Business Overview and History: Edgewell Personal Care Company's history dates back to 1919 when it was founded as the American Safety Razor Company, producing safety razors and blades. Over the following decades, the company expanded its product portfolio and grew through strategic acquisitions. In 1992, the company was renamed Energizer Holdings, Inc. after acquiring the Energizer battery brand, which diversified its offerings beyond personal care products.

The company continued to grow its personal care business, acquiring major brands such as Schick, Wilkinson Sword, Edge, Skintimate, Banana Boat, and Hawaiian Tropic. In 2015, Energizer Holdings underwent a spin-off, separating its personal care business into a standalone public company named Edgewell Personal Care Company. This strategic move allowed Edgewell to focus exclusively on its personal care brands and become more responsive to changing consumer preferences.

In recent years, Edgewell has faced challenges from increased competition in the shaving category, particularly from disruptive direct-to-consumer brands like Dollar Shave Club. This prompted the company to reevaluate its strategy and invest in strengthening its core brands. Additionally, Edgewell has had to navigate headwinds from declining birth rates impacting its feminine care business.

Despite these challenges, Edgewell has maintained its position as an industry leader through continuous innovation and strategic acquisitions. Notable recent milestones include the acquisitions of Bulldog skincare in 2018 and Billie women's shaving brand in 2021. The company has also focused on improving operational efficiencies and optimizing its supply chain to enhance profitability.

Today, Edgewell operates in over 20 countries and sells its products in more than 50 markets worldwide. The company's business is organized into three core segments: Wet Shave, Sun and Skin Care, and Feminine Care. The Wet Shave segment, which includes razor handles, blades, and shaving gels, accounts for the largest portion of the company's revenue. The Sun and Skin Care segment encompasses sunscreen, grooming, and other skin care products, while the Feminine Care segment focuses on tampons, pads, and liners.

Financial Performance and Liquidity: In fiscal year 2024, Edgewell reported net sales of $2.25 billion, a slight increase of 0.2% on an organic basis compared to the prior year. The company's international markets, which contributed 40% of total revenue, grew 7% organically, while the North America segment saw a 4% decline. Adjusted gross margin improved by 140 basis points to 41.5%, driven by productivity initiatives and strategic pricing actions.

Edgewell's adjusted operating margin expanded by 100 basis points to 11.9%, reflecting the company's focus on cost discipline and operational efficiency. Adjusted earnings per share grew 18% year-over-year on a constant currency basis, highlighting the company's ability to deliver bottom-line growth.

The company's financial position remains strong, with a net debt leverage ratio of 3.1x as of the end of fiscal 2024. Edgewell generated $175 million in free cash flow during the year, which enabled the company to fund its operations, support capital allocation strategies, and continue its deleveraging efforts.

For the most recent fiscal year 2023, Edgewell reported revenue of $2.25 billion, net income of $114.7 million, operating cash flow of $216.1 million, and free cash flow of $166.6 million. In the most recent quarter (Q4 2024), the company reported revenue of $517.6 million, net income of $8.8 million, operating cash flow of $101.2 million, and free cash flow of $88.6 million. Compared to the prior year quarter, revenue increased 0.6% organically, driven by strong international performance which offset a decline in North America. Net income decreased 83.3% due to higher costs and one-time charges, while operating cash flow increased 31.8% and free cash flow increased 27.5% year-over-year.

As of June 30, 2024, Edgewell's liquidity position included $209 million in cash on hand and $386 million available under its undrawn Revolving Credit Facility. The company's debt-to-equity ratio stood at 0.82 as of September 30, 2023, while its current ratio was 1.66 and quick ratio was 0.81 as of June 30, 2024.

Segment Performance and Strategic Initiatives: Wet Shave Segment: This segment, which accounts for approximately half of Edgewell's total revenue, saw organic net sales increase 0.7% in fiscal 2024. Growth in the international markets, up 8.8% organically, was offset by a 7.8% decline in North America due to ongoing category and channel challenges. The company's focus on innovation, such as the launch of the Wilkinson Sword brand campaign in Europe and the Schick First brand in Japan, has helped drive improved performance in key international markets.

For the third quarter of fiscal 2024, Wet Shave net sales decreased 2.4% compared to the prior year quarter, with a 0.6% decrease in organic net sales. The organic sales decrease was driven by a 6.7% decline in North America, partially offset by 4.5% growth in international markets. Wet Shave segment profit increased 47.4%, with 54.2% growth in organic segment profit, reflecting higher gross margins and lower marketing expenses.

Sun and Skin Care Segment: Organic net sales in this segment grew 6.6% in fiscal 2024, driven by the strength of the Banana Boat and Hawaiian Tropic sun care brands, as well as the continued expansion of the Billie and Cremo grooming lines. The company's investment in category-leading innovation, such as the Banana Boat 360 spray products, has been well-received by consumers.

For the third quarter of fiscal 2024, Sun and Skin Care net sales increased 4.9%, with 5.1% growth in organic net sales. The organic sales increase was driven by 16.0% growth in international sun care markets and a 1.0% increase in North America, as well as 14.0% growth in global grooming. Sun and Skin Care segment profit increased 4.6%, all of which was organic, primarily due to higher gross margins, partially offset by increased marketing and SGA expenses.

Feminine Care Segment: This segment faced challenges in fiscal 2024, with organic net sales declining 10%. The company is focused on revitalizing its Playtex Sport and Carefree brands to better align with consumer preferences and regain market share in the category.

For the third quarter of fiscal 2024, Feminine Care net sales decreased 7.9%, driven by declines in tampons and pads, partially offset by growth in liners. Feminine Care segment profit decreased 52.9%, primarily due to lower sales and the resulting impact on gross profit, as well as higher marketing expenses.

Outlook and Guidance: For fiscal year 2025, Edgewell is guiding for organic net sales growth in the range of 1% to 3%, excluding an estimated 70 basis points of favorable currency impact. The company expects adjusted gross margin to expand by approximately 75 basis points, driven by productivity savings and strategic pricing actions, which should offset inflationary pressures.

Adjusted operating margin is anticipated to increase by around 40 basis points, despite an estimated 10 basis point headwind from unfavorable foreign exchange. Adjusted earnings per share is expected to be in the range of $3.15 to $3.35, representing growth of about 7% at the midpoint or 13% on a constant currency basis.

Edgewell's guidance reflects its confidence in the strength of its international businesses, the continued momentum in its "right to win" portfolio in the U.S., and the company's ability to navigate the current macroeconomic environment through disciplined execution and operational excellence.

The company anticipates Q1 2025 growth to be down just under 1%, with low single-digit growth expected in each of the final 3 quarters. Edgewell's "right-to-win" portfolio is expected to continue delivering mid-single-digit growth, while the "right-to-play" portfolio is expected to be essentially flat to slightly down. International markets are projected to deliver mid-single-digit organic sales growth, while North America is expected to be flat to slightly positive.

For the full year, Edgewell expects approximately 290 basis points of productivity savings and 10 basis points of price gains to offset around 115 basis points of COGS inflation, 40 basis points impact from unfavorable absorption, 60 basis points of negative mix and other costs, and 15 basis points of unfavorable currency. Adjusted EBITDA is expected to be in the range of $356 million to $368 million, inclusive of an estimated $11 million in currency headwinds. Free cash flow for fiscal year 2025 is expected to be approximately $185 million.

Risks and Challenges: Edgewell faces several challenges in the personal care industry, including intense competition, shifting consumer preferences, and economic uncertainty. The company's performance in the North American Wet Shave and Feminine Care segments has been impacted by category and channel dynamics, requiring the company to focus on strengthening its competitive position in these key categories.

The volatility in foreign currency exchange rates and ongoing inflationary pressures also pose risks to the company's financial performance. Edgewell's ability to manage costs, implement pricing actions, and drive operational efficiencies will be crucial in mitigating the impact of these external factors.

Additionally, the company's success is dependent on its ability to develop and launch innovative products that resonate with consumers. Failure to anticipate and adapt to evolving consumer trends could negatively impact Edgewell's market share and long-term growth prospects.

Industry Trends: The personal care industry has seen a 3-year compound annual growth rate (CAGR) of around 4-6% globally, driven by increased consumer focus on health, wellness, and sustainability. Edgewell's organic net sales grew 0.2% in fiscal 2024, with its "right to win" portfolio (international, Sun Care, Grooming) growing mid-single digits, offsetting declines in the "right to play" portfolio (U.S. Wet Shave, Feminine Care).

Conclusion: Edgewell Personal Care Company has demonstrated its resilience and adaptability in navigating the challenges of the personal care industry. The company's strategic focus on strengthening its brand portfolio, driving international expansion, and improving operational efficiency has positioned it well to deliver sustainable growth and value creation for its shareholders.

As Edgewell navigates the current macroeconomic environment and competitive landscape, its proven track record, experienced management team, and commitment to innovation will be critical in capitalizing on the long-term opportunities in the personal care market. The company's ability to deliver modest top-line growth, significant gross margin expansion, and double-digit adjusted EPS growth in fiscal 2024 demonstrates its capacity to execute effectively in a challenging environment. With opportunities for continued improvement in its international markets and "right to win" portfolio, coupled with efforts to stabilize its U.S. Wet Shave and Feminine Care businesses under new leadership, Edgewell is well-positioned to drive future growth and shareholder value.