Societe BIC SA

PAR:BB

Earnings Call Transcript 2023-Q2

[Kimberly Stewart, executive]

Good morning, everyone. This is Kimberly Stewart with BIC, Head of Investor Relations. Thank you for joining us for our first half 2023 results conference call. With me today are Gonzalve Bich, CEO; and Chad Spooner, our CFO. This call is being recorded and will be available on our website, www.bic.com, along with today's presentation and press release.

During this call, we may make statements about our expectations for fixed future plans and performance. These forward-looking statements, which reflect our current views, are based on reasonable assumptions at the time of publishing our results. They are by nature subject to risks and contingencies liable to translate into a difference between actual data and the forecast made or inferred by these statements. A description of the risks borne by BIC appears in the section Risk Management in BIC's 2022 universal registration document filed with the French Financial Market Authority, the AMF, on March 30, 2023.

We also invite you to refer to our glossary in our press release and presentation for alternative performance measures. With that, I hand you over to Gonzalve.

[Gonzalve Bich, executive]

Thank you, Kimberly, and good morning, everyone. Let me start with the first of our 4 headlines. BIC is on track to deliver record sales for the full year 2023 in line with our 5% to 7% net sales growth objective and our Horizon Plan.

Despite the difficult broader economic context, consumers continue to choose BIC products day in and day out. We're gaining market share in key strategic markets, enabled by investments in innovation, premiumization and improved omnichannel integration.

The Flame for Life division had a relatively challenging first half. Chad will come back to this. But the Human Expression and Blade Excellence divisions have delivered strong commercial results across all channels. We gained momentum in the second quarter with strong revenue growth and an improved adjusted EBIT margin versus the first quarter. This all resolutely sets us on our Horizon Plan's growth trajectory as we forecasted earlier this year and gives us the foundation we need for future growth.

Looking ahead, we know that innovation is key to navigating and delivering on consumer demands while growing our commercial capabilities to lead our segments. With all this in mind, I can confirm with confidence that we will deliver our 2023 outlook, as announced earlier this year.

The second headline I want to share with you is the success of our revenue growth management program. As each of our divisions has gained market share, we've kept an intense focus on revenue growth as laid out in the Horizon Plan. This has been driven by premium product solutions and price pack configurations underlining our commitment to what consumers are looking for. I'm proud of our revenue per SKU evolution, which has grown 15% during the first half of 2023.

At the same time, building on 2 years of previous work, we have thus far reduced our net SKU count by 7%, ahead of our sector's average while continuing to grow the business. My third headline for this morning is the exciting growth projects we already have in flight. Let me tell you about a couple of these initiatives that will continue to drive our performance in the second half of the year and beyond.

One is our pursuit of brand-building marketing initiatives. Take the All Shave, No Clog consumer campaign for our new BIC EasyRinse razor. The success of that campaign brought us 1.7 points of the shaver market in the U.S. That's huge in just 6 months.

Another is our focus on innovation. At BIC, we're more consumer-centric and data-driven than ever, and we clearly see the results of our efforts. In anticipating new consumer needs turning insights into new products, pricing and placement. The results are there to see with new products accounting for 10% of all of our sales in the first half, and this trend should continue into the back half of the year.

The fourth and final headline I'll share with you is the progress of our recent acquisitions. At Rocketbook and Inkbox, our teams have been working hard on the integration and have made solid progress in addressing the current market-wide challenges of higher customer acquisition costs by accelerating physical distribution in other channels. We continue to learn from each of these new businesses, drawing lessons for future investments and guiding further sectorial choices, namely in Digital Expression and Skin Creative.

We're pleased with both acquisitions as they give us the opportunity to develop as category leaders in modern and dynamic segments, creating more long-term connections with consumers. With a keen eye on future markets, our Nigerian acquisition of Lucky Stationery continues on its double-digit growth trajectory, solidifying our leadership position on the important African continent underpinning our focus on strategic regional markets.

So as you can see, a lot is happening at BIC to justify our confidence as we look ahead to the rest of the year and beyond. I'm excited to share more on this with you at our investor update in Paris in September. It will be a show and tell, an opportunity to show you our Skin Creative products and the digital technologies being developed at our Digital Expression business, AMI, and an opportunity to tell you more about our progress on the Horizon Plan since we launched it in November of 2020.

Now let me hand it over to Chad, who will take you through our performance of the first half in more detail. Chad, over to you.

[Chad Spooner, executive]

Thank you, Gonzalve. Let's begin with an overview of our consolidated results for the first half 2023 key financial figures on Slide 6. Net sales for the first half were EUR 1.2 billion, up 7% at constant currencies. This growth was driven by our continued solid commercial execution both online and in stores through our Human Expression and Blade Excellence divisions and in most of our key regions, namely Europe, Latin America and the Middle East and Africa.

Our adjusted EBIT was EUR 175 million, which resulted in a margin of 14.9%. This was due to gross profit decline and increased OpEx and brand support investments to continue to deliver on our Horizon execution. As a reminder, Q1 of 2022 margin benefited from exceptional net sales performance in U.S. Lighters related to positive phasing. Adjusted earnings per share were EUR 2.93, a decline of 13.6% versus last year. Our free cash flow for the first half of the year was EUR 2.5 million. I'll talk more about this later and how our strong back-to-school sales in June had an impact on cash flow.

At the end of June 2023, our net cash position was EUR 198 million. We've completed EUR 60 million in share buybacks, of which EUR 52 million are part of the EUR 100 million announced in February that are dedicated to the cancellation of shares and the balance will be used for our long-term incentive programs.

Turning to Slide 7, you'll see a snapshot of our division, starting with our performance in Human Expression. Net sales were EUR 460 million, up 9.1% at constant currencies. The human expression adjusted EBIT margin was 9.7% compared to 8.1% in the first half of 2022. The increase was driven by favorable pricing and mix, lower brand support and favorable net sales leverage. This was partially offset by unfavorable ForEx, mainly the U.S. dollar versus Mexican peso and manufacturing costs as well as higher operating expenses.

On the center of Slide 7, we have our Flame for Life division with net sales of EUR 434 million, up 0.6% at constant currencies. The Flame for Life adjusted EBIT margin was 35.3% compared to 38.3% in first half of 2022. This was a result of unfavorable fixed cost absorption, negative net sales operating leverage in the U.S. and higher operating expense investments.

Brand support investments were also higher as we launch our BIC EZ Reach advertising campaign in Europe. This was partially offset by favorable pricing and mix, ForEx from euro to U.S. dollar hedging and input cost inflation was also offset by our manufacturing efficiencies.

Lastly, in Blade Excellence division, net sales were EUR 268 million, up 14.7% at constant currencies. The Blade Excellence adjusted EBIT margin was 7.6% compared to 18% in the first half of 2022. This was due to significant input cost inflation from raw materials and electricity and unfavorable ForEx, mainly the U.S. dollar versus the Mexican peso, partially offset by our manufacturing efficiencies. The margin was also impacted by higher operating expenses and brand support investments, mostly related to the launch of BIC's EasyRinse and its major advertising campaign in the U.S.

Turning to Slide 8. Let's now review our consolidated financial results starting with the second quarter of 2023 net sales evolution. On an as-reported basis, net sales for Q2 of 2023 totaled EUR 638 million, up 4.4% versus last year. On a comparative basis, our net sales were up 6.9%. Currency fluctuations had a negative impact of minus 2.9 points. That was mainly due to the decrease in the U.S. dollar, the Brazilian real, the Turkish lira and the Nigeria naira against the euro. The perimeter impact adjustments includes the acquisitions of Tattly and AMI. Argentina contributed 0.4 points.

Turning to Slide 9. Let's now review the first half of 2023 net sales evolution. On an as-reported basis, net sales for the first half of 2023 totaled EUR 1.2 billion, up 4.4% versus last year. On a comparative basis, our net sales were up 4.1%. Currency fluctuations had a negative impact of minus 0.5 points that was mainly due to the decrease of the Turkish lira and Nigerian naira against the euro, partly offset by the increase in the U.S. dollar and the Brazilian real against the euro.

The perimeter impact adjustment includes the acquisitions Tattly and AMI as well as 1 month of Inkbox. Argentina contributed positive 0.5 points.

Let's now take a closer look at BIC's adjusted EBIT margin change versus the prior year for the second quarter of 2023 on Slide 10. Q2 '23 adjusted EBIT margin was 16.5%, which was flat with last year. Q2 gross profit margin increased by 1.1 points as a result of favorable pricing, mix and manufacturing efficiencies. This was partially offset by input cost inflation, raw materials and electricity costs, fixed cost absorption, and ForEx, mainly U.S. dollar versus Mexican peso, euro versus Turkish lira and U.S. dollar versus Nigerian naira, while the euro versus U.S. dollar hedging was favorable. Brand support was 0.3 points lower.

OpEx and other expenses increased by 1.4 points as we continue to invest to support our Horizon growth strategy. First half 2023 adjusted EBIT margin was 14.9%, 3.1 points lower than the first half of 2022. The H1 gross profit margin decreased by 0.4 points, negatively impacted by input cost inflation on raw materials and electricity costs, fixed cost absorption and ForEx, which was mainly due to the U.S. dollar and Mexican peso and the Turkish lira versus euro exchange rate, while the U.S. -- while the euro to U.S. dollar hedging was favorable. This was partially offset by favorable pricing, mix and manufacturing efficiencies.

Brand support was 0.4 points higher driven by media campaigns for EasyRinse in North America,and EZ Rinse launch in Europe. OpEx and other expenses increased by 2.3 points.

On Slide 12, we have the key P&L elements summarized. Adjusted EBIT for the first half of 2023 was EUR 175 million compared to EUR 203 million last year. First half 2023 income before tax was EUR 169 million with 28.1% tax rate. That's compared to EUR 194 million in the first half of 2022, notably reflecting the strong performance of the U.S. Lighters business last year in the first quarter.

Net income group share was EUR 122 million compared to EUR 139 million for H1 of 2022. Our adjusted EPS group share was EUR 2.93 compared to EUR 3.39 last year.

Moving on to Slide 13, we see the main elements of working capital. Inventories increased by EUR 14 million compared to December of 2022. And we continue to drive inventory efficiencies as we improve our inventories in days by 18 days from June of 2022. Trade and other receivables increased by EUR 163 million, driven by increased sales as a result of our strong back-to-school sales in June.

Our focus on driving working capital efficiency is also seen in our receivables and days, which is 11 days improved from June from last year. On Slide 14, we have our net cash evolution from December 2022 to June 2023. You'll see that our operating cash flow was EUR 241 million. As we described in the prior slide, we had negative working capital and others of EUR 195 million.

Net cash was also impacted by investments in CapEx of EUR 43 million. This resulted in a free cash flow of positive EUR 2.5 million. During the first half, we bought back EUR 60 million in shares. Our net cash position at the end of June 2023 was EUR 198 million.

As Gonzalve stated earlier, we confirm our full year 2023 outlook. We expect net sales to grow between 5% and 7% at constant currencies, driven by price and mix. We expect to improve 2023 adjusted EBIT and adjusted EBIT margin with the growing gross profit margin, partially offset by continued investment in our operations and brand support, which are aimed at driving our Horizon ambition of delivering long-term profitable growth. And we remain confident in our ability to generate free cash flow before acquisition and disposals above EUR 200 million in 2023 for the fifth year in a row.

And more specifically, as we look towards the second half of the year, we're confident in our ability to deliver these margin results as we will continue to benefit from our team's strong RGM work to deliver price and mix, while we see an easing of material cost pressures that we had in the first half of the year.

In addition, our manufacturing efficiencies will continue to drive margin enhancements and we'll see more favorability from our U.S. dollar to euro hedging from last year. This strong increase in gross margin results in higher gross margin rates than we had in the first half of the year, and our Horizon investments in operating expenses and brand support will have less impact on EBIT margins in the second half of the year. All this being said, we anticipate seeing much higher EBIT margins in the second half of the year than we've seen in the past few years.

With that, Gonzalve and I are happy to take your questions. Operator?

[Operator]

[Operator Instructions] And our first question today comes from Kate Rusanova from UBS.

[Kate Rusanova, analyst]

So my first question is on Flame for Life. Sales growth in Q2 came in below expectations and seem to represent a step down on a 4-year [ debt ] basis versus Q1, and this is despite the launch of EZ Reach in Europe. So can you please shed some light on the main reasons behind this soft performance? And how should we think about the division's growth trajectory in the coming quarters?

For instance, would it be fair to assume some volume improvement in the second half versus the minus 3.6% reported in H1? And then I have a few questions related to your margin performance. Firstly, how should we think about your Q2 operating margin in Human Expression? What drove such a strong quarter? Currently, consensus is modeling 4% adjusted EBIT margin for Stationery in the second half. Do you see this as being too conservative?

Also, I was quite surprised to see the sequential step down in gross margin versus Q1. Can you explain why that was the case? And are you still expecting return to 50% gross margin mark for the full year? Maybe you can also tell us whether OpEx spend in the coming quarters can turn into a tailwind? And with all that combined, are you comfortable with consensus modeling 50 bps of adjusted EBIT margin improvement for the group in 2023?

[Chad Spooner, executive]

Kate, this is Chad. A lot of financial questions, so let me see if I can get them all here. Let's start with the first one. You talked about Flame for Life performance. And so we'll start with from a net sales perspective, we have to realize that the lighter market in the U.S. continues to decline. And this year, we're talking mid-single digits, right?

But BIC continues to gain share in volume and value. So we continue to outperform our competitors, but we need to realize it's still a declining market, right? That's the first thing we have to all recognize from the Flame for Life division. But in regards to the Q2 margin rates, this was impacted by higher raw material costs as we've been talking about the cost inflation that we had in the balance sheet at the end of the year persistent and came through in the first half of the year. So there's really no surprise there.

We had unfavorable fixed cost absorption, which is also inventory that we had at the end of the year with lower volumes producing at the end of last year, it gives us lower fixed cost absorption in the first half. And obviously, we had higher brand support investments as we launched EZ Reach in Europe. So these -- all these headwinds were partially offset by the great work that our RGM is doing across all categories to get more price and mix and the manufacturing efficiencies that our teams are driving.

So as we say those kind of things going forward, I think that you'll see more of a flattish type of business in the lighter business from a volume perspective. But the margins will, across all categories, as I said, be better. Why? Because we're seeing the easing of that material cost inflation while we continue to deliver on RGM.

[Gonzalve Bich, executive]

Let me just add 1 thing while you get to Kate's other financial questions. Kate, as we said after Q1 that comparative gap versus previous year where we had, had the shipments from Q4 of '21 that bled into Q1 of '22. Those, you can't make them up. But on a comparative basis, so if you exclude that, the business is growing 5.5% at constant currency, strong showing in all markets except for the U.S. where we're challenged. And we need to do better, both in the second half of this year. And then as we go into '24, it will be really important that we deliver on that Flame For Life, all flame [ occasions ] strategy that Horizon is underpinned on by continuing to grow EZ Reach, growing distribution in other segments and revenue growth management programs for the future.

[Chad Spooner, executive]

Thanks, Gonzalve. Second question I had was about Human Expression Q2 margin. So as you can imagine, we're very pleased with our Human Expression profitability in Q2 and it's a testament of the hard work that our commercial teams are doing to drive distribution gains and market share growth to get more sales. It shows that our RGM teams, the work that they're doing to drive price and mix is really working. And the work that our global supply chain team is doing to drive manufacturing efficiencies is working. So great news there.

And for the full year, I would say that we're expecting to see an increase in margin over the 2022 rate, as you can imagine. 3%, I told the market that, that is the lowest you'll see, and we'll definitely be rebounding from that. But obviously, it's not going to be at the rate that we saw in Q2, right? In Q2, we have higher volumes because of our back-to-school shipments. So we will see an increase, obviously, over last year, but obviously not to the extent that we've had here in Q2.

The third question I captured, you talked about gross margin deteriorating sequentially. On that one, I'd say it's really -- it's normal for our gross margin to drop from Q1 to Q2. And why? It's because Q2 is a much larger Human Expression quarter. We have over EUR 100 million more sales in Human Expression in Q2 than we do in Q1. And you know that's a lower overall mix in the company. So you get the mix effect from higher Human Expression.

But if you look at our sequential gross margin from [ Q2 ] 2022, you see it drop 390 basis points, right? So it was a much bigger impact. This year, it's only 80 basis points. So it's a really good sign of favorable increases that we're seeing in Human Expression margin, which I know is a concern of a lot of people at year-end in Q1.

So I think that's actually a good sign in terms of where we are, but it's a normal seasonality of our margin rates. The next question that I thought I heard you talk about OpEx, and you asked if it could be a headwind in the second half of the year.

[Gonzalve Bich, executive]

Kate, you said tailwind, right?

[Kate Rusanova, analyst]

Yes. I was wondering if you can...

[Gonzalve Bich, executive]

The question was tailwind.

[Chad Spooner, executive]

The way I look at OpEx is, the OpEx actually from a value perspective didn't increase from Q1 to Q2. So the number is the same. You're now talking about percentages, right?

[Gonzalve Bich, executive]

Operating leverage.

[Chad Spooner, executive]

Yes, operating leverage. And so what you will have, and I think I said this last quarter is the second half of the year will definitely not have as much negative impact on OpEx, on brand support as you saw in the first half of the year. So the margin rate won't be as negatively impacted.

And then your final question has me smiling. You're like, can the analysts expect the 50 basis points of margin headwind as good? Obviously, that would be tantamount to guidance, which we don't give on margin rates. So I think you'll infer from what we said is the confidence for sure that our margin rates will be growing this year, which is what we committed to the market, too.

[Operator]

And we're now moving on to our next question, which comes from Marie Fort from SG.

[Marie-Line Fort, analyst]

First question is about the outlook for new products for H2 and what will be your growth driver for the second half? The second question is about the Stationery margin again, sorry. I would like to know what is the outlook for Q3? Because if I well understand, part of the improvement in the Q2 operating margin in Stationery is due to decline in brand support. We can expect that with an increase in Q3 with less level of revenues. So how we should see the momentum in OpEx for Stationery in Q3? And also how Cello has contributed to the improvement in margin for the Stationery in Q2. Why we can see that sales in Asia and also probably in India was under pressure.

And last question is about the ForEx impact, either in terms of sales and EBIT. Could you help us to give some momentums in terms of impact either in terms of sales and EBIT?

[Gonzalve Bich, executive]

[Foreign Language] So the growth drivers for H2 that gives me the confidence to confirm our guidance today are double-digit growth in Brazil across all the categories. Remember, they have their 2024 back-to-school that gets shipped. A good percentage of that in 2020 -- in the last month of 2023, and they've had, over the last few years, really strong growth.

Continued strong performance in Human Expression division across Middle East and Africa, both in those new markets, but also our historical markets, the strategies that we put in place these last few years of focusing on the brand, focusing on winning products and making sure of excellence in distribution continues to pay off and shows us the importance of that current and future strategic market that is Africa. In Europe, continued strength of the Flame for Life division with both the rollout -- the continued rollout of EZ Reach across Europe, because remember, it's only a few months in, as well as distribution improvements and market share gains across all of Europe.

And then, finally, the back half of 2023 should continue to have strong growth from Blade Excellence in North America as EasyRinse continues to roll out and we continue to gain market share in a challenging market, but a dynamic market that I'm excited about.

So if you talk about new products, I talked about EZ Rinse, which is this year, very much focused on the U.S. market. And next year, we'll start rolling out to other markets. EZ Reach, which outside of the U.S., is still in launch mode. But in the U.S., we're still gaining distribution to achieve that 2025 goal that I talked about 3 months ago of reaching 10% market share. We continue to launch coloring products in the Intensity line. Always, every year, we seem to come up with new variants of 4 colors for back-to-school, and this year's back-to-school was no different. And I hope you specifically in the French market saw all those new variants.

The new break-resistant mechanical pencils for North America, Cello actually launched a few fun and exciting products for their market and then back to Latin America 3 and 5-blade products that continue to gain share in that interesting market. So we're really focused on those 9 Horizon capabilities of retail execution, consumer centricity and communicating our brand and products forward in a way that is synonymous with the BIC brand, value for money, valued by consumer, loved by consumers and very much part of the consumer landscape every day.

[Chad Spooner, executive]

Thanks, Gonzalve. Marie-Line, the next one I had from you was stationary margin Q3 outlook. So what I'll say on that is we are going to see across all the categories, stationery included, the benefits of the pricing and mix that we've seen from our RGM team that will continue throughout. We are going to see an easing of material cost inflation, which is also then going to benefit the gross profit margin. And we're going to see the stationary business seeing, I'll say, more than their fair share of manufacturing efficiencies being driven through, right?

Now we're not going to have as much volume leverage as we add so the margin rate attained in Q2 is not obviously a repeatable rate. But what we won't see is the negative margin rates that we saw last year in Q4, for example, for the stationary business and in Q3, right? So we had a second half negative. So we obviously won't be anywhere near that territory. And as I said, the 3% we saw at year-end was really the bottom number that we should see in the stationary at any point in time. So hopefully, that gives you a bit of color on stationary going forward.

In regards to Cello, one of the things that we'll continue to say is that Cello continues to improve quarter after quarter from an operations perspective. From the business team there is doing a great job of really driving more improvements to the business. So we are seeing some incremental part of that benefit of Human Expression will be from the continued improvements in Cello. And then from a ForEx perspective, the one thing that we'll see in the second half of the year is a lot more favorability from our U.S. dollar-euro hedging.

The way that rates worked out, the hedges that we attained at the end of last year, we're at a much better rate than the ones in the first half of the year. So we will see almost twice the benefit of U.S. dollar-euro hedging in the second half than we saw in the first half. And as you can imagine, we can't predict what's going to happen to the Mexican peso. Hopefully it doesn't continue to strengthen and the other currencies. So that's what I can give you on the foreign exchange. Hopefully, that helps.

[Marie-Line Fort, analyst]

Just 1 additional question. On Stationery, I would have to know because I expect that you've got a good view on that, is, do you expect that the brand support will increase for Stationery in Q3 mitigating the drop in Q2?

[Gonzalve Bich, executive]

No. The big brand support, Marie-Line, is really around things like EasyRinse and EZ Reach, right, our big innovation...

[Chad Spooner, executive]

Well, we have maintenance brand support launches in back-to-school in France, back-to-school in Spain, some in the U.S. So those big mega programs that, okay, caused some volatility in our P&L in quarters, which I understand for us, it's really this year was -- and we said it at the beginning of the year was EasyRinse and EZ Reach, I'm not excluding in future years for a big Human Expression launch to have a big campaign, but those are the ones you should be thinking about for the full year. Is that okay?

[Marie-Line Fort, analyst]

Yes.

[Operator]

[Operator Instructions] And we're now taking a question from Cedric Rossi from Bryan Garnier.

[Cedric Rossi, analyst]

Actually, I have 3. The first one, coming back on the Human Expression. If I recall correctly, you were expecting some orders to be postponed from Q3 to -- from Q2, sorry, to Q3. But actually, you had a good rebound in the second quarter. So is it still the case? And do you expect also some positive phasing impact to happen in the third quarter?

My second question is on the inventory outlook. So how do you see your inventory position by the end of the year? And my third question is could you update us on the integration process of Inkbox and the product and the commercial initiatives you are rolling out?

[Chad Spooner, executive]

I'll go first with the finance. I'll let then Gonzalve handle the rest. From an inventory outlook, what I'll say is you can tell by our Q2, what we call our DIO, right, or days inventory that we're making massive improvements from an operational standpoint on our efficiencies and our working capital efficiencies.

So you can expect that those type of efficiencies to continue and for us to generate some favorability from our inventory in the second half of the year.

When you look at free cash flow, 1 of the questions that probably wasn't asked that will be asked is with where you're at, how do you get to your free cash flow confidence for the year. The first answer is our operating results are going to be higher than last year, and that's going to deliver cash to the bottom line. The second thing is that we're going to collect even more on the AR side than we did last year with the higher sales and more efficiency in our receivables collection process, we're going to be bringing in the receivables for that second half of the year. And then inventory will be the third contributor in terms of us needing less inventory as we grow our future sales growth.

So that's kind of the way I look at inventory and all of our working capital overall.

[Gonzalve Bich, executive]

Which is a great segue to Human Expression because one of the things that you've seen in our results these past few years has been the shifting of buying patterns. And I need to be really specific with you all because remember, there is a big delay -- there's a notable delay between our sell-in and customer sell-out and back-to-school, which is normal. When you're shipping thousands and thousands of displays to large retailers who have to then put them in a warehouse, schedule them to be dropped to a store, get them into the store, have somebody pull them from the back, put them up, stock them up and then put the promotional stickers on them.

In some cases, that takes 1 to 2 months. And remember, last year, many of our retailers who wanted guarantee of availability bought things way ahead of time. And this year, I told you, you're absolutely right, Cedric, that I thought we were going to get more in Q2 than in Q3. And even though we did have a really strong Q2, we still have a lot of shipments to do in Q3. But you're right, we've had a very strong June.

What's important is to make sure that we have full sellout through the back half of the year, and then we can plan for 2024. Now as I think about 2024, I think we're going to go back closer to the schedules we used to have, let's call them pre-COVID, in shipments and schedules, which to Chad's earlier point and bridging back to your inventory question, means we won't have to start ramping up the factories quite as early as we did last year to make sure that we had everything, so that a further opportunity for us to make sure that we're optimizing our inventory levels by the end of the year. So hopefully, I've answered both of those questions in one.

And now to Inkbox, Chad is pointing to my third bullet-point in my page. So Inkbox, super exciting. Let's go -- let's talk about product. Let me do how I look at the business, and hopefully, this will help you.

So from product, super excited. We continue to work with new and exciting artists. We're doing collabs. Hopefully, you all saw Avengers and Marvel and many other different collaborations designed to increase the persona and consumer that the Inkbox product touches.

I mean, yes, 10,000 consumers -- or 10,000 designs in catalog plus the custom engines are very exciting. But we need to continue to make sure that we're very much in line with our vision at BIC, which is bringing joy to people and joy in the skin creative and tattoo space, is making sure that you find ways to express yourself and to do something fun. Today, Chad was noticing, I have a huge tiger on my forearm that I found yesterday and left. So that's really product today, but then there's the evolution of product.

So where can we take Inkbox, what features and benefits. And I can't get into the specifics because I don't want to take all the wind out of my sales when we announce later this year what we're going to be doing for 2024, but I'm very excited. Then you have the go-to-market strategy that I referred to in my opening statements. And I think anyone who does anything DTC in the last couple of years, be it the iOS challenges, retargeting technicalities and just how the space is evolving, has been challenged in making that model work both profitably and as effectively as it was. And the teams have been hard at work at that. Have we completely licked it? No. Are we hard at work? Yes. Are we still growing 16%? Yes. I'd like to do more.

I also told you that earlier this year, we got into retail. So we had our first big major push into retail. I'm really excited because this brings BIC back as not only a category leader, we do that in other places, but a market maker, right? Until BIC's Inkbox got into retail, we're the first ones to make major headways into distribution or modern mass market, if you will, and offer to Mr., Mrs. and everyone the ability to do this.

We're testing. We're learning. We have another drop actually ongoing right now in the U.S. with that same retailer, and we'll have a third one in October of this year. So those 3 pushes will give us a lot of learnings to drive our retail program for '24 and then further on. We also have international expansion, but we want to make sure that we do that right. And we've had some early learnings that were not expensive, but they were painful. And I want to make sure that we're learning from those as we continue our global expansion.

But Skin Creative is an absolutely fascinating and engaging segment that really speaks well to the vision and ethos that we have at BIC today of bringing simplicity and joy to people all over the world with our brands and products.

[Operator]

And up next, we have a question from Mourad Lahmidi from BNP Paribas.

[Mourad Lahmidi, analyst]

I have 2 questions. So the first one is on raw material costs. So I was just wondering how lumpy were those costs in the first half. It seems that they continue to reflect your sourcing cost of last year due to inventories. So what should we expect going forward? Are you going to start to benefit from these raw material costs in the second half?

Second question is about your guidance. It seems that it implies that your EBIT should grow faster than your top line this year. So if you have top line plus 5% to 7%, it should grow at least above that figure. Consensus is at plus 8%. So I was wondering if you can give me your thoughts on that affirmation.

[Gonzalve Bich, executive]

In terms of material cost, definitely, what we saw in the first half of the year is pretty much what we expected because it was on our balance sheet at the end of last year. We made the purchase of the inventory at the end of last year, and we sold them in the first half. We are definitely seeing an easing on the pressures that we saw last year.

Last year, we talked about EUR 105 million of inflation that impacted our P&L for the full year. This year, we'll be massively less. And I'll say in the second half of the year, those pressures will be eased substantially is the way I'd like to say. We're -- so that's -- in terms of lumpiness or whatever, we don't really think of it as lumpy because we kind of know what the costs are. They align with the sales of our different products. But we're not going to have the lumps of inflation like we've seen in the past, if that's you're calling a lump and add it on.

[Chad Spooner, executive]

I would just add for you, Mourad, if you're asking whether the market is lumpy or was lumpy, I would say still a little bit. It's not as linear as let's call it, pre-COVID, but that's easing. If that was your question, that would be my answer to you.

But at our total procurement level, I do want to reinsist. When we set out on Horizon, one of our key critical Horizon capabilities was procurement value capture. And in that procurement value capture was making sure that we smoothed out our procurement processes and kind of input costs. And we've been able to do that, and that's helping us deliver a little bit of sequential smoothness.

[Gonzalve Bich, executive]

And the second thing in terms of guidance, what I will say is we give guidance on the net sales. We haven't given explicit guidance on the EBIT margin, so I need to be very careful on that one. But I think you can infer with our rates increasing, right, it's going to -- you can do the math, depending on which you figure our EBIT margins are increasing to see what that implies or not.

But we would say that we're very happy with the margin accretion that we're having this year. We're very happy with the 5% to 7% sales growth, 7% through the first half of the year. But the work that we're doing, it's a testament to our teams that the RGM team, the work that they're doing is paying off with the work that the global supply chain team that Gonzalve said is paying off and we're seeing that in the margin enhancements.

Last year, we felt a lot of pain from raw materials. And as I've said numerous times, when EUR 1 of raw material goes up, you need EUR 2 of price to keep the rate the same. Price and mix, yes, price or mix. You need EUR 2 to cover it, right? So at a 50% margin business, which is essentially where we are. So easing of that, while we continue to get price and mix will help us substantially in the second half of the year.

[Operator]

[Operator Instructions] We do have a follow-up question from Marie Fort from SG.

[Marie-Line Fort, analyst]

I come back. For the U.S. business, could you tell us if the Q2 weakness is market-specific or BIC specific because you had a strong launch with EasyRinse in the U.S., and we don't see it really in the figures. Is it you the fact that you deliver EasyRinse in Q1 more than in Q2? Just if you got some explanation on that side.

And also in terms of M&A, there is a long time that you don't disclose anything. Where you are in your M&A strategy at that time?

[Chad Spooner, executive]

Marie-Line, Chad again. In the road to North America, what I'll say is we're continuing to take market share in value and volume. So I would say that as the market goes, we're outperforming where the market is, right? And so that's the way we think about of the North America business. They still continue to perform. So they've got some issues in terms of where the overall market is going in regards to...

[Gonzalve Bich, executive]

On M&A, Marie-Line, of course, we don't communicate until we have something to announce. But the program continues the way we laid it out for you last time, which is when you look at the top of the funnel, we have anywhere from, let's call it, 100-plus targets. We prosecute 20 out of those. We go into advanced learning and maybe due diligence on 10, and we go all the way to offers on 1, 2, maybe 3 per year. So those are averages. I'm not going to give you specifics of course because then you would ask me for names, but very much focused on that core and more strategy where we're looking at opportunities that either link into our route to market and it would allow us growth synergies.

And I referenced for you earlier Lucky Pen in Nigeria. I could have also talked about the deal that we did in Kenya. Those 2 have been not only accretive to the business, but they've strategically been important over our long term. We've looked also at opportunities in the different spaces of our core industry. So I'm confident that we're doing what's necessary to continue to fuel the nonorganic side of the growth, but I'm thrilled that we have a lot of strength in our core business that continues to deliver the very strong results of the company, both in growth and EBIT for the future.

[Chad Spooner, executive]

And Marie-Line, I pulled out the RI data just to give you some specific numbers for U.S. market share. Maybe that will help. From a value perspective, the Stationery market in the U.S. was down 2.7% and BIC gained 20 basis points of market share. In the Lighter division, the U.S. market was down 1.7% in value. BIC gained 1.5%, 150 basis points of market share. In the Shaver division, the U.S. market was actually up 10 bps, and we gained 30 bps of market share. So in the U.S. in all of our categories, we gained market share and value in the U.S. Hopefully, that helps.

[Marie-Line Fort, analyst]

Okay. And just EasyRinse, just to understand, is your Q2 has benefited from EasyRinse delivery? Or was it more in Q1, just for us to better understand.

[Gonzalve Bich, executive]

I think the way you could think about it is the pipeline for EasyRinse was split between the last like 2, 3 weeks of the -- no, it was in December because we had that 1 month early ship in the U.S.

So you add December and call it, January plus a few weeks in Feb, then you go into regular sales and those regular sales ramp up with distribution. So you have kind of this like small hill, then it goes down a little and then it will ramp up over the entire year as distribution improves because even though it can seem like you just flip a switch and the market has turned on. That's true of the largest hypermarket format, but when you're doing like point-to-point distribution in convenience stores and stuff like that, it takes time. So as the year goes on, we'll give you updates on like ACV and stuff. So that's how I would think about it if you're trying to build a model.

[Operator]

That concludes today's Q&A session. So I'd like to hand the call back over to you for closing remarks.

[Kimberly Stewart, executive]

Thank you, everyone, for joining us today. We hope to have the pleasure of seeing you on the afternoon of September 11 for BIC's Investor Update in Paris. At that event, we will be providing you with an overview of the current marketplace and the trends that we're seeing driving new segments and participants will also have the opportunity to sample our most recent product launches and even get a tattoo if you wish, temporary. So...

[Gonzalve Bich, executive]

AMI.

[Kimberly Stewart, executive]

Yes. And also our Digital Expression that will be there, so the Digital Expression [ trends ] can create. So that brings us to the call, and we wish you an excellent day. And if you have any follow-up calls -- questions, please do reach out to me. Thank you.

[Gonzalve Bich, executive]

Thank you.