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Banana Boat-maker Edgewell ‘holding or gaining share’ amid inflation, CFO says

Edgewell Personal Care CFO Daniel Sullivan joins Yahoo Finance Live to discuss company earnings, raising full-year guidance, inflation, consumer demand, international sales, and the outlook for Edgewell Personal Care.

Video Transcript

- Consumer products company Edgewell Personal Care, or ticker symbol EPC, they reported earnings for the fourth quarter exceeding expectations on both the top and bottom lines driven by strong sales growth across all segments. The maker of Banana Boat and Wet Ones raised its fiscal year revenue outlook, now expecting sales to grow between 2% and 4%.

Joining us now to discuss, we've got Edgewell Personal Care CFO Daniel Sullivan. Dan, thanks for taking the time here with us on Yahoo Finance. When you think of some of the catalysts for this quarter, what really stuck out to you?

DANIEL SULLIVAN: Yeah, good morning. It's great to be here, and thank you. Look, I think first of all, we're operating in largely healthy categories. And that's been the case, certainly in the US, for the better part of the last year. And we're taking advantage of that, obviously. So that's one.

I think two, we've got healthy brands. And we're executing really well at shelf. Our distribution outcomes across the portfolio have been very strong. These are brands that consumers know and like and appreciate. And that's obviously been a catalyst.

And then thirdly, look there's been pricing that's been brought into the category. We've participated in that as well. All of those are the tailwinds that, yeah, you mentioned it, we were quite pleased with the quarter-- 3% organic top line growth. And that was our seventh straight quarter of year-over-year growth.

- Because of the higher prices, Daniel, do you see consumers buying fewer razor blades, fewer replenishment razors trying to push some of these products to the edge of how long they should be used?

DANIEL SULLIVAN: No, you know, we haven't seen that. I mean, look, first of all we operate in categories that are largely nondiscrectionary, right. They're personal hygiene. They're part of daily regiment.

We also operate largely at the mid tier within pricing across the categories in which we compete. And so we haven't seen consumer behavior-- we've seen elasticities, actually, below historical levels. And we haven't seen signs of trade down.

Now the interesting thing is, within shave, we're the only supplier that actually participates in all areas of the category as a branded business. We participate also in private label. We participate in disposables.

So if the consumer does start to make trades and maybe shift down from a price point perspective, we're well positioned to succeed.

- And-- it's Julie here. Just to put a fine point on that, so you're not yet seeing that-- are you guys gaining any market share, for example, in this environment already? Are you seeing any signs of that in various categories?

DANIEL SULLIVAN: Yeah, we held share, Julie, for the quarter across our US-- total US portfolio-- which was a good outcome for us. We gained share internationally in many international markets including Germany, which is an important market for us. We held share in Japan where we're the market leader.

And so overall, again, I think we're seeing healthy consumption right now across the categories. And we estimate that we're holding or gaining share in about 75% of our portfolio.

- And if you're gaining share internationally, that's good news at a time when the dollar is coming down a little bit from its highs, right. So talk me through the currency effects as well, and what you have seen and what you expect to see this year, how much of a lift that could give to you guys.

DANIEL SULLIVAN: Yeah, look, it's a volatile currency market for sure. Just when you get on the other side of inflation you're met with a strengthening dollar. That seems to have eased. Now that'll take some time to work its way through, a lot of that will be trapped in inventory until we move the product.

But you did mention we took our guide up to 2% to 4% on the top line largely as a result of the easing of the dollar. I think the important thing is to actually also look at the business on a constant currency level. I think that's the best indicator of performance. And our outlook this year constant currency is for 8% EBITDA growth and 12% EPS growth.

- Daniel, I was in my recent-- I was in Target recently. I go down to the consumer product section. There seems to be a lot of just new stuff-- new creams for your face, new razors touting new blades. What's your whiz bang product innovation this year?

Do you have, like, one or two products that you think can cut through this clutter?

DANIEL SULLIVAN: Yeah, I'll give you a product and a brand. I think the brand itself is the Billy Brand. We bought it a year ago. We launched it exclusively at Walmart in this past fiscal year. It's now making its national retail launch with tremendous theater and in store activation.

It is the disruptor of the category. It gained a 17 share at Walmart in one year. So we're quite excited about that.

I think from a product level, you know, you look at this consumer behavior around do-it-yourself, do-it-at-home, particularly on the female side. That insight has led us to be quite active in new product development-- dermaplaning, big idea for us. It was the fastest growing product on Amazon.

- Daniel, real quick, real quick, because it's funny you mentioned dermaplaning. One of our producers here actually wanted us to bring that up with you. What drives that? I've never even heard of it before?

- I do it.

DANIEL SULLIVAN: Yeah, I think it's largely come out of the pandemic, where I think women now are hesitant to go back into the salon. Again picking up on that sort of do-it-yourself, do-it-at-home spirit. So dermaplaning-- big idea-- we've added now waxes and depils into the assortment. And now you start to really think about it less as a shave category and more as a grooming or hair removal category. And these products make total sense.

- Look, I agree, Daniel, as a person--

- Women and Brad.

- Yeah, as a person who cuts his own hair many times, it does help quite a bit. Just lastly, while we do have you, I was noticing within the margins as well you were talking about some of the gaining share and the consumption habits. Has any of that come at the rate of sacrificing the margins where you're seeing consumers opt for a lower price as you're even taking more share?

DANIEL SULLIVAN: No, we haven't. It's a great question. I think we've been pretty proactive in price. Where we're market leader in categories, we've led the market in pricing. In many places, like shave here in the US where we're number two, we've fast followed. So we've been pretty bullish.

And in fact, if you looked at our margin profile in this past quarter, it was the healthiest we've been in 18 months. Essentially the gains from pricing and cost savings-- we call it productivity-- fully offset the impact of inflation.

That's the first time we've said that in two years. So we're actually quite bullish right now on the overall margin profile for the business.

- All right, we'll leave it there. Daniel Sullivan, Edgewell Personal Care CFO, thanks for taking the time. We appreciate it.

DANIEL SULLIVAN: Thanks, great to be with you.