Edgewell Personal Care(EPC) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Organic net sales decreased by 14.7% in Q3 2020, with significant declines across all categories due to COVID-19 impacts [17][48] - Gross margin rate decreased by 200 basis points year-over-year to 46%, affected by COVID-related costs and unfavorable category mix [62] - Adjusted operating income decreased by $36.4 million, reflecting the challenges faced during the quarter [46] Business Line Data and Key Metrics Changes - Wet Shave organic net sales decreased by 14%, with North America down 16% and international markets down 13% [50] - Sun and Skin Care organic sales decreased nearly 19%, with Sun Care experiencing a 30% decline in organic net sales [55] - Wet Ones saw a strong organic sales growth of 52% year-over-year, driven by heightened hygiene demand [58] Market Data and Key Metrics Changes - In the U.S., the overall Sun category declined about 18%, but Edgewell's consumption was down only 5%, leading to a 370 basis point market share gain [56] - Market share in razors and blades declined by 190 basis points, but Hydro Men's gained 40 basis points excluding lost distribution [51][52] - E-commerce business grew organically by 76%, with Amazon contributing significantly to this growth [61] Company Strategy and Development Direction - The company announced its intent to acquire CREMO, aiming to expand its presence in the fast-growing U.S. men's grooming category [33][71] - The Sustainable Care 2030 strategy was unveiled, establishing 10 ambitions for the next decade to create a sustainable future [28] - Focus remains on managing the business in a disciplined manner while investing in long-term growth opportunities [23][75] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism that the worst impacts of COVID-19 may be behind, with sequential improvement noted in sales trends [43][44] - The company is closely monitoring uncertainties and volatility in the market, particularly in relation to COVID-19 [22][23] - Management emphasized the importance of maintaining a strong liquidity position and disciplined capital allocation [68][70] Other Important Information - The company generated over$ 100 million in operating cash flow during the COVID-impacted fiscal third quarter [26] - Project Fuel generated $23 million in gross savings, reflecting ongoing efforts to create efficiencies [24][69] - The management team has been reshaped, with new appointments aimed at enhancing capabilities in key areas [29] Q&A Session Summary Question: How does CREMO fit into the Wet Shave strategy? - Management indicated that CREMO is a key piece to enhance exposure in the fastest-growing part of the grooming segment, with confidence in the overall grooming market returning to normal [90][92] Question: What is the outlook for Sun Care and inventory management? - Management expressed confidence in inventory position and does not anticipate heightened returns or accruals, with a positive outlook for the upcoming season [93][95] Question: Why is there no formal guidance for the remainder of the year? - The decision not to reinstate guidance was due to uncertainties surrounding COVID-19, despite seeing sequentially improving top-line trends [100][102] Question: Can you provide details on the CREMO acquisition and its financials? - Management highlighted CREMO's attractive growth rate and profitability, with significant opportunities for distribution and geographic expansion [108][109]