Edgewell Personal Care(EPC) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net sales decrease of 4.2% for the full fiscal year, with a 3.4% decline on an organic basis [38] - GAAP diluted net earnings per share were $0.75 compared to $0.36 per share in the fourth quarter of fiscal 2018, while adjusted earnings per share were $0.86 compared to $1.11 in the prior year period [38][46] - Free cash flow for the fourth quarter was $74 million, up almost 23% versus the same quarter of last year [27] Business Line Data and Key Metrics Changes - Grooming and Sun and Skin Care segments saw higher volumes, but were offset by unfavorable price mix in Wet Shave, leading to a 1.7% decrease in net sales for the quarter [28] - International organic net sales grew 4.8% in the quarter, driven by Wet Shave and Sun and Skin Care [28] - Organic sales in North America decreased 5.1%, with Wet Shave stabilizing at a 1.7% decrease [29] Market Data and Key Metrics Changes - The U.S. razors and blades category decreased about 3% in the latest 12-week data, with the company's market share at 25.3%, down 40 basis points year-over-year [32][33] - In the Sun Care category, 12-week consumption increased 8.5%, but the company's share declined by approximately 110 basis points [34] Company Strategy and Development Direction - The company is focused on brand equity building and not on price competition, aiming for sustainable growth through investments in key brands and markets [62] - The pending combination with Harry's is seen as a transformative opportunity, expected to enhance capabilities and market position [16][18] - The company plans to increase advertising and promotional spending in 2020 to support brand growth [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stabilization of the business and improving trends in the second half of the fiscal year [10][39] - The outlook for 2020 includes flat to slightly down organic sales results, with expectations for gross margin stabilization and increased investments in growth initiatives [52][55] - Management acknowledged ongoing inflationary pressures but expects Project Fuel savings to help offset some costs [49][90] Other Important Information - The company generated $122 million in gross savings from Project Fuel, which will be reinvested in key brands and growth initiatives [11][49] - The company plans to divest its Infant and Pet Care businesses, with the sale of the Infant Care business expected to close for $122.5 million [15][16] Q&A Session Summary Question: Stability in Men's Grooming Category - Management noted that the Men's and Women's grooming categories have stabilized compared to a year ago, with the market showing slight growth [59] Question: Investment Risks - Management emphasized that the focus will be on brand equity building rather than price competition, aiming for long-term benefits from increased investments [62] Question: Fem Care Improvement - Management remains confident in improving trends for Fem Care, despite some inventory and promotional challenges in Q4 [63] Question: A&P Spending - Management indicated that the increase in A&P spending is a strategic move to support brand building, with visibility on returns expected to improve [65] Question: Long-term Targets - Management confirmed that they stand by their long-term targets, with adjustments to be made post-closing of the Infant and Pet Care divestiture [68] Question: Sun and Skin Care Profitability - Management expressed optimism about growth in the Sun and Skin Care segments, particularly in Men's Skin Care, and highlighted ongoing innovation efforts [97]