Q1 2025 Edgewell Personal Care Co Earnings Call
Speaker Change: Good day and welcome to the Edgewell first quarter 2025 earnings conference call.
All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2.
Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Chris Gough, Vice President, Investor Relations. Please go ahead.
Chris Gough: Good morning everyone and thank you for joining us this morning for Edgewell's first quarter fiscal year 2025 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, Dan Sullivan, our Chief Operating Officer, and Fran Weissman, our Chief Financial Officer.
Chris Gough: During this call, we may make statements about our expectations for future plans and performance.
Chris Gough: This might include future sales, earnings, advertising, and promotional spending, product launches.
Chris Gough: Savings and costs related to restructuring and repositioning actions, acquisitions and integrations.
Chris Gough: impacts from tariffs and other recent developments, changes to our working capital metrics,
currency fluctuations, commodity costs.
Inflation, category value.
Chris Gough: future plans for return of capital to shareholders, and more. Any such statements are forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to future events, plans, or prospects.
Chris Gough: These statements are based on assumptions and are subject to various risks and uncertainties including those described under the caption risk factors
Chris Gough: and our annual report on Form 10-K for the year-end of September 30, 2024, as amended November 21, 2024, and as may be amended in our quarterly reports on Form 10-Q filed with the SEC.
Chris Gough: These risks may cause our actual results to be materially different from those expressed or implied by 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.
Chris Gough: 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.
Chris Gough: A reconciliation of the non-gap financial measures to the most directly comparable gap measures is shown in our press release issued earlier today, which is available at the investor relations section of our website.
Chris Gough: This non-GAAP information is provided as a supplement to, not as a substitute, or as superior to, measures of financial performance prepared in accordance with GAAP. However, management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business.
Rod Little: With that, I'd like to turn the call over to Rod.
Rod Little: Thank you, Chris. Good morning, everyone, and thanks for joining us on our first quarter Fiscal 25 earnings call.
Rod Little: Brand knows our business well and is more than ready for her expanded responsibilities.
Rod Little: We delivered solid results this quarter, despite an external environment that has become increasingly more volatile and uncertain.
largely driven by the strengthening of the U.S. dollar.
Rod Little: Importantly, we saw continued growth in international markets with gains across wet shave, sun care, and grooming, and global growth in our Right to Win portfolio.
Rod Little: Gross margin at constant currency was again strong in the quarter and served as an important catalyst for year-over-year incremental brand investments.
Rod Little: Despite the worse than planned foreign exchange headwinds, as Fran will discuss later in the call, for the whole year we still expect to deliver organic net sales, adjusted EBITDA, and adjusted earnings per share within our previously provided outlet ranges.
Rod Little: This reflects our continued focus on driving operational performance, being disciplined in our investments, and management of costs and controlling the controllables.
Rod Little: It also assumes the current macro conditions do not materially deteriorate.
Rod Little: Importantly, we believe our performance demonstrates traction against our broader strategic priorities. It gives us confidence in our ongoing efforts to further transform the business.
Rod Little: Putting our first quarter performance in the context of our broader strategy, there are three important themes that underpin our performance to date, as well as the broader outlook for the full year.
Rod Little: First, the categories we compete in remain mostly healthy and consumption trends are in line with our expectations.
Rod Little: While organic growth remains mostly a result of price, volume gains have returned in many markets.
Rod Little: and consumer sentiment related to experiential spend and personal travel continues to be positive.
Consumers remain resilient and at the same time cautious.
Rod Little: Though in our categories, which are mostly non-discretionary, in everyday use, we see no material signs of purchasing hesitancy nor trade-down behavior.
Rod Little: Having said that, the U.S. wet shave and fin care categories remain highly competitive and promotional.
Rod Little: Importantly, we have no material indications of a similar trend across international markets.
Rod Little: We will continue to actively participate, as needed, in support of our brands on shelf, making our outsized productivity savings and gross margin expansion even more important as it unlocks our ability to remain in an investment stance commercially.
Rod Little: The second comment I would make relates to our international business.
Speaker Change: I am extremely pleased with our results here, and as Dan will discuss, the underlying drivers of our performance further reinforce the durability of our top-line growth.
Speaker Change: Of course, in the absence of weekly scanner data, the success is not as readily visible.
Speaker Change: But for International, the first quarter was our fifth consecutive quarter of organic sales growth and 11th in the last 12 quarters, delivering a three-year kegger of nearly 8%.
Speaker Change: Importantly, share results were also strong, especially in leading sun care markets like Australia and Mexico.
and also high-growth wet shave markets like China.
Speaker Change: Now representing 40% of our global business, we've never been in a better position internationally, and I'm increasingly confident in the future of this business.
Speaker Change: Relatedly, we're also seeing the initial benefits of our rebuilt innovation platform.
Speaker Change: As I've shared, we are committed to a more consumer-centric, locally-driven new product development model, and we spent much of last year taking the appropriate organizational steps necessary to deliver on these objectives.
Speaker Change: While work remains, our consumer insights are better, we're more locally focused and informed, and we're faster in bringing new products to market.
Some of which are already having an impact.
Our strong international results this quarter include contribution
Speaker Change: from the highly successful and disruptive launch of Schick First Tokyo in Japan.
Speaker Change: the broadening of our bulldog range to deepen our skin care penetration in Europe, and meaningful new forms and formats in sun care that supported strong share gains in Australia and Mexico.
Speaker Change: Third and finally, our business transformation continues to be most dependent on our talented people.
Speaker Change: I've said from the beginning, we are equally committed to both a business and a cultural transformation.
as we will not have one without the other.
Speaker Change: Our team is highly motivated and continues to perform with excellence in the face of an increasingly challenging environment.
Speaker Change: having been recently recognized as the number two best mid-sized company to work for out of 400 ranked.
Speaker Change: Our efforts are clearly being recognized externally, and our ability to attract and retain top talent is a key catalyst for our continued strong performance.
Speaker Change: Over the past six months, we've announced a series of leadership changes and organizational changes designed to strengthen our capabilities and operating model, streamline decision-making, and improve enterprise execution.
Speaker Change: In the quarter, we saw notable improvements in commercial and operational performance.
Dan will share more about this shortly.
Speaker Change: Last quarter, I announced the appointment of Jeff Spence to the role of president of our North American business.
At that time, I noted my desire.
Speaker Change: to both continue the strong performance across our right-to-win portfolio while equally accelerating our recovery in our right-to-play portfolio in the U.S. market.
And I'm excited about our early progress.
Speaker Change: Jeff and the team are moving with pace to confirm the strategic clarity and commercial baseline for the path forward for our North American business.
Speaker Change: We've already begun to enhance our talent profile in the U.S. market.
and we are better connected with our top retail partners.
Speaker Change: We're very excited about the path forward and the opportunity we have here.
Speaker Change: Finally, Jess and team are raising the bar on brand building and I expect our portfolio, brand plans, and our in-market activations will be significantly improved over the coming quarters.
Speaker Change: I'm confident in Jeff and the team's ability to have impact and create a lot of value in our North American business as we move forward.
Speaker Change: So in summary, I'm pleased with our performance in the quarter, and more broadly, expect continued stability across our categories as we move through the fiscal year.
Speaker Change: Our strategy is clear and we remain committed to its successful execution, with our global teammates at the core of our success.
Speaker Change: And while the macro environment remains challenging, we will stay focused on controlling the controllables, delivering products that our consumers love, and ultimately winning on shelf and online.
Speaker Change: Thanks, Rod, and good morning, everyone. As Rod mentioned, this was a solid start to the year, with organic net sales in line with our expectations.
Speaker Change: constant currency gross margins stronger than planned, improved operational execution, and solid market share performance across our international businesses as well as the billion promo brands in the U.S.
Speaker Change: As the macro environment grew increasingly volatile, we remained highly focused on executing in areas of the business that are under our direct control. With focus on maintaining our growth momentum in international markets and global right to win categories,
continuing to drive our productivity and enterprise efficiency initiatives.
Speaker Change: improving service levels and partnerships with retailers and strengthening commercial execution behind our brands to drive share gains in market.
Speaker Change: This quarter demonstrated that we have the right leadership in place, our innovation pipeline is robust, and our broader categories are largely healthy.
Speaker Change: As we move forward, we will continue to be relentless on commercial and operational execution. And that's why underpinning all of our strategic priorities is a deep organizational commitment to executional excellence across the enterprise.
Speaker Change: This is a key priority for me in my role as COO, and we believe it will provide further unlock of value going forward as we execute better in everything that we do.
Speaker Change: Now, let's move to the commercial and operational highlights for the quarter. Organic meat sales decreased 1.3% in line with our expectations.
Speaker Change: Growth was driven by international markets and our right to win businesses globally.
Speaker Change: International growth of 2% was slightly better than expected, driven by bolt price and volume gains.
Speaker Change: This growth rate was slightly lower than trend as we lapped strong growth an international year ago, largely related to last year's surge in orders ahead of the holiday period in Japan.
Speaker Change: Organic sales in North America declined about 4%, reflecting declines in our right-to-play businesses, wet shaves, and Femcare.
Speaker Change: Before discussing segment specifics, let me offer some commercial highlights in the quarter.
Speaker Change: In North America, organic growth was strongest across our grooming portfolio, and in particular, the Cremo brands.
Speaker Change: We saw double-digit segment organic growth, with Cremo growing 20%, driven by range expansion and good retail execution.
Speaker Change: The Billy Bramble is also a strength in the quarter, gaining an additional 230 basis points in Women's Shave market share, and now stands with a 15% share of the category at Walmart and over a 10% share nationally.
Speaker Change: Importantly, in a clear sign of growing consumer loyalty, the strength of its refills business is noteworthy, as Billy is now the number one brand in women's refills in units and number two brand in dollars across the top five retailer landscape.
Speaker Change: In terms of U.S. market share performance, we saw solid performance in grooming behind the accelerated growth for Cremo and, as discussed, meaningful gains for the Billy Brands.
Speaker Change: The remainder of our Shade portfolio and FemCare business share results were largely in line with trend.
Speaker Change: Internationally, we delivered 2% organic growth while cycling 16% growth last year. As Rod mentioned, this was our 5th consecutive quarter of organic growth and 11th out of the last 12.
Speaker Change: Commercial execution across the markets was very strong and both our innovation and strong brand activation were core to our results.
Speaker Change: Ship First Hydro in Japan has achieved almost a hundred and thirty percent of its targeted distribution since its launch in August last year and has quickly scaled to a two share in the category.
Speaker Change: A Wilkinson Sword brand relaunch continues to be disruptive in Europe, where we were also awarded three best product of the year honors, including the new Hydro 5 razor in the grooming category.
Speaker Change: and our private brands business remains a meaningful competitive advantage hosting double-digit organic growth fueled in part by new business across many key retailers including Aldi and Aledo.
Speaker Change: Market share across international was solid, with noteworthy gains in sun care across both Australia and Mexico, and good performance in the grooming category in Europe, where the Bulldog brand now sits at the number two men's grooming brand in the UK.
Now, turning to our segment performance.
Wet shave organic fetus cells were down 1.3 percent.
Speaker Change: International wet shave grew 3% with both price and volume gains, reflecting continued category health, impactful innovation, and strong in-market activation.
Speaker Change: In North America, wet shave organic vet sales declined just under 7%, as gains in men's systems and disposables were more than offset by declines in shave preps and women's systems.
Speaker Change: Women's systems continue to be negatively impacted by weakening channel dynamics in a highly competitive and promotional environment.
Speaker Change: Consumption in the U.S. Raises and Blades category was down 80 basis points in the quarter with continued heightened declines in the drug channel.
Speaker Change: Our market share decreased 100 basis points, consistent with 26 and 52-week trends.
Speaker Change: Sun and skin care organic net sales increased approximately five percent.
Speaker Change: as double-digit growth in skin and grooming more than offset declines in North America sun care, primarily as a result of a shift in phasing in some customer orders in what is our lightest sales quarter of the year.
Speaker Change: In the U.S. sun care category, consumption increased about 1.6% in a quarter, led by increased e-commerce sales, and our market share was down slightly.
Speaker Change: In our two most noteworthy international markets, we saw strong sun-season performance with both value and volume market share gains in Australia and Mexico.
Speaker Change: Grooming organic net sales increased 13% in the quarter, with growth across each brand. As mentioned, most notably led by 20% organic net sales growth in Cremo, and growth from the national rollout of Billy's Body Care.
Speaker Change: Wet One's organic net sales increased 15%, fueled by better in-stock positions, and our share was approximately 71%.
Speaker Change: FemCare Organic Dent sales were down approximately 12%. The decline was largely driven by our pads business as we continue to ramp conversion from stay-free to carefree.
Speaker Change: Consumption in the category was up 4% though continues to be driven mostly by 7% growth in pads where our penetration is the lowest.
Speaker Change: In the categories where we mostly compete, tampons and liners, consumption was down 1% and up 3% respectively.
Overall, the category remains highly promotional.
Speaker Change: And finally, turning to our operational performance in the quarter, Q1 reflects a continuation of our cost excellence strengths, paired with meaningful improvements in broader service levels and much improved in-stock positions.
Speaker Change: Productivity savings were 340 basis points and provided the tailwinds for our approximately 80 basis points of constant currency gross margin accretion in the quarter.
Speaker Change: Productivity savings were realized from a full collection of programs, including global sourcing and indirect savings, labor automation, and broader plant efficiency efforts.
Speaker Change: Importantly, we also delivered meaningful service gains, saw unit fill rates above target levels across most categories and markets, and addressed the supply challenges referenced last quarter in our grooming, preps, and skin businesses.
Speaker Change: Lastly, we were very pleased with our supply levels and in-stock positions as we prepare for the critical sum season in the U.S. and northern Latin American markets.
Speaker Change: While we continue to see some modest inflationary pressures, largely driven by labor, and more modest increases in commodities, there is no material change to our inflation expectations for the full year. The same cannot be said on the FX Round.
Speaker Change: Given the significant strengthening of the dollar against most major currencies, gross margin in the quarter was negatively impacted by an incremental 40 basis points of currency headwinds.
on a full-year basis.
Speaker Change: FX is now expected to be an incremental 20 basis point headwind to gross margin.
Speaker Change: So while I'm pleased with the progress we're making in the areas of the business that are in our direct control, these external factors certainly make for a more challenging operating environment.
Speaker Change: Going forward, we will continue to be proactive, act with urgency and discipline, and prioritize executing our strategies and focusing on the operational elements of the business that will lead to durable growth and broader value creation.
Speaker Change: Now, let me turn it over to Fran to discuss the financial results for the quarter and our full year outlook.
Fran Weissman: Thank you Dan. Good morning everyone. I'm excited to be here in my new role and I look forward to getting to know many of you in the weeks and months ahead. Now let's jump into a quick review of the first quarter followed by our updated outlook for fiscal 25.
As previously discussed, organic net sales decreased 1.3 percent.
Fran Weissman: International growth of 2% driven by both price and volume gains were more than offset by a 4% decline in North America due to lower volumes in fanfare and wet shades.
Fran Weissman: Adopted gross margin rate decreased 60 basis points but increased approximately 80 basis points in constant currency.
exceeding our expectations.
Fran Weissman: We realized approximately 340 basis points of productivity savings, which was partially offset by increased promotions net of price of 40 basis points, 200 basis points of core growth inflation and volume absorption, and 20 basis points of unfavorable mix and other headwinds.
Fran Weissman: A&P expenses were 10.5% of net sales, up from 9.9% last year.
Fran Weissman: Adjusted SG&A was 21.2% in rate of sales of approximately 20 basis points versus last year.
Fran Weissman: Overall, higher people costs and outside services were offset by lower incentive compensation expense, lower bail debt, and favorable currency impacts. Rate of sale increase was impacted by lower net sales in the quarter.
Fran Weissman: Adjusted operating income was $27 million compared to approximately $36 million last year. Adjusted operating margin decreased 170 basis points, almost entirely due to the net unfavorable impact from currency.
Fran Weissman: Importantly, on a constant currency basis, adjusted profit margin was nearly flat, despite the incremental brand investments driven by strong gross margin accretion.
Chris Gough: Gough's diluted net earnings per share were a loss of $0.04 compared to earnings of $0.09 in the first quarter of fiscal 24, and adjusted earnings per share were $0.07.
Chris Gough: Currency movements have an approximately 17 cents per share unfavorable impact in the quarter due to translational currency headwinds to operating profit and higher year-over-year hedge and balance sheet remeasurement losses within our other income and expense.
Chris Gough: At constant currency, adjusted earnings per share were flat to prior year.
Chris Gough: Adjusted EBITDA was $45.9 million, inclusive of an $11 million unfavorable currency impact, compared to $57.2 million in prior year. At constant currency, adjusted EBITDA was flat to prior year.
Chris Gough: Net cash used by operating activities was 115.6 million for the quarter compared to 72.9 million in the prior year period. Shifts in seasonal inventory bills versus last year drove the increased use of cash in the quarter.
Chris Gough: In the quarter, share repurchases totaled $30 million. We continued our quarterly dividend payout and declared another cash dividend of $0.15 per share for the first quarter. In total, we returned approximately $38 million to shareholders during the quarter.
Now turning to our Outlook for fiscal 25.
Speaker Change: As Rob and Van mentioned earlier, we are pleased with our operational performance in the quarter, and we have strong underlying fundamentals in place to continue to execute and deliver on our previously provided outlook ranges.
Speaker Change: However, the current macro environment remains challenging, particularly across currency markets. And as such, we have updated our outlook for the full year, primarily to reflect the impact of unfavorable currency movements compared to our prior outlook.
Speaker Change: On a constant currency basis, our outlook is essentially unchanged from a quarter ago.
Speaker Change: For the fiscal year, we still anticipate organic net sales growth to be in the previously provided range of 1 to 3 percent.
Speaker Change: Looking ahead, our growth assumptions for second quarter are now approximately 1%, reflecting an expected shift in sun care orders into third quarter.
Speaker Change: On a reported basis, currency is now expected to negatively impact reported sales by 160 basis points.
Speaker Change: versus our prior expectation of a positive 70 base point impact.
Speaker Change: While our outlook for a 90-basis point increase in gross margin on a constant currency basis is unchanged,
Speaker Change: Inclusive of 35 basis points of FX headwinds, 20 basis points worse than our previous outlook.
Speaker Change: Our outlook for adjusted EPS and EBITDA are now expected to be towards the lower end of their respective ranges, essentially flowing through the incremental FX headwinds partly offset by slightly improved below-the-line items, including a favorable pension true-up.
Speaker Change: Adjusted earnings per share are now anticipated to be towards the lower end of our 315 to 335 outlook range, inclusive of approximately 36 cents per share of currency headwinds, an increase of 18 cents versus our prior outlook.
Speaker Change: Adjusted EBITDA is also now expected to be towards the lower end of our $356 million to $368 million outlook range, inclusive of approximately $23 million in currency headwinds versus the $12 million currency headwinds contemplated in our prior outlook.
Speaker Change: Due to our revised FX expectations, we now expect approximately 70% of adjusted net earnings to be generated in the second half of the fiscal year, slightly higher than our previous outlook.
Speaker Change: On a constant currency basis, our half-one and half-two phasing expectations are essentially unchanged.
Speaker Change: As outlined in our earnings release, this outlook does not reflect the potential impact from U.S. or retaliatory tariffs given their rapidly evolving nature.
Speaker Change: For more information related to our Fiscal 25 Outlook, I would refer you to the press release that we issued earlier this morning. And now, I'd like to turn the call over to the operator for the Q&A session.
We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question today comes from Kate Graphstein with Barclays. Please go ahead.
Speaker Change: Thanks. So Femcare sales took another step back this quarter and you've talked about consolidating the brand portfolio with stay free and carefree and simplifying the portfolio but it seems like there's still some work to do. So if you could just talk a little bit about why the business is still so weak and maybe if the spring resets will help this time around. Thanks.
Speaker Change: Good morning, Kate. So on FemCare, look, the category is healthy overall.
Speaker Change: and if you look at where the growth in the category is, it's being driven by tasks in the most recent quarter. And that's where we're most challenged at the moment. And so if you step back
Speaker Change: and go back nine months or so ago we looked to consolidate our paths and liners under the Carefree Master Brand. So we had Stay Free in the base being shipped and today we don't have that.
Speaker Change: And it's taking us longer than we had anticipated to transition consumers.
Speaker Change: from Stay Free Pads into Carefree Pads. Are we making progress? Absolutely, we are.
So we're on that journey.
Speaker Change: Liners performed as we expected. Playtech Sport performed as we expected, slightly weaker in pads. That's the story. Final thing I'll say, and Dan, if you want to comment, you can, is
Speaker Change: You will see our results improve sequentially from here as we go throughout the year.
Speaker Change: if nothing else, from easier compares. And then the work we're doing to convert consumers will continue. So I think we get better from here. But Dan, I don't know if you had anything. Yeah, I would only add, we're actually pleased with Carefree's performance, Kate. So we're seeing actually traction here.
Speaker Change: In terms of the brand itself, we saw low single-digit growth in liners.
Speaker Change: We saw mid-single-digit growth in PADS. As Rod pointed out, the challenge, and this is what
Thank you.
Speaker Change: ____ performance which we're actually seeing traction on which is helpful, but the work remains on the stay free consumer. It's obviously where we'll stay focused.
Thank you, Kate. Operator, next question, please.
Speaker Change: The next question comes from Chris Carey with Wells Fargo. Please go ahead.
Hi everyone. Can you maybe just provide some context on
Speaker Change: The collection of your businesses that are going to be seeing a typically or that have been seeing a typically negative performance
and when those businesses start to lock that performance.
Speaker Change: thinking about the shape prep transition, sudden care transition, when do those businesses start to encounter or start to lap that really difficult, atypically difficult performance? And I guess I ask that in the context of
Speaker Change: The acceleration that's embedded here is some challenge businesses that are going to get beyond
Speaker Change: this, you know, this current one-year cycle, if you will, and then what are you embedding for the rest of the business from a sort of acceleration standpoint from here? I can reframe that if that doesn't make sense, but I'm curious your thoughts.
Speaker Change: issues we had last year, the fire in our manufacturing plant for wet ones was happening last fall, and so as we start to lock that, as we come back on in full production rate and mode, where are we seeing that one come back? Wet ones was up 15% in the quarter that we just finished. So that one's back online and in a relatively good spot. If you then look,
And then I mentioned FemCare in Kate's question earlier.
Speaker Change: That's one where, you know, one of the issues we've had is we had a delayed planogram reset, which was targeted February-March last year.
actually didn't happen until the summer.
Speaker Change: and so we're I think sequentially as you go here you'll see us improve.
Speaker Change: But the easiest compares, the more like-for-like compares are really in Q3 and Q4 of this year.
Speaker Change: here. Yeah, the only thing I would add, Chris, just to ladder back up, you know, we said last quarter, 70% of our business is growing at mid-single digits, and we expect that to continue
Speaker Change: for the fiscal year 2025. We still have a line of sight to that. Now, remember that's made up of international and our global right to win portfolio. Our expectation is still for 2025 that that 70% of our business will grow in single digits.
Speaker Change: Okay, you mentioned some shifts in some care orders I believe. Can you expand on that please? Thanks.
Yeah, I think there's a single driver here.
Speaker Change: around Easter timing. I mean, there's a couple of things, but it was a big driver where Easter's three weeks later. This year, as you get out into mid-April, last year it was earlier, and what you had profile was more shipments into the second quarter ahead of some of those big Easter resets.
Speaker Change: And from a planning basis, as we look at it, that is a driver of the benefit. Yeah, and just to be clear, you said FEM, I think you meant SON, because Rod was answering SON. That's what we called out as an order. If I said FemCare, I meant the FemCare business.
Speaker Change: We just have to remember, 80 percent of the season's consumption happens between April and September. So, whether shipments go in late March or in the first week of April, it's always tough to tell them when the season marketed.
Speaker Change: and I'll add a data point, Chris, we were down in Florida last week with the board and out looking at the shelf and some formats.
Speaker Change: where it was rainy and wet for most of the season. So it's early to Dan's point, but I think we're excited about the start, what we've seen here in the early couple of months.
Okay, thanks.
Thanks Chris. Operator, next question please.
Speaker Change: The next question comes from Olivia Tong with Raymond James. Please go ahead.
Olivia Tong: Great. Thanks. Good morning. FX is obviously a much bigger hit for you this year than you had originally anticipated. So can you talk about some of the offsets that you've planned, if you have any pricing plans or are evaluating that?
Dan Sullivan: Hey Olivia, it's Dan. I'm sorry that it was a bit muddled. Could you repeat the question?
Dan Sullivan: Sure. My question was around FX and it's obviously a bigger hit this year. So just if you have any, what, you know, what the plans are to offset that, if you have any plans for pricing or, you know, potentially evaluating incremental pricing in some of the categories.
Speaker Change: Yeah, look, it is a bit of a heavier FX hit for us in the quarter, and we discussed that. We flowed that through for the full year, so...
Speaker Change: certainly the FX headwinds are have increased from when we spoke back in November. Now we've held
to the lower end of the guide.
Speaker Change: in our 2025 business doesn't mean we can't reconsider. I think the areas that we typically will go to just in good operational hygiene are going to be around revenue management and how do we make sure
Speaker Change: Promotional dollars are most effective, trade terms are optimized, mix is managed well, which you actually saw in the first quarter. It was a tailwind for us in margin. And then, of course.
on the productivity side, while we delivered a healthy.
Speaker Change: 340 basis points of productivity savings in the quarter The team's DNA of course is always to push for more and so not committing to either one of those But the team will continue to look at all levers
Speaker Change: I don't know that I would say price at this point, there's a lot of factors going in right now, tariff and otherwise. We are certainly looking at it, but nothing that we would say today is firm.
Olivia Tong: And Olivia, I would add, one thing we're not going to do is to cut our brand investment.
Olivia Tong: in supporting our brands. We like the campaigns. We like the activation.
Olivia Tong: and what we have coming and we're going to keep that in because we think operationally that's the right thing to do and that sets us up for success not only in the back half of the year as we start to look out to fiscal 26. And so I think that's an important point of what we're not going to do.
Got it. Thanks
Speaker Change: And then just following up on FemCare, understand, you know, the delayed planogram from winter to summer last year, but it's been quite challenged for some time, and there have been a number of different reasons for that. So as you think about the plan for this year, what gives you confidence that that is the right plan, you know, for this year, and that you can, you know, the consolidation of the master plan does help stabilize the business?
Thank you.
I think...
Speaker Change: I mean it starts with the fact that we've got a healthy category.
Speaker Change: All right, so the category after a couple of years of being very choppy, a lot of noise in the printed results and consumption data.
Speaker Change: That's behind us now, and so we've got a stable, I would call it traditionally normal operating category
He is growing.
Speaker Change: We've talked about our three segments, pads, liners, tampons. We have a good line of sight to what's happening in each one of those. I think we feel good about our plans and the execution for the year. We'll see the sequential improvement as we've talked about. And so
Speaker Change: Whether or not we're right at that category growth rate or slightly below, I think part of what makes us feel good about it is we've just got line of sight to what's required, and the lab gets easier from here.
Thank you.
Thank you.
Thanks, Olivia. Operator, next question, please.
Speaker Change: The next question comes from Peter Grom with UBS. Please go ahead.
Thanks, operator. Good morning, everyone.
Speaker Change: Maybe just a few on just the top line, and maybe specifically stick to Chris's question.
I apologize if I missed this, but can you quantify...
Speaker Change: how big of an impact this timing shift is having on the second quarter organic sales outlook. And then maybe, you know, just on the growth from here, so I hear you completely that the U.S. weekly scanner data masks what the company is doing as a whole, just given the strong international performance. But
Speaker Change: How are you seeing U.S. versus international growth evolving from here? And I guess I'm trying to understand just, you know, as we look at the data, you know, would you expect to see some improvement here in the U.S.?
Yeah, so.
Speaker Change: here. Good morning. The scanner data that you see, we look at this obviously as 35 to 40 percent.
Speaker Change: in what's US available to read. It's 35 to 40% of our business. So it's a relatively small piece of the overall global total, but it's an important piece, right? It's out there every week, and it's roughly a little more than a third of the business.
We expect
to see sequential improvement.
Speaker Change: in our North American results. I think we went from minus six in quarter four to minus four organic here in quarter one. We're going to continue to see improvement as we go across the year in North America.
and we're going to continue to see strength in international.
Speaker Change: and I think Dan mentioned it earlier, we have 70% of our business in bid single digits growth between the international business and the right to win categories here domestically in the U.S. So we've got good line of sight.
Speaker Change: to that and I think you know we have a good level of confidence.
Speaker Change: that will be successful from here and be back in growth territory for the balance of the year. Related to the sun care question,
Speaker Change: I'll flip that to Dan, but it's a mechanical piece of what we had guided to initially. It's just not how the execution's happening from a quarterly phasing. Yeah, so we've taken our thinking for Q2 down to the lower end of our outlook, so call it 1% growth is our thinking. That's down.
Speaker Change: and I think we are just a point, point and a half from what we originally contemplated, so if I were to size it I would put it in the six, seven million dollar range as an impact that now.
Speaker Change: slides into 3Q. Just to ladder back up, I do want to make the point, we always contemplated a sequentially improving organic growth profile across the year.
Speaker Change: Q1 came in literally exactly as we had profiled it, and the drivers of this growth
Speaker Change: We continue to see international at mid-single digits. Remember, we just cycled our...
Speaker Change: Our strongest quarter of a year ago, 16% growth last year in Q1. Sun season U.S., coming off a flat season last year. Consumption, we think there'll be underlying growth there.
Speaker Change: The Billy Brand and other grooming strengths here, you saw double-digit growth in the quarter.
Rod Little: It is a sequentially improving growth story. We have a good line of sight to the drivers of it, and all of that sort of ladders back into the range that we contemplated on organics, improving, as Rod said, quarter over quarter as the year plays on.
Speaker Change: That's super helpful. Thank you very much. I'll pass it on.
Thank you, Peter. Operator, next question please.
Speaker Change: The next question comes from Dara Mosinian with Morgan Stanley. Please go ahead.
Hey, good morning.
Speaker Change: reinvigorate your top-line thoughts on forward pricing from here, particularly given the muted category environment and the industry landscape.
Speaker Change: And then internationally, I know we touched on this with Olivia's question, but just...
Speaker Change: Is it just this year you're not sort of making the decision to be too aggressive on pricing and look to offset it? Is it that FX has moved substantially? Just how should we think about how you guys manage pricing typically internationally relative to FX from a longer-term perspective? Thanks.
Speaker Change: Yeah, good morning. Thanks for the question. So let me let me take a step back. What is in
Our plans for this year from a pricing standpoint.
Speaker Change: Price increases are entirely outside of the US. So internationals where you will see us taking price. You've see it.
Speaker Change: show up in, not surprisingly, for the most part, in Japan Shave, where we're market leader.
Speaker Change: or in various aspects of our Suncare business, Australia and Mexico, where we are also market leaders.
Speaker Change: That's where we've taken price. There is a bit of carryover price from last year that plays in as well, but all of our pricing outside of the U.S.
Speaker Change: We are seeing promotional intensity continue in women's shaves and in femcare.
Speaker Change: at a heightened level, particularly in femcare. So Rod mentioned it's a healthy category. It is, but it is still quite promotional. And although we thought perhaps that would ease seasonally as we came out of the summer and fall, we haven't yet seen that.
Speaker Change: We are participating in that, and so we're not getting sort of out-executed on shelf. That's a bit of what is also a headwind within FemCare, is it had increased...
Speaker Change: And then I had a shared question that I think that Mr. Carter balanced collectively! Let's go back to the album options. Excuse my fashion worst jump cut. To meet you down the road, this is how it never ends! Must went right outta control. But don't give it up yet, because this photo is
Speaker Change: Pricing. FX is one of the variables that could affect that. Tariffs is another one. Rising costs is another one. But it'll ultimately be thought of as a commercial decision. Where do we have the opportunity and the right to take price?
Speaker Change: where can our brands withstand the price, where are we a market leader, and therefore will lead with price, all of these things go into our calculus here commercially, and while I said earlier we won't commit to further price at this point, we also have it a little bit out.
Speaker Change: Great. And then Suncare came up a couple times. Obviously, there's some near-term shipment timing, but just maybe taking a step back.
How do you think your position...
Speaker Change: From a consumer takeaway standpoint as as we head into the peak season. It's pretty cold in New York here today, but We're moving ahead to the spring and summer. So just thoughts around market share Innovation pipeline as you look at the sun care business both in the US and internationally would be helpful. Thanks
Thank you.
Dan Sullivan: Yeah, I'll start and then throw it to Dan for some international flavor, because I think that's important. 18 degrees on my right in this morning, Darrell. So you're right, it is cold up north here. We feel really good about how we're set for the sun season.
Dan Sullivan: for it to be sunnier and relatively warmer than last year on the start and we've got all the distribution we had expected. And so I think as we look at the distribution outcomes domestically here in the U.S., really solid as expected.
Dan Sullivan: We feel really good about the innovation pipeline, what's to come. We're in year two of Banana Boat 360 and the activations that go with that. We've got really good innovation coming on Hawaiian Tropic again.
with some new products.
Dan Sullivan: We feel good about our positioning and who we are. We know what we are. We're a Cajun-based, outdoor, beach, sport, fun, active.
type of brands, and that's where we win.
Dan Sullivan: that combined with the fact that leisure travel still appears to be robust as you look at not only domestically here in the U.S. but globally that is a key driver of what drives our brands in our business and so I think
Speaker Change: feel good overall. That's the U.S. perspective, Dan. I don't want you to add internationally. Yeah, look, we're coming off perhaps our best single quarter of international sun care in terms of in-market performance. We won share in dollars and units in Australia at the heart of the season.
Speaker Change: and we one share dollars and units in Mexico as we ready up for the season. So I think we feel really good.
Speaker Change: I was in Mexico before the holidays with the team. I can tell you the travel, the leisure, the destination tourism is on fire and that bodes well for the future.
Speaker Change: And then the only other thing I would say on NPD, Rod mentioned a couple of the big ones. I would also add there's a complete mineral restage happening here in the U.S.
Speaker Change: which we think is going to be super impactful. And we're launching the Banana Boat Baby line, which has been really well received from retail as well. So, good distribution outcomes, good innovation. We need sunshine, obviously, but good in stock position. We're certainly bullish on the season itself.
Great, thanks guys.
Thank you, Dara. Operator, next question, please.
Speaker Change: The next question comes from Susan Anderson with Canaccord Genuity. Please go ahead.
Susan Anderson: Hi, good morning. Thanks for taking my question. I guess maybe first I wanted to ask about ZilliBody and how it's doing. It sounds like it did help to drive growth. Maybe if you could talk about how the products are performing versus your expectations. And then I think historically you had mentioned a national expansion for the categories in 2025. Just curious if that's still in the works.
Susan Anderson: Yeah, good morning, Susan. Thanks for the question. Yeah, look, overall, we feel really good about the total grooming portfolio.
You're going to have some puts and takes across body.
Susan Anderson: where you'll see, you know, some examples of velocity that are at or above threshold, some that are below.
Susan Anderson: still very much in activation mode. So overall, we feel good. I think the data point we're most excited about is now as we begin the national launch, we're getting terrific retailer support, most notably Target, who's really gotten behind this brand and sees a really good connection.
with the Target shopper, especially on body wash.
Susan Anderson: Good opening at Wal-Mart, performed largely as we expected it would, and now we'll bring the offering.
Susan Anderson: to a national level and I think target a really, really exciting retailer behind the launch. Rod, anything you would add? I would just add, this is all...
a logical adjacency brand expansion, Susan, off of what is
It has to be.
Speaker Change: a healthy and rock-solid crochet business, and Billy is exactly that. We are the number one, the Billy four-count refill is the number one SKU, volume SKU in the entire category.
across the top five retailers, number one on volume.
Despite having just over a 10 share nationally.
Speaker Change: and increasing 200 basis points quarter-on-quarter. So that's the other piece of this that we're really focused on, is driving the growth that's there in shade and building that out, because that ultimately is a credentialer to the body piece.
Speaker Change: as we go forward. So it's definitely both strategy as we play forward with billing, but very, very happy with the progress to date.
Speaker Change: Okay great, that sounds good. And then maybe if you could talk about any updated thoughts around capital allocation plans, any potential M&A down the road. Billy's obviously been pretty successful so just curious if you'd consider buying another DTC brand like Billy in one of your segments to help drive growth. Thanks.
Speaker Change: I think it's a really good question. We've been on about an 18-month journey prioritizing de-levering, debt pay down, and share buyback, given what we think is a very undervalued share price.
Speaker Change: We expect to end the year right around three times levered. We think we've done the good hygiene in that. And so certainly
Susan Anderson: M&A will remain an important part of our growth story and our portfolio-shaping efforts here going forward. We've always been quite active, Susan, in the market. We've looked at a lot of assets.
Thank you.
Susan Anderson: It's difficult right now on value for sure, but we certainly wouldn't shy away from acquisition if we thought it would be meaningful to our growth and to the portfolio.
I think we're in a...
Susan Anderson: 18 months later, we're in a much healthier position. We have certainly optionality for ourselves given our free cash flow generation and M&A will continue to be sort of top of mind for us from here, pending valuation and opportunity.
Susan Anderson: It's not lost on us, Susan, that with the valuation we have now, repurchase is a really good use of capital. I think that's always something we look at, relatively where can you get return.
Susan Anderson: We're more convinced than ever that we can get a good return on the repurchase, which is why we're leaning in earlier in the year here.
Speaker Change: Okay, great. That's really helpful. Thanks so much. Good luck the rest of the year.
Thank you. Operator, next question, please.
Operator: At this time, there are no further questions in the queue. I would like to turn the conference back over to Rod Little for any closing remarks.
Operator: Yeah, thank you everybody. Look, I think it's important to stay focused on the fundamentals and the basics with a lot of uncertainty and noise around us. We're focused on controlling what we can control.
Operator: building our brands, investing behind our brands, and are confident in our path forward here. So, we look forward to speaking with you in early May when we talk about the results. See you then. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.