Ann: Company Update, page-24

Question asked during latest Edgewell earning call (Banana Boat / Hawaiian Tropic):

Bill Chappell

Thanks, good morning. Two questions. First, just maybe give a little more color on Sun Care and kind of your expectations. I'm just trying to understand what your - what the crystal ball is for travel, international travel this summer and how you're building for that?

I think last year, the big hit was that lack of international travel. I didn't know if you're expecting it to come back as we get to June. And hopefully, there's -- everyone's fully inoculated or if you're not planning for that. And same kind of with the US, I'm just trying to understand, what are the building blocks as you're working on production right now?

Rod Little

Yes. Good morning, Bill. And thanks for the question. This is nuanced, and there's three things going on. There's an international tourism market that's highly dependent on international travel across borders. That market has effectively been shut down or severely impacted since the beginning of the pandemic and continues to be that way today.

And I think that part of the sun market isn't going to return to normal until we're through the bulk of the lockdowns and vaccines are up at rate. And so we can all predict when that might be, but that's going to continue to be challenged for us. And that's primarily our international business.

In the second piece of this is the US market and then primarily the European domestic markets as well, where people can travel and get to the coast, to be at the beach or feel comfortable and safe to be out of their pools. That is less impacted because people can still go do that safely. In fact, being outside is encouraged to be safe, and you need to protect your skin when you're outside. So that's the second piece which is less impacted.

The third piece of this though is the timing of when and how all this happens. In addition to the first two impacts last year, the other element we had is we lost the early part of the sun season. With spring breaks being impacted, Easter being impacted, Memorial Day was impacted, things didn't really open up domestically in the US and the European markets. For example, swimming pools being open until the middle towards the end of June.

And so as we cycle this period, we continue to expect the international headwinds as I said. And the timing piece of these more domestic-driven Sun Care use occasions, I think we're a little more optimistic that we're going to be back into, let's call it, normal consumption, maybe a little sooner than we were last year. And I think we still feel good about the season overall in terms of the consumer going to be there.

There's going to be a lot of demand for people to be outside and out of the homes as we come out of the spring period here. And retailers see that as well. And so there's been good sell-in and priority amongst retailers. And I think the view from retailers is they're optimistic as well.

And we executed well last year. We expect to execute well again this year relative with the competitive set and having good islander and end-aisle displays and then our brands and the messaging will do the rest.

Bill Chappell

Got it. Well - and I'll just follow-up on that. I mean so are you producing where we could actually have out of stocks? Or are you okay with having a glut at the end of the season? Because I know that there's not - it's going to run on consignment, but it's somewhat - you take back returns, excessive returns in this industry. So I'm just trying to understand how that's planning. What do you see at the end of the tunnel or what you're comfortable with?

Rod Little

Yes. Our production around Sun Care is very flexible. We do it domestically here in the US, and we've got a very responsive model. You saw us last year, despite the category and the season being down overall, having no material write-offs, in fact, less. We, in fact, shorted some inventory at the end of last year as we were looking to be very careful and to not be in that position.

This year, we can meet all the demand that's there. We've been building across the fall. And so we're ready to go, and we can source volume up or down regardless of where it goes. But we don't foresee an out of stock issue even in a better-than-expected sun season.