Edgewell Personal Care Company — Q1 FY2024 Form 10-Q
Reporting period: Three months ended December 31, 2023. Amounts are in U.S. dollars, millions except per-share data. Edgewell sells products in wet shave, sun and skin care, and feminine care.
Financial performance
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|
| Net sales | $488.9 | $469.1 |
| Gross profit / margin | $197.7 / 40.4% | $189.6 / 40.4% |
| Operating income | $26.1 | $31.9 |
| Net earnings | $4.8 | $12.4 |
| Diluted EPS | $0.09 | $0.24 |
| Operating cash flow | $(72.9) | $(86.3) |
| Capital expenditures | $6.5 | $11.3 |
- Sales increased 4.2%; organic sales rose 3.1%, with a favorable $5.5 currency impact. Organic growth was mainly pricing; volumes were essentially flat. International sales rose 16.2%, while North America declined 4.9%.
- Adjusted net earnings were $12.0 and adjusted diluted EPS was $0.24, versus $16.5 and $0.32, respectively. Adjusted gross margin was 40.7%, up 30 basis points. These are company-defined non-GAAP measures.
- SG&A increased to $103.3 from $95.7, and advertising and promotion rose to $48.2 from $45.9. Management cited higher people and incentive costs, currency effects, and timing of marketing investments.
- Net cash used in operations improved by $13.4 year over year, primarily because of a lower working-capital build. Cash declined $2.2 to $214.2 during the quarter.
Segments and material changes
| Segment | Sales | Segment profit (loss) | Year-over-year context |
|---|
| Wet Shave | $301.7 | $53.7 | Sales +9.6%; profit +50.4% |
| Sun and Skin Care | $115.4 | $(1.3) | Sales +2.2%; prior-year profit was $13.3 |
| Feminine Care | $71.8 | $7.3 | Sales −11.2%; profit −38.7% |
- Wet Shave benefited from international growth, higher sales, and improved gross margins. Feminine Care sales fell primarily because of lower tampon sales, comparison with prior-year competitive product out-of-stocks, and retailer inventory reductions.
- Sun and Skin Care’s loss reflected significantly higher inflation-related costs, despite modest sales growth. Company-wide GAAP operating income fell $5.8 and net earnings fell $7.6 year over year.
- The prior-year comparison was revised for an immaterial correction involving aged goods-received-not-invoiced accruals. The revision increased Q1 FY2023 net earnings by $0.5, to $12.4; reported total cash flows by activity were unchanged.
Debt, liquidity, outlook and risks
- Total borrowings were $1,487.2 at December 31, 2023, up from $1,391.5 at September 30, 2023. This included $1,250.0 of fixed-rate senior notes, $213.0 drawn on the revolver, and $24.2 of short-term notes. The revolver had $206.6 available; it matures in April 2025. The company reported compliance with debt covenants.
- Current assets were $1,005.5 and current liabilities $467.7. Inventory was $521.9. Management said cash, operating cash flows, and borrowing capacity should meet financing needs for at least 12 months, while noting seasonal cash generation is typically stronger in fiscal Q2 and Q3.
- Management expects approximately $19 of restructuring and repositioning charges in FY2024; $6.8 was incurred in this quarter. No sales or earnings guidance is provided in the filing text.
- A December 1 fire at the Wet Ones plant caused a partial shutdown of the process producing Wet Ones raw materials. No injuries were reported; $1.5 of related costs had been incurred through quarter-end.
- Risks discussed include foreign-exchange exposure, inflation and cost pressures, variable-rate debt, and ordinary-course legal matters. Management said pending legal proceedings are not reasonably likely to be material, considering established accruals. The filing reports no interim goodwill impairment trigger.
Key facts for investors to verify
- Whether Wet Shave growth and margin gains continue, and whether Sun and Skin Care recovers from inflation-related losses.
- Whether Feminine Care demand and retailer inventory reductions stabilize.
- Progress on the Wet Ones plant recovery, related costs, and any operational impact beyond the quarter.
- Working-capital and seasonal cash-flow trends, revolver borrowings and availability, and refinancing needs ahead of the April 2025 maturity.
- Underlying performance alongside non-GAAP adjusted results, including the stated exclusions and the immaterial prior-period financial-statement revision.
