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Operator
Good day and welcome to the Edgewell Personal Care Q3 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event has been recorded. I would now like to turn the conference over to Chris Goff, Vice President of Investor Relations. Please go ahead.
Chris Goff
Good morning, everyone, and thank you for joining us this morning for Edgewell's third quarter fiscal year 2023 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, and Dan Sullivan, our Chief Financial Officer. Rod will kick off the call and hand it over to Dan to discuss our results and update to the full year 23 outlook before we transition to Q&A. This call is being recorded and will be available for replay via our website, www.edgewell.com. During the call, we may make statements about our expectations for future plans and performance. This might include future sales, earnings, advertising, and promotional spending, product launches, savings and costs related to restructurings, acquisitions and integrations, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for return of capital to shareholders, and more. Any such statements are forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to future events, plans, or prospects. These statements are based on assumptions and are subject to various risks and uncertainties, including those described under the caption risk factors in our annual report on Form 10-K for the year ended September 30, 2022. as may be amended in our quarterly reports on Form 10Q, which is on file with the SEC. These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances, except as required by law. During this call, we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in our press release issued earlier today, which is available at the investor relations section of our website. This non-GAAP information is provided as a supplement to, not as a substitute for or as superior to measures of financial performance prepared in accordance with GAAP. However, management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business. With that, I'd like to turn the call over to Rod.
Rod Little
Thank you, Chris. Good morning, everyone, and thanks for joining us on our third quarter earnings call. This was another strong quarter in which we continued to make progress against our strategic priorities. Organic net sales increased 4.5%, largely in line with our expectations and making nine consecutive quarters of growth. Adjusted earnings per share and adjusted EBITDA increased 14% and 12% respectively. and we expand a gross margin by 80 basis points or 185 basis points at constant currency. This strong bottom line performance was delivered despite facing a 17 cent headwind from unfavorable currency and taxes and over 300 basis points of gross inflationary headwinds in cost of goods. Our strong performance this quarter illustrates both the advantages of operating a broad and global brand portfolio as well as the impact of strong commercial execution. Organic net sales growth in the quarter was led by international markets, which contributed nearly 9% organic net sales growth. This growth was broad-based across segments and driven by both higher volumes and price. In North America, organic net sales increased just over 2%, driven by price, as category growth slowed sequentially, most notably in Sun and Femcare. Since the initiation of our new growth strategy two and a half years ago, our business has delivered consistent structural top-line growth, fueled by a stronger portfolio of brands and underpinned by the strides we have made across brand building, product innovation, and retail execution. While the growth this quarter once again exceeded our long-term algorithm, the composition of our growth was very consistent with our long-term view. as our right-to-win brands, which include Sun, Skin, and Grooming, grew organic net sales double digits, driven by both volume and price. And our right-to-play brands were essentially flat in the quarter, as higher pricing offset lower volumes. As I've discussed previously, in what continues to be a challenging operating environment, it's critical that we control the controllables. I am proud of the team's strong operational executions. that enabled us to deliver better in-stock positions, good on-shelf performance, a stable market share, and strong e-commerce performance. We again delivered against our productivity and efficiency initiatives, which coupled with price execution, served to more than offset inflationary headwinds, leading to healthy gross margin expansion in the quarter. And as you saw in our international performance, we are realizing the benefits from our revised go-to-market approach. better execution, and improved in-market capabilities. In the quarter, we also released our fiscal 22 sustainability report, highlighting the good progress we have made against our commitments across all three of our sustainability pillars, namely our brands, our operations and supply chain, and our people and communities. Our sustainable care 2030 strategy underpins all that we do and aligns with our values as a modern and responsible, progressively sustainable consumer goods company. I'm proud of our accomplishments today, including being recognized as one of USA Today's climate leaders in the United States, as well as the meaningful gain in rankings up to number 37 overall in Newsweek's annual list of the most responsible companies. With respect to our outlook for the business, we continue to navigate this challenging environment well. And despite persistent inflation and broader macroeconomic headwinds, the consumer remains largely resilient. This said, we have seen some impactful changes within the sun care category in North America since our last earnings call in early May. After a solid start to the season, beginning around Memorial Day, consumption has been negatively impacted by unfavorable weather conditions across most of the United States, which has subsequently affected replenishment order flow for most retailers in the current quarter. And although we are still in the midst of the season, and recent category consumption trends in July have improved, we now anticipate that our United States sun care sales, while still projected to grow mid-single digits for the year, will be lower than previously expected. which is reflected in our revised sales outlook that Dan will take you through shortly. We remain confident in the underlying fundamentals of our business, and we expect to deliver organic net sales growth slightly above the midpoint of our previous outlook range. This puts us on track to deliver our third consecutive year of 4% or more organic net sales growth, and we expect adjusted earnings per share and adjusted EBITDA to be at or above the high end of the previously provided ranges. Importantly, we've seen a return to gross margin accretion through the realization of price actions, the ongoing execution of our productivity initiatives, and some moderation in inflation. I'm confident that we are taking the right actions to deliver sustained value creation over the long term. And as I said a quarter ago, as we move beyond this period of significant inflation and foreign exchange headwinds, as well as other supply chain challenges, I believe we will realize the full potential of our fundamentally improved business model, driven by continued top-line growth, gross margin expansion, and free cash flow generation. And now I'd like to ask Dan to take you through our third quarter results and also to provide additional details in our outlook for fiscal 2023. Dan?
Chris
Thank you, Rod. Good morning, everyone. As you just heard, we deliver another strong quarter with mid single digit organic net sales growth and notable gains internationally from strong performance in both wet shave and sun care. Market share performance was solid, highlighted by gains in our women's shave business here in the U.S. and in key international markets. On the bottom line, we delivered double digit adjusted EPS growth that was underpinned by meaningful gross margin expansion and good cost control. giving us increased confidence in our ability to deliver full-year profitability at or above the high end of the previously provided range for both EPS and EBITDA. This quarter was the ninth consecutive quarter of organic net sales growth. Growth was delivered both in international and North American markets, reflecting continued strong demand for our products, and was led by further price realization, good performance on shelf, and improved product availability. As anticipated, we had significant gross margin expansion during the quarter as we have successfully delivered the margin inflection originally forecasted. Rod mentioned that the operating environment remains challenging. So let me give you some insight into the external dynamics in the quarter. Overall, the supply chain continues to stabilize and our service levels and fill rates further strengthened. Inflation has eased and certain items in the commodity basket have turned deflationary. The labor remains extremely tight. Gross inflation still presented meaningful headwinds in the quarter of approximately 330 basis points, though this did represent sequential easing, and we continue to expect further flattening in the fourth quarter. While the consumer remained largely healthy across the start of the summer, we saw some softening in certain category consumption in the U.S. Aggregate category growth in the quarter was just over 3%, down about six points from a quarter ago. driven primarily by sun care and to a lesser degree, fem care. The sun care category was essentially flat in the most recent 13 weeks, influenced by extreme heat and excessive rain across the U.S. This adverse weather across the U.S. since Memorial Day negatively impacted retailer replenishment orders in July, which I'll talk about in a bit more detail shortly. In the wet shave category, we continue to be very pleased with Billy's U.S. retail expansions. The brand has reached about a nine share of the category and continued to drive overall portfolio share gains for our women-shaped business. In contrast to the weather-driven challenges in the U.S. sun category, consumption in our international markets was very strong, as travel and leisure activity remained robust and weather has been favorable. Across key European markets, as well as Australia and Mexico, we saw over 30% consumption growth. helping to drive over 20% organic sun care growth for our international business. Now, let me turn to the detailed results for the quarter. As I mentioned, organic net sales increased 4.5%, with an 8.7% increase in international and a 2.3% increase in North America. Price drove just over 6% growth in the quarter. Wet shave organic net sales were essentially flat, with North America declining 6% while cycling mid-single-digit growth a year ago and international increasing almost 6%. In the U.S. razors and blades category, consumption was flat for the quarter, while our market share in aggregate declined 20 basis points, as gains in our women's systems portfolio, led by Billy, were offset by declines in men's systems and disposables. Women's shave value share results in the quarter continue to be positive despite the heightened competitive environment And importantly, our volume share gains of 160 basis points were above recent trend. Sun and skincare organic net sales increased 13%, driven by strong growth across the full portfolio of sun, grooming, and wet ones. North American sun care growth of just under 11% was driven by both price and volume gains. This quarter's strong performance comes in spite of the negative impact of sun care order phasing into Q2, discussed last quarter. As mentioned, international sun care sales increased over 20%, also driven both by price and volumes. In the U.S., the sun care category was flat for the quarter, and occasion-based usage was down due to the poor weather conditions. As competitive products returned to shelf following last year's recalls, our sun care brands lost approximately 90 basis points of market share in the quarter, however, a marked improvement from trend. Banana Boat held its number one share position during the quarter. Grooming organic net sales increased almost 13%, led by Jack Black growth in North America and Bulldog growth internationally. Wet One's organic net sales grew just under 13%, and our share approached 80%. As category consumption in the U.S. flattened in the third quarter, up about a point, our femcare organic net sales were essentially flat. as nearly 7% price gains were offset by similar volume declines. Femcare's two-year stacked organic growth continues to be healthy, and our dollar share in the quarter and over the last 52 weeks was stable. Importantly, our volume share increased 30 basis points in the quarter. Now, moving down to P&L. Gross margin on an adjusted basis increased 80 basis points, or 185 basis points at constant currency. In the quarter, gains from price execution fully offset persistent yet easing COGS inflation as approximately 375 basis points of price gains and 205 basis points of productivity savings helped to offset a 330 basis point headwind from inflationary pressures and a 65 basis point impact from negative category and market mix. AMP expense was 12.3% of net sales. Excluding the favorable impact of currency translation, AMP decreased about $1 million compared to the prior year quarter. Adjusted SG&A decreased 20 basis points versus last year as the benefits of leverage and operational efficiency programs more than offset the impact of higher people costs and travel expense. Adjusted operating income was $83.5 million compared to $70.3 million last year, an increase of nearly 19% or a 28% constant currency increase. GAAP-diluted net earnings per share were $1.01 compared to $0.57 in the third quarter of fiscal 22. And adjusted earnings per share were $0.98 compared to $0.86 in the prior year period, including an estimated $0.17 negative impact from unfavorable currency and taxes and a $0.03 favorable impact from share repurchases. Adjusted EBITDA was $109.1 million compared to 97.1 million in the prior year, inclusive of an estimated $5.5 million unfavorable impact from currency. Cashflow generation was robust in the quarter and net cash from operating activities for the nine months ended June 30th, more than doubled to $168.3 million compared to $72.4 million in the same period last year. We ended the quarter with $207 million in cash on hand, access to the $334 million undrawn portion of our credit facility, and a net debt leverage ratio of about 3.2 times. In the quarter, share repurchases totaled over $15 million. In addition, we continued our quarterly dividend payout and declared another cash dividend of 15 cents per share for the third quarter. In total, we returned nearly $23 million to shareholders during the quarter, and $69 million over the first nine months of the year. Now, turning to our outlook for fiscal 2023. As we've discussed, the commercial and operational fundamentals of our business are strong, and we're confident that we're on track to deliver another year of mid single digit top line growth. The consumer remains largely healthy and international categories continue to strengthen across many core markets. However, we're mindful that the challenges of the external operating environment that we've discussed have not fully abated. In addition, a less robust weather-impacted sun season in the U.S. has impacted our growth outlook for the current quarter, as retailers adjust replenishment ordering and manage down in-store inventory levels. Despite this, we anticipate delivering EBITDA and EPS results at or above the high end of our guidance range. As a result, for the fiscal year, we now anticipate organic net sales growth to be slightly above the midpoint of the 3% to 5% range, reflecting lower projected sun care sales in the fourth quarter. As a reminder, this is inclusive of an estimated 50 basis point full year headwind related to our intentional steps to revamp promotional activity with wholesalers in Japan and structurally decrease inventory levels in Q4, which we spoke to last quarter, but was not contemplated in our initial outlook at the beginning of the year. We now expect full year gross margins to be flat with last year, whereas previously we anticipated a small level of rate accretion. There is no material change to our view on price realization, inflationary headwinds, or productivity savings for the year. However, more unfavorable mix and incremental unfavorable transactional effects have impacted fourth quarter expectations. Importantly, gross margin accretion in the fourth quarter is expected to be approximately 200 basis points, inclusive of about 100 basis points of FX headwinds. We continue to anticipate adjusted operating profit margin accretion on a full year basis. The impact of currency on operating profit is now expected to be a $27 million headwind. a $3 million incremental headwind over our prior outlook. Adjusted EBITDA is now expected to be slightly above the high end of the $320 million to $335 million range. We anticipate that the tax rate will remain at 25%. Adjusted EPS is expected to be at the high end of the $2.30 to $2.50 range, inclusive of approximately 38 cents per share of currency headwinds. This upward revision to our outlook is largely reflective of our better than expected results in Q3. For more information related to our fiscal 2020 outlook, I would refer you to the press release that was issued earlier this morning. And now I'd like to return the call to the operator for the Q&A session.
Operator
We will now begin the question and answer session. To ask a question, you may press start then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from the line of Nick Modi with RBC. Please go ahead.
Dan
Thank you. Good morning, everyone. So just two questions on the Suncare business. Now that we're going through the fall reset process and there's been a lot of volatility on the shelf given product recalls and products coming back on shelf, maybe guys, if you could just give us kind of the state of the union on what you see net-net in terms of how you think you'll end up as we kind of come to the close of the year. And then the broader, bigger picture question is, know there's been a lot of changes in your international business as relates to operating model and management and just wanted to see if we can get an update on what's going on in that mark in japan and europe and some other china i think there were some changes there if you could just give us an update there as well thank you hi nick good morning um two good questions suncare let's start there state of the union um we feel good about our business
Rod Little
in SunCare in that we got the distribution we expected to get. We had a good innovation program this year that's been well received by the consumer. And I think, you know, when we look at what we can control and how we've executed in SunCare, I think the team has done a fantastic job. What we cannot control, unfortunately, is the weather. And as Dan had referenced, starting about Memorial Day all the way through the July 4th holiday, on both the west and east coast, particularly in the northeast, we had poor weather. Lots of rain, cooler than normal, and that impacted consumption. If you recall, Q2, we had a good shipment in. Q3, here in the U.S., we grew double digits again. And so with that weather not being good, we're now seeing a catch-up on consumption. So good news is consumption turned positive in July, second week of July. So it's going to be a bit of a different phasing, but as we called out in the script, we do expect our sun care business to be down versus what we had talked about last quarter. Still growing nicely for the year. And again, you saw not only a good result here in the U.S., but also internationally where we were up a little over 20% organic based on strength internationally as well. So again, what we can control, we feel good about. We're not going to get into a situation where there's going to be a messy cleanup at the end with too much inventory out there. We'll be careful with what we ship in here in Q4, and that's contemplated in our revised guide. As it relates to international, we have made a lot of change in terms of how we run the business, effectively eliminating an international layer, Dan taking on Europe, Latin America as direct reports to him, me taking on Japan, China as direct reports to me. And then, of course, we have Eric O'Toole running North America. What this has done for us is allowed us to go recruit new leadership and talent in some markets who have built out entirely new, what I think are more capable teams in some of the markets. And we've got momentum in international, as you see with the nearly 9% organic increase this quarter. I would expect that to continue as we start to look towards 2024. By the way, sun care with this bad weather base should bode well for 2024 if we get to a more typical weather season. I think both will be tailwinds for us, not only sun care at the base now, but international. We're just getting started with some of the work we need to do to transform our capability in some of the markets. But I think The work done in Latin America by our team down there has been fantastic, up 16% in the quarter. They're ahead on the journey. We've got new leadership in Europe taking a more pan-European approach. That bodes well for 24 and beyond. And then, again, China, Japan. We're further ahead in Japan at this point. I think we'll see those be accretive as we look into 24 and beyond. So we're excited about what's happening internationally. Two years ago, the focus was U.S., Get the U.S. competitive, build the team and the structure and capability here. We've done that, and so now the focus has moved to international. So not only do we have a better brand portfolio, but geographically we have, you know, just more countries winning versus losing, which was the past posture.
Dan
Great. Thanks for the perspective.
Chris Goff
Thank you, Nick. Upward, next question, please.
Operator
The next question comes from the line of Bill Chappell with Trust Securities. Please go ahead.
Bill Chappell
Yeah, good morning. Good morning, Bill. I just want to understand the kind of slight slowdown. It seemed that in the spring quarter you got some more shelf space and we're getting some momentum there and didn't know if it's more just You had good shipments in the last quarter, and the volume didn't show up. The consumers didn't show up this quarter.
Rod Little
Yeah, Bill, we're struggling to – I think I've got the basis of the question, but you're breaking up. Just the category you're interested in here is what?
Bill Chappell
Yeah, just – sorry now. Can you hear me now? Yes. Just a comment on your FemCare performance from last quarter to this quarter. It seemed to be a pretty big slowdown and didn't know if that's just shelf space gains versus consumer takeaway being a little bit lower than you would have expected or if there's something else going on.
Rod Little
Yeah, it's more of a base period issue, Bill, and I'll let Dan give you a little more perspective. on what we're seeing. We are confident in our femcare business, like where we are, share performance, volume, all that good pricing has been received. The biggest issue you're seeing this quarter is what happened in the base period a year ago, where there was some media coverage about a tampon shortage that drove a big consumption increase by consumers, effectively pantry loading, worried that they wouldn't be able to get tampons It was not an accurate portrayal, I don't believe, of what was actually happening, not only with us, but our competitors. And so that was in the base, is that bubble that we effectively cycled the quarter we just finished.
Chris
Yeah, that's right, Bill. So remember last year, Q2 of last year, we were down double digits organics in FemCare for the exact reason Rod highlighted. We cycled that last quarter, Q2, hence the growth. But I think if you ladder up to the category, you're seeing a much more sort of expected category in terms of growth and performance in the quarter. We're 52 weeks now with, you know, flat value share performance. So we feel like we've certainly hit that point of stability. I think importantly in the third quarter, even as the FemCare category slowed versus recent trend, we grew volume share significantly. about 30 basis points in the quarter. So we like the performance. We recognize the organics are a bit choppy given what's in the base.
Bill Chappell
Got it. And then just kind of a housekeeping on currency. I'm not sure if you said where things stand in terms of top and bottom line. I now tailwind for the fourth quarter and kind of how that would play out as we move into next year. I know you're not giving guidance, but I would think we've now moved to a full tailwind from a currency standpoint.
Chris
Yeah, look, I think I'll take it in two parts, Bill. I think for the back half of the year, we've seen net tailwinds. Now, it's important to understand where those came from. In operational margin, operating margin, it's a headwind. Transactional FX is still a headwind, and that's largely the effect of the yen. What we saw in the quarter, and we expect to see also in the fourth quarter, is gains from below-the-line hedge and balance sheet remeasurement. So net-net, slightly better currency environment than we thought a quarter ago. Quite candidly, that flowed through. That's why you see the uptick in the guide in terms of EPS. As far as next year, obviously, you're right. We're not going to comment on that yet. But the thing I would hesitate, though, or put caution around is, Not only do we need to see how the currency environment shakes out, but we have to then understand the transactional impact again and how inventory will play out over the course of next year, similar to how we think about inflationary pressures and when that relief will come. So I would, we certainly are encouraged, but I wouldn't assume that's a day one tailwind for our business.
Chris Goff
Got it. Thank you. Thank you. Thank you, Bill. Operator, next question, please.
Operator
The next question comes from the line of Chris Carey with Wells Fargo Securities. Please go ahead.
Chris Carey
Hey, good morning, everyone. I have a couple questions about gross margin. Hi. So maybe just simply, the gross margin, what was the key driver of why gross margin is coming down a bit versus prior expectations?
Chris
Yeah, very simply, Chris, it's increased headwinds from mix. That's largely a reflection of the international growth Rod talked about. And then within the shave category, you know, international markets tend to be more disposable and PBG based. So the mix was a bit more negative than we had anticipated on the margin profile. And then you have a bit higher FX headwinds on transactional FX that I mentioned on previous call. I think really important to call out the structural elements of margin, right? So we go back to price realization, productivity execution, and easing inflation. We're literally on the pin where we thought we would be a year ago. Nothing has changed there. But obviously some of these other items, a bit harder to predict, have proven to be a bit of a headwind here as we exit the year. But those are
Chris Carey
those are not structural we think those are unique to this to this moment okay okay um and then just a second related question um you know just on your view around perhaps medium term gross margins i guess i'm struck by you know street estimates for basically a hundred basis points of gross margin expansion next year, which seems significant relative to what you typically do. And clearly that's driving an earnings growth number that you don't typically do either. And perhaps you're, you know, thinking about continuing to invest, which I would imagine is top of mind. And so I guess I'm just, you know, relative to gross margins coming out of touch, you know, just how do you think about the medium term trajectory to get back to a gross margin kind of in the, you know, pre-pandemic range and, you know, perhaps the kind of timeline that you could see that coming together and whether, you know, near to medium-term estimates seem reasonable or not. You know, I just don't know if you have any comments on, you know, all of that and how that balances together. Thanks.
Chris
Yeah. Yeah. Thanks, Chris. So, look, I think what we've said and we still fundamentally believe is, one, we are absolutely committed to getting this business back to its pre-COVID margin profile, right? We've said that and we're committed to that. I think the second piece, and certainly 2023, is a good proof point. We're confident in our ability to pull the levers necessary to do that, right? You've seen that. in not just in the pricing work we've done, but in the SRGM work the teams have done, our ability to drive cost savings consistently 200, 225 basis points a year. So the levers at our disposal we feel really good about. Look, there are certain factors, namely the inflationary pressures, FX, that impact the pace at which we can recover the margin. And so we're obviously not yet ready to guide on that for next year. We'll give full transparency as we do in November. We like the fact that inflation is easing. We do see structural deflation in certain elements of the commodity basket. Labor is still the long pole in the tent, though, and is still challenging. So there are puts and takes. And then I think you hit the right point, which is there's a reinvestment cadence here. So I think what I would say is just the commitment is there. The levers are clear and available to us. We've demonstrated that. I think the pace at which we recover the margin
Rod Little
near term has some some factors to it that we have to work our way through in the plans and and certainly we'll talk about it in november and chris it's roddy i would just add one thing on to what dan said which i think is very comprehensive and hopefully gives you how we're thinking about it but don't underestimate the impact of foreign exchange we talked about it at the beginning of the year we've got 38 cents of headwind year over year in here in foreign exchange and as we go forward and again out of our control and we won't predict when it happens but as you get to more normal as defined by the last 20 30 years fx ranges among the major g7 currencies we will pick that up over time as well right there's there's a there's a pretty negative view maximally negative i think here in fiscal 23 that we feel like we'll recover and you know that's That's well north of 10% EPS right there. So beyond the work we'll do in running the business better and driving revenue management, I think we're confident over time we'll get some of that FX back as well.
Chris Carey
Hey, that's helpful. Thank you.
Chris Goff
Thank you. Thanks a lot, Chris. Operator, next question, please.
Operator
The next question comes from the line of Susan Anderson with Cannicle Genuity. Please go ahead.
Susan Anderson
Hi, good morning. Thanks for taking my question. I was wondering if you said how much Billy contributed in the quarter, and did you see growth in Billy, and then also how it's performing in the new retailers you've gone into? Are you seeing that add to growth or bringing in new customers to the brand?
Chris
Hey, good morning. It's Dan. Yeah, look, Billy did grow in the quarter. We don't disclose sort of the ins and outs with Billy, but I think your second question, I'll start there spot on. Like, We really are excited about the performance we're seeing in retail. You know, you'd recall last year was a super important year for the brand at Walmart, and the performance there was a clear catalyst for 2023 retail expansion. We're seeing that. The brand is up to about a nine share in the category of you know we're super pleased with the results retailers are very pleased with the results and even as the shelf has gotten more crowded in that space particularly at target the brand certainly sticks out as a winner uh amongst the women's uh category that is then proving to be a very important catalyst for next year right and 24 is the year that billy makes its move outside in a much more meaningful way of the shave category and gets into adjacent categories. So we're executing sort of the integration playbook and the growth playbook for the brand exactly as we kind of wrote it a year and a half, two years ago, and so far really, really excited about the performance on shelf.
Susan Anderson
Great. That sounds great. Good luck the rest of the year.
Chris Goff
Thank you. Thanks, Susan. Operator, next question, please.
Operator
The next question comes from the line of Olivia Tong with Raymond James. Please go ahead.
Raymond James
Great. Thanks. Good morning. I wanted to ask you about the mix of promotional spend versus advertising. You know, you're obviously seeing promo spend across the industry come up as conditions normalize. And relative to ours, and I think the market expectations, advertising margin came in a little bit less than we expected, and the gross margin in question perhaps while inflecting wasn't as substantial as we expected. So we'd love to hear your commentary in terms of promotional levels this quarter and your expectations going forward and compare and contrast that with advertising. Thank you.
Chris
Yeah, thanks, Olivia. It's Dan. Let me take the A&P question first, because I think that's important. You know, we spent in the quarter at over 12% rate of sale. So it was by no means a light quarter increase. You know, we felt good about the quantity of spend. It was probably about $3 million below what we had anticipated when we last spoke to everyone a quarter ago. And I think there were two reasons for that, both around SunCare. In the international markets, you know, you heard we talked in our prepared remarks, we saw tremendous growth, over 30% category growth in the key markets in which we play with SunCare. And so we had the product on the floor. The execution was terrific. There was simply no need to overspend. And we drove a 21% organic growth in the quarter, and we gained share in some pretty important markets like Australia and Mexico. And so for us, the international piece was all about efficiency. There was no need to overspend. Conversely, in the U.S., and we talked about what we've seen there in the category and the weather impact, by late May, retailers... the shelves had been stacked. Supply was saturated. The unfavorable weather was certainly weighing in on consumer consumption. And so it didn't make any sense for us to spend more in that space. The consumer wasn't there. So in the U.S., it was about effectiveness of spend. And so we made the decision to pull back. Some of that will come back in the quarter. In the quarter we're in, we're expecting over a 9% rate of spend in the fourth quarter, which is you know, meaningfully more than a year ago. But again, we're focused on spending the right amounts in the right way. And we felt really good about how we executed that in the quarter for A&P. To the broader point, you know, we said a quarter ago we expected that things might get a bit more promotional in the back half of the year. That was already contemplated in our outlook. We haven't seen widespread. increased promotions or let's say any irrational behavior, a bit in women's shape, but we don't think that's a reflection of consumer sentiment. We think that's a direct reflection of Billy's success. But that sort of incremental promotional activity on our end was already contemplated in our guide from what we said a quarter ago. So no new news there.
Raymond James
Got it. That's helpful. And then perhaps can I just follow up on your read on consumer sentiment, particularly in shaving. You're one of the few companies that have both a private branch group as well as branded. So curious if you could talk about share changes across brand and private label, specifically if you're seeing any acceleration at sort of the low end of the category given the macro situation and any incrementality in terms of price sensitivity.
Rod Little
We're not seeing any meaningful change In consumer sentiment, we talked about a little deceleration in a couple of categories, sun being the biggest one, which is more about weather, not the consumer being there. But beyond that, and particularly in shade, if we look at the last three-month category growth rate versus prior 52, very much in line here domestically in the U.S., so we're not seeing a slowdown. Internationally, it's actually picked up, and we're seeing some increases. So depending on the market you're looking at, The consumer is healthy. And then within that, we're not seeing any meaningful trade down to private label, for example, and the opening price point. And we're also not seeing any meaningful trade down to disposable going after a lower absolute price point, which consumers sometimes do when they get pinched. And so within Shea, we're seeing a stable growing category and no meaningful trade down.
Raymond James
Great. Thank you.
Chris Goff
Thank you. Thank you, Olivia. Operator, next question, please.
Operator
Again, if you have a question, please press star, then one. There are no more questions at this time. This concludes our question and answer session. I would now like to turn the conference back over to Radley for any closing remarks.
Rod Little
I'd just like to thank everybody for your time, your continued interest in Edgewell, and we'll talk to you in three months.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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