Société BIC SA (BB) Earnings Call Transcript & Summary

Good day, and welcome to BIC's Third Quarter and 9 Months 2025 Net Sales Conference Call. [Operator Instructions] And now I'd like to hand the call over to your host, Brice Paris, VP, Investor Relations. Please go ahead.

Good morning, and welcome to BIC's Third Quarter 2025 Net Sales Call. I'm Brice Paris, Head of Investor Relations. I'm glad to welcome Rob Versloot, our new CEO, who will lead his first analyst call at BIC. Chris Dayton, our interim CFO, is also with us today in Clichy. We will be available after the presentation for the usual Q&A session. As a reminder, this call is being recorded, and the replay will be available on our website, along with the presentation and press release. As always, please take a moment to read the disclaimer at the beginning of the presentation. With that, I now give the floor to Rob.

Good morning, everyone, and thank you for joining us today. It's great to be here with you for my first earnings call as CEO of BIC. Taking on this role in September was a new chapter opening for me, both personally and professionally. I'm honored to lead a company with such a strong legacy, and I'm even more excited about the opportunities ahead. Throughout my career, I've seen firsthand the reach and relevance of the BIC brand around the world. It's a brand that people know, trust and use every day, and that's something truly special. I want to start off by acknowledging that 2025 is a challenging year for BIC. Since the beginning of the year, our global business has struggled in the face of a tough environment, and we've now experienced negative organic growth for the third quarter in a row. In Q3, each of our categories declined with the exception of Tangle Teezer. And this leads us to revise our full year outlook, which I will detail more on in my conclusion. As the new CEO, my first priority is very clear. We need to shift gears and set a strong foundation for the future. This transition won't happen overnight, but we're moving quickly with speed and focus. I'll share more on how we're approaching it at the end of the call. Specifically, regarding BIC's Q3 performance, I want to highlight 3 key overarching takeaways. First, our performance in the U.S. continued to be challenged despite a slight rebound in our core Stationery business. Second, we saw areas of growth in other regions, driven by our value-added products and strong back-to-school season in several countries. And third, we had mixed performances in our acquired businesses. While Tangle Teezer continued to perform super well, others like our Skin Creative business and Rocketbook were disappointing and weighed on our overall financial results. Starting with the U.S. The overall business environment remains difficult for our 3 categories. However, in Q3, we saw a solid improvement in our core stationery category with record high net sales driven by strong retailer momentum and stand out performance in the Mechanical Pencils segment. In Flame for Life, net sales were still negative in Q3 despite improvement in lighter market trends since the beginning of the year. And in Blade Excellence, we struggled in a deteriorating shaver market with slowing consumption trends and ongoing competition. That being said, we had areas of growth in other regions and categories. Our value-added shaver products, including our Flex and Soleil ranges performed particularly well in Brazil and Europe. Back-to-school seasons were solid in several key European countries like Germany and the U.K., while performance in France was relatively flat. Finally, it's worth noting our acquired businesses delivered a mixed performance in Q3. While Tangle Teezer positively contributed to 3.6 points of the group's growth, other businesses such as Cello, Rocketbook and Skin Creative had a 2-point negative impact on the growth of our Human Expression division in Q3. Therefore, one of my first key actions as CEO is to complete the divestiture of our Cello activities in India. Despite our repeated efforts to turn the business around, BIC was never able to transform Cello into a growing and profitable business. My responsibility as CEO of BIC is to ensure that every decision and every part of the company drives sustainable and profitable growth while reducing complexity in the organization. To conclude this first part, I am determined to act swiftly. Since I joined the group a month ago, I've been closely analyzing BIC's long-term performance, and I've gained a deeper understanding of the current challenges we face. Right now, my teams and I are working hard to prepare a clear plan of action and define a new strategy to write the next chapter for BIC. I will now hand it over to Chris, who will share more details on our net sales and operational performance during the third quarter.

Thank you, Rob. Good morning, everyone. I'm Chris Dayton, Interim CFO, and let's begin with an overview of our net sales performance for the third quarter of 2025 on Slide 6. Net sales totaled EUR 519 million, down 3.9% as reported and up 0.3% at constant currency. Excluding the 3.6 points positive impact from the Tangle Teezer contribution, net sales were down 3.3%. Currency fluctuations had a negative impact of 4.2 points, mostly coming from the U.S. dollar. Turning to Slide 7. In the first 9 months of 2025, net sales totaled EUR 1.595 billion, down 5% as reported and down 1.6% at constant currency. Excluding the 3.8 points positive impact from Tangle Teezer, net sales were down 5.4%. Currency fluctuations had a negative impact of 3.4 points, largely coming from the U.S. dollar and the Brazilian real. I'll now provide you with a snapshot of the performance of our 3 divisions for the third quarter, starting with Human Expression on Slide 8. Net sales were EUR 192 million, down 0.5% at constant currency, a strong sequential improvement since the beginning of the year. In North America, net sales grew high single digits at constant currency, with solid growth in the U.S., mainly driven by back-to-school phasing of orders from Q2 to Q3. However, this was partially offset by poor performance of both Rocketbook and Skin Creative. In Europe, net sales were relatively flat at constant currency with mixed performance across the region during the back-to-school season. Growth was solid in Eastern Europe, Germany and the U.K. And our value-added products like the 4-Color Smooth, Intensity paint markers and break-resistant Mechanical Pencils performed well. However, this was offset by weaker results in Southern Europe. In Latin America, net sales declined high single digits in Q3 at constant currency, mainly due to tough performance in Mexico, impacted by significant competitive pressure from private label. In Brazil, net sales growth was negative but improved compared to previous quarters. Finally, in Middle East and Africa, net sales grew slightly at constant currency, driven by a solid back-to-school season in the Middle East and good performance in Nigeria from our iconic BIC Cristal and Lucky Pen products. Moving on to Slide 9 to review Flame for Life performance. Net sales totaled EUR 175 million in Q3, down 4.3% at constant currency. In North America, the U.S. pocket lighter market improved versus the beginning of the year while remaining negative at minus 2% in value in Q3. Additionally, the utility lighter market declined minus 4.1% in value. In this context, BIC's performance remained challenging and net sales decreased mid-single digits at constant currency. In Europe, net sales declined mid-single digits at constant currency as a result of softer performance in Eastern Europe, Italy and Germany. This more than offset solid growth in France and the Netherlands where we saw distribution gains, particularly in utility lighters. In Latin America, net sales decreased mid-single digits in Q3 at constant currency. In Mexico, BIC faced strong competition from low-cost pocket lighters while in Brazil, we were impacted by market slowdown and heavier competition. Finally, in the Blade Excellence division, Q3 net sales amounted to EUR 146 million, up 7.4% at constant currency. As Rob mentioned earlier, Tangle Teezer was the main driver, posting double-digit growth driven by the U.S. and Europe. Excluding Tangle Teezer, net sales were down 6.1% in Q3. In North America, net sales declined double digits, excluding Tangle Teezer. Our core Shaver business continued to face challenging market trends and continued competitive pressure. Net sales were also negatively impacted by reduced promotional activity versus last year. In Europe, excluding Tangle Teezer, we experienced slight growth on a comparative basis in the quarter. This was driven by continued distribution gains in Eastern Europe and the success of value-added shavers such as hybrid Flex 5 and Soleil Click 3. In Latin America, Q3 net sales increased low single digits at constant currency. The continued success of our 3 to 5 blade offerings led to robust growth in Brazil. However, this was partially offset by a weak performance in Mexico due to a very competitive environment. Lastly, in Middle East and Africa, Q3 net sales decreased significantly at constant currency mainly due to poor performance in Northern Africa and competitive pressure in South Africa. This concludes the review of our Q3 and 9 months net sales performance. With that, I'd like to hand it back over to Rob.

Thank you, Chris. I think it's fair to say that BIC has faced difficulties adapting to shifting consumer trends and a challenging global market environment. And this was again the case in Q3 where the performance was not where we wanted to be. As a consequence, and since we expect Q4 performance to remain broadly in line with what we have seen over the past few months, we are adjusting our full year outlook. We are now expecting net sales growth at constant currency in the range of minus 1% to minus 1.5%, an adjusted EBIT margin at around 13.7% and a free cash flow at around EUR 210 million. This outlook now includes the full impact of U.S. tariffs in our P&L and free cash flow, which was not the case before. As I mentioned earlier, my goal as the new CEO is to build a solid foundation and clear plan for the next chapter of BIC. While I'm still refining the strategy, my goal is to move as quickly as possible. I will share more details on further strategic priorities in due term. As we approach the end of the year, my top priority is to sharpen our focus on operations to make steady progress despite the hurdles we face. With that, the team and I will take your questions. Thank you.

[Operator Instructions] We will now take our first question from Geoffrey d'Halluin of BNP Paribas Exane.

I will have three questions, please. The first one is related to your new guidance, especially the new EBIT margin guidance. Would you mind to give us a bit more details on what you expect in terms of U.S. tariffs impact? And basically, breaking down what drove the new guidance before the prior ones. My second question is related to your Cello disposal. Would you mind to give us a bit more details on -- or at least remind us what was the overall revenue and EBIT numbers for this company? And the last question is -- so I get the point you would update the market for your new strategy in due course. But maybe a question is regarding the portfolio of brand activity in BIC, are you happy with the current portfolio? Or could we expect to have much more exit of brands in the next coming months, as you've just done with Cello?

Yes, Rob speaking. Thanks a lot for the question. Maybe to comment on your first question on overall, the main reasons behind the outlook revision. Maybe starting with the U.S. and as mentioned by Chris, in the lighter segment, we see slower-than-expected recovery, and the business is still down mid-single digit in Q3, and we believe that this should continue to be down in Q4. And in another important segment, the shavers in the U.S., there, we see higher-than-expected decline in net sales mainly due to a combination of deteriorating market trends, continued competitive pressure and less promotional activity. Also this situation, we expect to remain tough for the remainder of the year. So that's about the U.S. Then if we look in our Latin American business in Mexico, which is one of our top 5 countries in net sales, we saw a poor performance in Q3, double-digit down due to tough market trends, intense competition for private labels and distribution losses. We recently changed leadership in Mexico with the objective of improving the situation. A third element is concerning our new businesses. We observed very disappointing performance of Skin Creative, Rocketbook, BIC Blade-Tech and Cello. And this is one of the reasons why we concluded the sale of Cello to limit the negative financial impact it's having on our results. And lastly, and I think you were alluding to that, we are now including the full impact of U.S. tariffs on both our margin and free cash flow outlooks. And the gross tariff impact in 2025 is expected to be about nearly EUR 50 million, and we should be able to offset less than half of it at adjusted EBIT margin level. At a free cash flow level, the impact is expected to be at nearly EUR 15 million. Commenting on your second question, the divestiture of Cello. We've looked at it, and we have observed that Cello has been dilutive on the Human Expression division financial performance for many years. And despite repeated efforts of the company to turn the business around, BIC was never able to transform Cello into a growing and profitable business. So yes, my first decision, as CEO of BIC, is to conclude the sale of Cello to limit the negative financial impact going forward. And generally speaking, I see it as my responsibility to sharpen our focus on activities that can drive growth and profitability while continuing to invest in markets where we have a winning strategy. Coming to your last question with what about the strategy going forward, I want to manage expectations. I joined BIC a bit more than a month ago. So I'm afraid that I can't give you any communication on my strategic plan right now or in the near future. I have been analyzing closely the long-term performance of BIC and I'm gaining understanding of our current challenges. I'm currently working very hard with my team to prepare my action belt. I am determined to act swiftly. My first bold move is concluding the sale of Cello, and I will update you in due course of the details of my strategic plan. That said, my top priority as we approach the end of the year is to focus on operations and make sure we deliver on our promises. Thank you.

And we'll now take our next question from [ Andre Conger ] of UBS.

Two for me, please. First of all, on the outlook, and this is more about 2026, if you can share anything is, obviously, you saw the market deteriorate in Q3 and Q4 expected to be similar. What does this imply for the BIC, at least for the beginning of 2026, given the subdued market growth rates? And my second one, just going back to the tariffs, if we may. For 2025, you said that the impact is about EUR 15 million growth. What is the impact you envisage for 2026 essentially on an annualized basis, if I may?

Thank you for the question. Rob speaking here. Talking about 2026. As mentioned, I'm working on my strategic plan, 6 weeks in the business. So analyzing the long-term performance, but also the current challenges. I'm afraid it's a bit too soon for me to give an expectation on the 2026. But be assured, this is on our agenda. We'll come back on that as soon as we can and have a full understanding of the business where we are and our plans going forward. Thank you.

Andre, thanks for the question. This is Chris. To answer your question on the annualized impact of tariffs, we expect it to be around EUR 30 million on an annualized basis. We should be able to offset more of that on an ongoing basis than we do in 2025. We've built our action plans around 3 levers: pricing, gross profit optimization and then finally, managing at the EBIT level through cost management. Thank you.

And we'll now move on to our next question from Marie Fort of Bernstein.