Executive Summary / Key Takeaways

• Edgewell Personal Care is executing a multi-year transformation, shifting from a diversified consumer goods entity to a focused personal care pure-play with a strategic emphasis on operational efficiency, targeted innovation, and strengthening key market positions.
• Recent performance reflects this transition, with organic sales declines in North America (particularly Wet Shave and Feminine Care) offset by consistent mid-single-digit growth in international markets and "right-to-win" categories like Sun Care and Grooming.
• The company is prioritizing gross margin accretion through robust productivity savings (targeting 200-300 basis points annually) and strategic revenue management, which is fueling brand investment despite top-line pressures.
• Fiscal Year 2025 guidance anticipates organic net sales growth of flat to 1%, adjusted EPS in the range of $2.85 to $3.05, and free cash flow of $130 million to $140 million, reflecting macro uncertainty, tariff headwinds, and increased brand investment, but also expected sequential improvement.
• Key factors for investors include the successful turnaround of the North American business under new leadership, the continued momentum of international markets and growth brands like Billie and Hawaiian Tropic, and the ability to mitigate external pressures like tariffs and promotional intensity through operational discipline and strategic pricing.

Edgewell Personal Care Company, tracing its roots back to 1772 and established in its current form in 2015 following its spin-off from Energizer Holdings (ENR), operates as a focused player in the competitive personal care market. The company competes across three primary segments: Wet Shave, Sun and Skin Care, and Feminine Care, with a global footprint spanning over 50 countries. EPC's strategic journey over the past four years has centered on a comprehensive transformation aimed at enhancing its operational model, streamlining its organization, and sharpening its portfolio to drive sustainable growth and value creation. This involves leveraging its established brands while investing in targeted innovation and improving execution, particularly in key markets like North America and its growing international presence.

The personal care industry is characterized by intense competition, with large multinational corporations like Procter & Gamble (PG), Unilever (UL), Kimberly-Clark (KMB), and Colgate-Palmolive (CL) holding significant market share. These competitors often possess greater scale, extensive R&D budgets, and broader distribution networks. For instance, PG's Gillette brand dominates the wet shave market, while UL and KMB are strong players in skin care and feminine care, respectively. EPC positions itself by focusing on affordability and heritage brands in certain segments, while aiming for disruptive innovation and premium positioning in others, such as with the Billie and Cremo brands. While precise, directly comparable market share figures for all niche competitors are challenging to ascertain, EPC's performance indicates it holds a meaningful, albeit smaller, share compared to the industry giants. The competitive environment, particularly in the U.S. Wet Shave and Feminine Care categories, remains highly promotional, especially in channels like drug stores, which impacts pricing and margins across the industry.

EPC's strategic response to this landscape involves a multi-pronged approach. Operationally, the company places a strong emphasis on driving efficiency and cost excellence within its manufacturing and supply chain. This focus on productivity savings, targeting 200 to 300 basis points annually, serves as a critical lever to expand gross margins. These savings are realized through initiatives like global sourcing, labor automation, and plant efficiency improvements. This operational discipline is a foundational strength, providing dry powder to reinvest in brands and offset inflationary pressures and external headwinds like tariffs. Despite lacking proprietary, quantifiable technology differentiators, its technological edge lies in its refined product formulations, efficient manufacturing processes, and increasingly sophisticated digital capabilities, particularly in direct-to-consumer platforms built upon acquisitions like Billie. The company's R&D efforts, while perhaps smaller in scale than larger competitors (estimated 1-2% of revenue vs. 2-3% for some peers), are focused on consumer-centric, locally relevant innovation aimed at improving product performance (e.g., Banana Boat 360 spray, Schick First Tokyo razor for first-time users) and expanding brand adjacencies (e.g., Billie Body Care, Cremo range expansion). The strategic intent is to deliver innovation faster and more disruptively, gaining retailer buy-in and driving market share gains.

Recent financial performance reflects the ongoing transformation and the challenging external environment. For the second quarter of fiscal 2025, net sales decreased 3.1% to $580.7 million, with organic net sales down 1.5%. This was primarily driven by volume declines in North America across Wet Shave, Feminine Care, and Sun Care, partially offset by 2.9% organic growth in international markets. Gross profit decreased slightly by 0.7% to $256.2 million, but gross margin as a percent of net sales increased by 100 basis points to 44.1%, benefiting from productivity savings. Operating income declined to $58.9 million from $70.1 million in the prior year quarter. Net earnings were $29.0 million, down from $36.0 million. Adjusted diluted EPS decreased marginally to $0.87 from $0.88. For the first six months of fiscal 2025, net sales were down 2.7% to $1,059.1 million, with organic net sales down 1.4%. Gross margin improved by 40 basis points to 42.3%. Net earnings for the six months were $26.9 million, compared to $40.8 million in the prior year period, resulting in diluted EPS of $0.55 versus $0.81. Adjusted diluted EPS for the six months was $0.93 compared to $1.11.

Segment performance highlights the divergence between regions and categories. In the second quarter of fiscal 2025, Wet Shave net sales decreased 2.6% to $285.5 million, with organic sales down 0.9%. However, Wet Shave segment profit increased significantly by 15.3% to $46.6 million, driven by higher gross margins. Sun and Skin Care net sales decreased 2.0% to $231.1 million, with organic sales essentially flat (-0.1%). Segment profit for Sun and Skin Care decreased 6.6% to $50.8 million, impacted by lower gross margin and higher SGA. Feminine Care net sales saw the largest decline, down 9.1% to $64.1 million, with organic sales down 8.8%, largely due to declines in Pads and Tampons. Feminine Care segment profit plummeted 64.4% to $3.1 million, primarily due to lower gross profit and higher marketing expenses.

Liquidity remains sound. As of March 31, 2025, the company held $170.1 million in cash and cash equivalents and had $228.7 million available under its $425 million U.S. Revolving Credit Facility. Net cash used for operating activities was $70.5 million for the first six months of fiscal 2025, compared to cash provided of $56.1 million in the prior year period, primarily due to changes in working capital and lower earnings. Capital expenditures increased to $33.9 million in the first six months of fiscal 2025 from $18.0 million. Net cash provided by financing activities was $72.5 million, a significant shift from cash used in the prior year, driven by net borrowings under the revolver. The company continues to return capital to shareholders, repurchasing $65.7 million in shares during the first six months of fiscal 2025 and declaring quarterly dividends of $0.15 per share.

Looking ahead, Edgewell's fiscal year 2025 outlook reflects a cautious stance on the macro environment and specific headwinds, while signaling expected sequential improvement. The company anticipates organic net sales growth in the range of flat to 1% for the full year. Adjusted earnings per share are projected to be between $2.85 and $3.05, and adjusted EBITDA is expected to be in the range of $329 million to $341 million. Free cash flow is guided to be approximately $130 million to $140 million. This outlook incorporates a more modest expectation for consumption, particularly in Sun Care, due to anticipated impacts on travel and leisure spending, increased brand investments in North America (especially in Q3), and an estimated $3 million to $4 million in-year COGS headwind from tariffs. The company expects sequential improvement in sales and profitability in the second half of the fiscal year, with adjusted net earnings expected to be similar in the third and fourth quarters.

Key risks to this outlook include the potential for further deterioration in consumer sentiment and spending, particularly impacting discretionary categories like Sun Care. The volatile tariff landscape poses a risk of increased costs, with an estimated annualized exposure of 3% to 4% of COGS if current rates hold, although mitigation efforts are underway. Competitive intensity, especially the heightened promotional environment in U.S. Wet Shave and Feminine Care, could further pressure margins and market share. The pace of recovery in the Feminine Care business, which has faced delays and challenges in consumer conversion to the Carefree master brand, remains a factor to watch. Supply chain disruptions, although addressed for recent issues like the Wet Ones fire and Edge preps, could recur.

Conclusion

Edgewell Personal Care is navigating a complex market environment while actively pursuing a strategic transformation to enhance its operational efficiency and portfolio strength. The investment thesis hinges on the company's ability to leverage its proven operational discipline and productivity gains to fuel targeted brand investments, particularly in North America, while sustaining the growth momentum in its international markets and "right-to-win" categories. Despite recent top-line softness driven by macro factors and specific segment challenges, the company's focus on gross margin accretion and cost control has demonstrated resilience in profitability. The outlook for fiscal 2025 reflects realistic expectations for a challenging backdrop but anticipates sequential improvement as strategic initiatives and brand investments take hold. Investors should monitor the execution of the North American turnaround, the continued strength of international performance, and the effectiveness of mitigation strategies against tariffs and promotional pressures as key indicators of the company's progress towards its long-term value creation goals.