Edgewell Personal Care Co (EPC) 2013 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the first-quarter 2013 Energizer Inc. earnings conference call. My name is Lisa, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to send the conference over to your host for today, Ms. Jackie Burwitz, Vice President, Investor Relations. Please proceed.

Thank you Lisa, and good morning, everyone. And thanks for joining us on Energizer's first fiscal quarter earnings conference call. With me this morning are Ward Klein, Chief Executive Officer; and Dan Sescleifer, Chief Financial Officer. This call is being recorded and will be available for replay via our website, EnergizerHoldings.com. During our prepared comments and the question-and-answer session that follows, we may make statements expressing the expectations of management regarding our future plans and performance, including future sales, earnings, earnings per share, capital expenditures, advertising and promotional spending, product launches, the amount and timing of savings, and costs related to restructurings and other initiatives, the amount and timing of changes to our working capital metrics, the impact of price increases, currency fluctuations, raw material and commodity costs, category value, future plans for return of capital to shareholders, and future growth in our businesses.

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 risk and uncertainties, including those described under the caption Risk Factors in our annual report on Form 10-K filed November 20, 2012. These risks and uncertainties may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not undertake to update these forward-looking statements, even though our situation may change, and these forward-looking statements represent our views as of today only.

During this call, we will refer to 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 the press release issued earlier today, which is available in the Investor Relations section of our website, EnergizerHoldings.com. Management believes these non-GAAP measures provide investor valuable information on the underlying growth trends of the business. With that, I would like to turn the call over to Dan for a review of the quarter.

Thanks, Jackie. For the first quarter of fiscal 2013, adjusted net earnings per diluted share increased $0.15, or 7%, to $2.20. Organic sales gross margin and adjusted net earnings, excluding unusuals, were essentially flat, while shares outstanding were lower in the quarter. Turning to divisional results, in Personal Care, organic sales declined 1.4%, due to a number of offsetting factors. On the positive side, the Hydro franchise, which includes the Hydro men's and Hydro Silk women's systems products, continue to show top-line momentum, growing 26% versus prior year, reflecting the strength of these global new product launches. The rapid sales growth in Hydro reflects strong repeat purchases of cartridges as we are reducing promotional spending and advertising to more of a run-rate level as full distribution is realized.

Overall, men's and women's system sales were flat, as the growth in the Hydro franchise was offset by legacy declines, primarily in the Quattro franchise. These legacy declines reflect the negative impact of heightened promotional activity across the systems category, as well as trade-up to the Hydro franchise. With sales in men's and women's razor blade systems essentially flat, the modest organic sales decline within the total Personal Care division was the result of three general factors -- disposable razors declined 5% versus prior year, as heightened promotional activity continued in this segment; shave prep sales were down 7%, due to increased promotional activity by competitors; and sales in infant care declined 9% as the impact of declining birth rates and significant competitive product launches continued.

We saw positive sales in two other products segments. Within sun care, sales increased 8%, due to continued growth in international markets in the southern hemisphere, both in Asia and Latin America. The December quarter is a low sales quarter for sun care in North America, as the March quarter is when the summer selling will ramp up. And within fem care, sales increased 3%, reflecting a change from prior sales trends, driven by continued growth in sport and the positive impact of the sell-in of Gentle Glide 360 innovation, our newest product launch in this category. For the Household Products division, organic sales increased almost 1%, driven by $18 million of incremental sales volume from Hurricane Sandy.

Excluding incremental sales from the hurricane, organic sales declined 2%, compared to the prior-year quarter. The decline ex-hurricane was driven in large part by the loss of shelf space at a major retail customer, which occurred midway through the prior fiscal year, as well as the increased costs of contract renewals with certain retail customers in North America and Asia. On the positive side, we continue to see top-line benefit from the 2012 price increase, as we will not anniversary the price increase until the second fiscal quarter.

Now I would like to provide a little more insight on a couple of key line items on the consolidated P&L. Advertising and promotion spending was essentially flat versus last year on a dollar and percent of sales basis. The 7.9% spending rate is relatively low compared to annual spending levels, reflecting a quiet quarter in terms of product launches. Total selling, general and administrative expenses were lower by $13.6 million, equating to 110-basis-point reduction as a percent of net sales. This reduction reflects lower expenses at both the corporate and divisional levels. For the first quarter, our overall effective income tax rate was 31.2%. Excluding unusual items, our effective tax rate in the first quarter was 31.6%. This rate is higher than our previous estimate for fiscal 2013, reflecting the impact of country mix, including higher US sales and profits due in part to Hurricane Sandy. As you may know, the tax legislation enacted in early January reinstated the R&D tax credit for US firms on a retroactive basis to the beginning of 2012.

Based on our fiscal year, we will benefit from this reinstated credit in two ways. First, we will receive a tax credit for the 75% of fiscal 2012, or about $1.5 million, and will receive a full credit of $2 million for fiscal 2013. However, we did not include this in our first-quarter provision estimate, since the law was passed in January of 2013. Excluding unusual items in fiscal 2013, we expect our total-year effective tax rate to be around 31%. Keep in mind, this can change as our earnings mix changes during the year. From an all-in standpoint, including the tax benefit of restructuring costs, we are currently estimating an effective income tax rate in the range of 30% to 30.5%. During the first fiscal quarter, we continued to make progress on our working capital initiative, achieving a 50-basis-point reduction on a trailing four-quarters basis versus last quarter.

Net working capital as a percent of sales is 20.9%, a 200-basis-point reduction from the baseline working capital level of 22.9% at the end of fiscal 2011. We are five quarters into this initiative and on track to achieve the targeted reduction of 400 basis points by the end of fiscal 2014. To date, our progress has been largely related to an improvement in days payables resulting from targeted negotiations with vendors. As we move through fiscal 2013, we expect to see additional progress in reducing days sales outstanding and days in inventory. During the remainder of 2013, we anticipate temporary increases in inventory levels related to the manufacturing footprint changes and the 2013 restructuring project. We will provide insight into these temporary increases in our future quarterly updates.

During the quarter, we had two significant unusual items. First, we recorded $49 million in charges related to the 2013 restructuring plan, which was announced on November 8, 2012. There are three primary components of this charge. A $23 million non-cash write-up of assets in the form of asset impairment and accelerated depreciation, primarily related to anticipated changes to our manufacturing footprint. This includes the closing of three facilities and the streamlining of three more facilities within our Household Products division. Additionally, we incurred $14 million in severance-related expenses and $12 million in consulting and other charges.

Second, in the first quarter we reported a curtailment gain of $37 million related to the decision to freeze our US defined benefit plan effective January 1, 2014. This gain was originally recorded as a deferred asset in 2009 when we switched our defined benefit plan from a final average pay formula to a cash balance formula, and the balance was being amortized into income over the average future service life of the participants. With the freeze of the defined benefit plan, accounting rules require that we accelerate the recognition of the entire deferred gain in the current period. As an unusual item, this gain is excluded from our financial outlook range for adjusted earnings per share. With that overview of the quarter, I will now turn the call over to Ward.

Thank you, Dan. Now I will walk you through each of our businesses and the key factors that are impacting them. In Personal Care, our key priority for 2013 is to roll out innovation across all of our categories. As you will recall from our Investor Day in December, we have a robust innovation pipeline. New product launch activity is ramping up this quarter and will extend through the balance of the fiscal year. Let me begin with wet shave. Our top-line growth in the overall wet shave segment was depressed this past quarter by significantly heightened levels of promotional spending across all wet shave segments in the United States. Specifically, our major competitor in wet shave executed 19 freestanding insert coupons, including two buy-one-get-one-free coupons events this past quarter versus 11 FSI coupons with no BOGOS the previous-year quarter.

The unprecedented level of promotional spending in the US impacted our disposable razors and legacy systems US market share. Despite this onslaught, our US Hydro franchise continues to deliver very solid results. Furthermore, we continue to see strong mid to high single-digit growth in disposable razors in our markets in Asia and Latin America due to trade-up and distribution gains. Though one can wrench share through ramping up promotional spending and discounting, we have always preferred to grow our business through introducing innovative new products. This remains our long-term strategy in wet shave, and is evident by the following. We are expanding the Schick Hydro franchise beginning this quarter by launching Schick Hydro 5 disposable razors and Schick Hydro Silk disposable razors in North America.

With this launch, we continue to innovate in the category by providing the same great technology and skincare benefits unique to Hydro to the 37% of the market that prefers disposable razors. After successful launches in North America and Asia in 2012, we are also expanding our launch of Schick Hydro Silk systems and Hydro Power into markets in Europe. We will support the launch of Hydro and Hydro Silk disposables and the rollout of Hydro Silk and Power Select with strong media campaigns as well as promotional activity. So, you can expect higher A&P spending as a percent of sales versus the first quarter level as we move through the rest of fiscal 2013. In addition to these new product launches within the Schick Hydro franchise, we continue to grow our Schick Hydro sales across the markets where we've launched.

As Dan noted, our global net sales grew 26% in the quarter, due to double-digit sales in refills across all of our areas. We will continue our core focus on driving Hydro trial as we continue to be pleased with the effectiveness our promotional programs on both trial and repeat. Furthermore, consumer off take of Hydro Silk continues to be incremental to our women's system franchise in all markets where we've launched. Specifically, our US 52-week market share for women's systems grew 2.6 points to 39.7%. In addition to the Schick Hydro disposable launch starting in North America, and our continued rollout of Hydro Silk and Hydro Power globally, we introduced a new four-bladed Edge men's system at a key US retailer this quarter. Finally, we have two additional, new razor and blade product launches, which we will discuss in further detail at the upcoming Cagney Conference next month.

Our Personal Care top-line results were more robust outside of the wet shave category this quarter, driven by innovation in fem care line of business, the launch of media support behind Litter Genie, and a robust international growth in sun care. The recent launch of Gentle Glide 360 is on track with share gains in the latest two four-week periods. In addition, sport continues to grow share in this quarter. We will continue to support the Gentle Glide 360 launch with strong media and promotional campaigns. In sun care, while first quarter is not a heavy sun care quarter in the US, sales grew approximately 17% versus prior year in key international markets. This continues the long-term trend of double-digit growth of our international sun care business, much of which is a result of both distribution gains and the launch of innovative new products.

Specifically, we have introduced and are currently shipping three new product innovations -- new Banana Boat Cool Zone lotions, Banana Boat protect and hydrate lotions, and Hawaiian Tropic silk hydration [sea] sprays, which have all received broad distribution at our top accounts. We have also executed a price increase of 3% on certain Banana Boat SKUs. Finally, our Litter Genie media campaign kicked off in October. Retail sales have ramped up significantly as a result of the increased awareness, and repeat refill sales are stronger than anticipated. Again, our plans are to continue to support this exciting new innovation with ongoing media and promotional campaigns. In Household Products, our key priority for 2013 is to rationalize and streamline our cost structure, to improve our competitiveness, and re-focus on our core battery and affordable lighting product lines to markets and customers.

I will cover the progress of the restructuring project in a few minutes, but I did want to cover a few recent category and market share trends, provide more context to the quarterly results Dan discussed earlier. In the current quarter, global battery category volume was relatively flat in the latest 12-week data, driven by hurricane Sandy. Ex-hurricane, however, we estimated the global category volume was down nearly 2%. Battery category value was up 2.7%, but relatively flat again, excluding the impact of Hurricane Sandy. We will anniversary our 2012 battery price increase in the second fiscal quarter. Thus, we believe that the trend in category value will more closely align with a negative trend in category volume as we move through the remainder of fiscal 2013.

Despite these category challenges, the Household Products division delivered profit growth incremental to the impact of the hurricane. North America low single-digit net sales growth was due to the favorable impact of hurricane volumes and the price increase, partially offset by lower volume and market share losses, resulting from decreased shelf space and display activities in a key retailer early last year. In Asia-Pacific we experienced top-line softness in some of our key markets due to category declines. However, market shares were relatively stable. In Europe, Middle East, and Africa, organic sales were up 1%, and higher sales in developing markets in central Europe, Middle East, and Africa, partially offset by softness in some of our Western and Southern European markets.

Category remains very challenging, especially in Southern Europe. Market shares were relatively stable. Finally, in Latin America our sales were stable, as lower volumes, due primarily to timing of shipments and the continuation of negative category volume trends, were offset by favorable pricing. We continue to increase our market share leadership position in this part of the world. We are very pleased with the profit improvement in Household Products versus a year ago. This is without any restructuring savings flowing through. Now turning to the update of our 2013 restructuring program. As previously communicated, we expect to realize gross annualized pretax savings of $200 million through the combination of reduction in force, manufacturing footprint changes, procurement savings, benefit plan changes, and other reductions.

Significant progress has been made over the past two months as teams across the organization have begun implementing these changes. Thus far, 354 positions have been eliminated. We initially focused on organizational realignment and not plant locations across North America. Nearly three-quarters of our total non-plant North American headcount reduction target has been achieved. We remain on track to reach our overall reduction adjustment of 1500 positions. The timing of manufacturing footprint changes remains on track, with facility closures expected through the balance of this calendar year. In addition, procurement initiatives are progressing well. We continue to work with our suppliers to identify and eliminate non-value-added waste and cost in targeted areas. All other initiatives are also on schedule.

Given the timing of the approval of the plan in November, savings were not material in the first quarter, but will begin accruing in the second quarter. Global savings in fiscal 2013 are estimated to be in the range of $25 million to $35 million, which is consistent with our initial financial outlook. We remain confident in delivering our overall gross annualized pretax savings target of $200 million by 2015, and expect restructuring costs to remain under $250 million. As previously noted, $50 million of the targeted savings will be used to provide the operating flexibility needed to invest in our businesses, grow our brands, and continue to accelerate our innovation efforts, which we believe are critical to ensuring long-term sustainable growth. We will continue to provide updates on the progress of this critical program during future earnings calls and releases.

Before we move to Q&A, I would like to reaffirm our fiscal 2013 adjusted earnings per share outlook of $6.75 to $7. Within this outlook, we are expecting to achieve mid-single digit sales growth in Personal Care for the fiscal year, driven by our new product launches. Within our Household Products, we are expecting a low single digit sales decline for the fiscal year. This decline is driven by a continued category softness and year-over-year impact of shelf space and display losses in fiscal 2012. The sales projection for each of our businesses is consistent with the financial outlook given last quarter. In addition, this outlook includes estimated net pretax restructuring savings of $25 million to $35 million for fiscal 2013, but does not include the impact of restructuring costs, or any share repurchases during this fiscal year. Now, Dan and I will be happy to take your questions. Operator?

(Operator Instructions)

Your first question comes from the line of Wendy Nicholson with Citi Research.

Hi. My first question has to do with the profitability in the Personal Care segment. And I would have expected that with the lesser level of advertising and the shift towards more blades and the particular strength of Hydro, that margins would have been maybe a little bit more insulated, even if sales came in a little bit light of your forecast. So I guess can you explain that a little bit? And am I not thinking about the potential contribution to EBIT from the Hydro blades, but more importantly, if we look out over the next few quarters, to the extent Personal Care continues to be a little bit challenged, and if you fall short of that mid-single digit top line growth target, is there a risk that the negative operating leverage clips your earnings outlook for the year, would you say, or do you feel like you've got enough offsets for that? Thank you.

On the profit part of you question, Wendy, I will have Dan answer that. I think, really from the sales top line perspective, we really are feeling pretty confident still about achieving that mid-single digit sales growth for the Personal Care division. And again, a lot of that is attributed to all the innovation that we went through and that we're launching, as well as some additional innovation that we will be talking about. So we still are feeling pretty good on the top line projections we've been providing for personal care. As for the margins. Personal Care for the quarter, I'll let Dan answer that.

Yes. Wendy, if you recall, a year ago this quarter was when we really pulled back on spending within Personal Care is the Hydro launch essentially matured. So in reality, spending within Personal Care, we actually had slightly more A&P spending in this is quarter versus year ago. So it really wasn't a favorable comparison. And that is why, if you look on a consolidated basis, the A&P spend's pretty the same as it was a year ago. And just to kind of echo what Ward was saying, when we look at our organic sales forecast within Personal Care, and a lot of this related to the products that Ward talking about and we talked about at Investor Day, it's really across the portfolio. There aren't one or two big areas. It's across all of wet shave, clearly within sun care, and even within infant and fem care. We feel pretty good about the plans we have in place and that that's going to generate incremental organic growth.

Can you give us any sense for, I think at Analyst Day you talked about planograms kind of being change at the beginning of the year. Just how much of that is a sure thing? How much of it is orders in hand, the stuff's on the truck and it's going out the door this month or next, versus we're hoping to get distribution over the next six months, and that sort of mid-single digit's going to come at very end of the year? Because I think that's obviously where most investors are sort of most skeptical, if I could say.

In terms of the distribution listings for most all the new products that we've outlined at this point, those are pretty much locked in. As we work carefully with our customers, and especially this is the time of year a lot of these planograms get reset, the sale-in of these promotions really -- or products took place last fall. The distribution, we know what distribution we've had. We know, in most cases, what planograms are going to be set. These products are shipping. A lot of those decisions are already behind us. Our projections, again, are based on what we know we have already achieved, both in terms of listings and planogram sets for 2013.

Your next question comes from the line of Christopher Ferrara with Bank of America, Merrill Lynch.

Thanks. Guys, I guess on Edge, can you talk, on the razor I mean. Can you talk about. I guess, the early-on takeaways out of Costco, and can you talk a little bit about the retailers' incentive to stock it. I guess what I want to understand is, how is a doing? Can it expand, right, because, I mean, where I saw it, it's $25, basically, for handle and 17 blades. How do I think about the margin for a retailer versus the ring for a retailer, and what their incentive would be for it go somewhere else besides Costco?

Well, I don't want to get into customer-specific opportunities, per se. Let me just say that with Edge it's early in the game. It is a joint opportunity with this customer. The customer is as eager about it as we are. And so proceeding accordingly. Whether and when it is an opportunity that could rollout elsewhere is really kind of premature to talk about. We do know that the Edge brand has quite a bit of staying power in this particular space. And it's kind of an innovative way to crossover from simply shave preps into the razor and blade business with a brand name that does have that saliency. So we're early in the game. We're optimistic and working with the customer to see how well we can grow it and to see where it goes.

And I guess as a follow-up, I mean, it's more philosophically. I mean, would it be fair to say, would you have a view that there's lots of profit to be made in the blades and razor category, perhaps below the $3 per blade price point in that category?

I think there is. I think the overall category remains one of the higher margin, most profitable categories in the entire personal care space. And the tradition of growing profitability through offering better innovation to people who are willing to pay for, at all price points, I think remains intact. I think maybe where it start to get a bit frayed is when you get to the very, very high end of that price/value relationship. I think we've seen a little bit of balking by consumers the last couple years at the top, top end, but we don't really play at the top, top end, even with our Hydro 5 and Hydro 3, which offer best shaves shades out there from a pricing/value proposition. I think we're more in line to what consumers are willing to pay.

Your next question comes from the line of Bill Chappell with SunTrust.

Good morning.

Good morning Bill

Just a little bit more on the battery business. I'm actually surprised that your re volumes were kind of in line with worldwide volume trends, despite kind of losing some share in the US. Just wanted to dig into that in terms of going forward. I know you don't lap that shelf space loss until after this current quarter, but are you expecting share to stabilize after that? Are you seeing with the planogram resets you might lose some more, or gain some of that back?

I think we will see, at a minimum, our shares stabilize as we annualize through that one particular distribution loss that we took early last year. And I think our household battery division management's intent on growing some share back. But I don't see further declines like we've seen over this past year. We continue to, I think, offer some of the best brands and best category solutions for our customers in the category. I think we have more focus on the category than anybody else out there. And those are the reasons, as I'm looking forward anyway, in terms of our share performance in Household, that would be my view.

Okay. Just to follow-up, maybe Dan. On the FX side, as you look now with regards to your guidance. I would assume there's a little more of a cushion, but I don't know how kind of your hedges work and how much cushion, or if there is any versus what your original guidance was three months ago.

Yes, Bill. We are not seeing a whole lot of change. The end is negatively impacted us in a big way with our razors and blade business. Later in the year we would see some positives with the euro. We don't see FX year remaining or year total being a big driver of ups or downs.

Okay, great. Thanks.

Your next question comes from the line of Bill Schmitz with Deutsche Bank.

Hey, guys. Good morning.

Good morning Bill.

Hey, when you look at the Personal Care growth target as sort of the mid-single digits for this year. Have you ever said how much of that you think is going to be in new products versus the base business? And then some scuttle in the industry that you are co-branding an Axe razor with Unilever, and I'm just wondering how big of an impact that will be on the top line?

Yes, to answer the first part of your question. I'd say about two-thirds of that organic growth for the Personal Care division this fiscal year is going to be attributable to the innovation pipeline. The other third coming from just some of the normal growth we are experiencing on sun care and the continued expansion of Hydro, the original Hydro products. In terms of the Axe product, this is something really that we're going to, I think, spend more time talking about at Cagney.

So I don't want to get into details right now, although obviously there is some information out there. And so just to be clear, this is a product that we're offering. It's owned by us, it will be managed by us. It is a co-branded opportunity. So we, in effect, are licensing the Axe brand for this particular product. And obviously are coordinating the use of that brand with Unilever's use of that brand globally. We think it's a wonderful opportunity for us, we think it's a wonderful opportunity for Unilever, I think for our retail customers. We are trying this out. And I think consumers will respond well to it. But we're really not ready to get into details of it. I hate to kind of balk at that point, but further details certainly will be forthcoming over the next 30 to 60 days on that.

Okay. I mean, will be this year, just for modeling purposes, if we want to sort of like build the growth in the Personal Care business? And I have one more follow-up, if I can.

Well, I think I would lump it into the overall comment about innovation contributing about two-thirds of that organic growth on Personal Care, but we're not going to dissect it out any further than that.

Okay, and then there was some commentary in the press release about cost for contract renewals or higher costs for contract renewals. Does that mean it's costing you more to stay in existing accounts, or is there incremental distribution of batteries that you kind of had to pay up for?

I think it's really combination of all that. I think it's really just a combination of all that, and it's a matter of negotiations with customers and various parts of -- various classes of trades, frankly, various parts of the world. And the cost of business is not going down, I will put it that way. And yet it's always negotiation with a retailer in terms of how do we kind of grow both our businesses and grow profitability at both our businesses, which I think we have a pretty good track record of doing.

Got you. Will the ACV be higher or lower in batteries this year, do you think?

All commodity volume?

Yes.

In distribution?

Yes.

I think in our distribution, it is pretty broadly distributed now. I mean, you may go up or down a couple basis points, but that's not a material change for us one way or the other.

Okay, great. Thanks so much.

Your next question comes from the line of Dara Mohsenian with Morgan Stanley.

Good morning. I wanted to touch on your long-term top line growth expectations, and if you look out over the next few years, do you think it's realistic you can grow corporate organic sales growth beyond 2013? If you look at the last few years, you've been relatively flat, even with the Hydro benefit, and it looks like competition's increasing. So I'm just curious for your expectations for corporate top line growth beyond this innovation-driven year in fiscal 2013.

Sure. Well, obviously we will see some very healthy growth in Personal Care this year behind the innovation we've talked about. We certainly are not going to stop innovation after this fiscal year. So innovation remains in our long-term plans, two, three, four years out. And we're in some categories that have some nice category growth rates, especially in the developing parts of the world. And we're in a good position in many of those places to take advantage of that. So we have a number of nodes of growth, especially on the Personal Care side that we continue to pursue. I don't think we give actual guidance for long-term organic sales growth at this point in time. But based on what we're doing this year, and again just the Personal Care division becomes a larger and larger portion of the overall Company as we go forward through that growth, and has more of an influence on the overall growth number for the total Company as we go forward. I would expect that to continue.

Okay. And then has there been some type of change in terms of the way you approach your innovation process or the R&D process that you think drives a greater innovation pipeline as you look out over the next few years?

I don't know if I would say change, other than maybe an expansion of. I would say we've always had one of the strongest innovation pipeline and disciplines coming out of the razor and blade group and razor and blade business, where we really are working on 7- to 10-year innovation pipelines that roll forward. The discipline and that expertise we've applied over time to various businesses we've acquired. And again, when you acquire a business and I reflect on the acquisition of the Playtex businesses we acquired '07, '08, and more recently the ASR business we acquired.

Getting that innovation pipeline full, developed, and then executed is probably always the longest leg of those. And what you are seeing now is the R&D razor and blade discipline being applied to category after category after category. And so you're seeing, sun care we really, I think, stepped up the innovation a couple years ago, and you're continuing to see that. In fem care, you're seeing that with the Gentle Glide 360. Infant c, we have some stuff on the horizon we're not ready to talk about quite yet, although the Litter Genie is a nice example of that. So I think you're seeing just some kind of inherent strengths we have as it relates to innovation that stemmed out of razor and blades, being rolled out, and with time executed across all our Personal Care categories. And this is great year where we're really just in almost every category we have something going on.

(Operator Instructions)

Your next question comes from the line of Nik Modi with UBS.

Yes, good morning everyone.

Good morning Nick.

Just wanted to quickly ask on cost cutting. You've outlined, obviously, a lot of initiatives. Just curious kind of where trade spending falls into the whole mix as you look out over the next couple of years. If you could just comment on if you think there is any opportunity there.

Well, I think there is always opportunities to get more for the trade spending dollars we spend. And we've actually put some resources. It's really outside the restructuring program per se that we've been talking about. But we have redirected some resources towards customer analytics, customer P&L management, in helping our customers improve their efficiencies, improve their return-to-inventory investment, that sort of thing. I think we've always a pretty good at that, especially, actually, on the household battery side. Although our Personal Care people, I think, are also pretty good at that. And it is an area of strength that I think we're strengthening even more. But I won't necessarily cite that as part of this $200 million in savings that we are citing as part of the restructuring program per se.

It would be additive if you did find some efficiency there?

Absolutely. And sometimes that is offsetting other costs in other parts of the business, whether it's raw materials or labor or heath care costs or whatever. I mean, it's not all additive. We always have cost pressures in some parts of the business, and always looking for efficiencies in others to offset that.

Fair enough. Thanks. That's it from me.

Your next question comes from the line Ali Dibadj with Bernstein.

Hey, guys. Want to zoom in on batteries for a second. Just with a quick follow-up and a broader question. From a follow-up perspective, you do now have a sense of planograms, as you mentioned. Can you talk about shifts there, or any price changes or increases you'd expect going forward, because the way you're describing it, sounds like this negative 2% ex-Sandy number in Household probably gets worse from here. But the broader question is, and I apologize for this. I guess I'm kind of confused about your positioning in batteries at this point. Because Duracell very clearly spending more money to stay at the high end of prices and the high end of kind of brand, and Spectrum is doing the opposite, which is coming in at the lower end to gain share.

But you're priced aligned with Duracell, but it feels like you're kind of abandoning, in some sense, the investment in the batteries category. It doesn't sound like you are going to change that. So won't you have to invest more in the battery category? You might not want to, but won't you have to invest more in the battery category to maintain your price premium in line with Duracell, or risk a kind of tipping point, in some sense, from a share perspective, a price perspective, maybe a margin perspective? I guess I'd love some more clarity there, and the follow-up up front.

Okay. Well, there's a lot of questions there, Nik (sic). Let me see if I can get some of them for you. In terms of, you asked about planograms setting. The previous comments were really kind of more in the context of all the new products that we've sold in and those planograms, and most of that obviously being on the Personal Care side. Those listing decisions kind of already being made and locked in, and that's the case. I would say on the battery side we're in the midst, really, of planogram discussions, customer opportunities. With batteries, you tend to have more of a seasonality O&D, October, November, December kind of focus. And so those, I think, are more in process whereas the new products are pretty much locked in.

So just to be clear on that. In terms of the brands, we are not abandoning the premium by any means. Energizer imagery and Energizer quality, Energizer pricing, there are no changes in that strategy. As we've talked many times in the past, as we view the battery business, there's two premium brands. There's Energizer and Duracell, and there's a number of value brands, including Rayovac, private label and others. We have actually unique competitive strength in that we also have a value brand that we can you use time to time in the Ever Ready brand.

And we do have an Every Ready alkaline offering that we use in certain customers within certain countries and certain classes of trade. What that does is it gives us the benefit of protecting the premium image and pricing of Energizer as we continue that heated competition between Energizer and Duracell, while also fighting on a second front with a very effective brand, in this case with Ever Ready. In terms of funding and sustaining the Energizer brand, obviously as we do our project and carve out $200 million in savings, we're dropping $50 million of that back into the businesses. It is fair to guess that not all of that's actually going into Personal Care, that some of that can be funneled back into the brand building and equity sustaining activities with Energizer. So hopefully that answers all your questions.

It does. It helps. Shifting gears to Personal Care. It sounds like you're pretty confident, actually, in the kind of 6% to 7% organic growth you need in that business to get to your mid-single digit target for the next three quarters. And are you anticipating that the level of investment your competitors have put in the marketplace this past quarter, which it sounds is a little bit of a surprising level, high level, dissipates over time, or are you assuming that's sustainable? And then are you, in that category, also looking for, in Personal Care broadly, looking for anything to boost that growth? So, for example, we hear, the media press has J&J looking to sell Stem Care. Is that something that would be of interest to you? Two questions there again. I apologize.

Yes. We don't really care to speculate on what our major competitor's going to do promotion-wise going forward. You look at the impact of some of the categories from their promotional effort, and you see razor and blade value growth rates in the US, where a lot of this promotion's taking place, is down significantly on a 12-week basis versus a 52-week basis. Value growth, the data I'm looking at for razor and blades is like under 1.5% for category for the quarter during all this promotional activity. That's versus a 52-week run rate of over 3%, and that's versus a really kind of an ongoing global growth rates in the same category of 3%.

So you have to wonder how sustainable that model is if you're really trying to grow your value and the profitability of that category. But you'll have to talk to others about their strategy there. Our strategy very clearly is based on innovation. And as we laid out in December and we laid out again in this call and as we'll lay out further at Cagney, we have a lot of innovation to bring. And so that is the source of the guidance we're giving on mid-single digit organic growth in Personal Care for this year, and I think sets up well for continued growth.

I forget, what was a second part of your question? Are we are looking at the J&J opportunity? I think obviously we have always focused on just plastic tampons. It's not been a strategic business for us, but it's been a nice business for us, not without its challenges. It's kind of nice to see both the Sport and Gentle Glide brands plastic tampons growing right now. We are excited about Gentle Glide 360. It is real innovation again that we're bringing to the category that's right on in terms of the product proposition. We're going to let that run. And until we're pretty much focused on that, and whether there are opportunities outside that from an M&A point of view, we really just don't comment on that at all. So I can't help you on that.

There are no additional questions at this time. I would now like to turn the presentation over to Mr. Ward Klein for closing remarks.

Well, we really don't have anything else to cover today in the call. So thank you everybody for joining us, and operator, I will turn it back over to you.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.