Edgewell Personal Care Company

Good day and welcome to the Edgemill first quarter fiscal year 2026 earnings conference call. All participants will be in a 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 touch tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Goff, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Redwell's first quarter fiscal year in 2026 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, and Fran Weissman, our Chief Financial Officer. Rod will kick off the call and hand it over to Fran to discuss our first quarter 2026 results and full year fiscal 2026 outlook. We will then transition to Q&A. This call is being recorded and will be available via replay on our website, www.edgewell.com. Please refer to our website for supplemental information providing more details on the company's divestiture of its feminine care business. That closed on February 2nd, 2026. During this 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, brand investment, organizational and operational structures and models, cost mitigation and productivity efficiency efforts, savings and costs related to restructuring and repositioning actions, acquisitions, dispositions and integrations, impacts from tariffs and other recent developments, changes to our working capital metrics, currency fluctuations, commodity costs, inflation, category value, future plans for return of capital to shareholders, the disposition of our feminine care business, 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 end report on Form 10-K for the year end of September 30th, 2025, and as may be amended in our quarterly reports on Form 10-Q filed 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 and allows more meaningful period-to-period comparisons of ongoing operating results. Before moving on, I want to clarify how the divestiture affects the way to view our results and outlook. Beginning in the first quarter of fiscal 2026, the feminine care business is classified as discontinued operations, and prior period results have been recast to reflect this presentation. The results of the feminine care business are reported separately from continuing operations. All of our commentary today, unless otherwise stated, on performance and our outlook will reflect continuing operations, including our wet shave, sun, and skin care businesses. At the same time, to help investors compare our results and outlook on a consistent basis with our prior outlook, which included feminine care, we are also providing selected information on a consolidated basis, reflecting both continued and discontinued operations. To facilitate comparability, the press release and our remarks provide bridges to review results on a like-for-like basis and reconcile our outlook between consolidated and continuing operations presentation. With that, I'd like to turn the call over to Rob.

Thank you, Chris, and good morning, everyone. We appreciate you joining us for our first quarter fiscal 2026 earnings call. We delivered a solid start to the year with results modestly ahead of our expectations. Our performance in the quarter reflects progress on the strategy we are executing as we continue to concentrate our resources on the categories and markets where we have clear competitive advantage. While it is still early in the fiscal year, we believe this initial progress demonstrates that we are on the path to delivering on our full-year outlook. Before I get into the details, I want to highlight a significant milestone for Edgewell. As you saw in our recent announcement, we have successfully closed the sale of our femcare business to Essity. The transaction closed as scheduled, and importantly, the estimated annualized impact of the divestiture is expected to be favorable to our previous outlook. This transaction is a pivotal step in our transformation journey and reflects our longstanding strategic intent to sharpen our focus on the categories where we have clear competitive advantages and strong momentum. shave, sun, skin care, and grooming. By simplifying our portfolio and reallocating capital and resources towards these core businesses, we believe we are strengthening our ability to compete and invest where it matters most. With this move, we believe Edgewell is now better positioned to be a more focused, agile, and durable personal care company. One we believe can drive sustainable growth, deliver stronger margins over time, and create long-term value for our shareholders. Now, turning to our performance highlights, we delivered a solid start to the quarter, executing well in a dynamic operating environment. Overall results came in ahead of our expectations as strength in North America offset expected softness in international markets. Organic net sales in the quarter decreased by 50 basis points. reflecting stronger-than-expected performance in North America as certain retailers placed sun care orders earlier than anticipated. His strength more than offset declines in international markets, which was anticipated and was primarily due to new product development phasing in wet-shaven Japan and lower sun care sales in distributor markets where we cycled a large sell-in a year ago due to certain formulation changes. From a consumer and market share standpoint, Trends were consistent with category dynamics and recent trends. In the U.S., share pressure was modest and concentrated in specific categories, most notably in core wet shape, while we continued to see relative strength in men's grooming. Outside the U.S., we delivered share gains across several key markets, including Australia, Europe, Canada, and China, highlighting the resilience of our brands internationally. Over 70% of the markets either grew or held market share in the quarter. From a profitability standpoint, we delivered above-expectation results, supported by favorable mix and continued productivity gains. Importantly, this performance was achieved while maintaining our investment priorities. Looking ahead, we remain focused on what we control, driving good execution, making thoughtful investments in the business, while simultaneously delivering continued productivity gains that protect and enhance our profit profile and maintaining disciplined capital allocation. Despite an operating environment that is still choppy, we make good progress across four priority areas that are central to our near-term execution and our long-term strategy. International markets, innovation, productivity, and our U.S. transformations. These pillars are at the core of how we are allocating capital and effort, reflecting where we are concentrating resources and driving the highest returns. Progress across these four areas reflects disciplined execution and reinforces our conviction in the approach we are taking. Let me give you an update on each. First, durable international growth. Our underlying consumption and market share trends were encouraging, particularly in Europe and Oceania. But as expected, organic net sales declined in the quarter, reflecting timing and phasing impacts. With the divestiture of the femcare business, our international markets now represent nearly half of total company sales, underscoring their importance to Edgewell's growth profile. Importantly, our international markets remain a core pillar of our strategy, and we continue to expect mid-single-digit net sales growth in international markets for fiscal 26, with growth expected to resume beginning in the second quarter. Second, compelling innovation. We remain committed to delivering consumer-led, locally designed innovation across our portfolio, and we are seeing the benefits of that focus. In fiscal 25, we expanded Billy into Australia, Bulldog entered premium skin care across Europe, We took SHIC into premium skincare in Japan with the launch of Progisto, and we broadened Cremo's range in the United States and Europe, driving meaningful growth. Importantly, this translated into improved market performance that carries over into fiscal 26. As we look to the second half of fiscal 26, we have a robust innovation pipeline, including hydro and intuition relaunches in Japan, New Wilkinson Sword and Hawaiian Tropic launches in Europe, as well as meaningful launches across shade, grooming, and sun care in the U.S. Together, these initiatives reinforce innovation as a key driver of our focused and durable strategy. As we step up A&P, we're doing so with a clear return framework. The focus is on brands and markets where we see the strongest linkage between investment, distribution gains, household penetration, and repeat rate. This is not about spending more everywhere. It's about reallocating behind fewer higher return opportunities and holding ourselves accountable. Third, productivity through supply chain optimization. Our execution against our productivity agenda has been consistent. In the quarter, we generated approximately 240 basis points of gross productivity savings, keeping us on track to deliver on our margin expansion for this year. These actions are critical as we work to offset tariff pressures, reduce complexity, increase speed and service levels, and free up capacity to reinvest behind our core brands and innovation pipeline. Longer term, we continue to see significant opportunity to further optimize our North American wedge-shaped business and manufacturing footprint, consistent with the actions we outlined last quarter. We are streamlining operations, reducing duplication, and unlocking working capital. We believe these actions, combined with our continued investment in blade excellence, next-generation automation, and digital tools, will enable a more agile, resilient, and customer-focused supply chain, positioning us to deliver an accelerated pace of productivity savings in fiscal 27 and beyond. Stepping back, with FemCare now fully exited, we have a much clearer view of the underlying margin profile of the continuing business. While near-term margins reflect higher inflation, tariffs, and deliberate reinvestment, structurally, we believe this is a business that can return to or above pre-COVID gross margin levels for continuing operations over time. The productivity actions we're taking, particularly in manufacturing simplification and automation, are structural in nature. And as external cost pressures normalize, those benefits will increasingly flow through. Fourth, our U.S. commercial transformation. As we shared last quarter, we are executing a bold transformation in the U.S., focused on returning the business to profitable, sustained, top-line growth over time. Over the past year, we completed a comprehensive strategic review that reinforced the strength of our category positions, while also identifying opportunities to improve focus, execution, and speed. We've simplified our U.S. structure to reduce complexity and accelerate decision-making, supported by new leadership and higher investment behind core capabilities, including insights and analytics, brand building, and revenue growth management. At the same time, we are sharpening our portfolio focus and recommitting to our shape business, where we hold a differentiated position products, both branded and private label. While rebuilding distribution and share will take time, we are encouraged by early progress as we refocus on our strongest offerings and improve execution at shelf. We've also taken decisive action to increase investment in our five focus brands, Shake, Billy, Hawaiian Tropic, Banana Boat, and Crema, shifting towards sustained brand building and a more balanced marketing mix. As we look to the second half, we expect to see a step-up in brand investment against these brands with full-funnel campaigns on Hawaiian Tropic, Banana Bug, Schick, and Billy. This is the first time we have had this across the portfolio of core brands, along with strong distribution outcomes on some of our key SKUs. This is particularly true with Hawaiian Tropic and Cremo. These efforts give us confidence that we are laying the right foundations to stabilize our U.S. business fiscal 26 and position the company for renewed growth over the longer term. As we look at the remainder of fiscal 26, our outlook for continuing operations component of our business is unchanged from when we spoke to you last quarter. We believe our plan is balanced and achievable, even as we continue to operate in a challenging macro environment marked by muted category growth, a cautious consumer, and inflationary pressure from tariffs. To reiterate key underlying assumptions of this outlook, first, we expect a return to organic net sales growth driven by mid-single-digit growth in international markets and a more stable performance profile in North America. Second, we expect gross margin expansion supported by productivity gains that partially offset inflation headwinds, including a net of approximately $25 million impact from tariffs. Third, our plan includes a step-up in investment across trade and A&P to support our U.S. transformation and fuel key brands internationally, which we believe will drive increased household penetration, funded in part by margin improvement. Fourth, while we are making significant investments for the longer-term success of the company, we continue to prioritize free cash flow generation through working capital improvement and near-term capital allocation choices focused on using the proceeds from the FemCare sale for debt reduction. Underpinning all of this is the strength of our team. The progress we made this quarter and the results we delivered reinforce our conviction in the plan and path ahead. With that, I'll turn it over to Fran to walk you through our results and outlook for fiscal 26.