Edgewell Personal Care Prepares for Potential Tariff Increases

By Jessica DiNapoli

NEW YORK (Reuters) – U.S. sunscreen-maker Edgewell Personal Care (NYSE:EPC) is preparing to secure new two- to three-year contracts for chemicals sourced from China. This strategy comes as the company anticipates significant tariff hikes if President-elect Donald Trump fulfills his campaign promise. Chief Operating Officer Dan Sullivan discussed these plans with Reuters on Thursday.

Edgewell, based in Shelton, Connecticut, has a notable "China dependency" for its sunscreen chemicals, with Sullivan mentioning the lack of steady, alternative supply options. The strategies being employed are typical for procurement teams and aim to mitigate potential cost increases associated with Trump potentially raising tariffs on chemicals and other imported goods from China.

Edgewell produces well-known sunscreen brands such as Banana Boat and Hawaiian Tropic, available at major retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT). Competitors include Neutrogena by Kenvue (NYSE:KVUE).

Trump has indicated his intention to impose a 60% tariff on Chinese goods, building on his previous administration's policies. Currently, there is a 25% tariff on sunscreen chemicals, which Sullivan notes is already significant.

> "A tariff increase is a tariff increase. If it’s going to go from 25% to 60%, that’s meaningful," he stated, emphasizing the unique requirement for these highly engineered chemicals. He added that sourcing alternatives at scale is highly challenging.

To navigate these potential tariffs, Edgewell is considering individual negotiations with Chinese vendors to secure contracts that ensure chemical supply continuity for two to three years due to a lack of reliable alternative sources.

To counter previous tariff impacts, Edgewell raised sunscreen prices during the summer periods by mid-single digits. For reference, an 8-ounce bottle of Banana Boat SPF 50 sunscreen retails for $8.97 on Walmart.com.

The company is also looking to repeat its cost-cutting strategies if Trump implements new tariffs, Sullivan confirmed.

In terms of inflation, costs for sunscreen chemicals have notably decreased, with Edgewell expecting only a low-single-digit increase moving forward, a stark contrast to the approximately 30% rise seen during the COVID-19 pandemic.

U.S. consumer spending has also contracted following previous high inflation rates.

> “You have to be thoughtful around the state of the consumer and the caution we see right now with the consumer,” Sullivan noted.

During Trump's previous presidency, Edgewell received tariff exemptions for steel used in its razor blades, as previously reported by Reuters.