Good day, and welcome to the Edgewell Q2 2021 earnings call. Please note this event is being recorded. I would now like to turn the conference over to Chris Gough, VP of Investor Relations. Please proceed.

Good morning, everyone. And thank you for joining us this morning for Edgewell's second quarter of fiscal year 2021 earnings. 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 he will hand it over to Dan to discuss our results, and 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 the call, we will make statements about our expectations for future plans of 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, which reflect our current views with respect to future events. 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 10K for the year ended September 30th, 2020, as may be amended in our quarterly reports on Form 10Q. 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. The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are 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.

Thanks, Chris. Good morning, everyone. And thank you for joining us on our fiscal second quarter earnings call. Overall, I'm pleased with what we've been able to accomplish through the first half of our fiscal year, despite COVID-19 continuing to negatively impact consumption in our key categories since the start of the pandemic more than one year ago. Encouragingly, we are now seeing our key categories, particularly Sun Care, turn more in our favor as we begin to see post-COVID-19 reopening in some of our key markets. The supply chain environment remains challenging and volatile. And as a purpose and values driven organization, our commitment to the safety and wellbeing of our teams around the world remains the top priority. While staying focused on this priority is paramount, our teams have excelled, progressing a new company strategy, enhancing our digital and brand building capabilities, executing better at the shelf. All of which has put our business on far more stable footing and positioned us well for stronger results, both in the second half of fiscal 2021 and beyond. Over the first half of the year, we have increased our investment in brand building, new product innovation, and digital activation. We've expanded gross margin rates, with Project Fuel helping to offset the impact of higher input costs and commodities. In our wet shave segment, we returned to organic sales growth in the most recent quarter. We're beginning to see some signs of recovery in certain categories and geographies as vaccination rates increase and markets slowly begin to open up. We believe we are well-positioned to deliver on our financial and operational goals for the full year, including accelerated organic net sales growth in the second half of this year. Now let me take you through a few segment highlights and discuss the progress we're making against our strategic priorities, which as we've discussed, are designed to transform Edgewell into a growing, sustainable, consumer-centric company, focused on delivering consistent top line growth and predictable profit and cash generation. Our wet shave business returned to growth in the quarter with organic net sales increasing 1% and, importantly, marking another quarter of sequential improvement. Our women's systems business grew over 22% in the quarter and gained market share. In February, we launched a complete redesign of our Skintimate brand in North America, which included the national launch of a new sustainability-focused system razor, refreshed packaging, and redesigned prep products. Skintimate is now the second largest women's shave brand in the United States, growing in more households than any other brand according to Numerator's consumer panel. In the highly competitive men's systems business in North America, organic net sales increased 10% as we launched the new Hydro Skin Comfort rebrand, releasing a new skin-centric collection for men that speaks to the importance of shave comfort and credibility of the Schick blade platform and underpinned by the Your Skin Has Feelings advertising campaign. This relaunch is inclusive of new packaging, product innovation in a new marketing campaign. The lead innovation in the relaunch is the Stubble Eraser, our first razor on the market that shaves up to 7 days' worth of stubble with less tugging and pulling. The product, whose design is derived from the unique consumer insight that men prefer to grow 5 to 7 day stubble, clean shave, and begin the process again. We believe this product is particularly relevant given the pandemic's impact on men's shaving frequency. Media support started in mid-February ahead of planogram resets, and we continue to see velocities build, especially after activating the media campaign. In the sun and skincare segment, organic net sales decreased by 9% in the quarter, primarily driven by category-related declines in Sun Care, both in North America and across key international markets. In Sun Care, organic net sales decreased 12%, which was an improvement over the previous quarter. However, the business was still impacted by significant category declines in the United States in January and February and continued macro headwinds in international markets. Consumption in North America began to turn positive at the end of March as we cycled peak lockdowns from a year ago, and markets began to open up. We were encouraged by the early development of the category in the United States, particularly in spring break and early holiday activity. We remain confident in the outlook for our sun brands across the balance of the summer season. In personal hygiene, Wet Ones' organic net sales decreased 10% against the 81% year-over-year increase in quarter 2 of last year. Not surprisingly, consumer habits have moderated, and the category was further impacted by high levels of retail inventory, primarily driven by new, non-name brand entrants into the food and drug channel over the past several quarters. Although the category is experiencing heightened volatility as it cycles last year's pantry loading activity and manages through short-term congestion on shelf, we are confident both in the underlying category demand over the mid to longer term and the desire of both retailers and consumers to choose trusted, category-leading brands such as Wet Ones. Men's grooming organic net sales increased 8% in the quarter, driven by strong e-commerce sales across all brands, with notable strength in Jack Black. Our grooming portfolio consumption grew 4% in the quarter, gaining share as the overall grooming category declined in the face of continued COVID headwinds. I'm pleased with the progress we have made on the integration of the business, highlighted by the fact that many of the commercial leaders from the organization will play an important leadership role for Edgewell. We've made meaningful improvements on the brand's DTC site, improving content and the overall shopping experience. We remain confident that our approach to brand building and omni-channel retail will continue to drive share gains by our brands into an attractive category. In feminine care, organic sales decreased 21%, reflecting category declines as a result of last year's pantry load, which peaked in March a year ago, and the previously discussed distribution losses, largely at Walmart related to last year's planogram resets, which we have fully cycled as we enter the third quarter. As I stated at the beginning of the call, we're seeing the results of strong execution against our strategic initiatives and the impact of focused commercial investment in core brands and strategic markets. We are also seeing the results of the improvements we're making across areas like e-commerce, brand building, product innovation and design, and sustainability. Our digital e-commerce business continues to strengthen, providing accelerated growth and reflecting the investments in capabilities and resources we've made over the last 12 months. We successfully re-platformed our core DTC sites to our new Shopify platform, improved copy and graphics on the sites while bringing design and development responsibilities in-house, and we have significantly improved the overall shopping experience for our customers. Similarly, we're executing better on the Amazon platform, directing increased levels of ANP dollars to digital activation and seeing solid share gain across our key categories. We remain committed to incrementally investing behind our strategies. And in the second fiscal quarter, we made a meaningful increase in brand marketing to support our new brand campaigns in men's and women's wet shave, including new product introductions, focus brand building reinvestment behind our three grooming brands, and continued reinvestment in our market-leading presence in wet shave in Japan. This investment stance is a critical enabler of our expected top line growth profile, and will continue into the third and fourth quarters. Lastly, it's important to remind you that sustainability is embedded at the core of our strategy. We are committed to being a positive force in the world with careful consideration for the wellbeing of both society and our planet. We recently launched the new Schick Xtreme 3 Eco-Glide, the first and only disposable razor made from recycled plastic that's also fully recyclable. As part of the sustainable care 2030 strategy, our entire global portfolio of men's and women's disposable razors now has handles made with 100% post-consumer recycled plastic. We also announced the US recycling program designed to help consumers reduce the amount of waste they're sending to landfills. This new recycling program in the US encourages consumers to package up their old razors and send the razors back to the company. As an organization, we celebrated Earth Day with locally-led efforts across our manufacturing and distribution facilities that recognize our role in doing what's right for the planet. These are just a few examples of the continued progress we're making. Importantly, they are the direct result of having better capabilities across the company. We've been through an extraordinarily difficult period over the past year with COVID-19 negatively affecting all of our key categories with complex and costly supply chain challenges occurring almost daily. Throughout this period, our teams have continued to work relentlessly to execute our initiatives to transform the company. I thank each and every one of them for their valuable contributions. So in summary, we sit at the halfway mark of fiscal 21 with results broadly in line with our expectations. As we look to the rest of the year, we are confident in our full year outlook and believe we are well-positioned to deliver the consistent top line and profit growth discussed at our Investor Day. The macro COVID-19 environment is showing signs of improvement in our key markets. Our key categories are now turning in our favor, especially the all-important sun season. With that, I'd like to ask Dan to take you through our fiscal second quarter results and provide detail on our full fiscal year outlook.

Thank you, Rod, and good morning, everyone. As Rod discussed, we've made good progress against our strategic initiatives through the first half of the fiscal year, increasing investment in a targeted way in supportive brand equity building, innovation, and digital activation, continuing to strengthen our internal capabilities, and again, delivering against our fuel cost savings objectives. We executed well against our framework for sustainable value creation. This framework is to generate consistent organic top line growth, to make efficiency and continuous improvement core to how we run our business and a catalyst for investing in our growth objectives, to strengthen our gross margin profile with focus on both costs and revenue management, and to direct our attractive free cash flow in a disciplined way to improve shareholder return. With the first half of the year complete, the progress we are making against these objectives is clear. Despite the reality that we continue to operate in a heavily COVID-impacted environment, organic net sales for the first half were down 3%, inclusive of both the negative COVID impacts from cycling last year's pantry loading and the added impact of current year COVID headwinds. The men's grooming and Wet Ones components of our Right to Win portfolio delivered growth in half one. Importantly, we saw underlying improved performance in our wet shave category, with consecutive quarters of share gains across the women's business in the US and in both men's and women's in Japan. In the men's shave business in the US, we delivered organic sales growth in Q2, fueled in part by the new Stubble Eraser launch and the new Hydro Skin Comfort campaign. These trends combined with the improved planogram outcomes discussed last quarter position us well moving forward. In half one, we also delivered 40 basis points of adjusted gross margin accretion year-over-year in an environment that is considerably more challenging than expected, both due to transitory and structural market headwinds. Our fuel program continues to excel and is now coupled with added focus on effectively managing price promotion and mix. Importantly, in the first half of the year, we remained in investment mode, increasing our A&P year over year by $22 million and 230 basis points in rate of sale. As we focused our investments on digital activation, new product innovation, and brand relaunches. Strong cost discipline remained central to our business model, with adjusted SG&A growth of 2% year over year, while we invested in enhancing organizational capabilities and integrating the Cremo business. Underpinning our results was the continued seamless execution of our fuel program, with gross savings to date in fiscal 21 of approximately $33 million. Importantly, while the categories in which we compete largely remained challenged due to lingering COVID headwinds, there are signs of underlying recovery as we enter the second half of the fiscal year. In North America, although the wet shave category declined in the quarter, the rate of decline was less than Q1 and half the 52-week rate. We saw similar improvements in Japan, where category decline softened versus Q1 and the women's shave category turned to growth in March. The sun category showed structural improvement over the course of the quarter and exited Q2 with year-over-year growth. Accelerated vaccine deployment, easing of travel and community restrictions, and consumer pent-up demand fueled further category improvement in April, where we saw triple-digit weekly growth versus last year. With approximately 80% of the season remaining, this encouraging start to the sun season further underlies our confidence in half 2 top-line performance for the sun care business. In fem care, which was most impacted by the comparison to pantry loading a year ago, we expect much more favorable consumption trends going forward, with the cycling of prior year category declines. In our international markets, COVID-19 impacts in the quarter were greater than expected, as we are still seeing the effects of ongoing lockdowns, particularly in Germany, France, Japan, and across Latin American markets. We saw some improvement in the UK with reopening in March and we're seeing further recovery in China and Italy as well, two of the earliest impacted countries. Overall, we expect to see categories in most international markets recover modestly as the year progresses, though at a slower pace than in North America. Our teams remain focused on executing against the go-forward strategy that we outlined at our Investor Day in November. We still have a lot of work to do. We're encouraged by the progress we're making and feel well-positioned to deliver on our outlook for top and bottom line growth in the second half of the fiscal year. Now, turning to our supply chain. First, all of our global manufacturing plants and distribution centers remain open and fully operational. Although like many others, we are seeing much tighter availability for both materials and labor and rising commodity and transportation costs as a result. We believe we've addressed most bulk ingredient needs and have the balance of our 2021 raw material and input requirements covered. Help manage these supply and distribution issues, we remain agile and have taken the necessary steps to ensure continuity of service. The operational challenges experienced in Q2 were both transitory and structural, and we do expect to be operating in a heightened inflationary environment for the remainder of the fiscal year. The resulting incremental costs are fully contemplated in our full year outlook. Now I'll turn to the detailed results for the quarter. Organic net sales in the quarter decreased 5.6%, reflecting the impact of pantry loading in the prior year quarter, and the in-quarter impact of COVID-19, most notably on the sun care and fem care categories. Organic net sales in North America decreased 5.6%, as declines in sun and skin and fem care were only partly offset by growth in wet shave and men's grooming. International organic net sales declined 6%, driven by a 33% decline in sun care and a more modest 1.5% decline in wet shave. As Rob mentioned, our e-commerce business grew organically by over 30% in the quarter, with strong growth in all regions and all segments. In our largest e-commerce channel, Amazon, consumption increased by 40% and we gained 150 basis points of market share in the wet shave category. Our DTC performance was strong as well, led by Jack Black's 19% online growth. Looking deeper at our segments, wet shave organic net sales increased 1.1% in the quarter, largely driven by strong performance in women's systems, new product launches in men systems in North America, and strong growth in e-commerce. In the U.S., the razors and blades category was down 3.4%, an improvement from the previous quarter and the 52-week trend. The decline in the quarter was solely attributable to men's and disposables, reflecting continued transitory declines in shaving frequency in the work-from-home environment and a continued shift to e-commerce. The women's category grew over 2% in the last 12 weeks, reflecting the cycling of last year's COVID impact, increased household penetrations as a result of the continued shift away from salons, and consumer trade-up from disposables, in part driven by the new Skintimate systems launch. For the 12 week period, our U.S. market share in razors and blades declined 130 basis points, with total share for the Schick franchise essentially flat. Women's branded systems delivered share gains for the second consecutive quarter, driven by the Skintimate systems launch. Branded disposable share decreased 40 basis points in part, as a result of increased branded trade up. Our men's branded system share declined to 140 basis points largely in line with the 52-week trend driven by increased competitive activity and the impact of previously discussed distribution losses at Sam's Club and Walmart. Overall, we were pleased with the initial launch results of our Stubble Eraser innovation during the quarter, with trial at or above expectations. The launch was reinforced with a full complement of commercial support, including TV media, heavy online activation, and broad product sampling efforts. Sun and skin care organic net sales decreased 9%, driven by soft sun care sales, particularly in international markets. In the U.S., where the second quarter typically only accounts for about 12% of the full season, the sun care category declined 2% as COVID-19 and unseasonably cold weather impacted store traffic, travel, and outdoor activities. Hawaiian Tropic gained 60 basis points of share, largely a result of new distribution in club and increased velocities at several key retailers. Banana Boat share declined in the quarter predominantly due to lapping of the aloe gel spikes from a year ago and strong competitive promotional activity. Importantly, as I mentioned earlier, consumption trends have meaningfully improved in April, and we remain confident in both our outlook for the season and our portfolio of relative performance in the U.S. Men's grooming organic net sales increased 7.6% in the quarter with solid growth in Jack Black and Bulldog in international markets. The total men's grooming category in the U.S., excluding razors and blades, declined nearly 7% in the quarter. Wet Ones organic net sales declined 10% in the quarter, as total hand wipe category sales saw significantly slower growth for the first time in a year. Category growth was 12% versus a year ago compared to 320% growth in the first quarter. As consumption lapped the unprecedented spike in demand from the beginning of the COVID pandemic last year. However, March sales are up significantly on a two-year basis with an increase of 88% versus the same period in 2019. We remain confident in the durable demand for these products. Wet One's share in Q2 this year was impacted by heavy retail promotion of non-branded competitive products, in an effort to eliminate the high trade inventories. Fem care organic net sales decreased 21% as compared to the prior year period, while the U.S. category declined 15%, driven by last year's COVID-19 pantry loading. On a two-year stacked basis, fem care sales declined mid-single digits. This quarter market share declined 160 basis points, driven by heightened competitive pressures and the previously discussed distribution losses, most notably related to Gentle Glide at Walmart. Our online sales in the Amazon channel increased 11%. Moving down to P&L, gross margin rate on an adjusted basis increased slightly compared to the prior year, despite the challenging macro environment. As further fuel savings, improved pricing and promotion, and favorable mix offset rising commodity and supply chain costs. A&P expense increased $21 million this quarter, and was 13.2% of net sales versus 9% a year ago, reflecting increased investments and focus on critical commercial efforts, supporting the Schick Hydro relaunch, Stubble Eraser and Skintimate brand launches, and men's shave in Japan. Digital spending represented nearly 70% of overall advertising spend in the quarter. SG&A, including amortization expense, was $93.4 million or 18% of net sales. Adjusted SG&A dollars were flat versus last year, despite the inclusion of the operating costs associated with the Cremo business. Investments in key capabilities, inflationary pressures, and unfavorable currency translation were offset by project fuel savings and reductions in discretionary spending. Adjusted operating income was $69 million compared to $92 million last year, with the decline driven by increased investments in A&P and R&D. GAP diluted net earnings per share were $0.26 compared to $0.36 in the second quarter of fiscal 2020 and adjusted earnings per share were $0.70, compared to $0.92 in the prior year period, reflecting lower operating income and higher interest expense, partly offset by favorable foreign currency movement and hedge re-measurement income. Adjusted EBITDA was $91 million compared to $102 million in the prior year. Net cash used by operating activities for the first half of the year was $18.8 million. This compares to cash inflows of $17.2 million from operating activities in the prior year quarter, which was in line with expectations. This swing was largely attributable to higher inventory levels and lower net income. Both our capital structure and liquidity position remain strong. We ended the quarter with $282 million in cash on hand and access to a $425 million credit facility. At the start of the quarter, we successfully executed a $500 million high-yield notes offering maturing in 2029 at 4 1/8, well below the 4.7% rate of the notes they replaced. Our weighted average debt maturity is now over 6 and a half years, with our next significant refinancing not until 2025. Our net leverage ratio at March 31st was 3 times. In terms of capital allocation, in addition to investing in growth, we remain committed to returning capital to shareholders. We announced another quarterly dividend this morning, and in the first fiscal quarter, we repurchased shares at a cost of $9.2 million. That brings us to our outlook for fiscal 2021. As we discussed, we remain comfortable with our previously provided full year outlook, with organic net sales expected to increase low single digits, adjusted EPS expected to be in the range of $2.62 to $2.82, adjusted operating profit margin expected to be largely in line with 2020 levels and adjusted EBITDA expected to grow largely in line with organic sales growth. The adjusted effective tax rate is now expected to be in the range of 23.5% to 24.5%. We continue to be mindful that we are operating in an environment that has greater uncertainty than normal, making flexibility and agility a key focus. In terms of phasing in the second half of the year, we expect largely similar rates of organic net sales growth in both the third and fourth fiscal quarters, with year-over-year gross margin accretion in both the third and fourth quarters. We expect to maintain our investment stance in A&P, with spending as a percent of net sales in the third quarter expected to be in the range of 14 to 15%. We expect adjusted operating profit margin in Q3 to be largely in line with our full year outlook. As we stated previously, we will closely monitor the change in the COVID environment and we'll be prepared to pivot our investment stance accordingly while also optimizing more discretionary areas. For more information related to our fiscal 2021 outlook, I would refer you to the press release that we issued earlier this morning. With that, I'll turn the call back over to the operator to start the Q&A session.

Our first question today will come from Jason English with Goldman Sachs.

A couple of quick questions. I guess I was caught a little flat-footed by the organic sales strength in North America, a positive surprise obviously on Wet Shave. Was there any pipeline fill? I know you had some innovation out there, we recently got distribution. Anything that unusual that we should contemplate as we look at that number?

Yes. So Jason, good morning. We did have some pipeline on the men's side in particular. In the quarter as we launched the Stubble Eraser and the new hydro skin comfort ranges with that. There was some pipeline fill in the quarter on the men's side, less so on women's. It was a good quarter for us overall, as you call out in the U.S. Schick share was flat in the face of very heavy, competitive launch activity as you know. So it was a little bit down on men's, but then we had the pipeline fill on top and then women's grew nicely for the second quarter in a row. Overall a good to decent quarter for us on shave, particularly in the US.

And I think you guys mentioned a couple of times trends improving as the quarter progressed, and you spoke upbeat, at least around sun care, on what you're seeing in April. Can you put a finer point on that and tell us how were sales tracking through the quarter? How are sales tracking so far into this quarter?

Yes. So as you look at the categories, we saw wet shave improve in the quarter versus the prior quarter, right? So we're seeing a little bit of sequential improvement in the shave category as things start to reopen a bit. The biggest piece of improvement we saw within the quarter was sun care. Whereas we got into March and particularly in the back half of the March month, we were negative year ago as the lockdown was starting. We really started to see March pivot to a much more positive picture in the back half of March on sun care at the category level. We've seen that continue through all of April as well.

Our next question comes from Kevin Grundy with Jefferies.

Question probably for Dan. Just to kind of tumble through your earnings guidance a bit, some of the moving parts. So clearly the commodity cost environment has worsened broadly as you mentioned in your prepared remarks. Maybe just kind of walk us through a little bit. What's gotten better, whether this is sort of lower trade promotion. Maybe you feel a little bit better about some of the categories. I think that would be helpful to folks. And then Dan, I guess within that, what is the updated commodity cost outlook within the guidance? Maybe just comments on updated thoughts on pricing as well.

Sure. Thanks, Kevin. Yes. So let's take them in pieces. The commodity, call it supply chain picture, certainly got more challenging in Q2, not less. Now I think we have to distinguish between structural challenges. We're seeing inflationary pressures in certain commodities, most notably resin, a bit of labor pressure, and rising distribution cost pressure. Those are structural, and we anticipate those pressures will continue for the remainder of the fiscal. Equally though, you do see certain categories in the commodity world easing a bit. Alcohol would be a good example of that, aluminum, and other chemicals, et cetera. So it's slightly more inflationary environment here on out. Certainly we anticipate that. You also saw just transitory issues unique to the quarter, whether it was the weather events in Texas or the continued port congestion or even Suez Canal-related challenges. So I think what we're saying here is it's going to be more challenging for the rest of the year. But what that really means to us is that the net flow through of fuel will likely be absorbed. That's maybe the best way to think about the back half of the year versus what we would have seen in the first half. Then you turn to price and promotion and our overall outlook. And you're right. We do see price opportunities in the back half of the year. We do see continued benefits from promotional effectiveness. We have taken a price increase on the Wet Ones franchise, which is going into market end of Q2 now, into Q3. Those are tailwinds. What really reinforces our margin profile in the back half of the year, in addition to those elements, is you're getting the benefit of leverage and you're getting the benefit of mix. Remember what we are cycling in mix, year over year, back half of the year, is a pretty tough mix environment last year based on how the segments swapped out. So put it all together. I think cost pressures will remain. Fuel will continue to offset, and we anticipate strong margin accretion in the back half of the year for the reasons I mentioned.

Quick follow-up with that, just to kind of play that back. So presumably, you are within a lower point within the range, just given that some of the fuel savings that maybe you thought were going to flow through your earnings are now going to be absorbed by commodity costs. Maybe you just can confirm that, that you're understandably and likely within a lower part of your earnings outlook. And then Rod, maybe just your comments on expectations for pricing and men's grooming, and then I'll pass it on. Thank you.

Yes. No, I would actually, I'm glad you asked the question, Kevin, thank you. I would say quite the opposite. So let's unpack the second half of the year. Stronger top-line growth, continued gross margin accretion at or better than first half of the year, continued reinvestment in A&P, better than the first half of the year. In other words, stronger, more reinvestment. So if I were thinking about the EPS range using the midpoint, I have a higher degree of confidence to the upside than to the downside. Rod, I'll turn it to you.

Yes. Regarding pricing in men's grooming, blades and razors remain fairly competitive. While there have been fewer promotions compared to the previous year, I don't see any significant opportunities there. However, when looking at brands like Jack Black, Cremo, and Bulldog in the grooming sector, there may be potential for some pricing power.

Our next question will come from Bill Chappell with Truist Securities.

Sorry. First question. Just trying to understand as we walked through the wet shave category and really, and several of the categories, it's not the old play of just Gillette and Gillette and Gillette. It seems like there are a lot of smaller brands that are actually coming from Gillette or others that are popping up, both in grooming in actual shave. Now how does that change your strategy, your marketing, and does it make it so much noise in the space where it's harder to differentiate? Just trying to understand how you grow from here with so many new brands being introduced to the various categories.

Yes. So a good question, Bill. The landscape is quite different than it was a few years ago, no doubt. With new brand offerings coming in, not all brand offerings coming in, by the way, will make it through and get into full distribution. Some of them are at a retailer or specific to a channel. But you've got to perform right to move out of that channel space where you start. I think that's still to play out in how that plays out. Our focus has been to step all the way back. What we have is great shave technology and an IP portfolio to deliver a very comfortable shave that's underpinned by sharp, durable blades that last, that are very consistent from pack to pack. We can do that very well. As you take that as a given, over time, I think that's a durable piece you have to have to compete and win in the category over time. We've been focused on a very different approach to brand building and architecting our brands. It starts by working to eliminate sub-brands, simplify the portfolio, and make our brand messaging better and significantly easier to shop at shelf. For example, you've seen us consolidate on the women's side, 4 or 5 different disposable ranges, all under Skintimate as a master brand. We've launched Skintimate into systems as well, and are having success as we talked about in the call on Skintimate. We are looking across the portfolio again to simplify, consolidate into fewer brands, fewer SKUs, more power SKU type setups to cut through the clutter and have the messaging resonate. I think we're in the early innings of doing that. You'll see us continue steps towards that as we move into next year in a much bigger way, for example, on the Schick men's side.

Got it. And then switching to sun care, just understanding that the numbers are pretty astronomical off a pretty much zero base a year ago, but how do you plan or do you have the capacity if we really open, reopen in full and travel, everybody's out and about, and the whole category just explodes? Because I understand it's not sold on consignment, but it's definitely, you're managing your inventory and sales in and out to the retailers pretty tight. I mean, how do you forecast and how do you plan? And do you have the capacity if we do in fact kind of fully reopen and everybody gets out of the house over the next 3 months?

Yes. Well, it's not an easy category, Bill, to manage. It's one that's a little atypical based on the seasonality and the historical returns profile at the end. We're actually working to change that. We have some retailer setups where we don't take returns, as an example. We love the category and remain very bullish on the longer term outlook for the category. I feel like we've got great capability around formulation, regulatory safety, and like the portfolio we have with room to add to the portfolio over time. So with that as a backdrop, we are seeing very high levels of demand in domestic markets, for example, where you don't have to travel to cross an international border within that market. Think the US, Australia, Mexico, continental Europe, within the country, we are seeing very heavy demand. There's pent-up desire to be outside coming out of the winter season. There's pent-up demand to put vacation travel back into the routine for friends, family groups, and to go to warmer climates and basically be around water to do that. When you do that, being outside around water drives consumption. What you are seeing play out in the scanner data right now is people coming back online and doing that. We have, internally within our mix, we see potential upside in sun care, and we have tried to position ourselves to be able to meet higher than expected demand within the year with pre-buys, making sure we've got staffing in place where we've had long supply chains, working to shorten the supply chain, tighter power SKUs, skew ranges that we can produce longer into the season, for example. So we're set up and prepared to hit a higher demand outcome across the summer. If, frankly, it goes later into the fall, which we do expect, there's obviously a limit to how high you can go based on that tail. There's a balance that happens at the end of the year. We don't want to be shipping anything in that we're just going to turn around and take back or have to discount and flow through. We actually have pretty good analytics around that. I think we have a pretty robust capability to manage and execute in this category. We've got a direct store delivery team out in store that provides real-time data feedback that beats anything you see in scanner data. We have that type of data coming back in to help inform our decisions there as well. But it's going to be an interesting summer here.

Right. So you don't see capacity constraints in the near term.

Well, there is, Bill. There's a theoretical constraint out there anywhere. Again, do we hit that constraint? Yes or no? It just all depends on how? When category's growing 200% to 300% week on week, it can't do that all season. None of our competitors would be able to meet that demand. But if you get to where we expect it to be, we think we can hit the demand, but there are limits to it.

Next question comes from Wendy Nicholson, Citi.

I just wanted to follow up on that line of questioning. Rod, your color that you offered was fantastic. I guess I assume every sun care manufacturer is thinking the same thing and going out there with a lot of inventory. And I'm just wondering relative to past summers, this feels like it could be a great opportunity from a kind of land grab perspective. So can you just talk about your innovation sort of pipeline in sun care, and your marketing program, do you intend to spend more than usual? Just given how strong the category's going to be. And can you remind us in the sun care business specifically, how much of that business is online?

Sure. Dan, you want to start?

Yes. Wendy, I'll start and then I'll hand to Rod. So just building on his comments earlier, we feel really good about our position right now at the start of the season. We, as Rod said, pre-bought, pre-built. We were sitting on even slightly higher inventory level ourselves at 2Q, which you saw in the results. We've taken all of the necessary steps to be ready for the season. It probably played out a couple of weeks later than maybe we had anticipated. We've seen a really nice start to the quarter on our end. So feel really good about that. In terms of advertising and promotion, one of the reasons we spent slightly below the rate that we had thought we would spend in the quarter, aside from managing COVID and markets and effectiveness was sun. We pushed a fairly decent amount of our spend into 3Q that we anticipated spending in 2Q. We feel like we're in a really good place to start the season. We've got the inventory and the capacity. We are absolutely spending incrementally behind the brands, probably in a more disproportionate way in 3Q than originally planned. So from that standpoint, I feel really good about how we're prepared for the season and certainly liked what we saw in April where you're saying 100% growth week over week for 4 straight weeks. That's our overall outlook. Rod, I'll throw it over to you to add any comments.

Yes. And Wendy, the online piece of the business is still relatively small but growing fast. We just launched a Hawaiian Tropic DTC site, as an example, as a way to get the message out, connect with the consumer. The retailer.com, e-tailor piece, we've got a good capability to drive growth through that channel, and then at Amazon, it's a growing part of the business as well. So there's a good omni mix there, but it skews more traditional brick and mortar retail at this point. From an innovation standpoint, we're really excited about the pipeline. What we have in the pipeline to come is really exciting in terms of product forms, the package form itself, the product formulation around mineral sprays, not only the efficacy, but the skin feel, the ease of spread and how you get the product on your body. We've got innovation around that as well. The marketing teams have done a great job with the brands around the messaging, the brand equity, the positioning to pull Hawaiian Tropic into more of a better-for-you range, where Banana Boat's all around protecting the fun outside in the sun, more of a sport active, tight positioning. As we look at the pipeline, the clarity of the messaging, and what we can do going forward, I think we're in the best position we've been in the category, certainly since I've been here. This is coming off of a base period last year where we grew share, and so we are healthy in the category at the moment. As the category improves, we'd expect to go with it.

Our next question will come from Chris Carey with Wells Fargo Securities.

I'm trying to understand the outlook for the second half of the year and I have a follow-up question. You mentioned that organic sales growth for fiscal Q3 and Q4 should be similar. The challenge with this is the comp differential. I'm also considering that the sun care business appears to be performing well this quarter with very easy comps. Are you suggesting that the wet shave business will rebound after this quarter? I’m not implying that’s your stance, but there are significant comp differences between Q3 and Q4, yet you forecast both quarters to be similar. I’m just trying to reconcile this because it doesn’t seem to make sense to me at first glance.

That was a lot, Chris. I'll try to make it simple. You have the outlook right. We anticipate largely similar rates of organic growth in Q3 and Q4, 6-7% range for both. You have to remember that the categories we play in are lapping very different years last year. I wouldn't write the sun category off completely. You might recall, the sun season actually had a very strong end last year and went much longer than a normal sun season would go. Wet Ones is cycling unbelievable growth, so it's really difficult. I would encourage you to look category by category and go back and recall how Q3 and Q4 played out. If you paint it with a broad brush of must be cycling COVID, you'll come to the wrong answer. We do not anticipate that wet shave will decline, back half of the year. That's not our thinking. You've heard us talk. We're bullish on sun, so we would expect growth in sun. Of course, it's still growing in Wet Ones, although at a slower rate for obvious reasons. Hopefully that answers the question and gets you a little more comfortable on the back half of the year.

Yes, I appreciate that. And it's not necessarily questioning the back half of the year, as much as the cadence from Q3 to Q4, just given the so much easier one quarter to the next. But the organic sales growth is implied to be the same for both quarters. I just didn't know if there was a reversal dynamic going on, or was there other underlying issues, or not issues but dynamics, in one of the businesses to be mindful of.

Yes, Dan and team have done good math on the quarters and the outlook. We'll talk about it next quarter, but I think the guidance hopefully is pretty clear. If we need more time, we can do it in a follow-up with Chris and Dan. In terms of wet shave, just in general, the category remains very competitive here in the US across both men's and women's. That, in fact, is true. Internationally, while it's less dynamic around just the level of competition, broadly in international markets, there's a higher level of lockdown on balance right now. So you're seeing, back what we saw in the winter months here in the states, with that in the other markets, you're seeing the category recovery lag internationally. We still expect that to come as we get into the next couple of quarters, but it's a very different profile between the US and some of the international markets. The online channel has grown over the last year, via the lockdown. While the category has declined over the past year, around fewer shaving incidents with the more remote work, more casual approach to grooming habits, if you will, through that period, online has grown and brick and mortar has lagged. But as we now cycle a year into this, and get to what are frankly easier comps in brick and mortar, we're seeing that catch back up, and we're seeing a return to a more normal, not quite flat category yet in our read, but we think heading back there, which is where we were pre-pandemic.

The next question will come from Faiza Alwy with Deutsche Bank.

So Dan, your comments earlier in the call regarding where you expect to be relating to EPS outlook for the year was really helpful. I'm wondering if you could talk about organic sales growth and whether the composition of organic sales growth for the year has changed for you. I know we're still at low single digits, but it sounds like you seem to be suggesting that there's upside in sun care. I'm curious if the launch on the men's shaving side has gone better than expected. So just some comments around, and then Wet Ones, I don't know, it feels like it's a little bit not as good as expected. So I'm curious if you're recalibrating how you get to that low single digit number for the year?

Yes, thanks for the question. I think you're spot on. You might recall when we developed the guide, initially, we said low single digit organic growth, largely driven by Wet Ones was kind of the easiest way to think about it. Now sitting here at the halfway point, I don't know that I would say Wet Ones' results are disappointing. I think we knew at some point that the tailwinds of, if you can make it, you can sell it, were going to run its course. We still see growth for Wet Ones back half of the year. There are still certainly opportunities, particularly as we gain distribution in grocery and drug, which we weren't able to gain due to product constraints. There is growth in the profile, but maybe a bit less than what we thought. It's probably contributing a half to a third of our growth for the year organic growth. That's being reinforced by absolutely encouraging results on shave. You saw that this quarter, and Rod talked about it. Particularly the women's side, where we've now gained share 2 straight quarters, while still cycling through the distribution losses of a year ago and staring into positive distribution outcomes for the new sets. So feel good about shave, led by women's. Then, yes, maybe a bit more optimistic on sun. You just wouldn't know how to predict the season back in November when we gave the guide, and we're really encouraged by what we've seen and how we’ve seen retailers respond. So yes, the mix of organics is probably a bit more to the core. Wet shave, stronger. Sun, stronger, which we certainly like.

Yes, you asked about the wet shave innovation on Schick, and it's on track. It's early, but we feel good about it. It's meaningfully differentiated and well-supported in terms of how we're launching the Stubble Razor and Skin Comfort. So on track but early.

Okay. And if I may ask, just on the innovation, how would you recommend us evaluating the strength of that innovation near-term? I guess what I'm asking is, are you seeing better outcomes? And, e-commerce, is scanner data the right way to look at that? How's the business mix on the innovation relative to the rest of your business?

Yes. Scanner data is tricky. The quarter we just came through is really messy because we're in the middle of planogram resets. It's different timing retailer by retailer. As you know, the execution is not always perfect, so scanner data can be a little misleading. As we look at the online portion, our market share online is typically higher than it is in retail brick and mortar. The other thing that's been true here more lately is not only is our share bigger, but we're gaining share online vis-a-vis competition. That's true in shave as well. It's a growth area for us that doesn't show up in the scanner data. But over time, in brick and mortar retail scanner data, we need to be positive. I mean, we've challenged the teams to success is not just delivering an annual budget number. Success is delivering market share gains, and winning in market vis-a-vis competition. As we cycle through this, what you should be looking at in the near term is, are we hitting our numbers that we've committed to via the guidance Dan's put out? Over time, are we growing or losing share in an all-outlet look, not just XAOC, brick and mortar? That's still a big component. It's a complicated answer to the question. It's kind of all of the above. But I don't want to be losing share in anything we track over time. We've been talking to the teams about this as we cycle into fiscal 22.

There appear to be no further questions. So this will conclude our question and answer session. I'd like to turn the conference back over to Rod Little, CEO, for any closing remarks.

Right. Well, thank you, everybody, for your time and your continued interest. Be safe, be well, and we'll talk to you in 3 months. Thank you.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.