Edgewell Personal Care(EPC) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP diluted net earnings per share of $0.36 compared to $0.89 in the second quarter of fiscal 2019, while adjusted earnings per share were $0.92 compared to $1.13 in the prior year period [47] - Organic net sales in the quarter increased by 2.4%, with underlying organic sales performance being flat when adjusting for COVID-19 impacts [36][34] - Gross margin increased by 60 basis points year-over-year to 46.5%, with underlying gross margins increasing by 50 basis points [43] Business Line Data and Key Metrics Changes - Wet Shave organic net sales declined by 3.5%, driven by volume declines in men's systems and unfavorable price/mix in disposables, partially offset by growth in women's systems [38] - Feminine Care organic sales increased nearly 14%, largely driven by stock-up related to COVID-19, while excluding those increases, sales were down about 1% [42] - Sun and Skin Care organic sales increased almost 9%, driven by strong demand for Wet Ones, which was up $11 million or 80% over the prior year period [40] Market Data and Key Metrics Changes - North American organic net sales grew by 5%, driven by strong performance in Wet Ones, feminine care, and men's grooming [36] - International organic net sales declined by 2% in the quarter, largely due to COVID-19-related headwinds across broader Asian markets, but were up 1% on an underlying basis [37] - E-commerce sales grew by 63% in the quarter, reaching about 6% of total net sales, with growth on the Amazon platform of 80% [37] Company Strategy and Development Direction - The company is focused on innovating and building brands that consumers love, with significant steps taken to become more consumer-centric in the development of its innovation pipeline [19] - Strategic partnerships with key retailers are being built to win at the shelf, emphasizing strong collaboration and partnership [21] - The company is maintaining a strong balance sheet and deploying healthy free cash flow in a balanced and disciplined manner [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exiting the pandemic in a stronger position due to structural changes in consumer behavior favoring personal hygiene products [72] - The company has suspended forward-looking guidance due to the lack of visibility and continued uncertainty regarding consumer demand and supply chain impacts [52] - Management noted that while there are near-term challenges, the underlying fundamentals of the business continue to strengthen [35] Other Important Information - The company has successfully refinanced its $425 million revolver, securing additional liquidity for the business [51] - The company is taking steps to reduce costs while supporting strategic priorities, with a focus on digital advertising and brand activation [59] - The company has implemented enhanced safety protocols in its facilities to protect employees during the COVID-19 pandemic [12] Q&A Session Summary Question: Can you provide an update on overall corporate sales trends in April? - Management noted that April was a negative month due to lockdowns, but trends have improved as they exited April, with some categories showing year-over-year growth [66] Question: Can you discuss capacity constraints and ability to supply Wet Ones? - Management acknowledged current capacity constraints but indicated that additional capacity would come online in the summer, with investments being made to secure this [69] Question: How is the company positioned to exit the pandemic? - Management expressed confidence in exiting the pandemic stronger, citing structural changes in consumer behavior and improved fundamentals [72] Question: What is the status of brand rearchitecture work? - Management stated that significant progress has been made in architecting the brand portfolio to better target consumer segments, with improvements expected in 2021 [74] Question: Can you clarify the growth in Private Label sales? - Management indicated that Private Label sales were up high single digits, primarily in unmeasured channels, and they expect to maintain or grow share moving forward [78][81]