Andrea Teixeira

Andrea Teixeira asked for clarity on sales phasing for Q1 and the full year, particularly in the U.S., and sought more detail on the size of the Mexico business. She also inquired about the phasing of gross margin and EBITDA throughout 2025, considering the tariff impacts.

Answer

CFO Patraic Reagan provided guidance for high single-digit revenue growth for the total company in Q1. For the full year, he projected high single-digit growth domestically and high-teens growth internationally. Regarding margins, he indicated that Q1 would be the low point for the year, with margin accretion building through Q2, Q3, and Q4 as production shifts out of China. He reiterated the long-term Mexico opportunity of at least $400 million without specifying its current size.

Andrea Teixeira questioned the implied Q4 sales guidance, which seems conservative given strong consumption data, asking if it reflects a slowdown from shifts in Mexico and the UK. She also asked for an update on retail inventory levels.

Answer

CEO Mark Barrocas stated that while underlying Q4 demand is solid, inventory constraints on popular new products like the SLUSHi and Cafe Luxe will limit the ability to capture all potential upside. CFO Patraic Reagan added that channel inventory is clean and that on a two-year basis, inventory growth is now aligned with revenue growth, indicating a healthy, normalized position heading into the holidays.

Andrea Faria Teixeira inquired about the promotional environment, competitive landscape through October, and the use of price pack architecture for upcoming innovations to meet consumer price points. She also asked about the price algorithm embedded in the second half's organic sales growth and sought details on gross margin flexibility given operational deleverage and commodity trends.

Answer

CEO Linda Rendle described the competitive environment as largely rational but varying by category, with increased promotions in trash and cat litter. She confirmed the full use of price pack architecture for new innovations, including salad dressing and litter, to capture the full spectrum of consumer needs. CFO Luc Bellet stated that overall inflation is expected to remain moderate, with input costs about $20 million more favorable than prior estimates, but noted additional ERP-related expenses and increased trade/advertising spending, leading to gross margin being towards the lower end of the range, with robust expansion expected in Q3 and Q4.

Andrea Teixeira inquired about the promotional environment, competitive landscape, and the company's price pack architecture strategy for upcoming innovations, particularly how it aligns with value-seeking consumers. She also asked for details on the price algorithm embedded in the second-half organic sales growth and a follow-up on gross margin flexibility given operational deleverage and commodity trends.

Answer

CEO Linda Rendle described a largely expected, competitive environment with varying promotional increases by category, noting a focus on price pack architecture for innovations like salad dressing and cat litter to meet diverse consumer needs. CFO Luc Bellet updated on gross margin, indicating a slightly more favorable inflation outlook ($20M better) but also increased trade spending and advertising, leading to expectations for robust gross margin expansion in Q3 and Q4.

Andrea Teixeira of JPMorgan Chase & Co. sought a detailed explanation of the math behind the ERP-related inventory shifts, questioning why the negative sales impact in fiscal 2026 appears larger than the benefit in fiscal 2025, and asked about broader industry destocking trends.

Answer

CEO Linda Rendle clarified that general industry destocking was not a major factor and framed the ERP project as a complex, greenfield implementation. CFO Luc Bellet detailed that retailers built more inventory than initially expected (about two weeks' worth), shifting sales from July (Q1'26) into June (Q4'25). He explained the year-over-year math, noting the higher base in FY25 contributes to the outsized negative percentage impact in FY26.

Andrea Teixeira asked for examples of how Clorox's portfolio serves the bifurcated consumer and inquired about performance across different retail channels, such as club stores versus drugstores.

Answer

CEO Linda Rendle explained that Clorox is strong in mass and club channels where consumers are shifting, and less exposed to drugstores. She used the Cleaning category as an example of serving bifurcated needs: consumers can choose premium, convenient disinfecting wipes or high-value dilutable products like Pine-Sol and bleach. She noted that the company grew share in bleach, demonstrating its ability to capture value-seeking consumers while still succeeding with premium offerings.

Andrea Teixeira of JPMorgan Chase & Co. asked about the pace of distribution recovery following the cyberattack and if there is more room for gains, particularly with new innovation. She also questioned if the ERP implementation caused any delays in these plans.

Answer

CEO Linda Rendle stated that distribution lost during the cyberattack was fully recovered, with current levels higher than a year ago. She clarified that the distribution base is now normalized, and future gains will be driven by standard business practices like innovation, not further recovery. She also confirmed the ERP transition has not caused any timing impacts on innovation or distribution.

Andrea Teixeira inquired about category consumption trends amid value-seeking consumer behavior, the expected cadence for gross margins in the second half, and whether the company's commodity outlook has changed.

Answer

CEO Linda Rendle stated the consumer environment is playing out as expected, with value-seeking behavior leading to shifts in pack sizes and channel preferences, but not a significant trade-down to private label. CFO Kevin Jacobsen provided an updated commodity outlook that is slightly more favorable than previous estimates. He detailed the gross margin cadence, expecting a dip in Q2 before normalizing to the full-year rate of around 44-44.5% in the second half.

Andrea Teixeira from JPMorgan Chase & Co. questioned the drivers behind the impressive volume and profitability of the Hefty Waste and Storage segment, specifically regarding the impact of RGM, promotions, and distribution gains, and the outlook for these trends into 2026. She also asked about Reynolds Consumer Products' strategy for balancing its private label offerings and branded products, particularly in addressing value-seeking consumers and managing pricing across different tiers.

Answer

President and CEO Scott Huckins stated that Hefty Waste and Storage's success stems from product innovation, like scented waste bags, and strong execution, maintaining high 90% case fill rates despite competitive promotional intensity. He noted that the mix between brands and store brands remains static, indicating effective satisfaction of both brand-loyal and private label consumers, contributing to overall segment volume growth. Reynolds Consumer Products plans continued investment in durable innovation.

Andrea Teixeira asked for more detail on the impressive volume and profitability numbers for Hefty Waste and Storage, specifically regarding the impact of promotions and distribution gains, and when the company expects to lap these gains. She also followed up on the private label strategy within the segment, asking how Reynolds balances value for entry-level consumers with premium offerings like scented waste bags, given the stable mix between brands and store brands.

Answer

Scott Huckins, President and CEO, attributed Hefty Waste and Storage's success to innovation and its positioning as a performance brand, noting that promotional activity is in line with pre-pandemic levels. He highlighted consistent high 90% case fill rates as a key success factor. For private label, Huckins explained that the mix between brands and store brands in waste bags remains static, indicating strong loyalty for Hefty items and effective satisfaction of private label consumers.

Andrea Faria Teixeira asked for clarification on the gross margin outlook, the cadence of pricing actions to offset cost pressures, the embedded elasticity assumptions, and confirmation of share gain dynamics in branded trash bags versus private label food bags.

Answer

CFO Nathan Lowe reiterated the full-year guide anticipates 2-4 points of pricing to fully recover 2-4 points of cost headwinds, noting the Q2 gross margin pressure was a matter of timing. CEO Scott Huckins added that rising store-brand foil prices provide a constructive environment for their own pricing. He also confirmed that Reynolds gained share in Hefty branded waste bags and in store-brand food bags during the quarter.

Andrea Teixeira asked about consumption trends exiting the quarter, the level of promotional support planned for upcoming price increases, and how these factors contribute to the revised EBITDA guidance.

Answer

CFO Nathan Lowe explained the $20 million reduction in the EBITDA guide is driven entirely by lower retail volume expectations, as pricing actions are intended to be net neutral against tariff costs. CEO Scott Huckins added that Q1 retail performance was as expected, with March being stronger than January and February. He noted Q1 share gains were not from higher promotions, but Q2 will see a slight increase to support new distribution, with full-year 2025 promotions expected to be similar to 2024.

Andrea Teixeira asked for details on the prioritization of innovation and distribution, including whether it involves higher A&P spending. She also inquired about the 2025 gross margin outlook, the indirect impact of aluminum tariffs, and the company's hedging strategies.

Answer

President and CEO Scott Huckins explained the new approach involves force-ranking innovation to better allocate resources and expects 2025 advertising spend to be roughly consistent with 2024. CFO Nathan Lowe noted that while detailed gross margin guidance isn't provided, the EBITDA guide implies a modest margin increase. Regarding tariffs, Lowe stated the company needs to see how commodity markets settle but uses tools like longer-term supplier pricing windows, derivatives, and productivity to manage volatility.

Andrea Teixeira inquired about the impact of consumer down-trading to private label and asked for an update on the tableware business, specifically regarding the timeline and magnitude of the foam plate decline.

Answer

President and CEO Lance Mitchell stated that private label shares are back to 2019 levels and that the company's dual-brand model is a competitive advantage. Regarding tableware, he noted the foam decline trend has been ongoing since 2019 and is being managed with new products. CFO Scott Huckins added that foam is a minority of the tableware portfolio and that the non-foam parts of the business are outperforming their categories.

Andrea Teixiera asked for clarification on the $400 million synergies, specifically how procurement and commodity hedging are integrated, and how conservative the guidance is, considering JDE Peet's hedging capabilities.

Answer

CEO Tim Cofer clarified that the $400 million in acquisition integration synergies over three years are incremental to JDE Peet's €500 million cost-out program over seven years. Chief Transformation Officer Roger Johnson expressed confidence in the synergy underpinnings, emphasizing a 'best of both' principle and plans for detailed work in clean rooms to optimize manufacturing, routes to market, and coffee formulation.

Andrea Teixiera sought clarification on the $400 million synergy target, asking if it is incremental to JDE Peet's existing $500 million program. She also inquired about the breakdown of the $400 million, particularly regarding commodity hedging and procurement, and the conservatism of the guidance.

Answer

CEO Tim Cofer confirmed that the $400 million acquisition integration synergies over three years are incremental to JDE Peet's EUR 500 million cost-out program over seven years. Chief Transformation Officer and Supply Chain Officer Roger Johnson added that the synergy targets are underpinned by detailed plans across procurement, manufacturing, logistics, SG&A, and IT. He noted that while the coffee market is efficient, opportunities exist in technology and development, and further details on policies and action plans will be explored in upcoming clean room discussions.

Andrea Teixeira asked a two-part question regarding the outlook for pod volume recovery and price elasticity in the coffee segment, and the strategy (organic vs. M&A) to achieve a double-digit share in the energy drink market, including progress on GHOST distribution.

Answer

Chief Executive Officer Tim Cofer addressed both points. On coffee, he stated it is too early for a clean read on price elasticity but consumer response has been in line with expectations, and protecting profit to fund reinvestment is the priority. On energy, he highlighted the GHOST acquisition as a key part of the strategy, noting the distribution handover begins in March and KDP will add value by building ACV, display quality, and leveraging its DSD network to drive growth towards the double-digit share goal.

Andrea Teixeira asked for more detail on price mix by category, specifically consumer response to investments in value-tier products like Luvs diapers, and examples of products pivoting for low-income consumers in categories like diapers and paper goods.

Answer

CFO Andre Schulten reiterated P&G's strategy of driving superiority across all value tiers, citing examples like Cascade auto dish innovation (across super premium, premium, mid-tier), diaper upgrades (Luvs, super premium, mid-tier Baby Dry), and Olay's Super Serum. He emphasized that consumer response is positive when integrated superiority is executed well, leading to volume and value share growth and trade-in/trade-up, and noted this approach is being expanded across the U.S. portfolio.

Andrea Teixeira inquired about price mix by categories, specifically P&G's investment in Luvs and diapers in the U.S., consumer response to premiumization versus value-seeking low-income consumers, and examples of products pivoting for value in diapers and paper goods.

Answer

Andre Schulten, CFO, reiterated P&G's commitment to superiority across all value tiers, citing examples like Cascade's auto dish innovation and Pampers' multi-tier upgrades (Luvs, Baby Dry). He explained that successful innovation, combined with appropriate pack sizes, channel distribution, and promotion, drives consumer response, volume, and value share growth, confirming that this strategy is being expanded across the U.S. portfolio.

Andrea Teixeira of JPMorgan Chase asked for an update on the Personal Health Care strategy, particularly organic versus M&A growth, and for clarification on whether tariff mitigation and restructuring savings are included in the fiscal 2026 EPS guide.

Answer

President, CEO & Chairman Jon Moeller reiterated that Personal Health Care is a focus area with strong organic growth potential, but P&G remains open to opportunistic M&A. CFO Andre Schulten confirmed the midpoint of the guidance range includes assumptions for both tariff mitigation and restructuring savings, with savings expected to build in the second half of the year.

Andrea Teixeira from JPMorgan sought clarification on the annualized $1 billion to $1.5 billion tariff impact, suggesting it seemed manageable on an aggregate basis, and asked about mitigation plans.

Answer

Executive Andre Schulten confirmed the $1B-$1.5B pre-tax figure, equating to a 140-180 basis point margin impact. He emphasized that while the aggregate number seems manageable, the impact is highly concentrated on specific SKUs and markets. He stated that all tools are on the table for mitigation, including productivity, sourcing and formulation changes, and pricing, with the specific approach varying by product and market.

Andrea Teixeira of JPMorgan Chase & Co. sought clarification on the guidance tone, asking if management felt better about the top-line midpoint but more pressured on EPS, and inquired about any lingering effects from the December transportation supplier disruption.

Answer

Andre Schulten, an executive, stated that based on current conditions, P&G has good visibility towards the lower end of the guidance ranges for both organic sales and core EPS. He also clarified that the transportation system outage was fully overcome by the team within the quarter, resulting in no net impact on quarterly results or carry-over effects.

Andrea Teixeira noted the significant negative performance in Skin Care and questioned what provides confidence that the other 85% of the business can maintain its stability, implying a Q2 acceleration is necessary to meet guidance.

Answer

Executive Andre Schulten reiterated that the 3% to 5% guidance is a range reflecting multiple potential outcomes. His confidence in the core 85% of the business is based on its sustained track record of strong growth over the past five to six quarters, coupled with positive share trends and a robust innovation pipeline.

Andrea Teixeira asked about the headwinds of SKU rationalization on new organic growth, and for clarifications on PBNA's price reinvestment results (especially in core brands at entry-level price points) and whether the positive volume inflection mentioned was for the total company or specific regions/areas.

Answer

CFO Jamie Caulfield explained that SKU rationalization benefits operational efficiency and customer service by cutting the 'long tail' of small volume items with overlap, thus not losing much while gaining efficiency. Regarding PBNA price reinvestments, he noted that permissible subcategories are doing well, but the bigger opportunity for price pack architecture is in mainstream take-home, with ongoing refinement based on data to drive demand.

Andrea Teixeira asked about the potential headwinds of SKU rationalization on new organic growth. She also sought clarification on the results of price reinvestments in PBNA's core brands at entry-level price points and whether the reported positive volume inflection in the last four weeks was for the total company or specific regions/areas, and where it was observed.

Answer

EVP and CFO Jamie Caulfield explained that SKU rationalization, by cutting the "long tail" of small volume items, creates operational efficiency and improved customer service without significant loss, as there's often overlap with larger portfolio items. Regarding price reinvestments, Jamie Caulfield noted that permissible subcategories are doing well, but the bigger opportunity for price pack architecture refinement is in mainstream take-home products, with ongoing adjustments based on competitive data to drive demand. Chairman and CEO Ramon Laguarta clarified that the volume inflection was observed in the food business, which grew in the last four weeks, and that the overall direction of the business is positive due to improved basics like service, price, execution, and customer engagement.

Andrea Teixeira of JPMorgan Chase & Co. questioned why the share of healthy snacks remains relatively low despite consumer demand and asked if PepsiCo should pursue different product forms, like shakes or nuts, potentially through acquisitions.

Answer

Chairman and CEO Ramon Laguarta responded by broadening the definition of 'permissibility' to include portion control, noting that over 60% of U.S. food volume is already in smaller formats. He emphasized that the strategy involves multiple levers—including ingredients, cooking methods, and formats—to participate in on-the-go lifestyles, rather than focusing on a single approach.

Andrea Teixeira asked for a deeper analysis of Frito-Lay North America's volume declines, specifically whether the weakness is more pronounced in higher-priced large packs versus smaller packs, and how the company is reacting to these consumer behaviors.

Answer

Chairman and CEO Ramon Laguarta explained that consumers are increasingly focused on absolute price points, leading PepsiCo to emphasize entry-level items like smaller single-serves and smaller multipacks. He noted consumer behavior varies, with a focus on value per kilo early in the month and absolute price per unit later. He also highlighted the impact of lower traffic in convenience stores and the strategy to use meal deals to drive incidence in that channel.

Andrea Teixeira asked if international convenience foods require increased marketing to drive volumes, similar to the U.S., and questioned if Frito-Lay North America's margins would remain pressured due to these reinvestments.

Answer

Chairman and CEO Ramon Laguarta affirmed their ongoing focus on revenue management and brand investment in international markets. Regarding margins, both he and CFO Jamie Caulfield emphasized that they are managed at a total PepsiCo level. While Frito-Lay's focus is on stimulating demand, overall company margins are expanding, suggesting other segments are offsetting the pressure.

Andrea Teixeira asked about Coty's distribution strategy for the second half of fiscal 2026, sought a breakdown of retailer destocking assumptions for H1, and inquired about the strategic options and timing for the Wella stake divestiture.

Answer

CEO Sue Nabi stated that Coty is seeing significant distribution gains in mass fragrances and that new perfume mists are creating incremental shelf space. CFO Laurent Mercier detailed the destocking plan, explaining the sell-in/sell-out gap will gradually reduce through Q1 and Q2 to become nil by Q3 fiscal '26. He also reiterated that Coty remains committed to divesting its Wella stake at the right time and for the right value.

Andrea Teixeira asked about Coty's distribution strategy for H2 fiscal 2026, the retailer destocking impact assumed in Q1/Q2 guidance, and the strategic options and timing for the Wella stake divestiture.

Answer

CEO Sue Nabi stated Coty is seeing distribution gains in mass fragrances and that new perfume mist lines are incremental. CFO Laurent Mercier explained the destocking impact is expected to gradually reduce through H1 fiscal '26, reaching zero in Q3. He affirmed that Coty remains "absolutely committed" to divesting its Wella stake at the right time and for the right value.

Andrea Teixeira from JPMorgan Chase & Co. asked about U.S. color cosmetics, questioning why the successful U.K. Rimmel strategy hasn't worked as well for CoverGirl in the U.S., and how much of the announced cost savings will flow to the bottom line.

Answer

CEO Sue Nabi attributed the difference to the U.S. market being more competitive with greater exposure to indie/dupe brands. She explained the U.K. served as a test market for new strategies, like TikTok Shop, which are now being implemented for CoverGirl in the U.S. CFO Laurent Mercier detailed that the savings are intended to create headroom to manage volatility (like tariffs) and reinvest in brands, with the ultimate goal of continuing constant EBITDA margin improvement of 20-30 basis points on an ongoing basis.

Andrea Teixeira of JPMorgan Chase & Co. asked about the magnitude of PRGP savings embedded in the fiscal 2026 margin guidance, the level of reinvestment, the retail-to-shipment gap in the U.S., and the pricing assumptions included in the outlook.

Answer

EVP and CFO Akhil Shrivastava confirmed that significant PRGP savings are included in the FY26 forecast, with more to come in future years from outsourcing and procurement. He noted the North America retail-to-net sales gap should compress over the full year. President and CEO Stéphane de La Faverie clarified that a low single-digit price increase is embedded in the guidance, but the strategy is nuanced, involving targeted innovation by price tier and even some strategic price reductions to reignite growth on certain products.

Andrea Teixeira of JPMorgan Chase & Co. inquired about client retention trends in the Home and Office Delivery (HOD) business, the assumptions behind the expected Q4 inflection, and the market share dynamics in retail for purified water.

Answer

CEO Robbert Rietbroek emphasized that the disruption was concentrated in last-mile delivery, while other segments like refill and premium water grew. He highlighted strong underlying retail health, noting that Primo Brands grew retail dollar share by 11 basis points in the first half and 48 basis points in July. He pointed to positive category trends, including growth in new buyers and trips, as indicators of strong consumer demand.

Asked for a bridge from Q1's organic growth to the full-year guidance, the performance of entry-level purified water (Pure Life) versus spring water, and for clarification on whether the guidance already accounts for the leap year.

Answer

The company explained that Q1's normalized organic growth, adjusted for the leap year, was 4.2%, in line with guidance. Confidence in the full-year guidance is supported by the timing of Easter promotions, new distribution gains, and revenue synergies. The Pure Life business performed well, up 3.5%, with a focus on competitive pricing. It was confirmed that the full-year guidance already embeds the leap year impact.

Andrea Teixeira requested a bridge from Q1 organic growth to the full-year guidance and asked about the performance of the Pure Life brand relative to spring water and private label amid consumer pressures.

Answer

CEO Robbert Rietbroek clarified that Q1 normalized organic growth was 4.2% after adjusting for the leap year, aligning with the 3-5% annual guidance. He also noted a favorable Easter timing shift into Q2. He stated the Pure Life business performed well, with 3.5% net sales growth, driven by a focus on maintaining a competitive value proposition for consumers.

Andrea Teixeira asked how Kenvue intends to measure the success of its turnaround and what key performance indicators investors should monitor, particularly for the Skin Health & Beauty segment.

Answer

Interim CEO & Director Kirk Perry explained that the ultimate measure of success is 'consumers voting for us every day at the shelf,' which translates to sequential improvement in market share. He outlined his four operating priorities—leadership, strategy, execution, and structure—as the drivers to achieve this goal, reinforcing that consistent market share gains are the key metric for investors to watch.

Andrea Teixeira asked how Kenvue will measure the success of its turnaround, particularly for the Skin Health & Beauty segment, and how investors can monitor this progress through external data.

Answer

Interim CEO Kirk Perry stated that the ultimate measure of success is sequential market share improvement, reflecting consumers 'voting at the shelf.' He did not provide a specific timeline but reiterated that progress will be driven by the company's four key priorities: strengthening leadership, refining strategy, improving execution, and optimizing the operating model.

Andrea Teixeira asked for a deeper analysis of the Skin Health and Beauty segment, seeking ways for investors to measure the success of new campaigns and gain confidence in the turnaround, particularly in the U.S. market.

Answer

CEO Thibaut Mongon acknowledged that while there is more work to do, he is encouraged by positive signs in consumer consumption, which is outpacing organic sales growth as planned. He highlighted that key U.S. platforms like Neutrogena Face Care, Aveeno Body Care, and OGX Hair Care are seeing positive consumption momentum, indicating the company's strategic actions are beginning to yield results.

Andrea Teixeira requested more detail on the temporary trade investments planned for 2025 and their impact on price realization. She also asked about the operating margin outlook and whether the advertising spend rate would increase.

Answer

CEO Thibaut Mongon explained the investments are targeted price adjustments in the U.S. to hit key consumer price points and simplify promotions, which should drive volume. CFO Paul Ruh added this will cause negative value realization in the U.S. in H1 but will be offset by international pricing. He confirmed plans for modest gross margin accretion and a moderate increase in A&P investment, while still expanding the overall adjusted operating margin for the year, funded by efficiencies.

Andrea Teixeira requested more detail on the 'green shoots' in Skin Health, the timing for new initiatives to materialize, and an update on savings from TSA exits and the resulting margin evolution.

Answer

Executive Thibaut Mongon pointed to specific 'green shoots' like Neutrogena regaining its #1 position in U.S. brick-and-mortar channels and increased dermatologist recommendations. Executive Paul Ruh added that while TSA exits are on track, the significant savings will come from the 'Vue Forward' program, which is on track to deliver $350 million by 2026. These savings are funding increased marketing investments, with the full margin impact expected in 2025.

Andrea Teixeira asked for color on how Q3 is unfolding, considering promotional timing shifts for Costco and Prime Day, and the impact of easier comps from prior-year distribution issues.

Answer

CEO John Fieldly confirmed promotional timing shifts would create 'puts and takes,' noting a Costco promotion moved into Q3 and the Alani Witch's Brew LTO launched earlier than last year. While declining to give specific Q3 guidance, he reiterated that the company stands by its Alani modeling call framework, with the exception of the previously mentioned outperformance on gross margin.

Andrea Teixeira questioned the steep sales decline at Costco, asked for the North America sales decline excluding allowance changes, and sought clarity on the phasing of allowances and any destocking impacts for the year.

Answer

CFO Jarrod Langhans explained that scanner data for Costco was actually up, but timing of a promotion caused a pipe fill in the prior quarter, creating noise. He reiterated that allowances and incentives accounted for a couple of percentage points of the revenue decline in Q1. He projected similar pressure in Q2, which should then flip to a two-point benefit in Q3 and Q4. He stated there was no significant destocking in the DSD network.

Andrea Teixeira asked for an update on intra-quarter consumption trends for both Celsius and Alani Nu, when an improvement in velocity should be expected, and how the new product innovations have been received by retailers.

Answer

CEO John Fieldly acknowledged some weakness in Q1 for Celsius, attributing it to cycling a very strong prior-year launch of the Essentials line. He expressed excitement for a packed innovation pipeline for the summer season and the back half of the year, which he expects to drive improvement. He noted that Alani Nu's growth is incremental and that both brands are well-positioned to capitalize on health and wellness trends.

Andrea Faria Teixeira of JPMorgan Chase & Co. inquired about the U.S. business's exit rate for the quarter and whether the recent $1 price increase could lead to an acceleration from the reported 5% growth, considering consumer behavior.

Answer

Senior VP & CFO Mandy Fields stated that e.l.f. is modeling the impact of the price increase conservatively, acknowledging that consumers are being choiceful with their spending. However, she expressed confidence in the brand's value proposition, noting that even with the increase, 75% of the product portfolio remains at $10 or below, which should continue to resonate with their community.

Andrea Teixeira of JPMorgan Chase & Co. asked about recent top-line trends, the growth pace of Rhode, and its product diversification between skincare and color cosmetics.

Answer

SVP & CFO Mandy Fields stated she was pleased with current consumption but noted Q1 net sales will be affected by cycling last year's major growth from the Walmart expansion and Naturium's Ulta launch. Chairman and CEO Tarang Amin highlighted Rhode's rapid growth to $212M in sales with just 10 SKUs across categories, noting e.l.f.'s innovation capabilities will help broaden this assortment.

Andrea Teixeira inquired about U.S. consumption trends exiting the quarter and currently, the impact of shipment pull-forwards into Q3, and any notable differences in performance across retail channels.

Answer

Chairman and CEO Tarang Amin stated that Q3 consumption was strong, finishing up around 12% in tracked channels. While January saw a slowdown, the company still gained 90 basis points of market share. He emphasized that the updated guidance for 14-16% growth in the second half accounts for the timing of pipeline shipments between Q3 and Q4. Regarding channels, he noted strength on Amazon and a good start at Walmart, with some pre-reset softness at Ulta and Target.

Andrea Faria Teixeira from JPMorgan Chase & Co. asked about any signs of improvement in consumer confidence in North America and Europe, and requested details on the cadence of shipments-to-retailers (STWs) versus sales-to-retailers (STRs) for the remainder of the year.

Answer

CEO Gavin Hattersley stated candidly that the company has not seen an improvement in U.S. consumer confidence, noting continued value-seeking behaviors. He provided a global overview, describing cautious sentiment in Canada and the UK, and more significant impacts in Central & Eastern Europe. CFO Tracey Joubert added that a shipment timing headwind of approximately 300,000 hectoliters from the first half is expected to reverse, primarily in Q3.

Andrea Teixeira inquired about the company's pricing strategy to meet consumer needs, the timeline for the Blue Moon brand to normalize after its packaging change, and current business trends.

Answer

CEO Gavin Hattersley reaffirmed strong share retention for core brands like Miller Lite and Coors Light. Regarding Blue Moon, he acknowledged the Q1 disruption from a pack format change was a temporary impact that provides significant long-term supply chain and cost benefits. He expressed confidence in the brand, citing positive momentum from innovations and new distribution gains expected in spring resets, with marketing spend weighted towards the remainder of the year.

Andrea Teixeira of JPMorgan Chase & Co. asked about underlying consumption trends, the impact of shipment pull-forwards on the Q4 outlook, and the execution of tariff-related pricing. She also inquired about private label price gaps in e-commerce and consumption trends in Europe.

Answer

President and CEO Mark LaVigne confirmed that July 4th and Prime Day shipments were pulled forward into Q3, impacting the Q4 outlook. He stated that innovation-based pricing was taken earlier in the year and is flowing through now, fully offsetting tariff impacts. He noted some private label price movement, likely due to tariffs, and mentioned that European trends are softer than in developing markets but consistent with the U.S.

Andrea Teixeira from JPMorgan Chase & Co. inquired about the underlying consumer consumption exit rate for the quarter, the current promotional environment, and consumer behavior regarding price tiers and pack sizes. She also sought clarification on the drivers behind the 50 bps price/mix decline.

Answer

Executive Mark LaVigne noted a sequential softening in battery category volume into April and described the promotional environment as stable and healthy. Executive John Drabik clarified that the 50 bps price/mix decline was driven by promotional investments in Auto Care, not batteries, where pricing was flat. Drabik then provided a Q3/Q4 outlook, expecting low single-digit declines in battery offset by low single-digit increases in auto for Q3, with stronger performance in Q4 driven by pricing actions and lower A&P spend.

Andrea Teixeira inquired about the 100 basis point pricing headwind, asking if it was due to promotional reinvestment, and also asked about the outlook for marketing spend and the embedded foreign exchange impact in the full-year guidance.

Answer

CEO Mark LaVigne confirmed the headwind is from elevated promotional spending to drive volume. CFO John Drabik added that advertising spend is expected to be just over 5% of sales. Regarding FX, Drabik noted a 100-150 basis point top-line drag is embedded in the Q1 outlook, and the full-year forecast will be updated later.

Andrea Teixeira from JPMorgan Chase & Co. asked about the role of innovation in driving growth, the performance of the value-oriented part of the portfolio, and whether the company was planning any broad-based list price increases to offset tariffs.

Answer

President and CEO Rick Dierker stated that innovation remains a bedrock of growth, citing numerous successful launches. He noted that while the premium portfolio is growing faster, the value brands like Arm & Hammer are also performing very well and gaining share. Regarding pricing, Dierker confirmed they will take targeted price increases where necessary to offset tariffs after other mitigation efforts are exhausted, but it will not be a broad-based action.

Andrea Teixeira asked for an update on the HERO brand's growth trajectory as it laps tough comparisons and its distribution potential. She also sought clarification on the depth of promotions in categories like laundry and litter, beyond just the frequency.

Answer

Executive Richard Dierker stated that HERO's consumption remains strong with 13% growth, though it is impacted by foot traffic issues at a few key retailers. He affirmed there is still significant runway for distribution point growth. On promotions, he acknowledged that while frequency is stable, there is some transitory increase in depth from competitors making SKU and size changes, which the company is monitoring.

Andrea Teixeira asked about the gross margin outlook into 2025, considering commodity costs, and also requested an update on the M&A landscape and the company's approach to inorganic growth.

Answer

CFO Rick Dierker indicated that they anticipate inflation but aim to offset it with productivity. He noted they have hedged less than usual, believing some commodity prices may decline. On M&A, CEO Matthew Farrell reiterated that they are always looking but remain 'fussy' with strict criteria, emphasizing that the company's growth algorithm is not dependent on acquisitions. Dierker added they will continue to be selective to ensure they do the right deal.

Andrea Teixeira inquired about the M&A environment and what is preventing deals, and also asked for a housekeeping update on the performance of WATERPIK and the headwind from gummies.

Answer

Matthew Farrell (executive) confirmed that the M&A pipeline is very active and the company is busy evaluating opportunities, acknowledging cash is building on the balance sheet. Richard Dierker (CFO and Head of Business Operations) reported that WATERPIK consumption is up and the brand was flattish in the quarter, with the full-year outlook slightly down due to Q1 performance.

Andrea Teixeira asked for an update on the Back-to-School season's performance and inquired about the innovation pipeline's impact on the full-year guidance across various categories.

Answer

Chris Peterson, CEO, President & Director, stated that while it's early for Back-to-School consumer offtake, the company's sell-in and retail setup are very strong, with record fill rates and exclusivity wins. He detailed a robust innovation pipeline, highlighting the Sharpie Creative markers, the Graco SmartSense bassinet, a major Yankee Candle brand restage, the Oster Extreme Mix Blender, and strong retailer response to upcoming 2026 Outdoor & Rec products.

Andrea Teixeira asked about retailer destocking trends, consumption exit rates, and the mitigation strategy for the 125% China tariff, questioning why its potential impact was excluded from the current guidance.

Answer

CEO Christopher Peterson explained that the lowered market growth forecast is a precautionary measure, not a reaction to current consumption declines, as retailer inventories were stable in Q1. He stated the 125% China tariff was excluded from guidance due to its fluidity but detailed mitigation plans for the most-exposed baby gear category, including existing inventory, two price hikes totaling ~20%, and the fact that 40% of the baby business is not exposed to U.S. tariffs.

Andrea Teixeira asked for the specific contribution of pricing to Q4 core sales to better understand underlying volume trends and the outlook for the price/volume dynamic. She also questioned how potential economic challenges in Mexico could impact the company's international growth plans.

Answer

CEO Christopher Peterson stated that pricing contributed about one point to Q4 core sales, mostly in international markets to offset currency devaluation. He noted more pricing is planned for Q1 to counter significant FX pressure. Regarding Mexico, which is about 4-5% of total revenue, he expressed confidence in the company's ability to grow and gain market share despite the macroeconomic environment. CFO Mark Erceg added that the full-year pricing impact in 2025 will be weighted more to the second half.

Andrea Teixeira from JPMorgan Chase & Co. inquired about long-term targets for innovation and A&P spending as a percentage of sales. She also asked about the impact of distribution changes and requested a quantification of the headwind from distribution losses in the current year.

Answer

CEO Christopher Peterson stated that distribution, which was a headwind of 'a couple of points' in 2024 due to exiting unprofitable businesses, is expected to become a tailwind in 2025. He noted A&P spending has increased from ~4% to nearly 5% of sales, with a long-term target of 6-7%, funded by ongoing gross margin and overhead improvements.

Andrea Teixeira from JPMorgan Chase & Co. requested further details on the new productivity program's P&L impact and timing. She also asked for commentary on the business environment in both Western and Eastern Europe.

Answer

CFO Stanley Sutula stated the productivity program will not have a material impact in the second half of 2025, with costs and benefits spread over two to three years affecting both overhead and margins. Chairman, CEO & President Noel Wallace added that investments will target innovation and technology. Regarding Europe, he noted some market softness and volume decline as consumers react to inflationary pressures, particularly rising food costs.

Andrea Teixeira of JPMorgan Chase & Co. asked for clarification on whether the mid-April improvement in North America was in both shipments and consumption, and questioned how the competitive environment and brand investments would affect the flat gross margin guidance for 2025.

Answer

Noel Wallace, Chairman, President and CEO, confirmed that the improvement in categories in April was reflected in shipments. He stated that the competitive environment remains constructive, with a focus on value-added innovation rather than promotions to drive a turnaround. He emphasized that the company is focused on sharpening its strategy in North America around innovation, price pack architecture, and advertising ROI, expecting improvement in the back half of the year.

Andrea Teixeira requested more detail on FX-driven pricing expectations for 2025, particularly in Latin America and Europe, and asked which areas are expected to drive the volume component of the 3-5% growth algorithm.

Answer

CEO Noel Wallace confirmed that pricing actions are being taken in Latin America and Africa to offset currency headwinds, while Europe will focus on a value-oriented strategy driven by innovation. He stated that the shift to a more volume-driven growth algorithm is underway and will be broad-based, with contributions expected from Asia, Africa, Latin America, and North America, supported by positive trends in volume market shares.

Andrea Teixeira asked about the organic sales growth exit rate for the quarter, what is embedded in the Q4 guidance, and whether the current 6% global pace could continue. She also requested a clarification on the potential for more international expansion for Hill's with new capacity in 2025.

Answer

Noel Wallace, Chairman, President and CEO, declined to provide quarterly guidance but expressed confidence in the underlying health of the business, stating the full-year guidance reflects their outlook. Regarding Hill's, he confirmed that increased capacity is enabling expansion into high-growth wet segments and providing flexibility to address international growth opportunities as the supply chain team optimizes the network.

Andrea Teixeira from JPMorgan Chase & Co. asked about the upcoming U.S. cane sugar Coca-Cola innovation and the company's broader interest in expanding into functional beverages with ingredients like fiber.

Answer

Chairman and CEO James Quincey confirmed the fall launch of a Coca-Cola sweetened with U.S. cane sugar, noting it complements the existing portfolio. Regarding functional beverages, he referenced 'Coke with fiber' in Japan as an experiment from which they gathered valuable learnings, while emphasizing that building new consumer franchises is a long-term commitment.

Andrea Teixeira asked for commentary on performance in the EMEA region, particularly in Western Europe, and sought clarification on why the earnings guidance implied a weaker underlying result despite a better currency outlook.

Answer

President and CFO John Murphy addressed the guidance, reiterating that it is early in the year and the company is being prudent amid currency volatility. Chairman and CEO James Quincey added that EMEA's volume growth was driven by Eurasia, while Western Europe was softer but in line with previous quarters, impacted by the Easter shift and macro uncertainty. He noted a focus on affordability for the upcoming summer season.

Andrea Teixeira asked about the company's playbook in Mexico amid potential economic deceleration and for a breakdown of the strong price/mix in North America, questioning the contribution from Fairlife and away-from-home channels.

Answer

CEO James Quincey explained that about half of the Q4 North American price/mix was from mix, which will moderate in 2025 as Fairlife's growth moderates pending new capacity. Regarding Mexico, he described it as a market where the system has consistently executed its total beverage company playbook, offering a broad portfolio with products and price points for everyone. He also noted that FX headwinds from markets like Mexico are factored into the 2025 guidance.

Andrea Teixeira from JPMorgan Chase & Co. asked for a bridge from Q3 trends to the implied Q4 organic growth outlook, which she calculated at around 6%, and for clarification on a potential ban on CSD sales in Mexican schools.

Answer

Chairman and CEO James Quincey stated that any impact from a potential ban in Mexico would be minimal as the company already provides a no-sugar portfolio to schools. Regarding Q4, he suggested the implied growth is higher than calculated and emphasized that excluding high-inflation markets, the business is performing at the top end of its long-term growth algorithm.

Andrea Teixeira from JPMorgan Chase & Co. asked about the performance of new distribution points, inquiring about velocity trends and the level of incrementality being achieved heading into the summer season.

Answer

President & CEO Bill Newlands stated that gaining distribution is a critical growth driver, supported by strong brands like Pacifico and new products like Sunbrew. He emphasized focusing on 'controllables,' including broadening distribution, strengthening loyalty, and optimizing price-pack architecture to meet the needs of price-sensitive consumers.

Andrea Teixeira asked about the company's high single-digit distribution gains, seeking clarity on the velocity and incrementality of these placements heading into the summer season amid industry headwinds.

Answer

CEO Bill Newlands reiterated that as the number one share gainer, the company is well-positioned to continue securing shelf space for growing brands. He highlighted that strong brand loyalty supports velocity and that a focus on price pack architecture ensures products are available at all price points for consumers.

Andrea Teixeira asked for data on beer volume performance in Hispanic versus general market areas and questioned the rationale for the 8.5% A&P spending guidance for fiscal '26, given distribution gains and a market shift.

Answer

CEO William Newlands noted a channel shift among Hispanic consumers toward larger chain accounts, reflecting economic pressures. He explained that the 8.5% marketing spend still represents an increase in absolute dollars due to sales growth. CFO Garth Hankinson added that the company remains committed to top share of voice for its key brands and is not underinvesting.

Andrea Teixeira asked how the company would approach a potential tariff scenario, specifically whether it would prioritize volumes by absorbing costs or protect its 39-40% operating margin goal. She also sought clarity on the very wide implied volume range for Q4.

Answer

CEO William Newlands responded that it is too early to hypothesize on a specific tariff response but confirmed the company has modeled numerous scenarios. CFO Garth Hankinson added that the wide Q4 guidance range acknowledges the potential for downside risk from macro conditions as well as upside opportunity if those conditions improve.

Andrea Teixeira asked for expectations on the cadence of beer depletions versus consumption for the remainder of the fiscal year, considering factors like selling days and year-over-year comparisons.

Answer

CEO William Newlands stated that several factors should work to their advantage, including recent improvements in trends, the potential positive impact of Fed rate cuts, and an expected normalization of Hispanic unemployment. He noted that scanner results and depletions have recently been tracking closely. Newlands clarified that Q3 and Q4 have the same number of selling days, so no impact is expected, but reminded that Q2 had one less day, which impacted results at the higher end of the historical range.

Andrea Teixeira asked a multi-part question covering whether unit growth was driven by velocity or distribution, the progress of distribution gains from spring resets, the strategy for the product portfolio including vitamins, and the specifics of the tariff mitigation plan.

Answer

CEO Carla Vernon stated that unit growth was driven by velocity and a 'hero' distribution strategy, highlighting 12,000 new points of distribution in grocery and drug channels. She noted the vitamin portfolio is now narrowly focused on prenatal/postnatal care. Regarding tariffs, CFO Dave Loretta and CEO Carla Vernon explained their 3-pronged strategy, including building inventory to delay the impact to mid-Q3. They quantified the net impact at roughly 1.5 percentage points on 2025 gross margin, which they plan to offset with cost savings.

Andrea Teixeira from JPMorgan Chase & Co. inquired about the 2025 outlook, seeking details on the mix of volume versus pricing, the role of innovation, gross margin sustainability, cash flow expectations, and any lingering legal expenses.

Answer

CFO David Loretta stated that 2025 growth will be a blend of distribution and velocity gains, supported by innovation in diapers and skincare packaging. He projected a sustainable gross margin in the 38-39% range and positive free cash flow for 2025. Loretta also clarified that $1-2 million in residual legal costs are expected in the first half of 2025, which is why the company will continue to guide on an adjusted EBITDA basis.

Andrea Teixeira requested more details on the 2025 innovation strategy for the functional energy segment, particularly for the Bang and Reign brands, and asked for Monster's view on a competitor's recent acquisition in the space.

Answer

Executive Rodney Sacks explained that the company sees distinct positions for its brands, with Reign focused on the performance category and Bang positioned differently, allowing them to coexist within a broader portfolio. Hilton Schlosberg added that they are confident in their own strategy and believe competitors relying on new distribution for growth will eventually hit a ceiling.

Andrea Teixeira asked about the expected flow-through from the November price increase, the potential for sales pull-forward in October, and the overall health of the U.S. energy drink category.

Answer

Hilton Schlosberg, Vice Chairman and Co-CEO, explained it is too early to determine the net impact of the price increase on promotions and that quantifying any sales pull-forward was difficult due to a mid-October pricing cutoff and hurricane disruptions. Both Schlosberg and Rodney Sacks, Chairman and Co-CEO, expressed a view that the category slowdown has likely bottomed out, citing improving Nielsen data trends and positive macroeconomic factors.

Andrea Teixeira from JPMorgan Chase & Co. asked for the magnitude of savings from the cost and simplicity program, how the company is offsetting tariffs without price increases, and clarification on whether a ~$20 million Q1 sales beat should be considered a pull-forward from Q2.

Answer

CEO Nicholas Lahanas confirmed the cost and simplicity program was a significant driver of margin expansion but declined to provide specific savings guidance. He and John Hanson, President of Pet Consumer Products, affirmed that tariff impacts will be managed through supplier negotiations and internal cost-cutting rather than pricing. Lahanas conservatively agreed that the Q1 top-line beat could be viewed as a shift from Q2.

Asked about underlying consumption trends excluding wholesale noise, the impact of the distributor realignment on the wide Q4 guidance range, and for more details on recent positive depletion trends.

Answer

The wide Q4 guidance is due to shipment variability from distributor changes (affecting under 20% of volume) and general market uncertainty. The company confirmed that April and May showed good depletion growth but they remain cautious. They expect the market to level off and slightly improve in the coming months.

Asked about the softness in the Decoy Red Label, questioning if pricing was too aggressive, and requested a performance breakdown between on-premise and off-premise channels.

Answer

The company stated that post-price increase softness is normal and they see no signs that the pricing was a mistake, noting the portfolio returned to growth in November. They confirmed that distribution points are up in both on-premise and off-premise channels. The on-premise channel has been slightly stronger recently as consumer behavior normalizes post-pandemic, but both channels are showing growth.

Asked about the underlying depletion rate, the composition of the FY24 sales growth guidance (price vs. volume), the expected distribution gains, and the reason for the projected Q1 volume decline.

Answer

The FY24 growth will be primarily volume-driven, supported by significant distribution gains, with a projected 7-8% CAGR in new accounts over the next four years. The Q1 FY24 decline is due to tough year-over-year comparisons from distributor buy-ins in Q1 FY23, not an inventory issue, and the growth is expected to shift to Q2.

Inquired about volume trends during the quarter, the rationale behind the guidance raise, potential margin conservatism, and customer attrition rates after lapping price increases.

Answer

David Hass explained that volume momentum was broad-based and carried through from late 2023. The guidance raise is primarily a flow-through of the Q1 beat, reflecting a measured approach. They are confident in delivering the guidance, which now includes some savings from the business optimization program. Regarding attrition, the customer retention rate has actually increased slightly, attributed to improved service levels and enhanced customer service accessibility.

Asked about the company's future strategic direction, including the potential for larger transformational transactions post-divestiture. Also inquired about the composition of top-line growth in the Water Direct & Exchange segment and whether there was any deceleration in dispenser sales.

Answer

The company outlined a capital deployment strategy focused on organic growth, deleveraging, tuck-in M&A, and share repurchases, stating no large transformative deals are on the near-term horizon but they will explore 'water adjacencies'. For North America, Q3 volume growth was nearly 1%, with the rest from pricing. The dispenser sales comparison was tough, but they are on track for their 1 million unit target, with a strategic focus on brick-and-mortar over e-commerce for better customer connectivity.