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    Church & Dwight Co Inc (CHD)

    Business Description

    Church & Dwight Co., Inc. develops, manufactures, and markets a wide array of consumer household, personal care, and specialty products. The company is known for its well-recognized brands such as ARM & HAMMER® baking soda products, OXICLEAN® cleaning solutions, VITAFUSION® and L’IL CRITTERS® gummy dietary supplements, BATISTE® dry shampoo, and WATERPIK® water flossers and showerheads . Operating in three segments—Consumer Domestic, Consumer International, and Specialty Products Division (SPD)—the company focuses on delivering quality products across various categories . Seven of their brands, including ARM & HAMMER® and OXICLEAN®, are designated as "power brands" and significantly contribute to their net sales and profits .

    1. Consumer Domestic - Develops and markets a broad range of household and personal care products within the United States, contributing significantly to the company's net sales.
    2. Consumer International - Offers consumer products similar to the domestic segment but focuses on international markets, expanding the company's global reach.
    3. Specialty Products Division (SPD) - Provides specialty products that cater to niche markets, representing a smaller portion of the company's overall sales.

    Q2 2024 Summary

    Initial Price$103.92April 1, 2024
    Final Price$104.87July 1, 2024
    Price Change$0.95
    % Change+0.91%

    What went well

    • Strong new product pipeline expected to drive future growth: Church & Dwight is having a great year with new product ideas and expects these products to be big drivers next year as they continue to build distribution and awareness. Additionally, they have new product ideas coming as well .
    • Strength of brands gaining market share despite market slowdown: The company’s brands are outperforming categories, with 5 out of 7 power brands gaining market share in the quarter, and 10 out of 14 major brands growing share in Q1 and Q2. This success is attributed to the strength of their brands, innovation, and a balanced portfolio of premium and value offerings .
    • Successful product launches attracting new customers and driving growth: The launch of ARM & HAMMER Deep Clean is attracting both existing customers trading up and new customers switching from other brands. They anticipate Deep Clean to be a source of growth for the company .

    What went wrong

    • 1. Decelerating Category Growth Leading to Reduced Outlook*:
    • The company observed that consumption across key categories like laundry detergent, litter, and mouthwash is decelerating ( , ).
    • For example, laundry detergent category growth slowed from 2% in May to flat in June and down nearly 1% in July ( ).

    Q&A Summary

    1. Slowing Category Growth
      Q: Does guidance assume further slowdown?
      A: Categories have slowed, such as Laundry and Litter being flat in July. The company expects the slowdown to remain at current levels, not worsen. They plan to grow by gaining share, especially through new products.

    2. Promotional Spending 'Dry Powder'
      Q: Is additional spending factored into outlook?
      A: The company is prepared to deploy 'dry powder' for promotions if categories decline further or the promotional environment intensifies. This is primarily for household businesses like laundry and litter, and also applicable to vitamins.

    3. Vitamins Business Challenges
      Q: Is vitamin business stable? Timeline for improvements?
      A: The vitamins category is slightly down, but the company's issues are internal. Renovation of the portfolio has been slower than expected, and they don't expect to stabilize the business this year as planned. They need more time to turn it around. ,

    4. Gross Margin Outlook
      Q: What factors drive expected deceleration in H2 gross margin?
      A: Q2 gross margin benefited from favorable mix, with higher-margin products selling more than expected. In H2, modest inflation increases and potential promotional spending may impact margins. ,

    5. Key Brands Performance
      Q: What are growth expectations for THERABREATH and HERO?
      A: Both brands continue strong growth. While growth rates may moderate due to the law of large numbers, they expect strong double-digit growth ahead. They hold leading market shares in their categories. ,

    6. Marketing Investment
      Q: Is Q3 marketing spend incremental or shifted from Q2?
      A: Marketing spend was as expected in Q2 at 10.1%. The company plans to significantly increase spending in Q3 to support new products, then reduce it in Q4 to align phasing.

    7. M&A Activity
      Q: Any changes in M&A outlook?
      A: The company is actively looking at opportunities and sticking to their criteria. They acknowledge cash building on the balance sheet and note that the market is active. ,

    8. Executive Departure
      Q: Impact of Barry's departure? Plans to refill role?
      A: Barry has been a key part of their success; they are sorry to see him go. They have time to figure out how to fill the position, and it's business as usual.

    9. Retail Inventory Adjustments
      Q: Details on retail inventory reductions impacting sales?
      A: Disconnect due to prior HERO pipeline in the year-ago period and unexpected retail inventory adjustments, primarily in laundry. There's more noise as retailers manage inventory.

    10. International Performance
      Q: Expectations for international business in H2?
      A: International had a strong first half with 9% growth. The company expects around 7% growth in the back half, still exceeding their annual target of 8%.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Consumer Domestic1,116.91,128.21,133.11,1934,571.21,165.21,170.61,170.8
    - Household Products601.6619.2636.2627.12,484.1638.9653.2637.4
    - Personal Care Products515.3509.0496.9565.92,087.1526.3517.4533.4
    Consumer International230.6241.9244.4258.8975.7255.0263.7267.7
    Specialty Products82.384.178.476.2321.083.176.972.1
    Total Revenue1,429.81,454.21,455.91,5285,867.91,503.31,511.21,510.6
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States----4,870.4---
    International----997.5---
    Other--------
    Consumer Domestic--------
    Consumer International--------
    Specialty Products Division (SPD)--------
    Total Revenue1,429.81,454.2--5,867.91,503.3-1,510.6
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Equity in Earnings of Armand (Million USD)4.42.01.7--1.13.13.0
    Equity in Earnings of ArmaKleen (Million USD)4.42.01.7--1.13.13.0
    Intersegment Sales from Consumer International to Consumer Domestic (Million USD)3.63.44.7--5.67.07.0

    Executive Team

    NamePositionStart DateShort Bio
    Barry A. BrunoExecutive Vice President, Chief Marketing Officer, and President – Consumer DomesticApril 2022Barry A. Bruno has been serving in his current role since April 2022. He previously served as Executive Vice President and Chief Marketing Officer from October 2021 to April 2022, and Executive Vice President, International from January 2021 to September 2021. He joined CHD in 2013 and held various positions at Johnson & Johnson before that .
    Brian BuchertExecutive Vice President of Strategy, M&A and Business PartnershipsApril 2022Brian Buchert has been in his current role since April 2022. He was previously Vice President of Corporate Strategy and M&A from January 2016 to March 2022. He has been with CHD since 2006 and played a key role in acquiring 18 brands with a total transaction value exceeding $5.3 billion .
    Patrick D. de MaynadierExecutive Vice President, General Counsel, and SecretaryDecember 2011Patrick D. de Maynadier has been serving as Executive Vice President, General Counsel, and Secretary since December 2011. Before joining CHD, he held various roles at Hill-Rom Holdings, Inc. and was a corporate and securities partner at Bracewell & Patterson, L.L.P. .
    Richard A. DierkerExecutive Vice President, Chief Financial Officer, and Head of Business OperationsApril 2022Richard A. Dierker has been in his current role since April 2022. He previously served as Executive Vice President and Chief Financial Officer from January 2016 to April 2022. He joined CHD in 2009 and held various financial roles before that .
    Matthew T. FarrellPresident and Chief Executive OfficerJanuary 2016Matthew T. Farrell has been the President and CEO since January 2016 and Chairman of the Board since May 2019. He previously served as Executive Vice President, Chief Operating Officer, and Chief Financial Officer from November 2014 to December 2015 .
    Rene M. HemseyExecutive Vice President, Chief Human Resources OfficerApril 2022Rene M. Hemsey has been serving in her current role since April 2022. She was previously Executive Vice President, Global Human Resources from February 2020 to March 2022 and has been with CHD since August 2001 .
    Carlen HookerExecutive Vice President, Chief Commercial OfficerApril 2023Carlen Hooker has been in her current role since April 2023. She was previously Vice President, Mass Channel from September 2019 to April 2023. Before joining CHD, she held various positions at companies such as Ferrero U.S.A. Inc., Acosta, and others .
    Carlos G. LinaresExecutive Vice President, Chief Technology Officer & Global New Product InnovationApril 2022Carlos G. Linares has been serving in his current role since April 2022. He was previously Executive Vice President, Global Research & Development from June 2017 to April 2022. He has extensive experience in R&D product development and innovation .
    Joseph J. LongoVice President, Controller, and Chief Accounting OfficerSeptember 2020Joseph J. Longo has been in his current role since September 2020. Before joining CHD, he held positions at Dorman Products Inc., Pinnacle Foods Inc., and Tyco International Ltd. .
    Michael G. ReadExecutive Vice President, President Consumer International & Specialty Products DivisionOctober 2021Michael G. Read has been serving in his current role since October 2021. He joined CHD in 2016 and previously worked at Aryzta AG and Molson Coors .
    Rick SpannExecutive Vice President, Chief Supply Chain OfficerApril 2022Rick Spann has been in his current role since April 2022. He was previously Executive Vice President, Global Operations from May 2017 to April 2022. Before joining CHD, he had a long career at Colgate-Palmolive Company .
    Richard DierkerUpcoming President and Chief Executive OfficerMarch 31, 2025Richard Dierker is set to become the President and CEO on March 31, 2025. He has been with CHD for 15 years, serving in various roles, including Executive Vice President, Chief Financial Officer, and Head of Business Operations since April 2022 .

    Questions to Ask Management

    1. With the deceleration in growth of key brands like THERABREATH and HERO, despite their strong performance, how do you plan to maintain double-digit growth rates as the law of large numbers takes effect and category growth rates change?

    2. Given the slowdown in underlying category growth and the pressure on organic growth guidance, does your outlook assume further deceleration, and how do you plan to balance price/mix and volumes in this context?

    3. In light of rising commodity costs affecting gross margins, such as increases in pulp, paper, HDPE, and ethylene, what strategies are you implementing to mitigate these pressures and prevent further margin deceleration in the second half?

    4. Considering your disadvantage in the vitamins market due to a less extensive sugar-free portfolio compared to competitors, how are you planning to renovate your product offerings to address shifting consumer preferences towards sugar-free options?

    5. With the departure of key executive Barry, who has been integral to your success, how do you plan to ensure continuity in leadership and strategy, and what is your timeline for filling this critical role?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateOctober 28, 2021
    End Date/DurationNo expiration date
    Total additional amount$1,000.0 million
    Remaining authorization$658.9 million
    DetailsReplaced the 2017 program; aims to manage capital structure and return value to shareholders

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Sales Growth: Approximately 4% .
      2. Reported Sales Growth: Approximately 3.5% .
      3. Full Year Adjusted EPS Growth: At the low end of 8% to 9% .
      4. Gross Margin Expansion: Approximately 100 to 110 basis points .
      5. Marketing as a Percentage of Net Sales: Approximately 11% .
      6. Full Year Effective Tax Rate: Approximately 23% .
      7. Full Year Cash Flow from Operations: Approximately $1.08 billion .
      8. Capital Expenditures for 2024: Approximately $180 million .
      9. International Business Growth: 8% annually .
      10. Specialty Products Division: 5% organic sales growth .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024 and Q2 2024
    • Guidance:
      1. Cash Flow from Operations: Approximately $1.050 billion .
      2. Capital Expenditures: Approximately $180 million .
      3. Sales Growth:
        • Full year reported and organic sales growth: 4% to 5% .
        • Q2 reported sales growth: 3.5%; organic sales growth: 4% .
      4. Earnings Per Share (EPS):
        • Full year EPS growth: 8% to 9% .
        • Adjusted EPS for Q2: $0.83 per share .
      5. Gross Margin:
        • Full year expansion: 75 basis points .
        • Moderate expansion for Q2 .
      6. Marketing and SG&A:
        • Marketing as a percentage of net sales: 11% .
        • SG&A flat as a percentage of net sales .
      7. Tax Rate:
        • Q2 tax rate: 24% .
        • Full year effective tax rate: 23% .
      8. Other Expense: Approximately $80 million .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q4 2023 and FY 2024
    • Guidance (from Q3 2023 call):
      1. Reported Sales Growth: 5% .
      2. Organic Sales Growth: Approximately 4% .
      3. Gross Margin: Significant year-over-year expansion .
      4. Marketing Expense: In excess of 14% in Q4 .
      5. Adjusted EPS: $0.63 per share .

    Q3 2023 Earnings Call

    • Issued Period: Q3 2023
    • Guided Period: Q4 2023
    • Guidance:
      • The documents do not provide specific guidance from the Q3 2023 earnings call for Q4 2023, but the guidance for Q4 2023 was included in the Q4 2023 earnings call section above.

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • P&G
    • The Clorox Company
    • Colgate-Palmolive Company
    • S.C. Johnson & Son, Inc.
    • Nestle Purina PetCare Company
    • Nestle Health Science
    • Haleon plc
    • Henkel
    • Reckitt Benckiser Group plc
    • Kenvue Inc.
    • Pfizer Inc.
    • Bayer AG
    • NBTY, Inc.
    • Koninklijke Philips N.V.
    • Unilever PLC
    • Sanofi
    • Pharmavite LLC
    • Edgewell Personal Care
    • Cargill Incorporated (competitor in the specialty chemicals product line)
    • Lallemand Inc. (competitor in the specialty chemicals product line)
    • Solvay Chemicals, Inc. (competitor in the specialty chemicals product line)
    • Genesis Alkali (competitor in the specialty chemicals product line)
    • Natural Soda, Inc. (competitor in the specialty chemicals product line)