Operator: Good day, and welcome to the Edgewell Personal Care Q2 2022 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Chris Gough, Vice President of Edgewell Investor Relations. Please go ahead.

Chris Gough: Good morning, everyone, and thank you for joining us this morning for Edgewell's Second Quarter Fiscal Year 2022 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 then hand over to Dan to discuss our results and full year '22 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 restructuring, 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 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, 2021, as may be amended in our quarterly reports on Form 10-Q, 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. Management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business. With that, I would like to turn the call over to Rod.

Rod Little: Thank you, Chris. Good morning, everyone, and thanks for joining us on our second quarter earnings call.

We delivered our fourth consecutive quarter of organic net sales growth despite an increasingly challenging operating environment. In the quarter, many of our categories showed further signs of strengthening, and the demand for our products remained high, underpinned by the strong distribution outcomes on shelf that we spoke to previously. Consumption growth for our brands in the United States was over 10% and strengthened as the quarter progressed. As our pricing actions increasingly take effect and with our improved competitiveness on shelf, our market share gains in the U.S. and key international markets accelerated, particularly in Sun Care.

We reported organic net sales growth of 2%, which was slightly below expectations and well below inherent demand as a result of supply chain disruption. Organic sales growth was driven by Sun Care, which increased 28% and gained 3 points of share in the United States as well as women shave and men's grooming, each of which grew about 6% organically in the quarter. Additionally, Billie contributed over 5 points of top line growth in the quarter, driven by the strong initial rollout at Walmart. We are very pleased with the early results for the brand at Walmart has reached a 20% market share in women's shave and only recently reached full chain distribution. We anticipate meaningful growth opportunities, which our teams continue to explore as they finalize planning for next year.

At the same time, the external environment was increasingly challenging and volatile in the quarter. We faced higher-than-expected inflation, particularly across transportation-related costs as geopolitical events and overall supply and demand balances moved oil prices significantly higher. We also experienced significant pandemic-related supply chain disruption, most notably in fem care and women's Wet Shave. These disruptions impacted our ability to meet demand in the quarter and negatively impacted organic growth. Despite these supply chain challenges and transitory headwinds to our organic growth in the quarter, consumption trends strengthened, and we gained market share in both women's shave and the fem care categories in the U.S.

Dan will take you through specifics shortly. But looking ahead, we believe the supply chain disruptions are largely behind us, as evidenced by signs of more normalized product flow and improved service levels in late March that continued into April and May. Importantly, our performance in our key categories remain strong as we're seeing the impact of new distribution in Sun Care and Wet Shave and solid planogram outcomes across fem care and men's grooming. We're also executing incremental price increases beyond those discussed previously to help mitigate the rising cost pressures across the supply chain. As a result, we now expect organic net sales growth to increase approximately 4% for the full fiscal year, one point above our previous expectation.

Despite the macro market challenges, we are increasingly encouraged by the progress we continue to make against our strategic priorities to transform Edgewell and achieve our objective of sustained top and bottom line growth. This progress is a result of our continued focus on fundamentals and execution and is evidenced in 4 specific areas. First, our presence on shelf has improved significantly from years past. After successfully stabilizing our brands on shelf in fiscal 2021, and with the shelf set some planogram is now complete, we're seeing the benefit of strong distribution outcomes across many of our categories in 2022. This is particularly evident in our Sun Care business, where we gained facings at Walmart in aisle and enhanced placements in the key seasonal Islander programs.

We also gained new national distribution for our Banana Boat business in the club channel in both Sam's and Costco. And in Shave and Body Care, the Billie brand, which recently launched at Walmart, has already become the #2 brand in women's systems. Second, we have improved our ability to deliver innovation to the market, further helping us win on shelf. We have rearchitected our Schick Men's brand in the United States with a new brand campaign that is about the individuality and self-expression of our consumers. It is being activated almost entirely digitally and has already garnered strong recognition, both online and across the trade.

You've also seen new product innovation in Sun Care related to new formulations, formats, and packaging with increased focus on sport, kids, and sustainability. We've also successfully launched a new razor in Cremo, enabling us to leverage the inherent equity of the brand and compete at the high end of the price tier. Just a few weeks ago, we launched an exciting new fem care tampons, Playtex Clean Comfort with organic cotton and 40% less plastic, building on our recent strength in Playtex Sport, which is now the #2 Tampon brand in the United States and has been the fastest-growing tampon brand over the last 13-week period, growing 2.7 share points in the quarter. Despite the supply chain issues, Sport has grown to a 13% share of tampons, the highest market share position in 5 years. We continue to realize market-leading growth in Japan as the re-launch of men's Hydro brand has driven share of shelf gains, and we are preparing for the re-launch of the women's Hydro brand in the second half of this fiscal year.

Third, we've also taken the necessary steps to reshape our organization and improve performance. We've meaningfully enhanced our digital capabilities across the business. Our e-commerce business is now over 12% of total sales, which is almost 3x the penetration we had in 2019, and we are posting growth on top of strong growth a year ago. To improve the overall shopping experience, we re-platformed and significantly enhanced the experience on our DTC sites. Importantly, we've brought critical capabilities in-house, including site design, content and copy development, social and brand building.

And we are also further expanding our data and analytics capabilities to better leverage our DTC model to drive better consumer engagement and sales. Earlier this year, we completed the redesign of our North American business. The new business design fosters better agility, empowerment, and accountability for our brands while still leveraging our corporate scale where it's efficient and add value. And finally, we remain committed to our efforts to drive costs out of the business and structurally simplify our operating model. In the quarter, we realized approximately 200 basis points of cost of goods savings as part of our productivity program and an additional $3.3 million in gross G&A reductions.

Without question, we are operating in a challenging and dynamic environment. And in the second quarter, we experienced higher-than-expected operating costs and supply chain disruption, both of which dampened our end quarter results. However, we remain focused on our key commercial efforts, strong brand building, consumer-centric innovation, and excellent execution on shelf and online. And as a business, we remain in investment mode, ensuring strong activation across key brands and channels. Our brands are healthier than they have been at any time in recent years.

We are executing well at retail, aided by our recent acquisitions and evidenced by the best distribution outcomes we've seen since our split from Energizer in 2015. And as such, we've delivered 4 consecutive quarters of organic sales growth and consecutive quarters of market share growth in the United States. So while the near-term environment is volatile, we are well-positioned to drive consistent and sustainable organic sales growth over the longer term, in line with the algorithm we communicated at our Investor Day nearly 2 years ago. Let me turn to our adjusted outlook for the year. Against the backdrop of strong consumer demand and incremental pricing that we have executed across the business, we are raising our organic top line growth outlook for the year.

However, due to the incremental inflation we saw in the second quarter and also expect for the back half of the year, we are lowering our outlook for adjusted EPS and EBITDA for the full year. Given the momentum we are seeing in our categories, along with our improving market share trends, we remain committed to investing in our brands, our innovation platform, a critical capability building to drive sustained growth. We believe this is the best decision for the business and our brands for the long term. We remain focused on driving gross margin accretion over time through a combination of productivity driven cost reduction and strong revenue management. However, this heightened and highly transitory inflationary environment does not signal to us a reason to pull back on investment in the business, especially in light of the clear signs of progress we are seeing across categories and markets.

And now I'd like to ask Dan to take you through our second quarter results and also provide details on our outlook for the full fiscal year.

Daniel Sullivan: Thank you, Rod, and good morning, everyone. As Rod discussed, we saw a strong underlying demand for our brands in the quarter, realizing share gains in the U.S. and across many key international markets, including Japan, Germany, and Mexico. Consumption growth on our branded business in the U.S.

was over 10% and led to branded portfolio share gains of 70 basis points, with widespread gains across Wet Shave, Sun, Skin, and fem care. We exited the quarter with momentum, delivering a full point of branded share gains reflective of 12% consumption growth in the 5 weeks ended March 27th. And our Sun portfolio continued to be the catalyst with over 20% consumption growth in the quarter and for the last 52 weeks, and I'll talk more about segment results shortly. However, the external environment grew increasingly challenging in the quarter, and our organic growth rate in the U.S. lagged our consumption gains as supply chain disruption increased and certain raw material availability became stretched, both of which negatively impacted organic sales and to a degree, product availability on shelf, most notably in fem care and women shave.

As service levels declined sharply and inventory position softened, we were not able to meet inherent customer demand, creating an estimated 300 basis points headwind to Q2 organic growth. However, late in the quarter, we saw meaningful improvements in product flow, and this is carried over through April and into May. For both categories, on-time and full performance is now approaching expected levels and inventory continues to build. In Wet Shave, we are completely off supply allocations, and we expect to similarly the off allocation in fem care by the end of the current quarter. Additionally, organic sales in April were in line with our expectations, all of which we believe are clear proof points that we've largely put the transitory disruption in Q2 behind us.

Importantly, the macro disruptions have mostly been limited to these 2 categories, and we have produced at record levels across our Sun Care business, allowing us to meet the increased demand both in the U.S. and in key international markets. Beyond the supply chain disruption, inflationary headwinds increased again in the quarter, largely as a result of surging per barrel oil prices, which negatively impacted most areas of freight and distribution costs, certain fuel-driven commodities and utility costs across our plants. This, coupled with higher-than-expected reliance on air freight, drove approximately 560 basis points of year-over-year gross inflationary pressures in Q2. Importantly, we delivered about 200 basis points of productivity savings in the quarter that were in line with our expectations.

Tailwinds from price increases were over 100 basis points, but were more than offset by negative market and category mix and slightly higher nontrade costs. Now I'll turn to the detailed results for the quarter. As mentioned, organic net sales in the quarter increased 2.1%, equally driven by price and volume and inclusive of about 170 basis points of negative mix and higher trade spend and a 130 basis point drag from Wet Ones sales declines. Most of the realized price increases were attributable to fem care and Wet Shave and to a lesser degree, Wet Ones. Importantly, the benefits from pricing actions disproportionately occur in half 2 of this fiscal year and now included additional price increases in the U.S.

across men's and women's branded shave and most of our Grooming portfolio. North American organic net sales increased 2.4%, driven by strong performance in Sun Care and Grooming, while fem care and women shave were negatively impacted by the aforementioned supply chain disruptions in the quarter. Our North America e-commerce business again performed well, increasing 6% and excluding Billie sales. This was on top of over 30% growth during Q2 a year ago. International organic net sales increased 1.7%, driven by strong growth in Sun Care and modest growth in Wet Shave.

By market, growth was driven by initial strong recovery in Latin America, while Europe and Asia lagged as COVID recovery continues to be choppy. And as mentioned, our portfolio gained share in the U.S., Japan, Germany, and Mexico, with accelerating gains exiting the quarter in all markets. Looking deeper into our segments, Wet Shave organic net sales decreased 2.1% in the quarter as growth in Women's Systems was more than offset by declines in Men's Systems. Our Women's Systems business delivered organic sales growth for the seventh consecutive quarter, increasing 6%, led by Hydro Silk and Intuition as well as private label, which grew 27% in the quarter, while cycling 66% growth last year in Q2. International Wet Shave grew 1% as Women's Systems organic net sales grew nearly 15% for the quarter and disposables grew over 5%, both of which will remain a catalyst for growth in half 2.

For the fourth consecutive quarter, U.S. razors and blades category consumption increased, growing about 3%. The category growth in the quarter was seen across men's and women's systems and disposables. For the 13-week period, Edgewell consumption outpaced the category and total portfolio market share increased 30 basis points, while branded share increased 70 basis points, driven primarily by market share gains of 160 basis points in women's branded shave and disposable share growth of 100 basis points. Share of men's branded shape declined slightly in the quarter.

Our women's disposable business continues to shine, delivering 140 basis points of share gains from Silk Touch-Up, Hydro Silk disposables, and Skintimate. And as Rod also mentioned, we were extremely pleased with the results of the launch of the Billie brand at Walmart. The brand has grown to 20% share of women shave, owns the #1 and #3 of the top 5 SKUs and is the #2 brand in women's shave systems. We anticipate strong in-store support across the summer months with end cap, side cap, and 4-way displays in many Walmart stores through Labor Day. Sun and Skin Care organic net sales increased over 15% driven by strong global Sun Care results and men's grooming sales.

Sun Care organic net sales in North America increased over 30%, while international increased over 18%, led by strong execution as demand begins to recover in Latin America and Oceana. In the U.S., Sun Care category increased 24% for the quarter, aided by better weather and pent-up travel demand. Hawaiian Tropic and Banana Boat, both outperformed the category with 44% growth and collectively gained 320 basis points of market share. Our strong execution and prominent on-shelf position drove almost 500 basis points of share gains in the quarter at Walmart, and we saw sequentially improved results across both the drug and grocery channels, where we also drove heightened share gains. Over the last 52 weeks at Walmart, our Sun Care portfolio has grown consumption 35% and realized almost 200 basis points of share gains.

Men's grooming organic net sales increased almost 6% globally and over 8% in North America, led by strong growth for both Jack Black and Cremo, ahead of pricing actions that will take effect in the current quarter. Wet Ones organic net sales decreased 25% in the quarter. Category consumption; however, declined 46% versus a year ago, lapping COVID driven sales as demand in the category further resets. Wet Ones consumption declines of less than 1% were significantly better than the category, leading to a share position of over 58%. Fem care organic net sales decreased 11%, largely driven by the previously mentioned supply chain disruptions.

Declines in Carefree and Stayfree were partially offset by Playtex Sport. Importantly though, the portfolio saw a 9% consumption growth and slight share gains in the quarter, which provide a better proxy for overall portfolio performance. Playtex Sport continued to generate strong growth and healthy share gains reflective of new product launches and stronger brand support. Now moving down the P&L. Gross margin rate on an adjusted basis decreased 450 basis points compared to the prior year, inclusive of 60 basis points of inorganic headwinds from Billie and unfavorable foreign currency.

In the quarter, we delivered over 300 basis points of price and productivity offsets, but gross inflationary pressures were approximately 560 basis points. Additionally, there was a 140 basis point impact from negative mix and higher nontrade costs. A&P expense increased $1.5 million this quarter and was 12.8% of net sales, reflecting strong support of sun season execution, the Schick Masterbrand launch and Playtex Sport execution, and continued investment behind commercial activation in Japan and the U.K. SG&A, including amortization expense, was $101.3 million or 18.5% of net sales. Adjusted SG&A increased 90 basis points as a percentage of net sales due to higher compensation expense and the additional costs associated with the Billie acquisition, including amortization expense.

Adjusted operating income was $46.7 million compared to $68.7 million last year as a result of the impact of inflationary pressures on gross margin, higher brand investment, and higher adjusted SG&A costs. GAAP diluted net earnings per share were $0.43 compared to $0.26 in the second quarter of fiscal 2021 and adjusted earnings per share were $0.50 compared to $0.70 in the prior year period. Adjusted EBITDA was $73.7 million compared to $90.9 million in the prior year. Net cash used in operating activities for the 6 months ending March 31 was $39.9 million compared to a use of $18.8 million over the same period last year. The timing of seasonal working capital builds related to Sun Care demand and actions to increase service levels resulted in the increased first half cash outflow.

We ended the quarter with $188 million in cash on hand, access to the $240 million undrawn portion of our credit facility and a net debt leverage ratio of about 3.6x. This brings me to the topic of capital allocation. We remain extremely disciplined in our approach to capital allocation, executing in a thoughtful and balanced manner. 6 months ago, we announced our intention to put our healthy excess cash to work and repurchase approximately $300 million in shares over the next 3 fiscal years. In the quarter, our repurchases totaled $51 million, bringing our year-to-date repurchases to just over $75 million.

In addition, we continued our quarterly dividend payout and declared another cash dividend of $0.15 per share for the second quarter. Turning now to our outlook for fiscal 2022; as we look to the remainder of the year, we continue to be encouraged by the strengthening demand environment we see across many of our categories and geographies and the solid distribution outcomes we've discussed previously have us well positioned for growth across the remainder of the fiscal year. We believe the supply disruptions in 2Q are largely behind us. We've successfully executed incremental pricing actions across Wet Shave and Grooming and have meaningful innovation and rebranding efforts across the business coming to market, all of which we believe are catalysts for accelerated organic growth in the remainder of the year. Given these dynamics, we are increasing our organic net sales outlook to 4% growth for the year.

However, foreign exchange rates have moved further against us, offsetting much of tailwinds from the organic improvement. As discussed, we've also now experienced yet another step-up in cost inflation and the overall inflationary environment remains broad-based and shows little sign of easing. We anticipate that the commodity markets will remain turbulent. Freight and distribution costs will remain elevated and the labor markets will continue to be stretched. These costs and operational challenges are certainly not unique to Edgewell, and we will continue to partially mitigate their impact through continued cost reduction efforts and increasing tailwinds from price actions.

We continue to believe that much of the cost pressures are largely transitory with obvious near-term profit implications, but they are not a reason to fundamentally reduce investment in the business, especially given the traction we're seeing across key categories, brands, and markets. For the fiscal year then, as mentioned, we now anticipate 4% organic net sales growth. This increase versus our previous outlook is primarily driven by incremental pricing actions. We anticipate Q3 organic growth rates to slightly outpace Q4 growth, reflective of sun season phasing and improved service levels across fem care and women's shave. As a reminder, Billie third-party sales are excluded from the organic growth calculation.

Reported sales are anticipated to increase by mid-single digits, including both 400 basis points net from the Billie business and a 200 basis point headwind from currency. As we look to gross margin, we now anticipate approximately 350 basis points of year-over-year decline, an increase of 150 basis points over our previous outlook. The year-over-year decline reflects 650 basis points of gross inflationary headwinds, slightly unfavorable mix and FX and is partly offset by pricing benefits of 125 basis points and productivity gains of about 200 basis points. Year-over-year gross margin declines will be more pronounced in Q3 before moderating somewhat in Q4, where we will cycle heightened inflationary levels last year and benefit from increased sequential price realization. This outlook largely assumes spot prices across the majority of the commodity basket as well as in transportation and warehousing.

We will continue to invest in support of our brands in key markets. And for the full year, we expect A&P spending to be above last year, but comparable as a rate of sale. The third quarter will represent our strongest investment quarter of the year in both dollars and rate of sale, reflective of investments behind Sun Care execution; our Schick Masterbrand and Hydro Female brand relaunches and key program support across Wet Shave, Grooming and fem care. Adjusted operating profit margin is now expected to contract approximately 250 basis points year-over-year. Adjusted EBITDA is now expected to be in the range of $330 million to $345 million, and adjusted EPS is now expected to be in the range of $2.38 to $2.66.

Adjusted operating profit margin is now expected to contract approximately 250 basis points year-over-year. Adjusted EBITDA is now expected to be in the range of $330 million to $345 million, and adjusted EPS is now expected to be in the range of $2.38 to $2.66. And finally, free cash flow conversion is expected to be approximately 100% of GAAP net earnings. For more information related to our fiscal 2022 outlook, I would refer you to the press release that we issued earlier this morning. And with that, I'd like to turn the call back over to the operator to begin the Q&A session.

Operator: [Operator Instructions] The first question comes from Dara Mohsenian with Morgan Stanley.

Dara Mohsenian: Clearly some profitability pressure here with the higher costs versus what you expected a few months ago, but we didn't really hear about incremental pricing to help offset those cost pressures. So, a, are you taking any incremental pricing; b, why not take a greater level of pricing to offset some of these incremental cost pressures? Just help us understand that decision.

Rod Little: So on the profit pressure, you're right, Dara. The data point we were looking at when we were talking this time last quarter, diesel rate was $3.50 a gallon.

It's $5.30 today, right? So the Russian invasion has created a new move up in oil costs; certainly, which we're highly exposed to. Within that, when we aren't pricing more, we will continue to price more and you'll see the pricing offset become a bigger component as we move forward. I'll let Dan speak to that in a moment. The other thing, Dara, I want to get out there is we are very confident in our forward-looking plans and the share momentum we have in the business. And we made a conscious choice not to cut advertising and promotion support in the quarter.

In fact, we increased it by 9% year-over-year in dollars. And so that's a different choice than we would have made in the past. And I think the momentum we see made us continue to lean in on the investment behind the brands because we're seeing that move in the right direction. I'll let Dan speak to the pricing. Daniel Sullivan : Yes.

I won't go back through all we've talked about previously in terms of our strategy and how it's played out by category. But just to take your point on incremental pricing that we've gone and executed literally since the last time we spoke, it has been largely U.S. and Canada-based. We've taken up pricing mid to high single digits across men's branded Shave, mid-single digits across women's branded shave, and mid to high single digits across almost all of our grooming portfolio. Those price actions a bit maybe in Q2, but really start to get realized in Q3.

So as you then think about what that means to the margin profile, whereas pricing was about 100 basis point offset in our initial thinking for the year. In Q4, it will reach about 180 basis points. So you can see that sort of scaling up component here as we work that pricing through. And as Rod mentioned, we're certainly by no means done, that the team continues to evaluate further pricing opportunities across all categories.

Dara Mohsenian: Okay.

That's helpful. And just relative to prior plan, obviously, there was a lot of pricing in place, right, which is partially realized in the quarter and to come. But can you be a little more specific in terms of percent of the portfolio maybe where there could be additional price increases and how you're thinking about that strategically? Because just looking at the implied guidance, it doesn't seem like there's a big incremental pricing offset to what you had planned previously relative to these cost pressures moving up?

Rod Little: Sure. Yes. So let me start with sort of where you ended there, sort of how is our in-year pricing benefit changed from initial guidance.

And as I said, it was -- for the full year, we were originally anticipating about 100 basis points of price offsets, and it will be about 125 now for the year. So slightly better as an offset to inflation. But again, I think you have to look at Q4 run rate closer to 180, 190 basis points to see how that pricing ladders through the back half of the year. Areas around the portfolio where we will consider now further pricing, I think certainly, fem care in the U.S., where we've already taken high single-digit price increases essentially at the start of this fiscal year. Work continues there with the probability that we'll take further price.

And then Sun Care, where I think we've been selective in how we priced here mostly around NPD and new product execution for obvious reasons, when you look at the success we've had on shelf and in category, but that's an area that we would look to as well as the season winds down, which will provide further tailwind as we look to next year.

Operator: Our next question comes from Bill Chappell with Truist Securities.

Bill Chappell: Just following up on the kind of the top line guidance. Is the assumption that kind of the supply chain hit stuff in fem care and other areas in women's shave, it's not coming back, I guess, in 3Q, 4Q. Do you expect some of that to bounce back? Just trying to understand if the raise is all because of the incremental pricing or if there was something else driving it that gives you increased confidence?
Daniel Sullivan : Bill, it's Dan.

Certainly, as you think about exiting Q2 and looking at Q3, where we're modeling mid-single digit organic growth, we do expect that some of that supply disruption does come back. And I think in our prepared remarks, we also talked about April organics being largely in line with what we had expected. So you're already seeing the benefit of a little bit of a replenishment or restock, if you will, as service levels normalize. As you think about sort of growth in the back half of the year, the incremental pricing is mathematically what drove up our organic outlook, right? So it's purely a pricing play mathematically. But our confidence level for half 2 is really underpinned by the distribution outcomes that we've talked about earlier, which we're excited that the category health, the share gains that we have seen, and obviously, the incremental pricing I mentioned on the earlier question, all of that gives us a really good line of sight and a high confidence in our ability to execute what will be about a 5% organic growth in half 2.

Rod Little: Yes. Bill, I would just build on that with 2 points. One, the planogram outcomes are known now, and they're favorable. And we've been talking about better partnerships with our retail customers. That's happened, and that's showing up with better planogram outcomes as they reset.

So we now have line of sight to that for the next 6 months, and that's positive. But the other piece that's playing in here and you're seeing it move our market shares up with now consecutive quarters of market share growth, which we haven't had in the previous 5 years in the United States, which is better innovation and better brand messaging. So we've relaunched the Schick Men's Masterbrand with a new tagline "Be You. No One Else Can." It's an amazing campaign. It's very well crafted.

Playtex Sport, we've got a new campaign against Playtex Sport, with the reopening now benefiting this is the fastest-growing Tampon brand, up 2.7 share points in the last quarter with the new launch of Clean Comfort Tampon. We've launched the Cremo razor. We have mentioned that at the premium price tier. And then Sun is obviously working very well for us. We have really solid innovation across Sun, which drove us up 3 share points in the quarter.

And so we also look at the exposure of our main categories of shave and sun relative to reopening. We're reopening play here, right? People are going back to the office and returning to prior habits around shave and grooming. That benefits us in the category. And some, there's still pent-up demand for people to get out and move, which drives sun care consumption. Daniel Sullivan : The only thing I would add, Bill, just to build on the some point, our half 2 outlook contemplates low single-digit Sun Care growth.

So while it's been a significant driver to date back half of the year, low single digits.

Bill Chappell: Got it. And just to follow up on that sun point. From the other seasonal Lawn and Garden and other companies so far kind of implied that March, April wasn't that great in terms of getting out weather, especially in the southern half of the country. Has that not impacted the sun care market? Or is it your market share gains more than offsetting that?

Rod Little: Correct, Bill.

Category was up during that period. Our market share was up. There was a shift in Easter in the month of April, where there were a couple of weeks that were down. That was a little bit around weather, but very temporary in terms of you look at the year-over-year shelf sets and how Easter falls. The other thing for us though is looking outside the U.S.

is international is lagging the U.S. primarily whether you look at European, Latin America, or Asian markets, where we have a sizable business, and that's to come. And I think we expect outside the U.S. to look more like the U.S. looked last year.

So it's lagging for a year, and that will be a tailwind for us in the second half.

Operator: Our next question comes from Chris Carey with Wells Fargo Securities.

Chris Carey: So the first question is actually just to maybe clarify the back half acceleration. And so pricing is building, but supply chain is also expected to improve; sun low single, which would imply the other divisions re-accelerating. And so that reacceleration is due to the supply chain improvement.

I'm just trying to dimensionalize the pickup in pricing in the back half implied for supply chain improvement in the back half implied and what you're kind of embedding here? That's just a clarification. And I have a quick follow-up.

Rod Little: Yes. Chris, I think, in principle, you're right. Let's think about the build in half 2 to this 5-ish percent organic growth.

Half of that will be year-over-year pricing gains, right? The only pricing we had a year ago was Wet Ones. We hadn't moved yet on the rest of the portfolio. So you've got a meaningful lift from year-over-year pricing. Yes, you've got to a degree the replenishment, mostly in fem care that we talked about earlier. You still got Sun Care growing, albeit at a lower rate, as we said, low single digits.

And then I think probably the piece we haven't talked about yet this morning is accelerated growth coming out of shave internationally, driven by Japan, where we get the benefits of the women's Hydro relaunch, which we're excited about. And we have new TBG business. But you started to see a bit of a tailwind in the second quarter that now provides growth as we head into the back half of the year. So if you put all of those pieces together and then sort of anecdotally, Wet Ones is while still declining a bit declining far less and cycling for different half 2 segment performance than it did in half 1. And all of that sort of leads to our 5% organic outlook.

Chris Carey: Okay. Got it. And then just on the inflation piece, I guess, there as well. I'm just trying to understand a bit of visibility, obviously, seeing some worsening, but how much confidence you have in that outlook that it doesn't move from here? More specifically, do you have hedges in place on certain commodities just because you've locked up commodities for a seasonal category like Sun, have you locked in transportation costs? Or is there a potential that things could move here? And I guess, getting back to the prior question is just if that were to happen, are you in a position to be more aggressive on pricing? Certainly, we've seen the peer set take multiple rounds of mid-single digit up to double-digit pricing. And I just wonder if that's entering your thinking should things get worse from here?
Daniel Sullivan : Yes.

Look, on the cost piece, what's really sort of the driver of the new news for us is largely freight and distribution line. Rod gave a data point earlier on what we've seen in diesel. You've seen north of $100 a barrel of oil. So in every year that is 12%, 13% of COGS now has a roughly 20% year-over-year inflation expectation to it. We do not hedge here.

We have contracts in place, but quite candidly, with demand being where it's at, those contracts don't necessarily protect you because lanes are constantly being rebid, and ocean contracts are constantly being rebid. So I don't think that offers necessarily any comfort. And then we're still seeing choppiness in commodities, mostly in resins and a bit in Sun Chemicals, where I think we talked about it on our last call, we essentially reached all of our buy options with vendors. We're purchasing on the open market now. It's the right thing to do.

We've secured raw materials for the season, but we continue to see mid-single-digit increases in Sun Chemicals. So we think we've got a good outlook here, Chris. We think we've thought through all of the different puts and takes, and we do expect airfreight utilization to go down from here as it was spiked in the quarter as part of some of the supply chain challenges that we saw. So we think we've framed it the right way, but we're looking at about 12% inflation on COGS for the year now. And I think from a timing perspective, also, we feel pretty good about being locked in on the commodity front for the year, which helps, I think, put a bit of a baseline in our thinking as far as cost exposure.

So that's the inflation side of your question. Maybe Rod let you take the pricing side.

Rod Little: On the pricing, Chris, I would just say, we see it overall as a favorable environment for pricing, certainly versus historical norms with a typical elasticity curves up to this point. We take a position of typically following pricing in the fem and shave care categories. We are not the leader.

You've seen others make moves to price with more moves to come. We would look in our role to follow that pricing as we typically do. We've got our stated pricing strategies for our brands. And part of that is where you price relative to competition, right? And so that's something we look at. We lead in some skin and grooming more typically.

And we have intentionally not priced in Sun Care other than some tactical moves this year because we're mid-season. We're growing share. We feel really good about where we are, but we also recognize there's an opportunity. I think Dan touched on this earlier, there's pricing opportunity in some of those categories I mentioned, where we take more of a leadership position. And we will certainly do that even if there's no more inflation from here.

We're already looking at that. If there's more from here, well, then we would respond accordingly. And we've got an agile responsive approach to that.

Operator: Next question comes from Kevin Grundy with Jefferies.

Kevin Grundy: I did want to pick up on the comment, Rod, you just made actually, but I think sort of extrapolate it more broadly.

And this gets back to your approach to pricing and what we're seeing from a market share perspective. So I think what you and Dan have done has been very good in terms of turning the company around and improving the top line momentum and your market share. That certainly seems to be the lens with which you are approaching your pricing strategy. And I guess what I mean by that is, to your comment a moment ago where you haven't really moved a lot in sun tan products, but it doesn't seem to be reserved to that exclusively. I look at disposables, I look at systems, I look at blades, shaving cream, you guys have lagged the category.

And then implicitly with your guidance here, where the incremental commodity cost pressure is entirely flowing through with very little offset then, I think it was 25 basis points, I think, is what you mentioned, but negligible because the incremental commodity cost pressure is entirely flowing through. So Rod, maybe just expand on that a bit. The balance here in the approach with respect to sustain this top line momentum what seems to be general sort of satisfaction with market share trends with the willingness to foresee gross margins sort of in the near term? Is that sort of a fair assessment?

Rod Little: Well, I think you laid out the conundrum well, let me start by saying we're highly dissatisfied with the margin outcome in the short run, right? We've got almost 600 basis points of inflation in the quarter just printed. And we have 100 basis points of pricing as an offset and 200 basis points of cost productivity work. So the way I think to think about it going forward is we will continue the cost productivity work, primarily in the area of cost of goods.

And so that 200 basis points is a good proxy for going forward. The pricing element of the 100 basis points offset we saw in the quarter Dan spoke to, by quarter 4, it will be 180 basis points. And from there, as we move forward into next year, I would anticipate that getting bigger or holding, certainly not getting smaller. So if you think about our profile, we'll have somewhere between 350 and 400 basis points of pricing and cost productivity work flowing through as we begin to cycle less impactful inflation year-over-year versus prior periods. And at some point, I would guess we get to normalization on inflation, if not even deflation in some elements of the P&L, which would be helpful.

In terms of pricing and the lag, you're right. We look category by category, business segment by business segment at relative health of the brand, relative response from the consumer, how we're priced relative to competition, how we think about what we have around distribution changes and conversations with retailers, what we have in terms of innovation that's new, that's going to come, that others don't have line of sight to. And when we put that all together, you may not see a perfect match between inflation moving up and us responding in that moment to offset it or a competitor moving in a direction and us not responding. We will build value in this company by pricing more aggressively in the future than we've done in the past. No doubt, we've talked to the teams about that.

And it goes to health of the brands. Where you've seen us lag, it would typically be where there's less health in that part of the brand portfolio. As we fix the brand health, you'll see that catch up. And I think one of the things you're seeing is we're growing share in shaving now. We've grown share more recently in men's branded.

You will see a response in pricing across the portfolio start to ladder in. That's part of what's laddering in now.

Operator: Our next question comes from Olivia Tong with Raymond James. Olivia Tong : Just on the shaving business, you do sound a bit more bullish on both the men's and women's franchises, the re-launches, Billie, etcetera. So I'm curious you to talk about share changes across branded and private label.

More specifically, if you're seeing any acceleration in private label, given the macro situation potentially, any signs of increasing price sensitivity amongst your consumers are in the market?

Rod Little: To this point, no real changes in consumer behavior around price points and price tiers. Again, I think we've seen a period of fairly atypical elasticity curves broadly and certainly in shaving, I think that holds. And you're right, we are more confident and more optimistic in our Shave portfolio and our ability to grow and create value in the future. Not only because the category continues to recover with the reopening and by the way, not just here in the U.S. but outside the U.S.

But we're more confident with our internal plans around the moves we're making with the brand building, the innovation pipelines, and how we think about architecting this for the future. And I think as we look at our portfolio today across men's, women's, and what we call private brands group, which has 2 legs to it. One is opening price point and two is branded direct-to-consumer partners that we supply. We have all of those legs growing as we go into the back half of the year. So while we're not seeing any material shifts opening price point we grew in the most recent period.

We've talked about the growth we've had with branded partners that we supply that are primarily direct to consumer. And I think with Billie now coming into the portfolio and some of the momentum we have on the men's side, you're now seeing the breadth of the portfolio come to bearing with the final leg of the stool here being Schick Men's business. Schick Branded, which we've talked about for a long time, ceding market share to others, that has stopped in the most recent periods. And part of the great work by the team to go rebrand that part of the business and get excitement back into the category and identify Schick to men as standing for something that's meaningful, it has been a missing piece. And so yes, I think we've got the portfolio we think, in a good place and all legs of the stool are additive at the moment.

Olivia Tong : Got it. And then just really quickly on share repurchase. Obviously, in the quarter, you bought back some. As you think about the go-forward and different ways of utilizing your cash. Just kind of curious how you're thinking about share repurchase going forward and just broadly on other uses of cash.

Rod Little: I'll hit the broad capital allocation thoughts and then flip it to Dan if he wants to put more color here. Funding the organic business properly is priority one. And I think, again, you saw us do that in the quarter just finished as we look at brand support. We've made big incremental investments, capital investments behind increased capacity across various elements of our supply chain footprint. And so we're leaning in and funding the core base business.

The bar is higher than it's ever been on M&A for us as we focus on our core and build out what we think is a winning portfolio. It doesn't mean we won't do something at some point, but the bar is really high on that one. We initiated the dividend a year ago. We're happy we did that. We think that was the right move.

And we announced the $300 million of share repurchase, which we're committed to, which I think you saw in the last quarter, which, I don't know, Dan, if you want to speak to that?
Daniel Sullivan : Yes. No. Look, I think the broader point is right. We're going to simply continue to allocate cash to where the returns are the greatest. And in the near term, given the economics and the payback and quite candidly, what we think is an underpriced stock, we had the opportunity to accelerate the buybacks, and we did.

We put the $300 million program out there, never intending that it would be a ratable repurchase that we'll let the market dictate, and we saw opportunity in the quarter to accelerate the buy, and we'll continue to stay in that stance in Q3 if the market conditions remain.

Operator: Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Rod Little for any closing remarks.

Rod Little: Thank you, everyone, for your continued interest. Have a great day, and we'll see you in 3 months.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.