Edgewell Reports Q4 Results

Edgewell Personal Care Company reported that net sales were $537.4 million in the fourth quarter of fiscal 2018, a decrease of 4.9% when compared to the prior year quarter. Organic net sales were down for quarter.
 
Excluding a  $7.5 million benefit from the Jack Black acquisition, a $3.3 million negative impact from the Playtex gloves divestiture and a $5.0 million negative impact from currency translation, organic net sales in the fourth quarter decreased 4.7%.  The declines were primarily driven by the impact of unfavorable price mix in wet shave and lower volumes and price mix in feminine care, partly offset by growth in sun and skin care, the firm said.
 
“During the fourth quarter, we accelerated the pace of changes we are making under Project Fuel, successfully executed on growth initiatives across our categories and continued to deliver compelling innovation. Despite the challenging environment, we met our adjusted earnings per share expectations for the quarter and drove strong cash generation,” said David Hatfield, Edgewell's CEO, president and chairman of the board. “Our performance this quarter reflects the competitive environment we have been navigating throughout the year, further highlighting the importance of Project Fuel, our enterprise-wide initiative to transform the Company's business and cost structure.  Looking ahead to fiscal 2019, we are focused on delivering our targets for Project Fuel and continuing to invest in our growth initiatives. We are confident that these actions will position Edgewell to deliver enhanced shareholder value as a stronger, leaner and more agile competitor.”
 
In Q4, the company recorded a $25.3 million one-time charge to cost of goods sold due to costs associated with the write-off of select sun care product inventories. As a result of discussions with one of its suppliers during the quarter, Edgewell made certain supply chain and procurement decisions, including implementing an ingredient substitution due to anticipated regulatory changes related to REACH, the European chemical control law, that affect the supply chain of select sun care products.  To align with the company's ingredient selection process, Edgewell chose to make these changes now, well in advance of next year's sun care season to minimize potential impact to its distribution channels during the peak sales period.  As a result, Edgewell recorded charges primarily for the write-off of finished goods inventory for those select products.
 
Sun and skin care net sales—which also includes the company’s wipes and gloves units—increased $4.4 million in the fourth quarter, or 6.2%, as compared to the prior year.  Excluding the Jack Black acquisition and the impact of currency movements, organic net sales increased $1.3 million, or 1.8%, as compared with the prior year, with favorable volumes and price mix.  International organic net sales increased 11.5%, driven by growth in Asia Pacific, with the launch of Hawaiian Tropic in Australia and growth in Europe due to good end of season weather.  Both North America and Latin America sales declined in the quarter, according to the firm. Global Bulldog sales increased more than 40% with growth in both international and North America. During the quarter the company launched the Bulldog direct to consumer site in the US. 
 
Wet shave net sales in Q4 decreased $18.3 million, or 5.0%, as compared to the prior year. Excluding the impact of currency movements, organic net sales decreased $14.9 million or 4.0%, as compared to the prior year, primarily driven by the impact of unfavorable price mix, driven by higher promotional and coupon spend in North America and Europe. Volumes declined slightly as growth in women's systems, driven by Intuition f.a.b., and disposables was more than offset by declines in men's systems related to competitive pressure in North America.  
 
Net sales were $2.23 billion in fiscal 2018, a decrease of 2.8% when compared to fiscal 2017, including a 0.6% decrease from the sale of Playtex gloves, and a 0.9% increase from the acquisitions of Jack Black and Bulldog. Organic net sales decreased 4.5%. From a geographic perspective, North America organic net sales were down 6% primarily driven by declines in wet shave and feminine care, while international organic net sales decreased just over 1% with 5% organic net sales growth in sun and skin care more than offset by a 2% decline in wet shave. The decline in international wet shave was largely due to the inventory reduction in Japan during the fiscal third quarter, according to Edgewell.