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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals declining financial metrics, including a 4.2% drop in organic net sales and a significant decrease in operating income and earnings per share. The Q&A section highlights concerns about cash flow, reliance on international growth, and lack of clear guidance for fiscal '26. Despite some positive developments, such as balanced inventory levels and international growth, the overall sentiment is negative due to the weak financial performance and vague future outlook. Given the company's small market cap, this could lead to a stock price decline of -2% to -8%.
Organic Net Sales Decreased 4.2% year-over-year. The decline was driven by an 8% drop in North America due to volume declines and increased promotional levels in Sun Care, Wet Shave, and Fem Care. International markets grew by 2%, driven by price and SRGM gains.
Adjusted Gross Margin Rate Decreased 150 basis points year-over-year, or 40 basis points in constant currency. The decline was due to lower Sun Care sales impacting mix and trade promotion, partially offset by productivity, price, and core inflation.
A&P Expenses Increased to 12.8% of net sales from 11.8% last year. The increase reflects rephased spending for Banana Boat and higher investments in brand campaigns.
Adjusted Operating Income Decreased to $75.1 million (12% of net sales) from $94.8 million (14.6% of net sales) last year. The decline was due to lower sales, gross margins, incremental brand investments, and currency headwinds.
GAAP Diluted Net Earnings Per Share Decreased to $0.62 from $0.98 last year. The decline was driven by lower sales, gross margins, and currency headwinds.
Adjusted Earnings Per Share Decreased to $0.92 from $1.22 last year. Currency headwinds contributed $0.12 to the decline.
Adjusted EBITDA Decreased to $96.4 million from $117.2 million last year. Currency headwinds contributed $7.8 million to the decline.
Net Cash Provided by Operating Activities Decreased to $44.3 million for the 9 months ended June 30, 2025, from $157.3 million last year. The decline was due to shifts in inventory build, other working capital timing, and lower earnings.
Share Repurchases Totaled approximately $25 million in the quarter, contributing to a total of $90 million for the fiscal year.
Billie Wet Shave Line Expansion: Launched in Australia in July, expanding geographic reach.
Bulldog Premium Skin Care: Entered the premium skin care category, driving sales and market share growth in Europe.
Cremo Range Expansion: Broadened range in the U.S. and Europe, showing significant benefits.
Hawaiian Tropic Growth: Strong U.S. growth due to marketing campaigns, updated formulations, and on-trend branding.
Schick Progista Launch: Introduced in Japan's premium skin care market.
International Market Growth: Represents 40% of global sales, delivering consistent mid- to high single-digit organic growth over four years.
U.S. Market Share Improvement: Improved market share for Hawaiian Tropic, Cremo, and Schick Hydro Silk brands.
Productivity Savings: Achieved almost 300 basis points in realized gross savings this quarter.
Supply Chain Execution: Strong execution led to further productivity gains above the year-to-date trend.
U.S. Commercial Organization Redesign: Redesigned and launched a new U.S. commercial organization with a streamlined structure and new leadership team.
Incremental Brand Investments: Increased investments in trade support and advertising for key brands like Cremo, Hawaiian Tropic, and Schick Hydro Silk.
Sun Care performance: Adverse weather conditions in North America and Latin America significantly impacted Sun Care sales, leading to a $25 million shortfall in the quarter. This weak performance also affected replenishment orders to retail.
Tariffs: Evolving tariff policies have added significant challenges to the global supply chain, with an estimated $40-$50 million annualized cost impact. This has created headwinds for profitability and operational efficiency.
Foreign Exchange Volatility: Currency fluctuations, particularly in the Czech krona, euro, and Mexican peso, have increased cost pressures and created transactional FX headwinds, negatively impacting profitability.
Retailer Inventory Management: Retailers in the U.S. have tightened inventory levels, particularly in the fem care category, leading to a divergence between organic net sales and category consumption levels.
North America Business Challenges: The U.S. business has underperformed expectations, with an 8% decline in organic sales in North America. Challenges include weak Sun Care sales, higher trade spend, and structural inefficiencies in the U.S. commercial organization.
Macroeconomic Uncertainty: The broader macroeconomic environment remains unpredictable, adding pressure to consumption trends and operational planning.
Banana Boat Brand Performance: Declines in the Banana Boat brand due to poor weather and occasion-based usage have offset gains in other Sun Care brands like Hawaiian Tropic.
Incremental Investments: Increased investments in brand campaigns and trade support are weighing on short-term profitability, despite showing early signs of improving market share.
Supply Chain Costs: Global supply chain challenges, including tariffs and inflation, have increased costs, requiring mitigation efforts like inventory prebuys and vendor negotiations.
Full-Year Organic Net Sales: Expected to decline approximately 1.3% for fiscal 2025.
Currency Impact on Net Sales: Currency is now expected to be favorable for the full year reported net sales by 10 basis points versus the prior expectation of a negative 10 basis point impact.
Adjusted Gross Margin Rate: Full-year adjusted gross margin rate is expected to increase by 30 basis points on a constant currency basis, but decline by 60 basis points on a reported basis due to currency headwinds.
Operating Profit Margin: Full-year operating profit margin is expected to decline approximately 150 basis points, inclusive of 90 basis points of currency headwinds.
Adjusted Earnings Per Share (EPS): Full-year adjusted EPS is now anticipated to be approximately $2.65, inclusive of $0.46 per share of currency headwinds. On a constant currency basis, adjusted EPS is expected to increase by $0.06 or 2%.
Adjusted EBITDA: Expected to be approximately $312 million for fiscal 2025, inclusive of $29 million in currency headwinds, or down $12 million at constant currency.
Free Cash Flow: Expected to be approximately $80 million for fiscal 2025, reflecting lower GAAP earnings and reduced contribution from working capital in Q4.
Q4 Organic Net Sales Growth: Expected to grow approximately 2.5% on a constant currency basis.
Q4 Adjusted Gross Margin Rate: Expected to remain flat on a constant currency basis.
Q4 Adjusted EBITDA Growth: Expected to grow approximately 2% on a constant currency basis, even after incorporating additional brand investment and tariff headwinds.
Quarterly Dividend Payout: Declared another cash dividend of $0.15 per share for the third quarter.
Share Repurchases: Share repurchases totaled approximately $25 million in the quarter, achieving a target of approximately $90 million in share repurchases for the fiscal year.
The earnings call reveals a decline in key financial metrics like gross margins, operating income, and EPS, with additional currency headwinds and increased expenses. Although management provides optimistic guidance for future recovery, the Q&A section indicates skepticism about margin improvements and the impact of the Fem Care sale. The strategic plan's focus on debt reduction and brand investments doesn't alleviate immediate financial pressures. Given the market cap of ~$2 billion, the negative sentiment is likely to result in a stock price decline of -2% to -8% over the next two weeks.
The earnings call reveals declining financial metrics, including a 4.2% drop in organic net sales and a significant decrease in operating income and earnings per share. The Q&A section highlights concerns about cash flow, reliance on international growth, and lack of clear guidance for fiscal '26. Despite some positive developments, such as balanced inventory levels and international growth, the overall sentiment is negative due to the weak financial performance and vague future outlook. Given the company's small market cap, this could lead to a stock price decline of -2% to -8%.
The earnings call presents a mixed picture: International growth and increased gross margin are positives, but North American sales declined, operating income decreased, and consumer confidence is low. The Q&A reveals management's confidence in future growth, but uncertainties remain with tariffs and economic factors. The market cap suggests moderate volatility. Overall, the positives and negatives balance out, suggesting a neutral sentiment with potential for slight positive movement if international growth and strategic investments yield results.
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