Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Energizer Holdings Inc (ENR, Financial) achieved organic net sales within their originally guided range, supported by strong second-half momentum.
- The company improved adjusted gross margins by 190 basis points, reaching 42.2% in the fourth quarter.
- Energizer Holdings Inc (ENR) generated free cash flow of nearly $340 million, allowing for a $200 million debt reduction.
- The company is expanding its distribution footprint and accelerating growth in e-commerce, with a 15% increase in e-commerce sales in fiscal 2024.
- Energizer Holdings Inc (ENR) introduced innovative products, such as the Armor All Podium Series and the world's first three-in-one coin lithium Child Shield battery, enhancing their market position.
Negative Points
- Organic net sales declined by 2.2% for the full year, primarily due to timing of holiday orders and planned pricing and promotional spend.
- Adjusted SG&A expenses increased due to higher digital transformation costs, travel expenses, and wages.
- The company faces headwinds from pricing, with a 100 basis point impact expected in fiscal 2025.
- Energizer Holdings Inc (ENR) continues to carry a high leverage ratio, ending fiscal 2024 with a net leverage ratio of 4.9 times.
- The company anticipates foreign exchange headwinds, with a projected impact of 100 to 150 basis points on top-line growth in the first quarter of fiscal 2025.
Q & A Highlights
Q: Can you discuss the long-term trajectory for gross margins, given the structural changes made to the business?
A: John Drabik, CFO, explained that after reaching pre-pandemic levels, they anticipate a 50 basis point increase in 2025, followed by more algorithmic growth of about 25 basis points annually. They have several programs beyond Project Momentum to support this growth.
Q: What is the impact of tariffs on your supply chain, particularly concerning steel cans and US product sourcing?
A: John Drabik noted that Project Momentum has minimized tariff exposure by focusing on in-market production. Currently, less than 5% of their global cost of goods sold is subject to US tariffs due to China sourcing.
Q: How do you view the battery category's growth and pricing trends for the next year?
A: Mark Lavigne, CEO, stated that the battery category is resilient and expects a 1% growth trajectory in 2025. The category is experiencing healthy volume trends, with mid-single-digit growth driven by slightly elevated promotions.
Q: Can you elaborate on the growth and strategy for e-commerce, and how it fits into your overall retail channel strategy?
A: Mark Lavigne confirmed a 15% e-commerce growth in 2024 and expects to double that in 2025. E-commerce is becoming a center of excellence, enhancing partnerships with both online and brick-and-mortar retailers, and is considered margin-neutral overall.
Q: What are your expectations for auto care growth and profitability in 2025?
A: Mark Lavigne highlighted a solid year for auto care with over 2% growth in 2024 and expects 1% to 2% growth in 2025. The launch of the Armor All Podium Series and expanded online presence are key growth drivers, alongside improved gross margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
