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Why Did Edgewell Personal Care’s Income Fall in Fiscal 4Q15?

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Edgewell’s price movement

Edgewell Personal Care (EPC-2) has a market cap of $4.5 billion. Edgewell’s YTD (year-to-date) price movement was stable in 2015, but fell after the 4Q15 earnings report by 6.9% to close at $73.07 per share as of November 13, 2015. The price movement on a weekly, monthly, and YTD basis is -11.2%, -12.4%, and -22.6%, respectively.

Currently, the stock is trading at -13.0% below the 20-day moving average, -12.6% below the 50-day moving average, and -23.2% below the 200-day moving average.

The PowerShares S&P MidCap Low Volatility ETF (XMLV) invests 1.1% of its holdings in Edgewell. The ETF tracks a volatility-weighted index of the least volatile 80 S&P MidCap 400 companies. The YTD price movement of XMLV is 4.3% as of November 12, 2015.

The competitors of Edgewell Personal Care (EPC-2) and their market cap are:

  • Kimberly-Clark (KMB) at $42.6 billion
  • Estée Lauder (EL) at $30.5 billion
  • Coty (COTY) at $10.0 billion
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Performance of Edgewell in 4Q15 and fiscal 2015

The company reported net sales of $560.1 million in 4Q15, a fall of 14.4% when compared to net sales of $654.7 million in 4Q14. Net sales of the Wet Shave, Sun and Skin Care, and Feminine Care segments fell by 14.5%, 4.2%, and 18.0%, respectively, in 4Q15 as compared to revenue in 4Q14. The cost of sales as a percentage of sales rose by 8.5% in 4Q15 as compared to the same in 4Q14. The company reported an impairment charge of $318.2 million in 4Q15. Net income and EPS (earnings per share) fell to -$219.5 million and -$3.57 per share, respectively, in 4Q15, compared to net income of $85.2 million and EPS of $1.36 per share in 4Q14.

Edgewell completed the spin-off of its Household Products business and incurred incremental costs from evaluating, planning, and executing the separation.

According to David Hatfield, Edgewell’s president and CEO, “During the quarter we executed against our international go-to-market initiatives and invested in our brands, actions that will help position us well strategically for the future. Our top and bottom-line results reflect those actions, and while our results for the quarter came in below expectations, they do not change our view of 2016 or affect the long-term strategy. We are committed to returning capital to our shareholders and during the quarter repurchased more than 2 million shares.”

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In fiscal 2015, the company reported net sales of $2,421.2 million, a fall of 7.3% on a yearly basis. Net sales of the Wet Shave, Sun and Skin Care, and Feminine Care segments fell by 9.1%, 4.9%, and 1.6%, respectively, in fiscal 2015. The profit of the Wet Shave, Sun and Skin Care, and Feminine Care segments fell by 20.5%, 3.2%, and 4.7%, respectively, in fiscal 2015. Net income and EPS fell to -$275.3 million and -$4.44 per share, respectively, in fiscal 2015 compared to net income of $356.1 million and EPS of $5.69 per share in fiscal 2014.

The company has projected an adjusted EPS in the range of $3.20–$3.40 per share in fiscal 2016.

About Edgewell Personal Care

Edgewell Personal Care manufactures and markets a wide range of personal care products in the wet shave, skin care, feminine care, and infant care categories under brand names like Playtex, Stayfree, Banana Boat, and Hawaiian Tropic.

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