Q3 2025 Edgewell Personal Care Co Earnings Call
Good morning and welcome to Edge Wells, third quarter, fiscal year 2025 earnings call. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist. By pressing star, then zero on your telephone keypad.
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Please note this event is being recorded.
I would now like to turn the conference over to Chris Gogh, vice president investor relations. Please go ahead.
Good morning everyone. And thank you for joining us this morning for Edge, Wall's, third 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 friend Weissman, our Chief Financial Officer Ron will kick off the call then hand it over to Dan to discuss our third quarter of commercial and operational highlights followed by a friend who will discuss our Q3 Financial results in our 2025 updated, full year outlook, we will then transition to Q&A.
This call is being recorded and will be available for replay via our website. Www.well.com
During this call, we may make statements about our expectations for future plans and performance.
This might include future sales earnings advertising and promotional spending product, launches brand investment organizational and operational structures and models, cost mitigation and productivity, efficiency, efforts savings, and costs related to restructuring and repositioning actions, Acquisitions and Integrations impacts from tariffs and other recent developments changes to our working capital metrics, currency fluctuations, commodity costs, inflation category, value future plans for return to capitalism.
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.
These statements are based on assumptions that are subject to various risks and uncertainties, including those described under the caption "Risk Factors" in our annual report on Form 10-K for the year ended 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.
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 a revised version of any of these previously made forward-looking statements to reflect new events or circumstances, except as required by law.
During this call, we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in our press release issued earlier today, which is available in the Investor Relations section of our website.
This non-GAAP information is provided as a supplement to, not as a substitute for, or 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. With that, I'd like to turn the call over to Ron.
Thank you, Chris. Good morning everyone, and thanks for joining us on our third quarter, fiscal 2025 earnings call.
This was a challenge in quarter with our top and bottom line performance falling below expectations.
Our results were significantly impacted by very weak sunare seasons in North America in certain Latin America markets, largely related to adverse weather
While sunare performance pressured overall results.
We continue to see strong results in two important areas.
Internationally, we delivered another quarter of growth coupled with strength and market share performance.
And strong supply chain execution led to further productivity gains above the year-to-date trend.
Importantly, our market share performance. In the US also, improved most notably across our Hawaiian Tropic primo and Schick, Hydro Silk Brands, which saw stepped up investment levels in the quarter.
the operating environment remains challenging with both tariffs and foreign exchange contributing to full year profit, headwinds
On the consumer side apart from sunare are categories grew modestly in the US in line with the 26 and 52 week trends.
However, retailers further tightened inventory levels, most notably in the fim care category leading to some Divergence between our organic. Net sales and category consumption levels.
We are encouraged by the early results from these incremental Investments, which bolster our confidence going forward, and I will say more on this shortly.
Our performance in the quarter and over the first nine months of this fiscal year has further reinforced three fundamental strengths of our business.
First.
We continue to seamlessly execute our international market growth strategy across the business, which now represents 40% of our global sales.
These markets have collectively delivered consistent, mid to high single-digit organic growth over a 4-year period and we expect this business to deliver mid single-digit organic growth. Again this year with notable strengthening share positions across shaved sun and grooming in key markets.
Second, we are committed to delivering consumer-led locally designed Innovation across our portfolio.
We have expanded Billy's Geographic reach, launching the full wet shave line. In Australia, in July,
In grooming. Bulldog has entered the premium skincare category driving sales and market share growth across Europe.
And we are seeing significant benefits from the broadened criminal range in the United States and Europe.
In sunare Hawaiian, Tropic is experiencing strong us growth due to a successful marketing campaign, updated formulations and its on-trend branding.
And in Japan, we've taken the Schick brand to premium skincare with the launch of the proest brand in premium channels.
Third, productivity efficiency remains at the cornerstone of how we operate.
Demonstrated by the delivery of another quarter of almost 300 basis points and realized growth savings.
The work, our teams are doing across the supply chain is more important than ever as we tackle. The impact of global tariffs and increasing macro complexity.
Now, let's talk about North America where our results have been below our expectations and where we've been on a journey to strengthen our business in. The US is a catalyst for a return to profitable sustained. Topline growth.
Let me provide an update on the work that has been done thus far.
Following just this appointment last October. She and the team are focused their efforts in 3. Distinct areas, working with both diligent and urgency.
First performing a rigorous assessment of the business and gaining a clearer understanding of the challenges inherent within our us portfolio and broader us business model.
Second leveraging, deeper consumer understanding, and taking a modern approach to brand building that allows us to enhance brand message and better activate our brands with consumers.
and finally designing an organization that can achieve meaningful improvements in both commercial. Effectiveness and operating efficiency underpinned. By improved capabilities simplification in a lower cost to operate.
This holistic approach is designed to fundamentally strengthen our business for the future.
And I'm very pleased with the progress. We are making
Elements of which were visible in the quarter.
During the quarter. We were highly proactive in the market taking actions to support our brands at a different level.
and we saw a promising results, we designed and executed targeted brand campaigns across our Focus brands of cremo Hawaiian Tropic and Schick, Hydro Silk,
In support of these exciting programs, we have stepped up investments in a strategically shifted, our spend to better balance both upper and lower funnel activities.
The consumer has responded. Well and we've seen each Brand's consumption, Trends, improve with Hawaiian Tropic, share up, 150 basis points in Q3 continued. Share gains in grooming with Primo of 40 basis points and sequential Improvement in Hydro Silk share.
Also, we just completed the redesign and launch of the new U.S. commercial organization.
Underpinned by what is essentially a new US leadership team bringing together a talented proven and highly capable leadership group under just
This team will be fully in place by September and operating in a simplified streamlined structure. With laser focus on us consumers and building brands that consumers, love more and can win in Market.
And as you saw last quarter and we'll continue to see this quarter. This will come with targeted, increased investment in both trade support and amp along with a more efficient overhead structure.
Where we have winning campaigns. As the highlighted earlier, we will invest.
Making the US market or in line with the changes. We have successfully driven across our International markets which are now delivering consistent, mid single digit, sales growth and operating margin expansion.
As with anything, driving a step change in results, takes time.
But I'm confident the team we are putting in place and the renewed Focus we have on doing all of the right things to create value in our most important Market.
The team is actively building plans for 2026 and we will share more on the US transformation effort as part of our Q4 earnings call.
This leads me to our outlook for the full year.
We are at a pivotal moment in our transformation.
We are orchestrating significant change across our North America commercial operations.
While facing numerous external headwinds including foreign exchange tariffs and a significantly reduced sunare consumption profile for this season.
Last quarter, we discussed the importance of maintaining investment levels for key brands, even in the face of a challenging macro environment.
Similarly, as we look at the remainder of the year, we will continue to press forward on investment to support the required changes in the US that are already beginning to demonstrate returns through our improved share performance.
While these investments weigh on profitability in the near term, we believe they serve to strengthen our business and better position our portfolio in the competitive U.S. market, setting us up for long-term success.
and now, I'd like to ask Dan to take you through our operational commercial performance highlights in the quarter, Dan
Thanks, Rod. Good morning, everyone. As Rod mentioned, this was a challenging quarter, made even more so by very weak sun care category performance, especially in the critical period from Memorial Day through the 4th of July.
Despite this, we delivered solid top and bottom line results internationally. We drove another quarter of outsized productivity savings and took meaningful actions in North America, both in terms of commercial activation and investment, to create a stronger, better fit-for-purpose commercial organization.
Before discussing performance in the quarter, let me start by sharing perspectives on the broader operating environment.
The macro environment remains challenging and unpredictable, tariffs and foreign exchange continue to be volatile and have added pressure to our full year results.
Consumption Trends have been mixed.
While the sun category has been meaningfully weaker than anticipated particularly in the US.
We have seen stability across our other categories in the US which grew modestly in the quarter. Generally in line with 26 and 52 week trends.
internationally consumption, Trends also remain solid, and our share performance strengthened
The environment surrounding tariffs continues to evolve and the ever-changing policies have added significant challenges to the global supply chain.
While the cost impact of tariffs for fiscal 2025 remains modest at about $5 million, this is approximately $2 million higher than our previous outlook.
our teams continue to act with urgency responding swiftly to the evolving landscape and taking action to quickly, mitigate some of the near-term impacts, the inventory prebys and other supply chain actions,
These steps including the in-ear temporary benefits of these higher costs being trapped in inventory. Have kept tariff expenses, more modest in the current fiscal year.
Based on what we know today, we continue to anticipate that gross tariffs before, our mitigation efforts would have an approximately 40 to 50 million impact on an annualized basis or in the range of 3 to 4% of cogs.
The team is actively pursuing all opportunities to mitigate the potential impact of tariffs through expanded sourcing, efforts footprint optimization and heightened vendor negotiations.
However, ongoing policy uncertainty continues to pose significant challenges.
Fortunately, with the capabilities we've demonstrated over time in our Global Supply Chain organization, we believe we have the right level of urgency and confidence to act swiftly as policy formalizes.
In addition to direct cost mitigation efforts and Commercial pricing actions in certain markets and categories. We also continue to lean into our ongoing productivity efficiency efforts to support our gross margins.
In the quarter, the dollar continued to weaken providing a modest translational net of hedge benefit for our p&l.
Of intermarket currency fluctuations in locations where we manufacture and do not hedge. Namely the Czech krona Euro and Mexican peso
This resulted in greater currency headwinds than originally expected in Q3.
Now, let's move to the commercial and operational highlights for the quarter.
Earlier, ra discussed our sustained investment approach in support of focus Brands and improved Innovation platform with a local mindset as well as new targeted incremental Investments, within our us portfolio.
We believe that these Investments are having the desired effect, delivering strong, returns while strengthening our market share Trends across much of the business.
Market share performance internationally was strong in the quarter, as we saw significant gains across branded shave and greater China, as well as solid gains across sun care and disposables in Latin America, and grooming and sun care in Europe.
Additionally our branded wet shade portfolio in Europe, held share. Overall and importantly, we saw growth in 4 of our 6 key markets as well as in private labels across Europe
In the US, we saw a notable Improvement in market, share trends for the Hawaiian Tropic brand women's systems and grooming portfolios in part due to targeted new Investments. We're making in these brands
for Hawaiian Tropic, our new Tana Sutra campaign, featuring Alex Earle launched in May and reflects the step change in how we design and activate content to better reach and influence consumers.
This through-the-line campaign is successfully delivering on our brand-building objectives while driving notable sales and market share growth.
We saw 18% dollar sale consumption growth versus a year ago, amidst, a decline in category.
And 150 basis points of share gains, which was the most for the top 10 brands in our competitive setup.
In April, we relaunched Hydro Silk with new packaging, a new brand campaign, and a modern approach to Brand activation.
Further supported on shelf by investment in promotion and trade.
The incremental amp dollars, drove upper funnel focus, and delivered, a reach of over 70%, all of which contributed to improved organic sales and market share trends.
Our kremo apdo launch shifted to a full funnel approach, increasingly focused on Amazon driving substantial uplifts versus previous campaigns.
We increased Amazon media, spend and shifted significantly to enhanced video content.
This launch has had a strong start exceeding forecasted unit sales and underpinning. 35% year-over-year consumption growth for the franchise.
Behind our strategic brands, we've seen nearly the benefits of these strong brand campaigns that are well architected to reach consumers in a variety of ways and ultimately influence purchase behavior.
We are encouraged by this early read and will continue to invest incrementally where we see such strong returns.
Operationally, productivity and savings remain an important lever in gross margin performance, delivering 270 basis points of tailwind in the quarter.
These savings continue to be realized from a full collection of programs, including global sourcing and indirect savings, labor automation, and broader network efficiency efforts.
Importantly, in the face of a more challenging Global Supply Chain. We sustained our strong service performance from a quarter ago and saw a global unit. Fill rates and otif measures above Target levels, across most categories and markets
Delivering on our productivity objectives and maintaining strong service levels are key in our effort to mitigate tariff and currency headwinds. Our sustained brand investments deliver elevated service levels to our customers.
Now, turning to our business results in the quarter.
Organic net sales decreased 4.2% in the quarter.
Growth in international markets, continued with the 2%, organic growth driven, largely by price and srgm gains.
While cycling over 6% growth a year ago.
This represents our 13th, growth quarter in the last 14.
Double digit organic growth in Greater China and mid single digit growth in both oceanana and Europe, fueled our results.
Our international business continues to strengthen in market and in the quarter Approximately 80% of this business held or gained share.
Organic sales in North America, declined about 8% with volume, declines and increased promotional levels in sunare wet shave and fem care.
Turning to segment performance.
Wet shave organic. Net sales were down about 2%.
International wet shave grew about 3%, largely driven by price in SRGM gains, reflecting continued category health, good innovation execution, and strong in-market brand activation.
Our private Brands business remained, a meaningful competitive, advantage, and source of growth.
Posting low single digit gains.
Our international women's private brands branded business continued to grow at a rapid pace, growing over 18% while cycling 54% growth a year ago.
In North America, our wet shave results were as expected, with organic nut sales down about 8%.
Consumption in the US raises and Blades category was down 10 basis points in the quarter with continued. Heightened declines in the drug Channel.
Our market share decreased, 30 basis points for the quarter. Those sequentially improved 60 basis points versus Q2.
We continue to see solid results in women's systems with meaningful gains for the Billy brand on shelf.
Word gains in additional 140 basis points in market, share, and now stands at a 16% share of the category at Walmart 13% at Target and over an 11% share nationally.
additionally, as noted we saw sequential Improvement in market, share results for Hydro Silk
Sun and Skin Care organic, net sales were down, approximately 5% with mid single digit growth in grooming led by 28% organic, net, sales growth for kremo.
This was more than offset by declines in Sun, primarily a result of category consumption, declines and higher. Trade spends
Our sunare results in the quarter were materially impacted by adverse weather during the Memorial Day to 4th of July period. Both here in the US and across notable Latin markets, including Mexico, and Puerto Rico, all of which weighed on consumer consumption and ultimately impacted replenishment orders to retail
In the U.S. category, consumption decreased over 2%. Additionally, we saw significant declines in shipments in May and June.
Our market share was down 60 basis points. As the previously, mentioned strong, gains for Hawaiian trout. Work were more than offset by declines in banana boat.
Hawaiian Tropics 1 and a half point of share growth, reflected sustained velocity and distribution gains, as well as impactful MPD supported by the incremental Investments, made in the brand.
Share losses in Banana Boat were largely driven by poor weather impacting this occasion-based usage brand.
In international markets, we saw notable value and volume market share gains across Europe and Latin.
though we saw a sizable category decline in Mexico,
Hair organic. Net sales were down approximately 10%.
The decline was largely driven by tampons and pads.
We saw much improved consumption and market share Trends across our portfolio as expected. However, that Improvement was not reflected in organic. Net sales in the quarter as certain retailers appeared to be managing to lower inventory levels. Particularly in tampons,
Consumption in the category was up 4.5%, though driven by just under 8% growth in pads where our penetration is the lowest.
In the categories where we primarily compete tampons and liners consumption was up approximately 60 basis points and 30 basis points respectively.
In the quarter, our shared decline, 30 basis points, a 70 basis, point improvement from the 52 weak Trend and we saw strong share gains in liners.
as Rod mentioned earlier, we're at a critical juncture in our transformation as we drive significant change across our us Commercial Business while also facing numerous external headwinds including currencies and tariffs
against this backdrop, much of our business remains healthy and we remain confident in our ability to grow International and across our right to win businesses of sun skin and Grooming
These businesses are fundamentally strong, putting aside this year's unusual Sun Season.
Despite short-term transitory pressures, the core underlying fundamentals of our business are unchanged, underpinned by a relevant portfolio of brands and a strong gross margin profile. Across all categories, we have relentless cost management capabilities and the ability to generate strong free cash flow.
We are thoughtfully and deliberately making investments across the business despite lower-than-expected sales. These investments are generating strong initial returns.
Headwinds. They are having a short-term impact on profitability and therefore free cash flow. However, we firmly believe they serve to strengthen our business and better position our portfolio setting us up to deliver stronger results in 2026 and Beyond
Now, let me turn it over to France to discuss key financial results for the quarter and our updated full year outlook.
Thank you, Dan. Good morning, everyone. Let's jump into a quick review of the third quarter followed by our updated outlook for fiscal. 25.
As previously discussed organic net, sales decreased 4.2% with our North America suncare business. Underperforming our expectations, by approximately 25 million in the quarter.
Adjusted gross margin rate, decreased 150 basis points or down approximately 40 basis points in constant currency.
This was roughly 20 basis points below our Outlook at constant currency, as lower sunare sales impacted, both mix and trade promotion, however, productivity price and for inflation were largely as expected.
Amp expenses were 12.8% of net sales up from 11.8% last year.
While the rate of sales was in line with our outlook, we did rephase some spending for Banana Boat out of Q3 and into Q4.
Adjusted sgna was 16.2% in rate of sales and flat versus last year.
This was primarily driven by lower incentive, compensation expense, and favorable currency impacts, which mitigated the negative impact of lower sales.
Adjusted operating income was 75.1 million or 12% of net sales compared to 94.8 million or 14.6% of net sales last year, reflecting the impact of lower sales, lower gross margins incremental brand Investments and the net impact of exchange which drove a headwind of 100 basis points in the quarter.
Gap diluted net earnings per share were 62 cents compared to 98 cents in the third quarter of fiscal 24, and adjusted earnings per share were 92 cents compared to a dollar 22 in the prior year quarter.
Currency headwinds drove a 12-cent unfavorable impact on adjusted EPS in the quarter, as the unfavorable transactional currency and lower year-over-year hedge and balance sheet remeasurement gains than other income and expense were only partially offset by translational currency tailwind to operating profits.
Adjusted ibida was 96.4, million inclusive of a 7.8 million, unfavorable currency impact, compared to 117.2%.
Net cash provided by operating activities, was 44.3 Million for the 9-month ended. June 30th 2025 compared to 157.3 million in the prior year.
Shifts in inventory bills and other working capital timing in addition to lower earnings versus last year, drove the heightened use of cash in the current year.
In the quarter share repurchases totaled, approximately 25 million. We continued our quarterly dividend payout and declared another cash dividend of 15 cents per share for the third quarter.
In total, we returned approximately $32 million to shareholders during the quarter and achieved our target of approximately $90 million in share repurchases for the fiscal year.
Now, turning to our outlook for fiscal 25.
We have updated our outlook for the year to reflect year-to-date performance as well as the expected Q4 Financial impact of slightly lower than previously. Forecasted sun care, sales increased brand investments in both trade and A&P in the US as well as additional tariff and FX headwinds, which are only partially offset by more. Favorable taxes.
For the fiscal year. We now anticipate organic net sales to be down approximately 1.3%.
On a reported basis currency is now expected to be favorable for the full year. Reported net sales by 10 basis points versus our prior expectations of a negative 10 basis point impact.
On a reported basis, full year, gross margin is expected to decline, 60 basis points. Versus prior year. Inclusive of a 90 basis point currency headwind which is 30 basis points, higher than our prior Outlook.
We now expect full year, operating profit margin to be down approximately 150 basis points. Inclusive of the aforementioned 90 basis points of currency headwinds
Given these changes full year adjusted earnings per share are now anticipated to be approximately $2.65 inclusive of approximately 46 cents per share of currency headwinds.
On a constant currency basis, adjusted EPS is expected to increase by 6 cents or 2%.
Adjusted yvanna is now, expected to be approximately 312 million inclusive of approximately 29 million in currency headwinds, or down 12 million at constant currency.
The updated outlook for adjusted, EPS also reflects a lower full year. Adjusted effective tax rate of 16.5% compared to 20% in our prior Outlook.
Versus last year, this implies a Q4 outlook on a constant currency basis of approximately 2.5% organic net sales growth.
Flat, adjusted gross margin rate, and approximately 2% growth in adjusted ibida, even after incorporating meaningful, additional brand investment and tariff. Headwinds
re cash flow for the year is now expected to be 80 million, reflective of lower Gap, earnings and reduce contribution from working capital in Q4, which includes the impact of higher tariffs trapped in inventory. While the p&l impact of tariffs is approximately 5 million. The cash impact is estimated at approximately 10 million
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 to ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone 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 2. At this time, we will pause momentarily to assemble our roster.
And the first question comes from Chris Carey with Wells Fargo Securities, please go ahead.
Hey, good morning everyone. Um I I wanted to start with cash flow and leverage. So number 1 can you expand just on the the drivers of the
Free cash flow cut. Uh,
and I also want to understand you know within the organization how uh the organization is incentivized around cash flow, I'm just conscious that you know leverages is is ticking up and I just wanted to get a bit more context on key drivers this year and and how you're
Um, thinking about kind of attacking this over the next, you know, 12 plus months. Thanks.
Hey, Chris. Good morning. Um, so I'll start with the incentive piece and cash flow and then throw it to to the Fran on how we're we're looking at the cash right now, as we move forward from and incentive perspective. Um, we we've had cash flow in uh, for the executive level around delivery. Um, we look at when we go down in the organization we look at operating a profit Evita metrics with with some adjustment for for Capital spend and
So we we have um, the metrics you would want us to have in place around cash flow. I, I will say in this, in this moment,
Some of that gets overridden, for example, when you have to make adjustments to inventories.
To try to deal with the new tariff regime that's come up, right? That's not something, an individual is responsible for that becomes a corporate decision.
when we pivot and make adjustments to to plan and put inventory in places,
That will benefit us not only now but over time as we think about tariff, mitigation is 1 example. But it's in there.
Um as we incent the teams. And um I'll I'll flip it over on how we want to address the piece on the, the cash flow, change and Leverage.
Hi Chris. Thank you for the question. So when we look at cash and we and we compare versus our previous Outlook, You've Got 2 main drivers about 2/3 of the difference is really driven off of lower earnings, the additional FX headwinds as well as the incremental tariffs to the p&l. And then you've got 1/3 of the increase. That's really driven off of working capital changes, and mainly inventory. So weaker Sun season has left us with slightly higher sunare inventory levels. We have been leading in on tariff, mitigation efforts, especially around increasing levels, to prepare us um to mitigate. And I think as we look at the full year slightly higher pre-built around our Mexican consolidation. So significant amount of transitory items within cash.
Um, especially as we compare versus our previous Outlook.
Christ. The only thing I would add is Stan. The only thing I would add look there's there's a few things. This business model does really well and and thrown off free cash. Flow is 1 of them and I appreciate you kind of asking where are we going with this? Um, you know, better than anyone has a business. This we we've thrown off anywhere between 150 and 200 million of cash flow and we have a cash flow yield over 10%. So we're really confident in our ability to do that and I think history shows that France points are fair. They're not, they're not great answers, but they're Fair lower earnings. Higher working capital inventory bills around tariffs. We got quite a bit heavy with sun for obvious reasons, given the season.
And I mean, all of that factors in, but we don't see any of these, as structural, barriers going forward, and, and I think, importantly, our, our capex rate is is largely where it's been as a percentage of sales. So so structurally, there's nothing here to prevent uh us from thinking about a return to the type of free cash flow generation that you've seen from us. We'll talk more about that in November, but I think at the Spirit of your your question, I think we believe strongly in our ability to continue to deliver really healthy cash flow.
Okay. All right. I'm going to leave it there. Thank you.
Thanks, Chris, operator. Next question, please.
In your next question, comes from Peter Grom with UBS. Please go ahead.
Thanks, Operator. Good morning, everyone. So, maybe following up—and I know we're going to get more details in a few months—I'm on physical 26, but can you maybe just...
Speak high level I guess to to the puts and takes. As you see them today um maybe specifically, you know, on organic sales, you're exiting a Year with much stronger, you know, growth than maybe what we've seen in the last couple of quarters. So just curious if there's anything unique that is driving that or or is that exit rate? A fair run rate as we, you know, begin to look out the next year and then just on profit you know a lot of moving Pieces cost tariffs Etc. Can you maybe just help us understand what's transitory versus maybe the headwinds that you would expect to persist as As you move into next year? Thanks.
Yeah, good morning, Peter, um, I'll I'll start with this 1 and and take the, the growth rate and and kind of where we are today it, if you I think you're referencing basically. What's implied for quarter 4 is is an organic growth rate of 2 and a half percent.
Um, broke, which would be good, right? That would be the best quarter of the year. And the question is, does that carry forward? We are not going to get into fiscal 2026 or give any specific guidance for 2026.
Um but what I will tell you we we've got 1 month in the books. July, we're on track for that 2 and a half percent in the quarter and and structurally. What, what plays out there is very much in line with how we've thought about the algorithm. Uh, we've got Sim care improving in in quarter. 4 versus where it's been, is, is you know, fim care has been down high single digits to low double digits. Um, as we've cycled through the, the change over the last year of the Carefree Master brand execution and, and all the Dynamics that have been in that category.
We've got Sim care back to to growth in quarter 4 and I think a a flatter business going forward. Shave is an increasing priority for this company. Um we we can win and be successful in shave and we're going to do that in the quarter. We just printed
Global shave down 2% organic. Um we'll be better than that as we go forward. But this idea that we can be a flat business and shave absolutely holds sunare
We are I guess, depends on how you look at it glass half empty. We're we're impacted. And maximally negative in the quarter. We just reported
So, you're seeing that in our print, maximally negative due to weather, by the way, not, not a change of consumer Behavior or our brand resonance, so, as we go forward, yeah, I would look, uh, for some care to be in growth position as well. Certainly off of what is a very weak base as, as we move into this, and then we've had grooming, um, in growth High single digits all the way along with a Criminal brand, that is accelerating. So we're not going to give you a number for 26. But I I guess what you're getting at is, can we deliver our our growth algorithm of plus 2 to 3%? As we move forward, we absolutely can. And I'm not going to time stamp that because we're going through the transformation work in North America. But I think we're more convicted than ever, when we look at what we have and how we go forward the that we can grow this business Dan. Yeah, Peter I I would only add because I think broads comments are fair and and this isn't the moment to to
Start to put numbers on the board for next year but this has been an incredibly challenging and transitory year on a number of fronts, right? Tariffs, inflation currencies a disastrous suncare quarter, which is 50% of the Season, uh, negative year-over-year. So that that, you know, we'll work our way through all of that. I think what we feel really good about though. What continues to underpin this business International growth. Uh mid single digits. We've talked about this really good proxy going forward, productivity savings.
250 basis points a year. As a, as a as a placeholder, it'll be more than that this year. I just talked about free cash flow and I and our confidence there. So it it comes down to to the North America business which which Rod just talked about and so got a lot of work to do to, to get this tariff policy locked down, uh, and and get mediation efforts in place. And then, of course, the state of the consumer and how they're going to be feeling next year as they feel the effects of likely Rising inflation and, and a pressure job market. So there's a lot for us to work through. But at the core, uh, International growth, feel really good, productivity savings, feel really good, free cash flow will come back, uh, and we just got to cycle our way through some of these other points and we'll, we'll certainly share more about that in November.
Great. Thanks so much. I'll pass it on.
Thank you. Thanks, Peter operator. Next question, please.
And the next question comes from Olivia Tong with Raymond James please go ahead.
Okay, great, thanks. Um, I want to follow up on that a little bit, um, about, you know, Q4 and what kind of drive that organic sales growth that you're looking for. That looks like about a 650 basis point. Um, turn from Q3 to Q4, you know, what are you thinking? In terms of underlying category growth?
How much have you seen Sun rebound? Now that the season has commenced and and sort of what's your view? Also on further destocking across the business and then I have a follow-up
Yeah. Hey Olivia. It's it's Dan good morning. Yeah, look. So let me, let me try to unpack the quarter and I think you have to look at it differently, between what we're expecting internationally, where we are going to see growth rates accelerate, and what we're expecting in North America, where we will expect to see declined moderate and sequentially improved, let me take them in order for international. Uh, we have a really good line of sight to what looks like a step up in growth of about 5 Points. We've been running sort of in the 2 to 3% growth for the year. We're profiling the quarter between 7 and 8. A couple of drivers to that, we've got new pricing going into the markets that's been fully executed. Uh, that'll start to impact, uh, 42, that's worth a couple of points. We've got a healthy NPD, uh, and and product launches, including Billy moving into International new to the quarter. And we've got some successful private Brands, tenders that that ramp in the quarter that had started earlier. But that ramp in the quarter that
Collectively is worth 3 points. So you got the pricing, you've got Billy and other MPD you've got private Brands tenders that have uh that have successfully been won. And now scale that that delivers your your growth for uh International
on North America. There's essentially 3 factors, all of which are are fairly equally weighted 1 is on care. We are not expecting a minus 11, organic profile in 4 q. We're expecting 4% consumption growth in the category and 4% Organics.
2 is Femme care. Um, and I think for fem care here, we're profiling low single digit growth.
Point you made, uh, but we're feeling much better about uh, the state of the portfolio there and then lastly is wet ones where we've got an outsized quarter, uh, profile largely because we're cycling. Some of the effects of the fire last year and some out of stocks that you know, put all of that together that sort of gets you to that minus 1 uh, that we're expecting in North America. Now, let me talk about the, the the month we're in because I think where the month we just ended because I think that's important in Rod was alluding to that. First of all, we we've essentially delivered our sales profile for the month of July, our biggest month of the quarter, I think that's important. It gives us, uh, sort of added confidence for the fourth quarter. I think, as importantly we've seen performance on shelf in the US actually improve categories. Remain healthy grew about 4%. Last uh 4 weeks and in July sunare was up 8% and we held share. That's a really good indicator.
And and fem care, we again held share. Um, so now you've got about 7 16 17 weeks of demonstrated fem care strength on shelf, as a result of all of that.
Total Edge. Well, business was flat in terms of share. Um, so we like what we're seeing, we are seeing evidence of strength on shelf. It doesn't suggest the quarter is done yet, but we have increased confidence today on our ability to deliver that that organic growth in the quarter.
Got it, that's very helpful. And then in terms of investment levels going forward, it sounds like you're you're quite pleased with some of the new brand supports uh things that you're doing. Unfortunately that you know, ran against poor, whether this quarter. Um so as you think about the go forward, what continues, um, you know what, what, you know, as you think about elevated levels of Brands important in certain areas, um, would we should we expect that to continue into fiscal 26 and then um as you think about the Innovation plan for next year, are there other areas where you could potentially see um increased investment as we think about all the different puts and takes uh for next year? Thank you.
Yeah, so thanks Olivia. I think what, what you'll see continued from an international perspective as Dan referenced that that 40% of the portfolio. Um, as we've been growing, we've been incrementally investing behind those Brands, um, and and and growing margin at the same time that we've been doing that by getting leverage out of the GNA profile and also driving really good gross margin management with all the pricing Revenue mechanics. So you'll see that continue as we move forward.
Forward. Um in international in North America, what you've seen us do incrementally
Um, in in Q3 and what will continue to do in Q4. There are 3 specific new activations, um, cremo, the scent Kings campaign, um, is in place and is working and driving. Why entropic, Dan referenced you? You, you've probably seen the Alex Earle campaign with Lion Tropic. Um, we feel really good about that, and then we've got a nice campaign up against Hydro Silk, that's resonating these. These are campaigns that are part of broader activations, getting the lineup, right? The pricing right now, get the messaging right, with good scoring campaigns. We're seeing that, we're getting an Roi on those campaigns as we as we pivot to next year, not only will we continue those style of campaigns will look to put new campaigns, uh, potentially against a couple of other brands as well. I'm not going to mention the brands, but there's 2 Brands, we've got in mind.
Um, again you don't you don't just throw a new campaign out there. You've got to have the lineup structure, right? You've got to have uh, the capabilities right with the team. You you've got to have everything in place and have a point of view on where you want to take the brand and, and increasingly the capabilities built being built in the North American Business. The US specifically are
Like how on a productivity and efficiency front to fund it, we talk a lot about supply chain and the numbers there. You've seen that equally in the remarks, you would have heard Fran, talk about North America's reorganization, which ultimately led to a more cost-effective and more talented and more capable organization. So we're going to, we're going to continue on that front with driving cost, out to create dry powder to invest.
Understood, thank you.
Thank you, Olivia operator. Next question, please.
And your next question comes from Susan Anderson with Canaccord Genuity. Please go ahead.
Hi, good morning, thanks for taking my question. Um, really quick, follow-up on sun. I guess, I, I assume you're expecting some replenishment and the rest of the year with the Expo, patient for 4% growth and fourth quarter. And then maybe, if you could just talk a little bit about how inventory is right now are in the channel for sunare and then I guess looking out to next year, are you expecting any new innovation in the category, as it seems like, there have been quite a few competitors, kind of jump into the space and, and start to take a little share of things.
Yeah, good morning, it's Dan. Um so look I we're overall profiling, a flat to slightly down, son season. Um you know decent at the start really tough in the middle which is the quarter we just exited. And then up mid single digits here in the final stretch of the of the season. So flat to slightly down is our profile.
Right now. And so yes, our our organic sales expectations for the quarter are largely, the replenishments to to to feed that expected growth 1 month in so far. July, it's holding, and you see the impact of of improved weather right now? I think we're we're generally comfortable in terms of of inventory levels. Um, we sort of worked our way through that last quarter. That's why you saw Organics down, such a big amount versus consumption on shell. So I think we're, we're in a pretty good place.
I would also say this is where our supply chain is a distinct Advantage because we can replenish quicker than others. Um because of proximity in the amount of product end to end that, that, that we manufacture. So we're hopeful that we can that we can end the season here in a good way, 1 month in, certainly the data supports that. And as for next year, look, I'm not going to, I'm not going to get into the specifics. But as always, we have a really healthy, uh, view right now of of interesting Innovation that will bring to the to the category. Uh, not just here in the US, but across International as well, Rod. Anything you want to add to that? Yeah, I on that last point.
Susan on the sum of the new entrance and and Innovation. Uh,
Let's just look at where we are with our 2 Brands Hawaiian Tropic in the top 10 brands in sunare, which is the bulk of the volume, is the fastest growing brand in the set.
Um, the team has done an amazing job, um, with that brand. It's it's current it's relevant. Um, and it's resonating with consumers and, and that's the campaign. It's the, it's the brand positioning, it's the messaging, it's the product lineup, leading into the body, butter is tanning things. The the enhanced skin look and feel, so it's it's even less about SPF in that case. Um, when you look to Hawaiian Tropic and then as you look, then a Banana Boat. It's more about being outside the fund in the sun, um, which makes it highly correlated to whether. So when the weather wasn't good between Memorial Day and July 4th, you saw Banana Boat Suffer. Well, as the weather turns better in July here, as we go into quarter 4, we're seeing Banana Boat now, perform, um, significantly better. And so, it's just interesting from a portfolio perspective, the impact that, that whether specifically has on Banana Boat,
Really good about the, the momentum we have with Our Brands and the team doing the work.
I guess just curious what you're seeing from a competitive Dynamic. Are you seeing it ease at all on the women's side? Or is it still kind of very promotional then? Also, if you could talk about how Billy's body wash has performed and have you also seen a similar competitive dynamic in that area, just given a number of Brands seem to be kind of moving across categories. Thanks,
Yeah, I'll just address the questions direct directly on and then I I got a a bit of a broader statement uh on women's in the US specifically yes. Highly promotional continues to be at an elevated level. Yeah. It's a very very competitive space with that being, you know, the the number of brands. In that space right now is is too many for the future. Frankly, I don't think we'll continue with all the brands in the set. So women's highly promotional, you see our share results in that space, Billy winning share, Hydro Silk sequentially improving in a in a material way, in the quarter. So we're I think we're, we're, we're super competitive. And what is the most competitive space? Um, as you you asked a question about Billy body, frankly, we're not happy with the results, um, on where we are. There we um we still feel like Billy absolutely has the right?
Right? To be a Lifestyle brand and can play outside of shave. Uh, from a category perspective. Um, in some cases, like we like the products, the products are amazing. They work.
Um, but they, they didn't hit some of the thresholds, we wanted at some of the retailers. And so we're looking at how do we reset and go forward um with the body range it's not Material. If I think if you go back to our language in the past, as we launched this, it was more of a test and learn pilot and as we put it out there we've learned and so we'll adapt and adjust as we go forward. What I, what I will tell you though, the strength of the Billy brand is in shape, it continues to grow over 100 basis points of share in every period as we go forward. It's now an 11 share, brand nationally, um, and has surpassed some of the other brands that were out there, um, in brick and mortar before it. Um, final thing I'll say around shape competitively
and and I said it earlier, in 1 of the responses, we are going to increase the priority of winning and shave in this company. We're the number 2 player by far globally.
Most of our shade business is outside, the US over 55% of our shade business is outside the US.
It's structurally profitable. It's primarily a 2-player uh category outside the US and we have wonderful R&D and Manufacturing capabilities that we can leverage and as we get the the marketing and brand building capabilities, right?
We have a ton of opportunity in what is a stable, slightly growing category, and I don't know what you. Yeah, I would just highlight because I think that the shave performance in the quarter on shelf in the U.S. was a real eye-opening strength for U.S. men's systems. They were flat in terms of share, but it's about a point improvement from where we've been. Women’s systems gained a point of share, including Hydro Silk handles being flat in share. To your point, Rod, our disposable business grew 40 basis points in share, so we were really encouraged. This goes back to the investing and returning point I made earlier with our shave performance. Thirteen weeks does not make a trend for sure, but we see encouraging results on shelf.
Okay. Great, thanks so much for
Thank you, Susan. Operator. Next question, please.
No further questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Rod little CEO for any closing remarks.
All right. Thank you, operator. And thanks everybody for your continued interest in time this morning. Uh, we'll see you in November with an update.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect