: Energizer CEO says inflation will keep going and going, disputing what the Fed has said


Energizer Holdings Inc. reported Monday a fiscal second-quarter adjusted profit that more than doubled from a year ago, and raised its full-year outlook, as the battery and lighting products company said cost reductions and increased pricing helped fend off rising input costs.

On a net basis, losses narrowed to $14.3 million, or 21 cents a share, from $121.8 million, or $1.75 a share, in the year-ago period. Excluding nonrecurring items, such as acquisition and integration costs, adjusted earnings per share rose 77 cents from 37 cents, beating the FactSet consensus of 60 cents.

The company also raised is fiscal 2021 adjusted EPS guidance range to $3.30 to $3.50 from $3.10 to $3.40.

Sales grew 16.7% to $685.1 million, above the FactSet consensus of $625.9 million, boosted by new distribution, increased replenishment volumes and favorable pricing.

Energizer’s stock

closed Monday unchanged at $50.53, as it seesawed from being down as much as 2.7% at its intraday low of $49.19 to being up as much as 1.3% at its intraday high of $51.20.

On the downside, rising costs took a bite out of the bottom line. Gross margin percentage fell to 39.5% from 40.1%, as costs of product sold increased 18.0% to $414.6 million.

“As we look to the future, we do not believe that these costs are transitory and have initiated productivity and revenue management efforts to offset them.”

— Energizer CEO Market LaVigne

The company named a number of factors that contributed to “inflationary headwinds,” such as increased costs for transportation, commodities and labor, as well as higher tariffs associated with sourced products.

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The company said it was able to effectively manage the higher costs through a focus on cost reductions, hedges on commodities exposure and increased selling prices.

From what Chief Executive Mark LaVigne said, efforts to fight inflation will be something the company will have to focus on for the foreseeable future.

“As we look to the future, we do not believe that these costs are transitory and have initiated productivity and revenue management efforts to offset them,” LaVigne said, according to a FactSet transcript of the post-earnings conference call with analysts.

That runs contrary to what the Fed said in its most recent policy statement, on April 28: “Inflation has risen, largely reflecting transitory factors.”

Also read: U.S. inflation picks up in March, starting conversation about how long it will last.

Energizer Chief Financial Officer Timothy Gorman followed CEO LaVigne’s comment by saying he expects inflationary headwinds to persist “over the balance of the current year and into next year.”

Again, that disputes what most most Fed officials believe, according to the minutes of the March policy-setting meeting: “After the transitory effects of these factors fade…participants generally anticipated that annual inflation readings would edge down next year.”

The average estimate of analysts surveyed by FactSet expect the cost of goods sold (COGS) for fiscal 2021, which runs through September for Energizer, to increase 2.5% from fiscal 2020 to $1.70 billion. And Wall Street seems to currently side more with the Fed than with Energizer management, as the FactSet COGS consensus for fiscal 2022 is for a slight decline to $1.69 billion.

Energizer’s stock has rallied 23.7% over the past 12 months, while the S&P 500 index

has run up 42.9%.

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