Net Sales increased 4.0%, or 3.9% Organic for Fiscal Year 2022
Second Consecutive Year of Mid-Single-Digit Organic Net Sales Growth
Returned nearly $158 Million to Shareholders via Dividends and Share Repurchases
Initiates Fiscal 2023 Outlook for growth in Organic Net Sales, Adjusted EPS and Adjusted EBITDA on a constant currency basis
SHELTON, Conn., Nov. 10, 2022 /PRNewswire/ — Edgewell Personal Care Company (NYSE: EPC) today announced results for its fourth fiscal quarter 2022 and fiscal year ended, September 30, 2022, and provided its financial outlook for fiscal 2023.Â
Key Financial Highlights from Edgewell’s Fiscal Year 2022
- Fourth quarter net sales reached $536.9 million, reflecting a slight decrease of 1.2% compared to the same period last year. Overall, Full Year Net Sales totaled $2,171.7 million, which marks a commendable increase of 4.0% from the previous year.
- Notably, organic net sales experienced a 1.2% increase for the quarter and a 3.9% rise for the entire year. This organic growth metric excludes the effects of the Billie acquisition and any adverse impacts from currency fluctuations.
- GAAP Diluted Earnings Per Share (“EPS”) were reported at $0.64 for the fourth quarter and $1.84 for the full fiscal year of 2022.
- Adjusted EPS figures stood at $0.79 for the fourth quarter and $2.57 for the overall fiscal year.
- By the end of the fiscal fourth quarter, the company maintained a strong cash position with $188.7 million on hand and a net debt leverage ratio of 3.6 times.
- In terms of shareholder returns, the company distributed $157.9 million to shareholders through $125.3 million in share repurchases and $32.6 million in dividends throughout the fiscal year.
- The Board of Directors declared a cash dividend of $0.15 per common share on November 3, 2022.
- Looking ahead, the fiscal 2023 outlook projects a 3% to 5% growth in organic net sales, alongside an approximate decline of 7% in adjusted EPS and 2% in EBITDA on a constant currency basis, translating to an expected increase of 12% and 8%, respectively, at the midpoint of this outlook range.
The Company reports and forecasts results on both a GAAP and Non-GAAP basis, reconciling Non-GAAP results and outlook to the most directly comparable GAAP measures later in this release. For a more detailed explanation, including definitions of various Non-GAAP terms used in this release, please refer to the Non-GAAP Financial Measures section. All comparisons made in this release are with the same period in the prior fiscal year unless stated otherwise.
“We successfully achieved our second consecutive year of mid-single-digit organic net sales growth, which is particularly commendable given the increasingly challenging macroeconomic environment. These results showcase the effective execution of our growth strategy, which has led to significant structural improvements across our business in areas like brand development, product innovation, and retail execution. Furthermore, we have adhered to financial discipline, achieving over 300 basis points in productivity and cost-saving measures to counteract the substantial inflationary pressures affecting the industry,” stated Rod Little, Edgewell’s President and Chief Executive Officer. “As we set our sights on fiscal 2023, we anticipate delivering another year of mid-single-digit organic net sales growth. This, combined with our ongoing cost-saving initiatives and effective revenue management, will position us for robust operational performance on a constant currency basis.”
Detailed Overview of Fiscal 4Q 2022 Operating Results (Unaudited)
Net sales amounted to $536.9 million during the quarter, reflecting a 1.2% decrease. This figure includes a net contribution of $19.6 million, or 3.6%, from the Billie acquisition, along with a $32.5 million or 6.0% negative impact attributed to currency fluctuations. Organic net sales rose by 1.2%, driven by a 7.7% increase in international sales, primarily fueled by over 64% growth in Sun Care products and just over 3% in Wet Shave. However, North America experienced a decline in organic net sales of 3.3%, largely due to a significant drop of nearly 26% in Wet Ones, as this business cycled growth from COVID-driven demand from the previous year, along with reduced sales in Wet Shave.
Gross profit for the quarter was $218.8 million, compared to $244.8 million during the same period last year. The gross margin percentage of net sales decreased to 40.8%, reflecting a decline of 430 basis points from the previous year. Adjusted gross margin also fell by 450 basis points, primarily due to a 550-basis point negative effect from increased commodity and transportation costs, which was only partially offset by pricing and promotional management efforts.
Advertising and sales promotion expense (“A&P”) stood at $41.3 million, representing 7.7% of net sales, down from $50.0 million or 9.2% of net sales in the same period last year. This decrease in spending for the quarter was attributed to higher private label sales, along with the timing of new product launches and marketing campaigns. Notably, digital marketing initiatives accounted for over 85% of the total advertising expenditure during the quarter.
Selling, general and administrative expense (“SG&A”) totaled $98.2 million, representing 18.3% of net sales, compared to $107.2 million, or 19.7% of net sales in the previous year. Adjusted SG&A as a percentage of net sales decreased by 70 basis points, as operational efficiency programs and reduced incentive compensation costs were partially offset by increased operating expenses associated with the Billie acquisition.
The Company incurred pre-tax restructuring and other non-recurring expenses totaling $6.4 million during the quarter, primarily related to severance and outplacement, alongside $1.9 million in acquisition and integration costs linked to the Billie acquisition.
Operating income was reported at $57.8 million, down from $63.2 million in the corresponding period last year. Adjusted operating income was $66.6 million, or 12.4% of net sales, compared to $80.1 million, or 14.7% of net sales in the same period last year. This decline was primarily driven by the escalation of costs and unfavorable currency impacts.
Interest expense associated with debt amounted to $18.1 million, compared to $16.8 million in the same quarter of the previous year. The rise in interest expense was largely due to an increased overall debt balance resulting from draws on the Revolving Credit Facility during fiscal 2022, primarily to finance the Billie acquisition.
Other (income) expense, net </bwas recorded as income of $3.7 million, compared to income of $1.0 million in the prior year quarter. The improvement in income was attributed to favorable foreign currency hedge settlements compared to the previous year, which helped to offset other negative operational impacts caused by currency fluctuations.
The effective tax rate for fiscal 2022 was 19.9%, slightly higher than the previous year’s rate of 19.8%. The adjusted effective tax rate for fiscal 2022 was 20.9%, showing a decrease from the prior year’s adjusted tax rate of 21.2%. This effective tax rate reflects a favorable mix of earnings in lower-tax jurisdictions and net favorable discrete items, including the effect of changes in our prior estimates.
GAAP net earnings for the quarter were $33.7 million, translating to $0.64 per share, in comparison to $44.1 million or $0.80 per share in the previous year. Adjusted net earnings amounted to $41.6 million or $0.79 per share, compared to $55.7 million or $1.01 per share in the prior year. Adjusted EBITDA reached $94.7 million, down from $102.3 million in the previous year period.
Net cash from operating activities totaled $102.0 million for fiscal 2022, a significant decrease from $229.0 million in the previous year. This decline in fiscal 2022 was primarily driven by lower net earnings and a cash outflow associated with temporarily elevated inventory levels aimed at ensuring the availability of raw materials and products amid a persistently challenging operating environment.
Fiscal 4Q 2022 Operating Segment Results (Unaudited)
The following is a detailed summary of fourth quarter results by segment:
Wet Shave Segment Performance
The Wet Shave category, which includes men’s systems, women’s systems, disposables, and shave preparations, experienced a decline in net sales by $14.1 million or 4.2%. Organic net sales decreased by $4.7 million or 1.4%. International organic sales showed a positive trend with a 3.1% increase, driven by growth in Private Label, new product launches, and shave preparations. However, organic net sales in North America contracted by 7.5%, primarily due to declines in women’s systems and disposables, partially countered by gains in shave preparations and men’s systems. Wet Shave segment profit fell by $22.0 million, translating to a decrease of 27.7%. When excluding the negative impact from currency translation and the Billie acquisition, organic segment profit saw a decline of 17.3%, largely a result of increased cost of goods sold and reflective of the ongoing inflationary pressures.
Sun and Skin Care Segment Performance
The Sun and Skin Care segment, which encompasses Sun Care, wipes, Bulldog, Cremo, and Jack Black brands, reported a net sales increase of $6.6 million or 5.2%. Organic net sales grew by $10.0 million or 7.8%, fueled by robust international sales in Sun Care and men’s grooming products. The Wet Ones brand saw a decline of 23.6% in organic net sales for the quarter, cycling against last year’s elevated COVID-driven demand. The Sun and Skin Care segment’s profit increased by $3.6 million or 29.3%. Organic segment profit saw a significant rise of $4.5 million or 36.6%, primarily driven by increased sales and reduced spending, despite higher costs of goods sold in the context of ongoing inflation.
Feminine Care Segment Performance
The Feminine Care segment, which includes products such as tampons, pads, and liners, experienced a marginal increase in net sales of $1.2 million or 1.6%. Organic net sales slightly increased by $1.3 million or 1.7%, predominantly due to higher pricing strategies that countered slightly lower volumes. The segment profit saw a notable rise of $3.0 million or 33.0%, with organic segment profit up by $3.1 million or 34.1%, primarily supported by increased gross profit and reduced spending.
Fiscal 2022 Operating Results Overview (Unaudited)Net sales for the entire fiscal year amounted to $2,171.7 million, reflecting a 4.0% increase. This growth included a net benefit of $74.9 million or 3.6% attributed to the Billie acquisition (which is composed of $93.7 million in third-party sales from Billie less $18.8 million in intercompany sales to Billie) along with a $70.9 million or 3.5% negative impact from currency fluctuations. Organic net sales increased by 3.9%, driven equally by higher volumes and pricing strategies. Segment growth was significantly bolstered by strong performance in both Sun Care and Grooming segments, with more modest growth observed in Wet Shave and Feminine Care segments. Notably, organic net sales rose across geographical regions, with North America reflecting a 2.6% increase and international markets boasting a 5.9% growth rate.
Gross Profit Details
The fiscal year saw a gross profit of $879.4 million, down from $950.1 in the previous year. The gross margin percentage decreased by 500 basis points from the prior year to 40.5%. Adjusted gross margin also saw a decline of 400 basis points, reflecting higher costs associated with commodities and transportation, although this was net of productivity savings. The benefits from pricing initiatives were largely offset by negative product mix and unfavorable currency developments.
A&P Expenses Insights
The Advertising and sales promotion (A&P) expenses totaled $238.3 million, a slight decrease of $3.2 million from the prior year. A&P as a percentage of net sales dropped to 11.0% from 11.6% in the previous year.
SG&A Expense Overview
Selling, general, and administrative (SG&A) expenses were recorded at $389.1 million, or 17.9% of net sales. This figure includes $29.4 million attributed to intangibles amortization. Adjusted SG&A as a percentage of net sales decreased by 40 basis points compared to the prior year, as benefits from sales leverage and operational efficiency initiatives outweighed the increased operating costs linked to the Billie acquisition and the associated amortization.
Operating Income Overview
For the fiscal year, operating income was reported at $181.2 million, compared to $238.8 million in the previous year, marking a 24% decline. Adjusted operating income for the year was $230.3 million, or 10.6% of net sales, down from $278.4 million, or 13.3% of net sales in the prior year.
GAAP Net Earnings Overview
For fiscal 2022, GAAP net earnings were reported at $98.6 million, translating to $1.84 per share, compared to $117.0 million or $2.12 per share in fiscal 2021. Adjusted net earnings were $137.6 million or $2.57 per share, compared to $166.7 million or $3.02 per share in fiscal 2021, which includes a negative impact of $0.20 attributed to the Billie acquisition, primarily due to increased amortization expenses and deferred profits. Adjusted EBITDA was $335.1 million, down from $366.6 million in the previous year.
Capital Allocation Strategy Insights
On November 3, 2022, the Board of Directors declared a quarterly cash dividend of $0.15 per common share for the fourth fiscal quarter, payable on January 4, 2023, to stockholders of record as of the close of business on November 29, 2022. During the fourth quarter of fiscal 2022, the Company disbursed dividends totaling $7.8 million to its stockholders.
Additionally, during the fourth quarter of fiscal 2022, the Company repurchased 0.4 million shares at a total cost of $15.2 million. For the entire fiscal year, share repurchases totaled 3.3 million shares at a cost of $125.3 million. The Company currently has 6.5 million shares of common stock authorized for repurchase in the future as per the Board’s 2018 authorization.
Projected Financial Outlook for Fiscal Year 2023
The Company is offering the following assumptions and expectations for fiscal 2023:
- Reported net sales are anticipated to increase in the range of flat to 2%. This includes an estimated 50-basis point inorganic benefit from two months of net sales related to the Billie acquisition, net of prior year Edgewell sales to Billie, and an estimated 360-basis point negative impact from currency translation.
- Organic net sales are expected to grow in the range of 3% to 5%.
- GAAP EPS is projected to be within the range of $1.90 to $2.10, which will include restructuring charges, acquisition and integration costs, and costs associated with Sun Care reformulation.
- Adjusted EPS is expected to range from $2.30 to $2.50, which includes an estimated $33 million pre-tax profit, or a $0.48 EPS unfavorable impact from foreign currency changes. Adjusted EPS at constant currency is expected to increase by 12% at the mid-point of the range.
- Gross margin is anticipated to increase by approximately 30-basis points, with margin accretion expected in the latter half of the fiscal year.
- Operating margin is projected to decline by about 30-basis points.
- The EPS outlook incorporates the anticipated effects of share repurchases.
- Adjusted EBITDA is expected to fall within the range of $320 to $335 million, including an estimated $33 million unfavorable impact from foreign currency changes. Adjusted EBITDA at constant currency is expected to rise by 8% at the mid-point of the range.
- The adjusted effective tax rate is expected to be around 24%.
- Total depreciation and amortization expenses are anticipated to be approximately $93 million.
- Capital expenditures are projected to be approximately 3.0% of net sales.
- Free cash flow is expected to be around $140 million</
Sienna Blake is a licensed aesthetic consultant and beauty writer specializing in cosmetic surgery advancements and non-invasive treatments. With a background in dermatology and over eight years of industry experience, Sienna is passionate about helping people achieve confidence through informed beauty decisions. She holds a Bachelor's degree in Health Sciences and regularly collaborates with top plastic surgeons to stay at the forefront of aesthetic innovations. Outside of her work, Sienna enjoys traveling, skincare research, and practicing Pilates.
