Advanced purchases of Glad products ahead of our March price increase are likely to reduce shipments in the fourth quarter. That said, we are pleased that we continue to grow share in the higher-margin, premium trash bag segment.
Turning to Cat Litter, volume increased as a result of strong category growth and increased merchandising. Though sales lagged due to unfavorable mix and increased trade promotion spending in the face of heightened competitive pressures. In response, we're looking forward to our August launch of Fresh Step Extreme lightweight, which we believe will provide the lightweight product many consumers seek with the excellent clumping and odor control that Fresh Step consumers have come expect from our premium Cat Litters.
Volume in our Lifestyle segment decreased 1%, while sales decreased 3%. Sales lagged volume due to higher trade promotion spending, primarily on our Food business. Volume gains on our Food business from increased shipments of Hidden Valley bottled and dry salad dressings were more than offset by decreases on our Brita business, due to ongoing category softness and competitive activity. We anticipate having a meaningful competitive response out in the first half of next fiscal year on our Brita business.
Turning to our International segment, volume increased 1% and sales decreased 6%. Sales lagged volume due to 15 percentage points of negative foreign currency impacts across many International markets, notably in Argentina, Venezuela, Canada, Chile, and Australia. On a currency-neutral basis, International sales grew 9%, reflecting very strong gains in strategic growth markets behind innovation and higher brand investments. Steve will provide further details on Venezuela and Argentina in a moment.With that, for fiscal year 2014, we now anticipate sales to be down slightly, reflecting softness in the company's U.S. retail business and foreign currency declines. On a currency-neutral basis, we anticipate International segment sales to increase and total company sales to grow about 2%. Steve will provide additional detail on factors impacting our sales growth in fiscal-year 2014, as well as discuss our fiscal year 2015 sales outlook. With that, I'll turn it over to Steve Robb. Stephen M. Robb, Chief Financial Officer & Senior Vice President Thanks, Steve, and welcome everyone. So for the quarter, diluted earnings per share increased 5%, despite the negative impact of an effective currency devaluation in Venezuela. In March, we started using the SICAD I rate of VEF10.8 to US$1 to record our Venezuela business operations. The devaluation reduced diluted earnings per share by $0.13. Excluding this charge, earnings per share from continuing operations is $1.18. With that, let me take you through the details of our third quarter financial results. Sales for the third quarter declined 2%, reflecting more than three points of foreign currency declines and nearly a point of higher trade promotion spending, partially offset by about 1.5 points of pricing, primarily in International and 1 point of favorable mix. Excluding the impact of foreign currencies, sales were up more than 1%. Gross margin for the quarter came in at 41.8%, a decline of 30 basis points. We delivered $21 million in cost savings or 140 basis points, and about 80 basis points from pricing, primarily in International markets. These benefits were more than offset by 120 basis points of commodity costs, primarily related to resin. As well as a 120 basis points of higher manufacturing and logistics costs, due in part to continued inflation in International markets, particularly in Venezuela and Argentina. Selling and administrative expense for the third quarter was about 13% of sales, down 80 basis points versus a year ago, driven by a reduction in employee incentive compensation accruals, reflecting anticipated lower year-over-year payouts, consistent with our pay-for-performance philosophy. The total incentive compensation accrual reduction was about $25 million or about $0.12 of diluted earnings per share impact, benefiting several lines on the P&L, including cost of goods sold, selling and administrative expense and R&D costs. Advertising spending for the current quarter was nearly 9% of sales. Spending in the U.S. remained above 9% of sales, exceeding investment levels in International. On an absolute basis, advertising dollars were lower as we shifted a portion of our demand-building investment in the current quarter to trade promotion to address the intense competitive environment. Our third quarter effective tax rate of 35.3% on earnings from continuing operations was more than a point higher versus the year-ago quarter, reducing diluted earnings per share by $0.02. The higher rate was primarily driven by the non-deductible cost related to the Venezuela currency devaluation this quarter. For the full fiscal year, we now anticipate an effective tax rate of about 35%. Net of all of the factors I've discussed today, in the third quarter, we delivered diluted earnings per share from continuing operations of $1.05. Year-to-date free cash flow was $346 million versus $352 million in the same period year ago. This modest decrease is the result of the timing of tax payments, funding of liabilities under certain non-qualified deferred compensation plans, partially offset by lower capital expenditures. Importantly, we continue to anticipate free cash flow as a percentage of net sales will be about 10% for the fiscal year. In the third quarter, we repurchased about 1.5 million shares of common stock at a cost of about $130 million and we also ended the quarter with a debt-to-EBITDA ratio of 2.2 times to 1 times within our targeted range of 2 times to 2.5 times. Now, we'll turn to our fiscal year 2014 outlook. As Steve mentioned, we now anticipate sales to be down slightly for the fiscal year, reflecting softness in our U.S. retail business, including lower than previously anticipated Charcoal sales in the second half of the year. In addition, our outlook continues to reflect more than 2 points of foreign currency declines for the full year, with about 3 percentage points impacting the second half. For perspective, softness in our U.S. retail business is contributing about three-quarters of the decrease in our sales outlook with the Venezuela devaluation making up the balance. Higher year-over-year trade spending in the fourth quarter will also temper sales growth. On a currency-neutral basis, sales are now anticipated to grow about 2% for the fiscal year. Turning to gross margin, we continue to anticipate gross margin for the full fiscal year to be down slightly, reflecting the margin impact of our updated foreign exchange outlook and continued commodity cost headwinds. All other assumptions about gross margin remain generally the same, including an anticipated benefit of 150 basis points from cost savings, partially offset by about 100 basis points of negative impact from inflation, affecting manufacturing and logistics costs. We continue to take pricing actions where possible to help offset higher commodity cost and inflation. And as we mentioned in our press release, we increased Glad Trash prices by 6% in March to help offset the rising cost of resin. We continue to expect our fiscal year EBIT margin to be flat to up 25 basis points, reflecting lower selling and administrative expense as a percentage of sales, driven by reduced employee incentive compensation accruals and the company's ongoing productivity programs. Advertising spending on our U.S. retail business is expected to be about 9% of sales. With $0.15 of negative impact on the fiscal year from the recent currency devaluation in Venezuela, we now anticipate diluted earnings per share from continuing operations to be in the range of $4.25 to $4.35 for fiscal year 2014. Now, I'll turn to our financial outlook for 2015. As we noted in our press release, our preliminary outlook anticipates flat sales for the year. On a currency-neutral basis, our outlook anticipates sales growth of 1% to 3%, excluding the negative impact of more than 2 percentage points from currency declines in Argentina, Venezuela, and other countries. Following the third quarter devaluations in both Argentina and Venezuela, we expect currency declines to be higher in the first half of the fiscal year. These headwinds, combined with intense competitive pressures, may result in lower sales in the first half of the fiscal year, followed by stronger sales in the second half. Finally, our sales outlook also assumes about three points of incremental sales growth from new product innovation and the benefit of price increases, as well as the negative impacts of higher trade promotion spending and unfavorable mix. Now, let me make a comment about Venezuela. Our fiscal year 2015 outlook also assumes the ability to increase prices on controlled products in Venezuela where price freezes had been imposed on more than two-thirds of our portfolio for well over two years. Over the last few years, continued inflation in Venezuela has more than doubled our manufacturing costs. Although it's our desire to continue supplying millions of Venezuelans with the product they use every day, we continue to seek immediate, meaningful and ongoing price relief to address the deteriorating margins and operating losses in that country. Now turning to EBIT margin; for fiscal 2015, we anticipate margin to increase 25 basis points to 50 basis points, reflecting cost savings of about 150 basis points, some benefit from pricing in International markets and moderated year-over-year commodity costs. We expect these factors to be partially offset by high inflation impacting manufacturing and logistics costs, as well as higher advertising investment.
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