Edgewell CFO: Consumers still spending on little luxuries
Edgewell Personal Care (EPC) stock is rising on Wednesday as the company posted its first-quarter earnings, revealing $488.9 million in revenue, beating Wall Street expectations. The company also saw sales growth both domestically and internationally.
Dan Sullivan, Edgewell Personal Care CFO, joins Yahoo Finance to discuss the company's performance and how Edgewell is handling changing consumer habits.
Sullivan lays out what he sees in customer's habits: "Consumers want simplicity, particularly male consumers. They want simplicity in the regimen. They want products that can solve multiple hygiene challenges and regimen challenges for them. You see that in categories like shave, which are moving into a hair removal play. We've brought dermaplaning on the female side of the equation, as a good example of that, as women haven't gone back, necessarily, to the behaviors pre-Covid, where it was spa-based and doing much more at home. I think most interestingly on the consumer side, that what we see is a consumer that continues to spend on themselves, continues to search for interesting experiences for themselves."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
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BRAD SMITH: Edgewell Personal Care seeing sales rise over 4% in the first quarter with strong international performance offsetting a sticky consumer backdrop. The owner of Schick and Banana Boat did however see profits slip from a year ago. Dan Sullivan, who is the Edgewell Personal Care CFO, joins us now.
Always a pleasure to catch up with you here. First and foremost, we got to know what were some of the largest catalysts for this quarter, and does that trend remain true from your perspective for the rest of the year?
DAN SULLIVAN: Yeah, good morning, Brad. Thank you. Great to be here. Look, we had a good start to the year. We delivered about 3% organic growth. As you mentioned, we saw heightened growth internationally-- double digit growth. Share performance was solid across the US. We gained share in key markets like Germany and Japan.
And I think most importantly, we saw a real catalyst in the quarter around our gross margin profile, 200 basis points of year-over-year gains, which certainly bodes well for the year. In terms of growth, I think what we are seeing right now is really strong brands on shelf, good distribution outcomes, some interesting innovation that's now making its way to the consumer.
And in certain markets, mostly internationally, we continue to take price. Japan is a great example of that as the market leader. And so all of that does bode well. We have a guide out for the year of 2% to 4% growth at the top. And so Q1 slides in quite nicely into that outlook.
SEANA SMITH: Dan, you mentioned the better than expected improvement that you saw in gross margin. I'm curious what do you attribute that to? What are some of the changes or strategies that you have implemented in order to increase that and better position the business?
DAN SULLIVAN: Yeah, we saw a great execution from the team on both sides. On the cost side of the house, we have a program called Project Productivity, which delivered meaningful cost savings for the organization north of 300 basis points of cost takeout.
We also saw revenue gains about 200 basis points. That's pricing, but that's also what we call strategic revenue management. So how do we think about interesting innovation? How do we think about promotions, contracts with retailers? And so all of that the team executed extremely well. It was a bit of an outlier. It was stronger than we thought it would be. But both of those led to the strong margin profile.
BRAD SMITH: What type of resilience do you see in self-care? And particularly, you know, I think about my own activities here, Dan. I'm just going to make it personal. My own self-care Sundays or self-care Saturdays that I have-- there's a lot of your products perhaps that many other people out there they might lean into the same way that I do.
When you think about the resiliency of little luxuries that people might tap into if they don't feel as confident making big ticket purchases, how does that bode for Edgewell, and where is that showing up within some of your segments?
DAN SULLIVAN: Yeah, look, consumers want simplicity, particularly male consumers. They want simplicity in their regimen. They want products that can solve multiple hygiene challenges and regimen challenges for them. And you see that in categories like shave, which are now moving more into a hair removal play.
We've brought dermaplaning on the female side of the equation, as a good example of that, as women haven't gone back, necessarily, to the behaviors pre-COVID, where it was spa-based and doing much more at home.
I think most interestingly on the consumer side, though, what we see is a consumer that continues to spend on themselves, continues to search for interesting experiences for themselves that bodes well for travel, beach, being out in the sun, being out with friends. That behavior is still there.
We saw a spike post-COVID. That behavior remains. And certainly, as the leading suncare portfolio in the US, bodes well for us heading into the season.
SEANA SMITH: Dan, have you seen at all, though, consumers, trading down in terms of your products to the more affordable lineup that you have at Edgewell? Are you seeing a little bit more traction there?
DAN SULLIVAN: We've not. We don't see any real signs in our category. And in shave, we would see it, Seana, because we operate across all three subsegments, right, branded, disposable, and private label. And if you look at consumption patterns behavior, you're not seeing any real shift in terms of the last 12 to 18 months.
That's why we say I think the consumer is resilient. We're also operating in categories that are certainly not discretionary in nature, and so we benefit from that. We're also mid-tiered in terms of pricing, which also helps as well.
