EPC - NYSE

Good morning, and welcome to Edgewell's Third Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Gough, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell's Third Quarter Fiscal Year 2025 Earnings Call. With me this morning are Rod Little, our President and Chief Executive Officer; Dan Sullivan, our Chief Operating Officer; and Fran Weissman, our Chief Financial Officer. Rod will kick off the call, then hand it over to Dan to discuss our third-quarter commercial and operational highlights, followed by Fran, who will discuss our Q3 financial results and our 2025 updated full-year outlook. We will then transition to Q&A. This call is being recorded and will be available for replay via our website, www.edgewell.com. 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 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 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, 2024, as amended November 21, 2024, and as may be amended in our quarterly reports for 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. With that, I'd like to turn the call over to Rob.

Thank you, Chris. Good morning, everyone, and thanks for joining us on our third-quarter fiscal 2025 earnings call. This was a challenging quarter with our top and bottom line performance falling below expectations. Our results were significantly impacted by very weak Sun Care seasons in North America and certain Latin America markets, largely related to adverse weather. While Sun Care performance pressured overall results, we continue to see strong results in 2 important areas. Internationally, we delivered another quarter of growth, coupled with strengthened market share performance and strong supply chain execution led to further productivity gains above the year-to-date trend. Importantly, our market share performance in the U.S. also improved, most notably across our Hawaiian Tropic, Cremo, and Schick Hydro Silk brands, which saw stepped-up investment levels in the quarter. The operating environment remains challenging with both tariffs and foreign exchange contributing to full-year profit headwinds. On the consumer side, apart from Sun Care, our categories grew modestly in the U.S., in line with the 26- and 52-week trends. However, retailers further tightened inventory levels, most notably in the fem care category, leading to some divergence between our organic net sales and category consumption levels. Despite this challenging environment, as we discussed last quarter, we remain committed to incrementally investing across our business to support new brand campaigns, ensure robust backing for our newly launched innovations, and deliver the necessary improvements in our U.S. business in order to strengthen our portfolio for the longer term. We are encouraged by the early results from these incremental investments, which bolster our confidence going forward, and I will say more on this shortly. Our performance in the quarter and over the first 9 months of this fiscal year further reinforced 3 fundamental strengths of our business. First, we continue to seamlessly execute our international market growth strategy across the business that now represents 40% of our global sales. These markets have collectively delivered consistent mid- to high single-digit organic growth over a 4- year period, and we expect this business to deliver mid-single-digit organic growth again this year, with notable strengthening share positions across Shave, Sun, and Grooming in key markets. Second, we are committed to delivering consumer-led, locally designed innovation across our portfolio. We have expanded Billie's geographic reach, launching the full Wet Shave line in Australia in July. In Grooming, Bulldog has entered the premium Skin Care category, driving sales and market share growth across Europe. And we are seeing significant benefits from the broadened Cremo range in the United States and Europe. In Sun Care, Hawaiian Tropic is experiencing strong U.S. growth due to a successful marketing campaign, updated formulations, and its on-trend branding. And in Japan, we've taken the Schick brand to premium skin care with the launch of the Progista brand in premium channels. Third, productivity and efficiency remain at the cornerstone of how we operate, as demonstrated by the delivery of another quarter of almost 300 basis points in realized gross savings. The work our teams are doing across the supply chain is more important than ever as we tackle the impact of global tariffs and increasing macro complexity. Now let's talk about North America, where our results have been below our expectations and where we've been on a journey to strengthen our business in the U.S. as a catalyst for a return to profitable, sustained top-line growth. Let me provide an update on the work that has been done thus far. Following Jess's appointment last October, she and the team have focused their efforts in 3 distinct areas, working with both diligence and urgency. First, performing a rigorous assessment of the business and gaining a clear understanding of the challenges inherent within our U.S. portfolio and broader U.S. business model. Second, leveraging deeper consumer understanding and taking a modern approach to brand building that allows us to enhance brand message and better activate our brands with consumers. And finally, designing an organization that can achieve meaningful improvements in both commercial effectiveness and operating efficiency, underpinned by improved capabilities, simplification, and a lower cost to operate. This holistic approach is designed to fundamentally strengthen our business for the future, and I'm very pleased with the progress we are making, elements of which were visible in the quarter. During the quarter, we were highly proactive in the market, taking actions to support our brands at a different level, and we saw promising results. We designed and executed targeted brand campaigns across our focused brands of Cremo, Hawaiian Tropic, and Schick Hydro Silk. In support of these exciting programs, we have stepped up investments and have strategically shifted our spend to better balance both upper and lower funnel activities. The consumer has responded well, and we've seen each brand's consumption trends improve with Hawaiian Tropic share up 150 basis points in Q3, continued share gains in Grooming with Cremo up 40 basis points, and sequential improvement in Hydro Silk share. Also, we just completed the redesign and launch of the new U.S. commercial organization, underpinned by what is essentially a new U.S. leadership team, bringing together a talented, proven, and highly capable leadership group under Jess. This team will be fully in place by September and operating in a simplified, streamlined structure with laser focus on U.S. consumers and building brands that consumers love more and can win in market. And as you saw last quarter, and we'll continue to see this quarter, this will come with targeted increased investment in both trade support and A&P, along with a more efficient overhead structure. Where we have winning campaigns, as I highlighted earlier, we will invest. Many of the changes we are making in the U.S. market are in line with the changes we have successfully driven across our international markets, which are now delivering consistent mid-single-digit sales growth and operating margin expansion. As with anything, driving a step change in results takes time, but I'm confident the team we are putting in place and the renewed focus we have on doing all of the right things to create value in our most important market. The team is actively building plans for 2026, and we will share more on the U.S. transformation effort as part of our Q4 earnings call. This leads me to our outlook for the full year. We're at a pivotal moment in our transformation. We are orchestrating significant change across our North America commercial operations while facing numerous external headwinds, including foreign exchange, tariffs, and a significantly reduced Sun Care consumption profile for this season. Last quarter, we discussed the importance of maintaining investment levels for key brands even in the face of a challenging macro environment. Similarly, as we look at the remainder of the year, we will continue to press forward on investment to support the required changes in the U.S. that are already beginning to demonstrate returns through our improved share performance. While these investments weigh on profitability in the near term, we believe they serve to strengthen our business and better position our portfolio in the competitive U.S. market to set us up for long-term success. And now I'd like to ask Dan to take you through our operational and commercial performance highlights in the quarter. Dan?

Thanks, Rod. Good morning, everyone. As Rod mentioned, this was a challenging quarter, made even more so by very weak Sun Care category performance, especially in the critical period of Memorial Day through the 4th of July. Despite this, we delivered solid top and bottom line results internationally, drove another quarter of outsized productivity savings, and took meaningful actions in North America, both in terms of commercial activation and investment, and to create a stronger, better fit-for-purpose commercial organization. Before discussing performance in the quarter, let me start by sharing perspectives on the broader operating environment. The macro environment remains challenging and unpredictable. Tariffs and foreign exchange continue to be volatile and have added pressure to our full-year results. Consumption trends have been mixed. While the Sun category has been meaningfully weaker than anticipated, particularly in the U.S., we have seen stability across our other categories in the U.S., which grew modestly in the quarter, generally in line with 26- and 52-week trends. Internationally, consumption trends also remained solid, and our share performance strengthened. The environment surrounding tariffs continues to evolve, and the ever-changing policies have added significant challenges to the global supply chain. While in-year cost impact of tariffs for fiscal 2025 remains modest at about $5 million, this is approximately $2 million higher than our previous outlook. Our teams continue to act with urgency, responding swiftly to the evolving landscape and taking action to quickly mitigate some of the near-term impacts via inventory prebuys and other supply chain actions. These steps, including the in-year temporary benefit of these higher costs being trapped in inventory, have kept tariff expenses more modest in the current fiscal year. Based on what we know today, we continue to anticipate that gross tariffs before our mitigation efforts would have an approximately $40 million to $50 million impact on an annualized basis or in the range of 3% to 4% of COGS. The team is actively pursuing all opportunities to mitigate the potential impact of tariffs through expanded sourcing efforts, footprint optimization, and heightened vendor negotiations. However, ongoing policy uncertainty continues to pose significant challenges. Fortunately, with the capabilities we've demonstrated over time in our global supply chain organization, we believe we have the right level of urgency and confidence to act swiftly as policy formalizes. In addition to direct cost mitigation efforts and commercial pricing actions in certain markets and categories, we also continue to lean into our ongoing productivity efficiency efforts to support our gross margins. In the quarter, the dollar continued to weaken, providing a modest translational net of hedge benefit for our P&L. However, transactional FX headwinds have increased cost pressures, largely due to meaningful appreciation of inter-market currency fluctuations in locations where we manufacture and do not hedge, namely the Czech krona, euro, and Mexican peso. This resulted in greater currency headwinds than originally expected in 3Q. Now let's move to the commercial and operational highlights for the quarter. Earlier, Rod discussed our sustained investment approach in support of focused brands and improved innovation platform with a local mindset, as well as new targeted incremental investments within our U.S. portfolio. We believe that these investments are having the desired effects, delivering strong returns while strengthening our market share trends across much of the business. Market share performance internationally was strong in the quarter as we saw significant gains across branded Shave in Greater China and solid gains across Sun Care and disposables in Latin America and Grooming and Sun Care in Europe. Additionally, our branded Wet Shave portfolio in Europe held share overall. And importantly, we saw growth in 4 of our 6 key markets as well as in private labels across Europe. In the U.S., we saw a notable improvement in market share trends for the Hawaiian Tropic brand, Women's Systems and Grooming portfolios, in part due to targeted new investments we're making in these brands. For Hawaiian Tropic, our new Tana Sutra campaign featuring Alix Earle launched in May and reflects a step change in how we design and activate content to better reach and influence consumers. This through-the-line campaign is successfully delivering on our brand- building objectives while driving notable sales and market share growth. We saw 18% dollar sale consumption growth versus a year ago amidst a declining category and 150 basis point share gain, which was the most for the top 10 brands in our competitive set. In April, we relaunched Hydro Silk with new packaging, a new brand campaign, and a modern approach to brand activation, further supported on shelf by investment in promotion and trade. The incremental A&P dollars drove upper funnel focus and delivered a reach of over 70%, all of which contributed to improved organic sales and market share trends. Our Cremo APDO launch shifted to a full funnel approach, increasingly focused on Amazon, driving substantial uplifts versus previous campaigns. We increased Amazon media spend and shifted significantly to enhanced video content. This launch has had a strong start, exceeding forecasted unit sales and underpinning 35% year-over-year consumption growth for the franchise. Behind our strategic brands, we've seen the early benefits of these strong brand campaigns that are well-architected, reach consumers in a variety of ways, and ultimately influence purchase behavior. We are encouraged by this early read, and we'll continue to invest incrementally where we see such strong returns. Operationally, productivity savings remain an important lever in gross margin performance, delivering 270 basis points of tailwinds in the quarter. These savings continue to be realized from a full collection of programs, including global sourcing and indirect savings, labor automation, and broader network efficiency efforts. Importantly, in the face of a more challenging global supply chain, we sustained our strong service performance from a quarter ago and saw global unit fill rates and OTIF measures above target levels across most categories and markets. Delivering on our productivity objectives and maintaining strong service levels are key in our effort to mitigate tariff and currency headwinds, support our sustained brand investments, and deliver elevated service levels to our customers. Now turning to our business results in the quarter. Organic net sales decreased 4.2% in the quarter. Growth in international markets continued with the 2% organic growth driven largely by price and SRGM gains, while cycling over 6% growth a year ago. This represents our 13th growth quarter in the last 14. Double-digit organic growth in Greater China and mid-single-digit growth in both Oceania and Europe fueled our results. Our international business continues to strengthen in market. And in the quarter, approximately 80% of this business held or gained share. Organic sales in North America declined about 8% with volume declines and increased promotional levels in Sun Care, Wet Shave, and Fem Care. Now turning to segment performance. Wet Shave organic net sales were down about 2%. International Wet Shave grew about 3%, largely driven by price and SRGM gains, reflecting continued category health, good innovation execution, and strong in-market brand activation. Our private brands business remained a meaningful competitive advantage and source of growth, posting low single-digit gains. Our International Women's private brands branded business continued to grow at a rapid pace, growing over 18% while cycling 54% growth a year ago. In North America, our Wet Shave results were as expected, with organic net sales down about 8%. Consumption in the U.S. razors and blades category was down 10 basis points in the quarter, with continued heightened declines in the drug channel. Our market share decreased 30 basis points for the quarter, though sequentially improved 60 basis points versus Q2. We continue to see solid results in Women's Systems with meaningful gains for the Billie brand on shelf, where it gained an additional 140 basis points in market share and now stands at a 16% share of the category at Walmart, 13% at Target, and over an 11% share nationally. Additionally, as noted, we saw sequential improvement in market share results for Hydro Silk. Sun and Skin Care organic net sales were down approximately 5% with mid-single-digit growth in Grooming, led by 28% organic net sales growth for Cremo. This was more than offset by declines in Sun, primarily a result of category consumption declines and higher trade spend. Our Sun Care results in the quarter were materially impacted by adverse weather during the Memorial Day to 4th of July period, both here in the U.S. and across notable LatAm markets, including Mexico and Puerto Rico, all of which weighed on consumer consumption and ultimately impacted replenishment orders to retail. In the U.S., category consumption decreased over 2%, and we had significant declines in shipments in May and June. Our market share was down 60 basis points as the previously mentioned strong gains for Hawaiian Tropic were more than offset by declines in Banana Boat. Hawaiian Tropic's 1.5 point of share growth reflected sustained velocity and distribution gains as well as impactful NPD, supported by the incremental investments made in the brand. Share losses in Banana Boat were largely driven by poor weather, impacting this occasion-based usage brand. In international markets, we saw notable value and volume market share gains across Europe and LatAm, though we saw a sizable category decline in Mexico. Fem Care organic net sales were down approximately 10%. The decline was largely driven by tampons and pads. We saw much-improved consumption and market share trends across our portfolio as expected. However, that improvement was not reflected in organic net sales in the quarter as certain retailers appear to be managing to lower inventory levels, particularly in tampons. Consumption in the category was up 4.5%, though driven by just under 8% growth in pads, where our penetration is the lowest. In the categories where we primarily compete, tampons and liners, consumption was up approximately 60 basis points and 30 basis points, respectively. In the quarter, our share declined 30 basis points, a 70 basis point improvement from the 52-week trend, and we saw strong share gains in liners. As Rod mentioned earlier, we're at a critical juncture in our transformation as we drive significant change across our U.S. commercial business while also facing numerous external headwinds, including currencies and tariffs. Against this backdrop, much of our business remains healthy, and we remain confident in our ability to grow international and across our right to win businesses of Sun, Skin, and Grooming. These businesses are fundamentally strong, putting aside this year's unusual sun season. Despite short-term transitory pressures, the core underlying fundamentals of our business are unchanged, underpinned by a relevant portfolio of brands, a strong gross margin profile across all categories, relentless cost management capabilities, and the ability to generate strong free cash flow. We are thoughtfully and deliberately making investments across the business despite lower-than-expected sales, and these investments are generating strong initial returns. When combined with other transitory headwinds, they are having a short-term impact on profitability and therefore, free cash flow. However, we firmly believe they serve to strengthen our business and better position our portfolio, setting us up to deliver stronger results in 2026 and beyond. Now let me turn it over to Fran to discuss key financial results for the quarter and our updated full-year outlook.

Thank you, Dan. Good morning, everyone. Let's jump into a quick review of the third quarter, followed by our updated outlook for fiscal '25. As previously discussed, organic net sales decreased 4.2%, with our North America Sun Care business underperforming our expectations by approximately $25 million in the quarter. Adjusted gross margin rate decreased 150 basis points, or down approximately 40 basis points in constant currency. This was roughly 20 basis points below our outlook at constant currency, as lower Sun Care sales impacted both mix and trade promotion. However, productivity, price, and core inflation were largely as expected. A&P expenses were 12.8% of net sales, up from 11.8% last year. While A&P rate of sales was in line with our outlook, we did rephase some spending for Banana Boat out of Q3 and into Q4. Adjusted SG&A was 16.2% in rate of sales and flat versus last year. This was primarily driven by lower incentive compensation expense and favorable currency impacts, which mitigated the negative impact of lower sales. Adjusted operating income was $75.1 million or 12% of net sales compared to $94.8 million or 14.6% of net sales last year, reflecting the impact of lower sales, lower gross margins, incremental brand investments, and the net impact of exchange, which drove a headwind of 100 basis points in the quarter. GAAP diluted net earnings per share were $0.62 compared to $0.98 in the third quarter of fiscal '24, and adjusted earnings per share were $0.92 compared to $1.22 in the prior year quarter. Currency headwinds drove a $0.12 unfavorable impact on adjusted EPS in the quarter as the unfavorable transactional currency and lower year-over-year hedge and balance sheet remeasurement gains within other income and expense were only partially offset by translational currency tailwinds to operating profit. Adjusted EBITDA was $96.4 million, inclusive of a $7.8 million unfavorable currency impact compared to $117.2 million in the prior year. Net cash provided by operating activities was $44.3 million for the 9 months ended June 30, 2025, compared to $157.3 million in the prior year. Shifts in inventory build and other working capital timing, in addition to lower earnings versus last year, drove the heightened use of cash in the current year. In the quarter, share repurchases totaled approximately $25 million. We continued our quarterly dividend payout and declared another cash dividend of $0.15 per share for the third quarter. In total, we returned approximately $32 million to shareholders during the quarter and achieved our target of approximately $90 million in share repurchases for the fiscal year. Now turning to our outlook for fiscal '25. We have updated our outlook for the year to reflect year-to-date performance as well as the expected Q4 financial impact of slightly lower than previously forecasted Sun Care sales, increased brand investments in both trade and A&P in the U.S., as well as additional tariff and FX headwinds, which are only partially offset by more favorable taxes. For the fiscal year, we now anticipate organic net sales to be down approximately 1.3%. On a reported basis, currency is now expected to be favorable for the full year reported net sales by 10 basis points versus our prior expectation of a negative 10 basis point impact. On a constant currency basis, our outlook reflects full-year adjusted gross margin rate accretion of 30 basis points, a decline of 40 basis points from our previous outlook due primarily to the impact of higher trade spend, unfavorable mix, and incremental tariffs. On a reported basis, full-year gross margin is expected to decline 60 basis points versus prior year, inclusive of a 90 basis point currency headwind, which is 30 basis points higher than our prior outlook. We now expect full-year operating profit margin to be down approximately 150 basis points, inclusive of the aforementioned 90 basis points of currency headwinds. Given these changes, full-year adjusted earnings per share are now anticipated to be approximately $2.65, inclusive of approximately $0.46 per share of currency headwinds. On a constant currency basis, adjusted EPS is expected to increase by $0.06 or 2%. Adjusted EBITDA is now expected to be approximately $312 million, inclusive of approximately $29 million in currency headwinds, or down $12 million at constant currency. The updated outlook for adjusted EPS also reflects a lower full-year adjusted effective tax rate of 16.5% compared to 20% in our prior outlook. Versus last year, this implies a Q4 outlook on a constant currency basis of approximately 2.5% organic net sales growth, flat adjusted gross margin rate, and approximately 2% growth in adjusted EBITDA, even after incorporating meaningful additional brand investment and tariff headwinds. Free cash flow for the year is now expected to be approximately $80 million, reflective of lower GAAP earnings and reduced contribution from working capital in Q4, which includes the impact of higher tariffs trapped in inventory. While the P&L impact of tariffs is approximately $5 million, the cash impact is estimated at approximately $10 million. For more information related to our fiscal '25 outlook, I would refer you to the press release that we issued earlier this morning. And now I'd like to turn the call over to the operator for the Q&A session.

[Operator Instructions] And the first question comes from Chris Carey with Wells Fargo Securities.

I wanted to start with cash flow and leverage. So number one, can you expand just on the drivers of the free cash flow cut? And I also want to understand within the organization how the organization is incentivized around cash flow. I'm just conscious that leverage is ticking up, and I just wanted to get a bit more context on key drivers this year and how you're thinking about kind of attacking this over the next 12-plus months?

So I'll start with the incentive piece and cash flow, and then throw it to Fran on how we're looking at cash right now as we move forward. From an incentive perspective, we've had cash flow in for the executive level around delivery. We look at -- when we go down in the organization, we look at operating profit, EBITDA metrics with some adjustment for capital spend. And so we have the metrics you would want us to have in place around cash flow. I will say in this moment, some of that gets overwritten by example, when you have to make adjustments to inventories to try to deal with the new tariff regime that's come up, right? That's not something an individual is responsible for. That becomes a corporate decision when we pivot and make adjustments to plan and put inventory in places that will benefit us not only now, but over time, as we think about tariff mitigation as one example. But it's in there as we incent the teams, and I'll flip it over on how we want to address the piece on the cash flow change and leverage.

Chris, thank you for the question. So when we look at cash and we compare versus our previous outlook, you've got 2 main drivers. About 2/3 of the difference is really driven off of lower earnings, the additional FX headwinds, as well as the incremental tariffs to the P&L. And then you've got 1/3 of the increase that's really driven off of working capital changes and namely inventory. So weaker sun season has left us with slightly higher Sun Care inventory levels. We have been leaning in on tariff mitigation efforts, especially around increasing levels to prepare us to mitigate. And I think as we look at the full year, slightly higher prebuild around our Mexican consolidation. So significant amount of transitory items within cash, especially as we compare versus our previous outlook.

Chris, the only thing I would add, it's Dan. The only thing I would add, look, there's a few things this business model does really well, and throwing off free cash flow is one of them, and I appreciate you kind of asking where are we going with this. You know better than anyone as a business, we've thrown off anywhere between $150 million and $200 million of cash flow, and we have a cash flow yield over 10%. So we're really confident in our ability to do that, and I think history shows that. Fran's points are fair. They're not great answers, but they're fair. Lower earnings, higher working capital inventory builds around tariffs. We got caught a bit heavy with Sun for obvious reasons, given the season. I mean all of that factors in, but we don't see any of these as structural barriers going forward. And I think importantly, our CapEx rate is largely where it's been as a percentage of sales. So structurally, there's nothing here to prevent us from thinking about a return to the type of free cash flow generation that you've seen from us. We'll talk more about that in November. But I think at the spirit of your question, I think we believe strongly in our ability to continue to deliver really healthy cash flow.

And your next question comes from Peter Grom with UBS.

So maybe following up, and I know we're going to get more details in a few months on fiscal '26. But can you maybe just speak high level, I guess, to the puts and takes as you see them today? Maybe specifically on organic sales, you're exiting the year with much stronger growth than maybe what we've seen in the last couple of quarters. So just curious if there's anything unique that is driving that? Or is that exit rate a fair run rate as we begin to look out to next year? And then just on profit, a lot of moving pieces, cost tariffs, et cetera. Can you maybe just help us understand what's transitory versus maybe the headwinds that you would expect to persist as you move into next year?

Yes. Peter, I'll start with this one and take the growth rate and kind of where we are today. If you -- I think you're referencing basically what's implied for quarter 4 is an organic growth rate of 2.5% growth, which would be good, right? That will be the best quarter of the year. And the question is, does that carry forward? We are not going to get into fiscal '26 or give any specific guidance for '26. But what I will tell you, we've got 1 month in the books, July. We're on track for that 2.5% in the quarter. And structurally, what plays out there is very much in line with how we thought about the algorithm. We've got Fem Care improving in quarter 4 versus where it's been. As you know, Fem Care has been down high single digits to low double digits as we've cycled through the change over the last year of the Carefree master brand execution and all the dynamics that have been in that category. We've got Fem Care back to growth in quarter 4, and I think a flatter business going forward. Shave is an increasing priority for this company. We can win and be successful in Shave, and we're going to do that. In the quarter we just printed, Global Shave down 2% organic. We'll be better than that as we go forward. But this idea that we can be a flat business in Shave absolutely holds. Sun Care, we are -- I guess, it depends on how you look at it, glass half empty, we were impacted and maximally negative in the quarter we just reported, down $25 million in the quarter versus what we expected going in. That's 5 points of growth in the quarter right there. So you're seeing that in our print maximally negative due to weather, by the way, not a change in consumer behavior or our brand resonance. So as we go forward, yes, I would look for Sun Care to be in growth position as well, certainly off of what is a very weak base as we move into this. And then we've had Grooming in growth high single digits all the way along with a Cremo brand that is accelerating. So we're not going to give you a number for '26. But I guess what you're getting at is, can we deliver our growth algorithm of plus 2% to 3% as we move forward? We absolutely can. And I'm not going to time-stamp that because we're going through the transformation work in North America. But I think we're more convicted than ever when we look at what we have and how we go forward that we can grow this business. Dan?

Yes, Peter, I would only add, I think Rod's comments are fair, and this isn't the moment to start to put numbers on the board for next year. But this has been an incredibly challenging and transitory year on a number of fronts, right? Tariffs, inflation, currencies, a disastrous Sun Care quarter, which is 50% of the season negative year-over-year. So that -- we'll work our way through all of that. I think what we feel really good about, though, what continues to underpin this business, international growth, mid-single digits. We've talked about this, really good proxy going forward. Productivity savings, 250 basis points a year as a placeholder. It will be more than that this year. I just talked about free cash flow and our confidence there. So it comes down to the North America business, which Rod just talked about. And so we've got a lot of work to do to get this tariff policy locked down and get mediation efforts in place. And then, of course, the state of the consumer and how they're going to be feeling next year as they feel the effects of likely rising inflation and a pressured job market. So there's a lot for us to work through. But at the core, international growth feel really good. Productivity savings feel really good. Free cash flow will come back. And we just got to cycle our way through some of these other points, and we'll certainly share more about that in November.

And your next question comes from Olivia Tong with Raymond James.

I want to follow up on that a little bit about Q4 and what kind of drives that organic sales growth that you're looking for. That looks like about a 650 basis point turn from Q3 to Q4. What are you thinking in terms of underlying category growth? How much have you seen some rebound now that the season has commenced? And sort of what's your view also on further destocking across the business? And then I have a follow-up.

Yes. Olivia, it's Dan. Yes, look, so let me try to unpack the quarter. And I think you have to look at it differently between what we're expecting internationally, where we are going to see growth rates accelerate, and what we're expecting in North America, where we will expect to see declines moderate and sequentially improve. Let me take them in order. For international, we have a really good line of sight to what looks like a step-up in growth of about 5 points. We've been running sort of in the 2% to 3% growth for the year. We're profiling the quarter between 7% and 8%. A couple of drivers to that. We've got new pricing going into the markets that's been fully executed that will start to impact 4Q. That's worth a couple of points. We've got a healthy NPD and product launches, including Billie moving into international new to the quarter. And we've got some successful private brand tenders that ramp in the quarter that had started earlier, but that ramp in the quarter. That collectively is worth 3 points. So you've got the pricing, you've got Billie and other NPD, you've got private brands tenders that have successfully been won, and now scale. That delivers your growth for international. On North America, there's essentially 3 factors, all of which are fairly equally weighted. One is Sun Care. We are not expecting a minus 11% organic profile in 4Q. We're expecting 4% consumption growth in the category and 4% organics. Two is Fem Care. And I think for Fem Care, here, we're profiling low single-digit growth in North America. And I think here, you have to look at shelf performance to get confident with that. We've seen really improved trends in consumption growth. We grew 1 point in Fem Care in the third quarter and essentially held share. You didn't see it in organics to the inventory point you made, but we're feeling much better about the state of the portfolio there. And then lastly is Wet ones, where we've got an outsized quarter profile largely because we're cycling some of the effects of the fire last year and some out-of-stocks. That -- put all of that together, that sort of gets you to that minus 1% that we're expecting in North America. Now let me talk about the month we're in because I think or the month we just ended, because I think that's important, and Rod was alluding to that. First of all, we've essentially delivered our sales profile for the month of July, our biggest month of the quarter. I think that's important. It gives us sort of added confidence for the fourth quarter. I think, as importantly, we've seen performance on shelf in the U.S. actually improve. Categories remain healthy, grew about 4% last 4 weeks ended July. Sun Care was up 8%, and we held share. That's a really good indicator. And Fem Care, we again held share. So now you've got about 16, 17 weeks of demonstrated Fem Care strength on shelf. As a result of all of that, total Edgewell business was flat in terms of share. So we like what we're seeing. We are seeing evidence of strength on shelf. It doesn't suggest the quarter is done yet, but we have increased confidence today in our ability to deliver that organic growth in the quarter.

And then in terms of investment levels going forward, it sounds like you're quite pleased with some of the new brand support things that you're doing, unfortunately, that ran against poor weather this quarter. So as you think about the go forward, what continues? What -- as you think about elevated levels of brand support in certain areas, we -- should we expect that to continue into fiscal '26? And then as you think about the innovation plan for next year, are there other areas where you could potentially see increased investment as we think about all the different puts and takes for next year?

Yes. So thanks, Olivia. I think what you'll see continue from an international perspective, as Dan referenced that 40% of the portfolio. As we've been growing, we've been incrementally investing behind those brands and growing margin at the same time that we've been doing that by getting leverage out of the G&A profile and also driving really good gross margin management with all the pricing revenue mechanics. So you'll see that continue as we move forward in international. In North America, what you've seen us do incrementally in Q3 and what we'll continue to do in Q4 are 3 specific new activations. Cremo, the Scents King campaign is in place and is working and driving Hawaiian Tropic. Dan referenced, you've probably seen the Alix Earle campaign with Hawaiian Tropic. We feel really good about that. And then we've got a nice campaign up against Hydro Silk that's resonating. These are campaigns that are part of broader activations, getting the lineup right, the pricing right, now get the messaging right with good scoring campaigns. We're seeing that we're getting an ROI on those campaigns. As we pivot to next year, not only will we continue those styles of campaigns, we'll look to put new campaigns potentially against a couple of other brands as well. I'm not going to mention the brands, but there's 2 brands we've got in mind. Again, you don't just throw a new campaign out there. You've got to have the lineup structure right. You've got to have the capabilities right with the team. You've got to have everything in place and have a point of view on where you want to take the brand. And increasingly, the capabilities built -- being built in the North American business, the U.S. specifically, are really strong in the brand-building area. And so you'll see us continue to invest in A&P. And we haven't talked about it, but it's in the results. You see it. There's also some trade support and investment as well. So there's very much a 360 view as we work to get our brands to healthy positions, not only with consumers, but also with retailers where we can win space on shelf. It's a very holistic set of investments being put in.

Olivia, I would only add, I think we're going to continue to operate with 2 key thoughts in mind. One is we're going to continue to invest where we see good returns, and we're seeing that with the work the North America team is doing. And two, we're going to continue to drive like hell on a productivity and efficiency front to fund it. We talk a lot about supply chain and the numbers there. You've seen that. Equally, in the remarks, you would have heard Fran talk about North America's reorganization, which ultimately led to a more cost-effective and more talented, and more capable organization. So we're going to continue on that front with driving cost out to create dry powder to invest.

And your next question comes from Susan Anderson with Canaccord Genuity.

Really quick follow-up on Sun. I guess, I assume you're expecting some replenishment in the rest of the year with the expectation for 4% growth in fourth quarter. And then maybe if you could just talk a little bit about how inventories right now are in the channel for Sun Care. And then I guess, looking out to next year, are you expecting any new innovation in the category, as it seems like there's been quite a few competitors kind of jump into the space and start to take a little share.

Yes. It's Dan. So look, we're overall profiling a flat to slightly down Sun season. Decent at the start, really tough in the middle, which is the quarter we just exited, and then up mid-single digits here in the final stretch of the season. So flat to slightly down is our profile. Right now -- and so yes, our organic sales expectations for the quarter are largely the replenishments to feed that expected growth. One month in, so far, July, it's holding, and you see the impact of improved weather. Right now, I think we're generally comfortable in terms of inventory levels. We sort of worked our way through that last quarter. That's why you saw organics down such a big amount versus consumption on shelf. So I think we're in a pretty good place. I would also say this is where our supply chain is a distinct advantage because we can replenish quicker than others because of proximity and the amount of product end-to-end that we manufacture. So we're hopeful that we can end the season here in a good way, 1 month in, certainly, the data supports that. And as for next year, look, I'm not going to get into the specifics. But as always, we have a really healthy view right now of interesting innovation that we will bring to the category, not just here in the U.S. but across international as well. Rod, anything you want to add to that?

Yes. On that last point, Susan, on some of the new entrants and innovation. Let's just look at where we are with our 2 brands. Hawaiian Tropic, in the top 10 brands in Sun Care, which is the bulk of the volume, is the fastest-growing brand in the set. The team has done an amazing job with that brand. It's current, it's relevant, and it's resonating with consumers. And that's the campaign. It's the brand positioning, it's the messaging, it's the product lineup, leaning into body butters, tanning, things that enhance skin look and feel. So it's even less about SPF in that case when you look to Hawaiian traffic. And then as you look then at Banana Boat, it's more about being outside the fun in the sun, which makes it highly correlated to weather. So when the weather wasn't good between Memorial Day and July 4, you saw Banana Boat suffer. Well, as the weather turns better in July, as we go into quarter 4, we're seeing Banana Boat now perform significantly better. And so it's just interesting from a portfolio perspective, the impact that weather specifically has on Banana Boat. Now we're going to take that knowledge as we move forward. And the same team that has built the Hawaiian Tropic campaign, the focus is not only on continuing that for next year, but putting energy up against Banana Boat as well. We've got a multiyear plan for Banana Boat to strengthen what is already a leading brand in the set to ensure that we don't lose that. I would tell you, too, as you look to some of the other brands that have come into the set this year, that happens every year. There's always some level of newness that people come in. There's not necessarily a new form, a new product packaging, a new formulation that's breakthrough or different. We think we're on the leading edge of all of that. It's just a new name for today, grabbing influencer momentum to get out, get some real estate. And again, we see a certain amount of that cycle every year. So as we go forward to next year, I assume that will continue, but we feel really good about the momentum we have with our brands and the team doing the work.

And then I guess maybe just a follow-up on the Wet Shave. I guess just curious what you're seeing from a competitive dynamic? Are you seeing it ease at all on the women's side? Or is it still kind of very promotional? Then also if you could talk about how Billie's Body Wash has performed? And have you also seen a similar competitive dynamic in that area, just given a number of brands seem to be kind of moving across categories?

Yes. I'll just address the questions directly on and then I got a bit of a broader statement. On women's in the U.S. specifically, yes, highly promotional continues to be at an elevated level. It's a very, very competitive space with that being -- the number of brands in that space right now is too many for the future. Frankly, I don't think we'll continue with all the brands in the set. So women's highly promotional. You see our share results in that space, Billie winning share, Hydro Silk sequentially improving in a material way in the quarter. So we're -- I think we're super competitive in what is the most competitive space. As you asked the question about Billie Body, frankly, we're not happy with the results on where we are there. We still feel like Billie absolutely has the right to be a lifestyle brand and can play outside of Shave from a category perspective. In some cases, like we like the products. The products are amazing. They work, but they didn't hit some of the thresholds we wanted at some of the retailers. And so we're looking at how do we reset and go forward with the body range. It's not material. I think if you go back to our language in the past, as we launched this, it was more of a test-and-learn pilot as we put it out there. We've learned, and so we'll adapt and adjust as we go forward. What I will tell you, though, the strength of the Billie brand is in Shave. It continues to grow over 100 basis points of share in every period as we go forward. It's now an 11 share brand nationally and has surpassed some of the other brands that were out there in brick- and-mortar before it. Final thing I'll say around Shave competitively, and I said it earlier in one of the responses, we are going to increase the priority of winning in Shave in this company. We're the #2 player by far globally. Most of our shave business is outside the U.S., over 55% of our shave business is outside the U.S. It's structurally profitable. It's primarily a 2-player category outside the U.S., and we have wonderful R&D and manufacturing capabilities that we can leverage. And as we get the marketing and brand-building capabilities right, we have a ton of opportunity in what is a stable, slightly growing category. Dan, I don't know what you want--

Yes, I would just highlight because I think the Shave performance in the quarter on shelf in the U.S. was a real eye-opening strength for us. Men's Systems we're flat in terms of share. That's about 1 point improvement from where we've been. Women's Systems gained a point of share, including Hydro Silk handles being flat in share, to your point, Rod. Our disposable business grew 40 basis points in share. So we were really encouraged. This goes back to the investing and returning point I made earlier with our Shave performance. 13 weeks does not make a trend for sure, but encouraging results on shelf.