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    Church & Dwight Co Inc (CHD)

    Q3 2024 Earnings Summary

    Reported on Feb 7, 2025 (Before Market Open)
    Pre-Earnings Price$99.91Last close (Oct 31, 2024)
    Post-Earnings Price$105.75Open (Nov 1, 2024)
    Price Change
    $5.84(+5.85%)
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Organic Revenue Growth

    FY 2024

    4%

    4%

    no change

    Reported Sales Growth

    FY 2024

    3.5%

    3.5%

    no change

    Adjusted EPS Growth

    FY 2024

    8%-9% (low end ~8%)

    8%

    no change

    Gross Margin Expansion

    FY 2024

    100–110 bps

    110 bps

    raised

    Marketing Expense (% of Sales)

    FY 2024

    ~11%

    above 11%

    raised

    Adjusted Effective Tax Rate

    FY 2024

    23%

    22.5%

    lowered

    Cash Flow from Operations

    FY 2024

    $1.08 billion

    $1.1 billion

    raised

    Capital Expenditures (CapEx)

    FY 2024

    $180 million

    $80 million

    lowered

    International Organic Growth

    FY 2024

    no prior guidance

    8%

    no prior guidance

    Specialty Products Organic Sales Growth

    FY 2024

    no prior guidance

    5%

    no prior guidance

    MetricPeriodGuidanceActualPerformance
    Organic Sales Growth
    Q3 2024 vs Q3 2023
    ~4%
    ~3.8% year-over-year (from 1,455.9M to 1,510.6M)
    Met
    Reported Sales Growth
    Q3 2024 vs Q3 2023
    3.5%
    3.76% year-over-year (from 1,455.9M to 1,510.6M)
    Beat
    Gross Margin Expansion
    Q3 2024 vs Q3 2023
    100–110 bps
    Expanded by ~80 bps (from ~44.4% to ~45.2%) [(1,455.9−809.6)/1,455.9 vs. (1,510.6−827.5)/1,510.6]
    Missed
    EPS Growth
    Q3 2024 vs Q3 2023
    8%–9% full-year adjusted EPS growth
    Fell from 0.72 USD/share to -0.30 USD/share (diluted), a negative growth
    Missed
    TopicPrevious MentionsCurrent PeriodTrend

    HERO brand growth

    In Q1 and Q2, consistently positive performance: #1 in acne with a 20% share, strong distribution gains, and double-digit growth.

    Remains the #1 brand in acne care with a 22% share, increasing patch share to 57%. Continues international expansion into 40 countries and maintains a bullish outlook.

    Consistently strong growth

    Underperformance of the vitamins business

    In Q1 and Q2, consumption declines of 12% and 10.9% with internal issues and slower innovation contributing to underperformance.

    Consumption down 10%, significantly underperforming a flat gummy vitamins category. Major challenges persist despite reformulations, new packaging, and higher marketing spend.

    Worsening sentiment, major brand challenges

    Decelerating category consumption

    Q1 and Q2 both noted broad-based slowdown in categories (laundry, vitamins, mouthwash), attributed to consumer price sensitivity and weaker macro environment.

    Growth slowed to about 2.5% in mid-Q3, then rebounded to 5% in October, though management remains cautious for Q4.

    Consistent negative sentiment

    Increasing promotional activity in litter/laundry

    Q1 and Q2 highlighted rising promos tied to category slowdowns. Company kept “dry powder” ready to respond if rivals escalated promotional spend.

    Litter promotion rose from 15.5% in Q1 to 19.5% by Q3, adding margin pressure. Laundry promotions remained near 30%, though innovation (e.g., Hardball lightweight litter) helped mitigate share losses.

    Ongoing margin pressure

    THERABREATH brand expansion

    Introduced in Q2 as a fast-growing brand (17% total mouthwash share). Expanded product line and distribution, driving incremental category growth.

    Continues upward trajectory in Q3: #1 alcohol-free mouthwash with a 35% share, launched Deep Clean Oral Rinse in the antiseptic segment, contributing significantly to share gains.

    Ongoing positive expansion

    WATERPIK business

    In Q1, created a 1% drag due to retailer inventory issues but was expected to grow for the full year. Q2 was described as “flattish” with stable consumption.

    Mentioned primarily for China tariff exposure; steps taken to mitigate impact. No major consumption updates in Q3.

    Stable mentions, less emphasis

    Consumer trade-down to value brands

    Noted in Q1 as consumers shifting to lower-priced options like ARM & HAMMER Extra laundry. No further explicit mentions in Q2.

    Not specifically referenced in Q3. Discussion focused instead on consumers buying both premium and value offerings under the ARM & HAMMER umbrella.

    No longer discussed

    Gross margin improvements

    Emphasized in Q1 and Q2 (up 220–320 bps) from favorable mix, productivity, and some one-time benefits. Full-year guidance raised to 100–110 bps expansion.

    Up 60 bps to 45% in Q3 due to volume, mix, and productivity gains, offset partially by higher manufacturing costs.

    Continued improvement

    ARM & HAMMER brand’s strong performance

    Q1 and Q2 showed share gains from normalized promotions and product innovations, with ARM & HAMMER outperforming flat or declining categories.

    Achieved all-time high shares in liquid detergent (14.7%) and unit dose (4.8%), driven by new launches like Deep Clean and Power Sheets.

    Strengthening market position

    Significant vitamins impairment charge

    Not mentioned in Q1 or Q2.

    Recorded a $357M write-down in Q3, signaling deeper structural issues within the vitamins segment. Stabilization efforts likely to show results in 2025.

    New negative development

    1. Organic Sales Outlook
      Q: What is the outlook for category and organic sales growth?
      A: Management expects category growth to average around 2.5% in Q4, similar to September trends. They anticipate 2%-3% organic sales growth in Q4, confident in their second-half guidance.

    2. Gross Margin Outlook
      Q: How is gross margin affected by commodity costs?
      A: Despite an improved gross margin in Q3, management expects Q4 gross margin to be up slightly due to continued inflation in commodities like ethylene and linerboard. They are focusing on offsetting inflation through productivity.

    3. Key Brands' Performance
      Q: What is the outlook for THERABREATH and HERO brands?
      A: Management is optimistic about THERABREATH and HERO, citing years of growth potential. THERABREATH aims to increase household penetration from 9%, and HERO plans to expand into adjacent categories and international markets.

    4. Vitamin Business Challenges
      Q: How will you stabilize the struggling vitamin business?
      A: They acknowledge challenges and took an impairment charge due to lowered expectations. Innovation is expected in March-April 2025, aiming to stabilize the business with new products and reformulations.

    5. Promotional Environment Impact
      Q: How do increased promotions affect margins and share?
      A: Competitors increased promotions, with sold-on-deal rates of 40%-45%, but management won't chase aggressive promotions that erode margins. They focus on innovation to drive growth and have retained about 40% of prior share gains.

    6. Marketing Investments
      Q: How will increased marketing spend affect growth?
      A: Marketing spend increased to over 11% of sales, supporting innovation and international expansion. Investments focus on brands like THERABREATH, HERO, and new products in laundry and litter.

    7. Innovation Initiatives
      Q: What role does innovation play in growth?
      A: Innovation contributes about 2% of incremental net sales, with strong pipelines for the next 2-3 years. New products like Deep Clean in laundry and Hardball in litter are key drivers.

    8. Portfolio Pruning
      Q: Are you considering divesting underperforming brands?
      A: Management evaluates all brands annually and is considering strategic options, including potential divestitures. Details may be shared in early to mid-next year.

    9. M&A Outlook
      Q: What is the outlook for acquisitions?
      A: The company continues to seek opportunities but remains selective. Their growth algorithm isn't dependent on acquisitions, focusing on finding the right deals.

    10. International Expansion
      Q: What progress is being made internationally?
      A: THERABREATH and HERO are being registered in multiple countries, with HERO targeting 40 countries by end of 2024. Early results are promising for international growth.