Shares of Edgewell Personal Care (NYSE: EPC) slipped to a 52-week low Thursday morning in the wake of new data from IRI that revealed a surprising 8% drop in razor blade sales for the four-week period ending  Oct. 8. Edgewell, which was spun off of Energizer Holdings two years ago, sells personal care products like Schick and Edge razors, Banana Boat sunscreen, and Playtex feminine care products.

The key facts

Edgewell reports its revenue in four segments -- wet shave; sun and skin care; feminine care; and all other products. Only its sun and skin care unit posted positive year-over-year sales growth last quarter -- the other three all reported declines due to competition, currency headwinds, and divestments.

Its wet shave business, which accounted for 56% of its sales during that quarter, has always faced tough competition. Edgewell's Schick and Edge brands vie with the disruptive Dollar Shave Club, which Unilever bought last year, and the market-leading Gillette brand, owned by Procter & Gamble. Once customers buy a brand of razor, they can be resistant to switching, which provides the manufacturers with longer-term -- and higher-margin -- sales of replacement razor blades. And naturally, each line of blades is incompatible with rivals' razors.

A takeover candidate?

The packaged goods industry is generally considered a recession-resistant one which underperforms during bull markets. That may help explain why shares of Edgewell fell more than 10% over the past 12 months while the S&P 500 rallied 20%.

But Edgewell's actual growth isn't terrible. Analysts expect its revenue to dip 2% this year, but for its EPS -- lifted by share buybacks -- to grow 11%. With a market cap of $3.9 billion and a reasonable forward P/E of 19, Edgewell is also frequently mentioned as a potential takeover target for bigger consumer-staples companies. It remains out of favor, but investors shouldn't completely write this stock off just yet.

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The author(s) may have a position in any stocks mentioned.



Leo Sun has no position in any of the stocks mentioned.

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