Edgewell's Q4 2025: Contradictions Emerge on Sun Care Inventory, Promotions, Productivity, and Market Outlook

Date of Call: November 13, 2025

Financials Results

• Revenue: Organic net sales +2.5% in Q4; fiscal '25 organic net sales -1.3% YOY
• EPS: Adjusted EPS $0.68 in Q4, down from $0.72 prior year; GAAP diluted net loss per share $0.66 vs. $0.17 income prior year
• Gross Margin: Adjusted gross margin rate decreased 330 bps in Q4; FY adjusted gross margin decreased 110 bps YOY (20 bps at constant currency)
• Operating Margin: Adjusted operating income $40.3M (7.5% of sales) vs $56.0M (10.8%) prior year; FY adjusted operating margin 9.9%, down ~200 bps

Guidance:

• FY26 organic net sales: -1% to +2% (excludes 150bps FX); Q1 -1% to -2%; mid-single-digit international growth; North America flat to slightly down.
• Adjusted EPS $2.15–$2.55; Adjusted EBITDA $290–$310M (midpoint ~flat); Free cash flow $115–$145M.
• Gross margin: ~+60bps YoY (20bps CC) supported by ~310bps productivity/mitigation; $25M net tariff headwind.
• A&P to rise to ~11.8% of sales (+70bps); results H2-weighted (≈2/3 EBITDA, 3/4 EPS in H2).
• Feminine Care discontinued from Q1; annualized impact ~$0.40–$0.50 adj. EPS and $35–$45M adj. EBITDA; net proceeds (~80% cash) to pay down debt.

Business Commentary:

* Sales and Market Performance: - Edgewell Personal Care Company reported organic net sales growth of 2.5% for Q4, with international markets delivering 6.9% growth, driven by both volume and price gains. - The domestic market showed improvement, with North American sales declining only 0.6% compared to the previous quarter. - The positive trends were attributed to improved consumption and market share performance in North America and successful innovation in international markets.

• Productivity and Cost Management:
• The company achieved 270 basis points in gross savings in fiscal 2025, with plans for 310 basis points in fiscal 2026, inclusive of tariff mitigation.

• Increased productivity savings were due to supply chain optimization efforts, which included reducing complexity and improving customer service.

• Financial and Operational Challenges:

• Adjusted gross margin rate decreased by 330 basis points in Q4 due to transitory headwinds, including inventory adjustments, increased trade promotions, and tariff pressures.
• The company faced external pressures like tariffs and foreign exchange volatility, impacting financial performance and supply chain management.

• Strategic Focus and Restructuring:
• Edgewell announced the divestiture of its Feminine Care business to focus on core categories like Shave, Sun, and Skin Care.
• The strategic shift aims to enhance operational efficiency, reinvest in core brands, and establish a more focused and consumer-driven business.

Sentiment Analysis:

Overall Tone: Neutral

• Management repeatedly described FY25 as "challenging" with "transitory" headwinds (Mexico inventory, trade/promotions, tariffs) while emphasizing the plan is "balanced and achievable," international strength, 310bps of planned productivity/mitigation, H2-weighted recovery, and the Feminine Care divestiture to strengthen the balance sheet—mix of near-term pressure and strategic optimism.

Q&A:

• Question from Olivia Tong Cheang (Raymond James & Associates): The outlook range is wider; can you explain category growth assumptions, market share assumptions, segment shapes (e.g., Sun and Skin), and flexibility to maintain profit goals?
  Response: Plan is balanced and achievable: assumes low-single-digit category growth, holding current share (70% of category/country combos growing/holding); Q1 may show an EPS loss; expect H2-weighted recovery driven by productivity, pricing and brand investments.

• Question from Nik Modi (RBC Capital Markets): What is the strategic "North Star" for the portfolio and are you considering M&A as asset values decline?
  Response: Strategy is focused on four categories—shave, grooming, sun and skin; Fem Care divestiture provides proceeds to invest (notably in a consolidated, automated shave plant) and to reduce debt; M&A remains opportunistic with a high discipline threshold.

• Question from Christopher Carey (Wells Fargo Securities): Q4 productivity was low versus expectations and gross margins missed—how confident can we be in productivity offsetting inflation/tariffs and what about pricing timing?
  Response: Productivity target for FY26 is ~260bps core and ~310bps including tariff mitigation; Q4 margin shortfall was driven by transitory Mexico plant inventory adjustments and higher trade promotions; margin improvement is expected in H2 via mitigation, selective pricing (mainly international and phased) and volume/absorption.

• Question from Peter Grom (UBS Investment Bank): How quickly will proceeds from the Fem Care sale be deployed and how might this impact EPS after closing?
  Response: Fem Care expected to close early calendar 2026; ~80% of proceeds convert to cash and will be used primarily to pay down debt to target ~2–3x leverage; any M&A would be selective—no direct EPS uplift guidance given now.

• Question from Susan Anderson (Canaccord Genuity): In Sun & Skin, given higher promotions, what are inventory levels at retail, category health and competitive/introduction plans for next year?
  Response: Recent sun season was promotional and weak but inventories are clean heading into next year; management is conservatively planning low-single-digit Sun growth and will invest behind Hawaiian Tropic (year‑2 campaign) and a new Banana Boat campaign to regain share.

Contradiction Point 1

Sun Care Inventory and Promotional Activity

It addresses the promotional environment and inventory levels in the Sun Care category, which are crucial for sales strategy and financial performance.

How are you positioning the Sun and Skin category for next year, especially with increased promotions in Sun? What are current retail inventory levels in the category? Do you anticipate healthier category performance next year? What is the competitive landscape with new brands entering the market? Are there any new product innovations planned for next year? - Susan Anderson(Canaccord Genuity)

2025Q4: It was not a great season. It was very promotional from the start, as you rightly point out, with some competitors going very deep discounts every day across the set. And so it was, I would say, a higher-than-normal level of promotional intensity all year. - Rod Little(CEO)

What are the expectations for Sun Care replenishment and innovation in the coming year? - Susan Kay Anderson(Canaccord Genuity)

2025Q3: Sun Care is expected to end with mid-single-digit growth, driven by replenishment. Inventory levels are manageable. - Daniel J. Sullivan(COO)

Contradiction Point 2

Productivity and Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding productivity and gross margin expectations, which are critical indicators for investors.

What is the North Star for the portfolio strategy? Is there intent to consider more M&A as asset values decline in the current environment? Where is the company trying to direct its strategic focus? - Nik Modi (RBC Capital Markets)

2025Q4: We've consistently been delivering 250 basis points of productivity efforts over the last few years. And as we look ahead to '26, we still believe that we will deliver at its core 260 basis points and with mitigation 310 basis points. - Francesca Weissman(CFO)

Can you quantify the tariff impact on raw materials, finished goods, and U.S.-to-Canada exports? Would you raise prices to offset these tariffs? - Lauren Lieberman (Barclays)

2025Q2: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s and operating margins in the mid-70s. - Dan Sullivan(COO)

Contradiction Point 3

Sun Care Market Outlook and Promotional Activity

It involves differing views on the promotional activity and market outlook for the Sun Care category, which impacts revenue projections and competitive positioning.

What are your expectations for the Sun and Skin category next year, considering increased promotions? Are inventory levels at retail healthier? How is the competitive landscape evolving with new brands entering the market? Do you have any new product innovations planned for next year? - Susan Anderson (Canancord Genuity)

2025Q4: As we look to 2026, more than 3/4 of our share gains in Sun Care are expected to come from share gains in North America, and particularly in the U.S. - Rod Little(CEO)

Can you elaborate on the organic sales growth in the second half and the confidence in the expected acceleration? - Peter Grom (UBS)

2025Q2: The confidence in the second half growth comes from a 3% to 4% sequential improvement, driven by transitory tailwinds like Easter shift and supply disruptions from last year. International markets are expected to grow 4.5% to 5% in the second half. U.S. Sun Care is expected to grow about 2% in consumption, and sequential improvement is anticipated in Sun Care. - Dan Sullivan(COO)

Contradiction Point 4

Sun Care's Growth and Market Dynamics

It highlights differing perspectives on Sun Care's growth trajectory and promotional intensity, which are crucial for investor expectations and strategic planning.

How are you positioning the Sun segment with increased promotions and what is your outlook for the Sun & Skin category next year? What are current retail inventory levels in the category? Do you anticipate the category will be healthier next year? How is the competitive landscape evolving with new brand entrants? Are there any upcoming product innovations planned for next year? - Susan Anderson(Canaccord Genuity)

2025Q4: We ended the year not wanting to take any of that drag into next year. So inventories are clean. We landed the year and as part of the Q4 thing we believe is transitory is just making sure we go into next year very clean with any inventory positions, any returns, accrual adjustments, that's all in line, and we're very clean as we go into next year. - Susan Anderson(Canaccord Genuity)

Can you discuss your Sun Care position as peak season approaches? - Dara Mohsenian(Morgan Stanley)

2025Q1: Look, I would say in the U.S., flat to slightly down. In the international markets, we grew in 6 out of the 7 markets we've reported on. And we did that with a net pricing decline in 4 of those 7 markets. And as we said, this is a category that we really have confidence in. - Daniel Sullivan(CFO)

Contradiction Point 5

Productivity and Gross Margin Expectations

It involves differing expectations regarding productivity and gross margin improvements, which are critical for financial performance and investor confidence.

Given the record-low productivity and below-expected gross margins this quarter, how will productivity gains offset these challenges, and can you clarify the pricing strategy in the back half versus North America's limited pricing to build confidence in gross margin recovery? - Christopher Carey(Wells Fargo Securities)

2025Q4: We have a second half-oriented plan here as it puts forward. I want you to know, like we've been through this at great levels of detail, and we're very confident in the profile we put forward. And some of what drives the gross margin delivery and the rate delivery is a higher expected sales growth in the second half of the year. - Rod Little(CEO)

Why is the Fem Care business weak, and will the spring resets stabilize it? - Katie Grafstein(Barclays)

2025Q1: We are -- we are achieving structural cost efficiencies, and we are achieving productivity benefits. We -- we do see some cost benefits in Q3 and Q4 as opposed to Q2, so that's right. - Rod Little(CEO)