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S&P Global Ratings revised its outlook on Edgewell Personal Care (NYSE:EPC) Co. to negative from stable on Thursday, while affirming the company’s ’BB’ issuer credit rating. The ratings agency cited weakening consumer spending and the impact of higher tariffs on the company’s margins as key factors behind the decision.
The negative outlook reflects the possibility that S&P could lower Edgewell’s ratings within the next 12 months if profitability does not improve. S&P expects the company’s adjusted leverage to remain elevated at 4.2x by the end of fiscal 2025, above the 4x downgrade trigger, before improving to 3.9x by fiscal 2026.
Edgewell’s performance has been challenged by declining revenue and EBITDA, with its North America business reporting a 3.9% decline in organic sales for the six months ended March 31, 2025. The company’s wet shave segment has been particularly affected by weaker consumption trends and price competition, while execution issues led to out-of-stock situations in its shave preparation and feminine care businesses.
S&P anticipates tariffs will have a material impact on Edgewell’s EBITDA in fiscal 2026, estimating an unmitigated effect of $40-50 million annually. These tariffs primarily affect chemicals required for sun care, steel, aluminum, and U.S. exports to Canada, adding pressure to the company’s already strained margins.
The ratings agency noted that Edgewell’s international businesses, which account for about 45% of total sales, continue to perform well, with low-single-digit percent organic revenue growth expected in fiscal 2025. The company’s productivity initiatives are providing some margin support, though these gains are partially offset by related restructuring costs.
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