in the second quarter, even but really as you get into the third and fourth quarters. We think we should we should see some improvement from there on the top line.
And on pricing do you think that pricing will because you've been firm and disciplined with the promos you don't think pricing will be turning negative.
Well.
Well, what we said was that.
Pricing overall, I don't think that Theres any broad based price increases that we would talk about there is no incremental pricing coming through and we've kind of lapped all of it heading into 'twenty. Four so we do think that we'll reinvest some of our margin improvement back into <unk>.
Pricing and promotional activity and so I kind of called out on the gross margin side, you heard that theres, probably a little over 100 basis points of negative pricing drag for the year.
Mhm, Okay. That's super helpful. Thank you.
Thanks Sandra.
The next question is from Dara <unk> with Morgan Stanley. Please go ahead.
Hey, good morning.
So first just for clarity I think I heard that you expect an incremental $80 million to $100 million in project momentum savings is that correct.
So over the next several years it is okay with the $50 million plus this year.
Whats driving the upside relative to your original goal.
And then b of that incremental $80 million to $100 million, how much is slated to come through in fiscal 'twenty four versus fiscal 'twenty five.
Fiscal 'twenty four is $55 million to $65 million of savings what drove the upside we went into this a little bit in the last quarter's call, where we talked about adding a third year allowed us to undertake some projects from an operational network standpoint that we're a little bit constrained from a two year standpoint, but that yielded greater savings.
It's just a few more projects that we're able to.
Complete and the three year time period, and we've also been able to make some organizational changes from the digital transformation, which is driving some of the savings in SG&A, but all in three year program.
Wondered $30 million to $150 million total.
Great. That's helpful. And then just on the battery pricing front, obviously, one of the hallmarks of the battery category has been pretty consistent price increases over time.
I understand why youre not seeing that this upcoming fiscal year with the consumer and retailer environment, but can you just discuss conceptually as you move beyond this year your expectations in terms of pricing for the battery category and maybe compare and contrast that with the environment in fiscal 'twenty four.
24 feels a bit like a reset year for a lot of categories in terms of just getting back to foundational elements of category management I would say the focus for our organization is continue to invest in the brands continue to invest in products, both on batteries and auto care and allow those investments to then drive opportunities for pricing going forward.
Third batteries has not been kind of a year over year price increase type approach over the years. It's always been every couple of years there have been price increases.
I would expect that to continue but I do think we have to continue to rebase ourselves at the current level I think consumers have to.
Buying the price points, we have to continue to normalize promotional activity and then from there you invest in brands you invest in innovation and that's going to drive pricing discussions going forward.
Great. Thanks, guys.
Thanks, Dara Thanks, Ron.
The next question is from Rob Einstein with Evercore. Please go ahead.
Great. Thank you very much and I know you've kind of touched on this in different places, but I think we're still a little bit of confused on the volume outlook.
I think you had mentioned that the holiday volume you had a tough comp.
But.
I think but I have is that you were down 5% in December of last year. So I don't know if thats correct, but trying to trying to square that.
Second can you give us any sort of sense.
Kind of a breakout between your shipments in your takeaways in the U S and.
And internationally for batteries kind of where those look.
Particularly in terms of your guidance in the quarter.
Then.
If theres any kind of weird destocking, that's going on in any particular country or category.
And then tied to that.
Any thoughts in terms of what's what people are keeping at home in their pantries in terms of batteries. Thank you.
Well, let me start with the.
The first point on the holiday just so we're clear we had holiday shipments for this holiday that moved into Q4 of 'twenty, three and Thats about half of the headwind that we're seeing going into Q1. So it's really the sequential quarters not year over year on the holiday side.
I think your second question a little bit was about inventories at retail I think we've sold in ahead of the holidays and I would say that the inventories that were seeing are relatively in line.
We need to see how the sell through goes through over the next month really but we feel like we're in pretty good shape. There and then on the consumer front I would say we've consistently engaged.
Our research with consumers and for a period of time they were always they were buying for immediate needs.
And with their consumers are delaying some purchases right now which is what we're seeing from consumers generally theyre also using household inventory to meet current needs.
But I would not say there is an abundance of consumer inventory if anything it's decreasing as they make prioritization decisions as they shop in today's environment and so I would not there is not a headwind from consumer.
Inventory levels, if anything it could be a bit of a tailwind once the macro.
Environment becomes a little bit better.
Thank you.
Thanks Robert.
The next question is from Hale Holden with Barclays. Please go ahead.
Yeah.
Hi, good morning. Thanks, So I just had two follow up questions on the category growth comments you made I was wondering when you think about device growth over the next couple of years.
If that was going to be more in the health care side blood pressure monitors glucose monitors et cetera or.
If you were going to see it from somewhere else.
I would put home automation in line with sort of health care automation and the devices that come from both of those.
As sort of <unk> and <unk> in terms of where those devices should come from.
Great.
The second question was.
Your comments around the shift to online where you had lower share or is that specific to the non tracked kind of.
Home stores or was that broadly across the domestic market.
It's broadly across online market.
Yeah.
Okay. Thank you very much.
Thanks Al.
Again, if you have a question. Please press Star then one.
The next question is from William Reuter with Bank of America. Please go ahead.
Good morning, I have two so the first one you talked about the first quarter headwinds.
You talked a little bit about DIY and then you talked about the timing shift I didn't hear anything about kind of seasonal SaaS with your retail partners being down year over year were there any changes to the amount of distribution that might be and kind of.
Specific to the holiday period.
Any changes to the amount of shelf space that they're allocating to the products.
There is not it's consistent year over year, what we're seeing in the U S and international markets, we talked about some distribution losses and that obviously would impact holiday, but in the U S. Holiday sets are largely consistent with last year.
Okay, and then just secondly from me.
Did mention that there may be some shifts going on to non tracked channels.
Alright, sorry, rather that your market share of online.
Non tracked channels, there's a little bit lower.
Are there any changes in terms of consumer consumption around private label, you talked a little bit about how you have rayovac and some some lower priced options that you can try and kind of fill those gaps but is there anything going on with private label.
Private label overall globally is up about seven share points Youre seeing.
Higher than that in the U S, but it's isolated to certain retailers as well as online as you've dealt with some of that channel shifting thats going on there in international markets on balance it's going down.
It's going down in Europe, it's increasing a little bit in APAC, but overall.
It is going down so I would say private labels within the manageable historical range of what <unk> seen from category penetration over the years.
Perfect. That's all for me thank you.
Thank you thanks, Bob.
The next question is from Brian Mcnamara with Canaccord Genuity. Please go ahead.
Hey, good morning, guys. Thanks for taking the question just following up on Andrew's question on the top line Youre, starting minus six to eight in Q1 on your easiest compare you have guided flat to low singles for the year. So what drives that improvement specifically the volume improvement in the back half of the year.
I would say from a from an overall standpoint, what we're we're factoring in as you have half of this shift from Q1.
As going into Q4 this year from a volume standpoint, we're expecting flat volume year.
Year over year pretty much throughout throughout the year and I think just healthy category dynamics in distribution that are going to drive the improvement as we get into Q2 Q3.
Is there any specific dynamics between batteries and auto care and that volume outlook.
Pretty consistent consistent between the two you can see in terms of top line youre going to see a little bit.
In auto care for the year.
Whereas as batteries.
We will be trailing that.
And then secondly, if this shift towards value offerings in batteries persistence that you change your promotional strategy for there.
Yes, I think as we analyze promotion and we wanted to make sure that you don't sort of solve the temporary problem with a permanent solution and I would say continue to invest behind your brands. You continue to promote we've got value brands, we can offer but ultimately consumers will come through this environment into a healthier environment.
Want to make sure that we can continue to keep them at the premium end of the category.
Because thats the healthier margin dynamic for us and Thats going to be continue as how do we bridge the gap.
Both with our value brands, our promotional strategies.
To continue to work our way through this macro environment that consumers are experiencing.
Thanks, So much best of luck.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Mark Levine for any closing remarks.
Thanks, everyone for joining the call and the ongoing interest in Energizer hope everyone has a great rest of the day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Okay.