Church & Dwight Q1 2025 Earnings Report

Church & Dwight EPS Results

• Actual EPS: $0.91
• Consensus EPS: $0.89
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.96

Church & Dwight Revenue Results

• Actual Revenue: $1.47 billion
• Expected Revenue: $1.52 billion
• Beat/Miss: Missed by -$49.21 million
• YoY Revenue Growth: -2.40%

Church & Dwight Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 10:00AM ET

Church & Dwight (NYSE:CHD) Co., Inc. engages in the development, manufacture, and marketing of household, personal care, and specialty products. It operates through the following segments: Consumer Domestic, Consumer International, Specialty Products Division (SPD), and Corporate. The Consumer Domestic segment offers household products, such as laundry detergents, fabric softener sheets, cat litter, household cleaning products, and personal care products including antiperspirants, oral care products, depilatories, reproductive health products, oral analgesics, nasal saline moisturizers, and dietary supplements. The Consumer International segment is involved in the personal care, household and over-the-counter products in international subsidiary markets, including Australia, Canada, France, Germany, Japan, Mexico, China, and the United Kingdom. The SPD segment consists of sales to businesses and participates in three product areas namely, animal nutrition, specialty chemicals, and commercial and professional. The Corporate segment includes equity in earnings of affiliates. The company was founded by Dwight John and Austin Church in 1846 and is headquartered in Ewing, NJ.

Church & Dwight Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Church and Dwight's First Quarter twenty twenty five Earnings Conference Call. Before we begin, I've been asked to remind you that on this call, the company's management may make forward looking statements regarding, among other things, the company's financial objectives and forecasts. These statements are subject to risks and uncertainties and other factors that are described in detail in the company's SEC filings. I would now like to introduce your host for today's call, Mr. Rick Dirker, President and Chief Executive Officer of Church and Dwight.

[Operator]

Please go ahead, sir.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

All right. Good morning, everyone. Thanks for joining us today. I'll begin with some thoughts on the macro environment and review our Q1 results, and then I'll turn the call over to Lee McChesney, our new CFO. When Lee is done, we'll open the call up for questions.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

As you read in the release, we have several topics to discuss this morning, including Q1 results, portfolio changes, tariff management, U. S. Consumer spending and a revised full year outlook. With that, let's turn to how we performed in Q1. During our presentation at CAGNY in February, we stated we expected our organic sales growth to be at the low end of 0% to 2% range due to retail destocking and weakening consumer demand.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

As it turned out, organic sales decreased 1.2% falling short of our outlook. Retailer destocking accounted for a drag of approximately 300 basis points on organic growth. The good news is our strong brand performance. We gained share in nine of our 14 major brands as our consumption outpaced category growth. 80% plus of our business grew volume share in the quarter.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Contributing to our Q1 results is our success in the online class of trade with online sales as a percentage of global sales now reaching close to 23%. In a few minutes, I'll contrast our Q1 consumption with category growth when I comment on the major categories. Regarding earnings per share, adjusted EPS was $0.91 beating our outlook by a penny. Now let's discuss the strategic actions we outlined in the press release. Each year, our management team reviews our brand portfolio with the Board of Directors and in concert with that review, the company completes evaluation exercise for each and every brand.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

As a result of that review, the company is pursuing strategic alternatives for the FLAWLESS, Spin Brush and WATERPIK showerhead business, which means we'll be shutting down or selling these businesses. These businesses generate $150,000,000 of net sales or around 2% of our total net sales with below average profitability. We expect to take a charge in Q2 relative to this decision. This decision will prune our portfolio, sharpen our focus on core brands and mitigate a significant tariff exposure, is the next topic I would like to discuss. Turning to tariffs, while the tariff situation remains fluid, the company is currently projecting a gross twelve month run rate tariff exposure of $190,000,000 The net impact of the portfolio decisions and a series of supply chain actions is expected to reduce our tariff exposure by approximately 80%.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

The supply chain actions include no longer sourcing WATERPIK flossers from China for The U. S. Market. Our ability to move with urgency to execute these changes is a testament into the Church and Dwight culture. I'm very proud of the company and the reaction that we've we've done here.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Now I'm going to turn my comments to each of the three businesses. First up is The US. Consumption was positive in the quarter for The US business, while organic sales declined 3%, entirely driven by negative volume from retail destocking. So let's look at the trend line. In The US, consumer spending continues to sequentially weaken.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

For context, it's instructive to look back at our U. S. Year over year category growth since around mid-twenty twenty four. In the second half of twenty twenty four, category growth averaged 2.5%. In Q1, our categories grew around 1.5, March was flat and April was negative 1%.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And remember for context, over the last ten years or so, category growth is typically around 3%. In addition to the consumer, retailers took inventory actions which impacted our top line. Now I'm going to provide a bit of color for a few of our important categories. Let's start off with laundry detergent. ARM and HAMMER liquid laundry detergent consumption grew 3.4% in contrast to zero category growth.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

ARM and Hammer share in the quarter reached 14.7%. There's a similar story on unit dose. ARM and Hammer unit dose saw consumption growth of 26.9%, which drove 120 basis point share gain to reach a 5.5% share. This is in contrast to a weak unit dose category which declined 1.1%. Now moving to Litter, similar story to Laundry, the category was up 1.9% while Arm and Hammer Litter consumption grew 2.3%, which outpaced the category and share reached 24.9%.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

The Gummy Vitamin business continues to be a drag on the company's organic growth. The Gummy Vitamin category grew 4.8%, which is the second consecutive quarter of growth. The bad news is our consumption was down 19%. The plans that we shared with you on previous calls will begin to be visible in the market starting in May. Those actions include new products, an enhanced taste profile, and new creative marketing.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We'll update you on our progress on the Q2 call. Next step is Baptiste. Consumption was down 5% in the quarter with share declining 3.4%. There are a couple of contributing factors. One is we were experiencing some supply chain issues that have since been resolved.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

In addition, a competitor had a significant price increase that impacted our dollar share. On a positive note, Batiste continues to be the global leader in dry shampoo. And this year, we're launching Batiste Lite. As a leading brand, our innovations continue to attract new users to the category and increase household penetration. Over in mouthwash, TheraBreath continues to perform extremely well.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

While the mouthwash category was flat in q one, TheraBreath consumption grew 26% and is now the number two mouthwash with a 20.3% share. Remember, we believe there's a lot of runway here as our household penetration for TheraBreath currently sits around 10.5% versus the category of 65%. HERO is the number one brand in acne care with a 22% share and continues to drive growth. HERO grew consumption by 13%, outpacing a 1.1% decline in the category. HERO market share grew two eighty basis points in the quarter.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And similar to the TheraBreath story, we believe household penetration growth is key for this brand. Currently, sits at 8.7% versus the category of 25%. Hero continues to launch innovative solutions and patches and is entering the growing body care segment in 2025 with the Mighty Patch Body. Looking ahead, we're excited about our pipeline of new products, which remain a key driver of our success. In 2025, we expect continued innovation power our growth and build on our momentum, especially in several core categories where we're leading the way.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And we spoke about many of these at our Analyst Day in New York. Now turning to international and SPD. Our international business delivered sales growth of 2.7% in the quarter. Organic sales increased 5.8% largely due to higher volume. Growth was led by Hero, TheraBreath and WATERPIK and was broad based with all of our subs delivering growth.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Finally, SPD organic sales increased 3.2% due to a combination of higher price and product mix and higher volume. This business continues to deliver and we continue to be excited about the future. Looking ahead, our full year organic growth outlook is now 0% to 2% driven by a weaker US consumer. We expect our Q1 brand share momentum to continue bolstered by our new product launches, our distribution gains and sustained full year investment in marketing. After considering the trend line that I shared with you, we do not see a catalyst for improvement in The U.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

S. Consumer. Our outlook also reflects no bounce back from Q1 retailer destocking. For adjusted EPS, we now expect 0% to 2% growth, which reflects the impact of lower sales and the impact of tariffs. I'll close by saying that despite a slowdown in category consumption, our brands are strong.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

They're doing well. We're gaining both dollar and volume share across much of the portfolio with a healthy mix of value and premium offerings, and we're well equipped to navigate the current environment. The strategic actions we announced today will position the company well for the future, and we continue to be on the hunt for the right acquisitions. I'd like to thank all of the Church and Dwight employees for executing well in a volatile environment. And now I'll hand it over to Lee for more detail on the quarter.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Thank you, Rick, and good day to everyone. Before I jump into the quarter, I do want to say thank you to Rick and the entire CHD team for the warm welcome. I've only been here for a month or so. I've already seen what makes this company such a strong performer as a team is focused on execution. We're acting swiftly to address the challenging macro environment that nearly every company is facing today.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

With that, let's dive into the first quarter and our outlook. We'll start with EPS. First quarter adjusted EPS was $0.91 down 5.2% from the prior year. The $0.91 was slightly better than our $0.90 outlook. Reported revenue was down 2.4% and organic sales was down 1.2%.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

The organic sales decline was due to lower volume of 1.4% partially offset by positive pricing and mix of 0.2%. Our first quarter adjusted gross margin was 45.1%, a 60 basis points decrease from a year ago with improved productivity, positive mix and higher margin acquisitions being offset by the impact of commodity inflation, higher manufacturing costs and lower volume. Let me walk you through our Q1 gross margin bridge. We saw 160 basis points from productivity, a favorable 10 basis points from the combination of mix and price and a positive 10 basis points related to the acquisitions. Those factors were offset by the headwinds I just mentioned above and 20 basis points related to FX.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Moving to marketing. Our marketing expense as a percentage of sales was 9.3% or 80 basis points lower than 1Q of last year. For the year, we are targeting 11% of net sales. And accordingly, we expect to continue our first quarter momentum in gaining market share. For SG and A, Q1 adjusted SG and A increased 40 basis points year over year, primarily due to the year over year volume change.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Other expense decreased by $7,700,000 inclusive of lower interest expense and higher interest income. We continue to expect other expense for the full year to be approximately $50,000,000 on an adjusted basis. In Q1, our effective tax rate was 22% compared to 19.9% in Q1 of twenty twenty four, a two ten basis point year over year increase. The expected adjusted effective tax rate for the full year continues to be 23%. And now to cash.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

For the three months of 2025, cash from operating activities was $185,700,000 a decrease of $77,300,000 versus last year due to lower cash earnings and the sales timing impact on working capital. Capital expenditures for the first three months was $16,500,000 a $29,800,000 decrease from the prior year. We expect 2025 CapEx of approximately 130,000,000 as we return to historical levels of 2% of sales in 2025. Let's now take a few minutes to walk through our outlook. For the full year, we now expect our organic revenue outlook to be approximately 0% to 2%.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Previously, that was 3% to 4%. The sales outlook now reflects the slower category growth and the retailer inventory reductions that we don't expect to recover. Full year gross margin is now expected to contract 60 basis points versus 2024. Previously, that was a positive 25 basis points outlook. As we expect the tariff impacts, persistent commodity input inflation costs to offset the incremental productivity, we now expect full year adjusted EPS to be 0% to 2%, down from our previous view of seven to 8%.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

This is primarily due to lower sales outlook and the tariff pressures. Cash flow from operations for the full year is now estimated to be approximately 1,050,000,000.00 due to the impact of our lower EPS and the onetime charges. For 2Q, we expect organic sales of approximately negative 2% to flat. And as a result, we expect adjusted EPS of $0.85 per share, a decrease of 9% versus last year's adjusted Q2 EPS. As our outlook implies, we expect EPS growth to be weighted towards the back half of '20 '20 '5 due to marketing investment timing versus last year.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

And finally, as we noted in our release, this adjusted outlook as of 04/01/2025, excludes charges and the ongoing results for the FLAWLESS, Spin Brush and WATERPIK showerhead business. Those charges are expected to be between $140,000,000 largely recorded in 2Q and two thirds is expected to be non cash. With that, Rick and I would be happy to take any questions.

[Operator]

Your first question comes from the line of Rupesh Parikh with Oppenheimer. Please go ahead.

[Rupesh Parikh, Senior Equity Research Analyst at Oppenheimer & Co. Inc.]

Good morning. Thanks for taking my questions. So obviously a lot of areas to cover, but maybe I'll start out just as we look at your updated organic sales growth guide, is there any way to get updated expectations by segment? And then it's related to that, do international play out your expectations for Q1?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yes. Sure, Rupesh. Yeah. Q one was was spot on for international. Lee, do you have the division that you can share?

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Sure. So, you know, international, as as we talked about, had good growth in the first quarter and organically about 6%. SPD was about 3%. As we look forward, you know, we expect international to, you know, to be in that zone, maybe a little bit of pressures, some of the macro pressures spread across the globe. SPD will be maybe slightly better than it was in the first quarter.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

The domestic business, obviously, we're you can imply in the outlook, we had negative three in the first quarter. We're looking for a similar performance here in 2Q and then an improvement in the back half. Still be slightly negative to get to the overall outlook of still 0% to 2% organic for us in total.

[Rupesh Parikh, Senior Equity Research Analyst at Oppenheimer & Co. Inc.]

Great. And then I guess maybe just my follow-up question. Just given a softer category outlook and a backdrop that you're seeing right now, what do you see on the promotional backdrop for the quarter? Then how are you thinking and then do you expect the promotional backdrop to to to intensify from here?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yep. No. It's a fair question. You know, for for the quarter, when we talk about promotional, we really talk about laundry. And laundry in q one was 34% amount sold on deal, very similar to what q four was, very similar to what q three was.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

So not a huge step up right now. A lot of things happening on the laundry category. You know, there's concentration happening from one of the peers. There's some price increases in in in another part of the peers as they switch out different offerings. And so it looks like there's a little bit more promotional going on right now as they work through those old inventory, you know, and transitions.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

You know, litter is the other example. Litter promotion was around 18.8% in the quarter. Sorry. 17.8 in the quarter. It was 18.8% last time.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

So, again, stable. As categories are flat though, people tend to increase their promotional spend. I'd say we're well positioned for what we think is the right level of promotion. Our our assumption for category growth, you know, used to be around two and a half percent for the year. It's closer to, you know, 1%, one point five % these days.

[Rupesh Parikh, Senior Equity Research Analyst at Oppenheimer & Co. Inc.]

Oh, great. Thank you. I'll pass it on.

[Operator]

Your next question comes from the line of Anna Lazol with Bank of America. Please go ahead.

[Anna Lizzul, Vice President, Equity Research at Bank of America]

Good morning and thank you so much for the question.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Hi, Anna.

[Anna Lizzul, Vice President, Equity Research at Bank of America]

Hi, Rick. I was wondering if you could discuss maybe your expectations for the category relative to market share growth since you did mention softer trends in April. Are you seeing a significant difference here across the premium and value segments of the business in terms of the slowdown? And just on the value side, are you trying to see any benefit here from trade down or anticipating a benefit as we're moving through the year? Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. So, you know, if you take a big step back and and you look at our outlook organically, we're saying, the midpoint's around 1%. And we saw minus one in q one. We're saying q two looks well like that, so maybe minus one. And, and then that that implies something closer to to around two in the back half.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And like I just told Rupesh, you know, the, the categories themselves, we used to think we're gonna grow two and a half percent, and we were gonna grow faster than that. We think the categories are gonna grow maybe one to one and a half percent and we grow a little bit faster than that. In terms of trade down, you know, surprisingly, we're still not seeing the amount of trade down that we would expect if this type of environment perpetuates. So orange box still isn't growing faster than black box on litter as an example. The value part of the laundry category is not growing as fast as the mid tier.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And the mid tier, again, is growing a lot behind DeepClean, our new innovation. But when when trade down happens, those two things will be a trigger. And, you know, I I expect, you know, our extra business as well will will do better. It's just we have to be down like this for a period of time. So I I believe that we're in early early days of this type of environment, and and we're well positioned for when, we we stay here.

[Anna Lizzul, Vice President, Equity Research at Bank of America]

Okay. Thanks very much.

[Operator]

Your next question comes from the line of Chris Carey with Wells Fargo. Please go ahead.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Hey. Hey. Good morning, everyone. Can you guys, frame within the reduction in earnings for the year, how much was the revenue call down versus, tariffs? And and maybe just, you know, simply put, you know, what what is the tariff impact that you're embedding for this year?

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

And can you help give us a bit of clarity on, you know, the wraparound tariff impact in the 2026, on on mitigated for some of the sourcing changes you're making, and then perhaps how you're thinking about your 2026 absolute tariff exposure. I mean, effectively, there's this hundred $90,000,000 number, but what we're gonna end up seeing in the p and l is is, like, substantially lower. So how does that look in '25 and and 2026? Then I have a follow-up.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Sure. I'll give you my thoughts. And then if Lee has anything to add, he can do it. Just taking a big step back on the tariffs.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

I really do think this is a great example of Church and Dwight moving with speed and urgency. A gross impact of around a hundred $90,000,000 on a twelve month run rate basis. And I just wanna be clear, we're not taking those strategic actions cut because of tariffs. We've been discussing internally for for some time and they've been on the list of of businesses that we believe are are either have a better owner elsewhere or or we're gonna shut down. And even as recently as this past summer, we went we went through those details with the board.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so those three businesses, though at marginal profit levels at a hundred and $50,000,000 of sales, are, are really hit extremely hard, by tariffs. So it made sense to kind of fast forward that that discussion and that decision. So that hundred and 80 hundred and 80,000,000 goes down to, a hundred million when those three businesses have strategic options around it. And then that goes down to around $40,000,000 after we've made the manufacturing decisions for water pit flossers as we've moved that business out of China over time. And so to be able to go from a hundred and 90 gross to kind of a $40,000,000 number is fantastic.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And then we're gonna continue to be working, you know, through supply chain activities and and maybe nuanced pricing over time to to reduce that even further. So in the p and l for 2025, to answer your question, there's a net number of around $30,000,000 in our outlook. If you do the wraparound at 2026, you know, that's why we kinda say it takes twelve months to to do some of the rest of the supply chain activities. We won't go through all the detail, but we expect to further mitigate that number over time. And that's a that's a you know, is it an issue?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yes. But after all that work, that's a manageable issue that we feel pretty confident on being able to mitigate over over the next twelve months or so.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Thank you. From the connected in a way to what you were saying about some of these businesses that, you know, you had presented to the board and, you know, had had thought about strategic alternatives. I'm conscious the vitamin business, you know, how to plan for this year, on a performance to category, you know, is is widening. You know, at what point does, patients with plan, you know, run out? I'm conscious you have, you know, strong balance sheet, which gives you a lot of options to do many things.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

And so maybe give us updated thoughts on where vitamin sits within your medium to long term plans and maybe what's happening this year that hasn't gone as well as maybe what you would have hoped relative to your, you know, go in plans? Thanks so much.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yep. Fair question. I think right now, we're kinda in that, a little bit of a that circle where you have negative consumption that leads to lower TDP growth. Lower TDP TDP growth distribution points leads to lower consumption. What we're laser focused on is the innovation, the best tasting reformulation, change in marketing to reach reach the right consumer, and and and to do some couponing to go drive trial.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Loyalty rate is actually very low in the in the vitamin category. I think, it was, eight or 9%. So if we can go, you know, get those consumers to retry our best tasting formulas and and again, the new innovation is power plus, our most powerful vitamins. And I think we have a good chance to have some green shoots and inflection points in that business. That business is not meeting expectations.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We've we said last call that we needed from April through July to see if this innovation turnaround and investment is working. And so that's why in my prepared remarks, I said we'll talk more about that after q two.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Okay. Thanks.

[Operator]

Next question comes from the line of Andrea Teixeira with JPMorgan. Please go ahead.

[Andrea Teixeira, Analyst at JPMorgan Chase]

Thanks, operator, and good morning, everyone, and welcome, Lee, to the call. I wanted to just go back. You called out in terms of consumption, you called out the 300 basis points reduction in customer domestic for the inventory destocking. But if you can comment also on Hero, it was a big motor of growth. And I understand all the actions you're taking and the brand continues to be strong, but I'm assuming it is hitting a very tough comp.

[Andrea Teixeira, Analyst at JPMorgan Chase]

And as you said, like for vitamins, it's obviously a completely different story between them between hero and the vitamin side. But talk about the distribution points and how we can think about that brand continue to grow as lap the growth. And then on the commentary, just for my clarification on the promo side, I understand the depth and how the percentages are still on promo, but if you can comment on the depth of the promotions, if there is a to your point, some of these categories, later and, in laundry, perhaps, you know, having a little bit more depth, and for how long do you think that's gonna normalize? Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Thanks for that question, Andrea. I would say for hero, we are still really pleased with with consumption. You know, it's double digit consumption up 13% in the quarter. I think the nuance that's happening in Hero is remember, it's overexposed to a few retailers.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

You know, it started at a few that are having foot traffic issues. And so it's doing great growth almost everywhere, apples to apples, but foot traffic declined at a few different retailers. Kinda over indexes to hear up. But overall, you know, with that said, double digit consumption is fantastic. We still think we have t d b TDP growth.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We believe we you know, with our share of market, we're under indexed at shelf in many places. So not only just going to new retailers and new distribution, but just being able to spread out on shelf. You know, it still happens that by by Sunday or Monday, the shelf could be empty. And I think we gave the example at a few of our conferences that at a few retailers at times especially at temple events, but at times, the number the top three units or or dollar sales at any retailer is water, paper towels, and hero. So it's it's doing really, really well, and it still is, and we have some great distribution gains ahead of us.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Moving to sold on promo, you're right. The percentages kinda tell you the frequency. Depth is a different story. You know, most of the I would say it's a little opaque out there, but different concentration moves and different pricing moves and some of this being spent back on promotion. And, I would say right now, we view that as transitory because of, you know, size changes and SKU changes and and whatnot.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

If that, extends for a period of time, we'll talk more about that in q two. But for now, I would say, pretty much in line with what we were expecting.

[Andrea Teixeira, Analyst at JPMorgan Chase]

Thank you.

[Operator]

Your next question comes from the line of Steve Powers with Deutsche Bank. Please go ahead.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Good morning and welcome Lee as well. I guess, Rick, guidance implies, I think your expectations are explicit about back half improvement in organic growth. And I'm just juxtaposing that against your expectation that you're not really expecting consumption to improve and we've seen the step down in April. So acknowledging that the destocking in 1Q probably doesn't continue as a base case, just what's the bridge to back half improvement?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. I I I think it's a fair question. I think positive category growth, I think it is kinda unique for us to have I I went through in the release, but I'll say it in my script, but I'll say it again. Right? Two and a half percent growth in the back half of twenty twenty four, '1 and a half percent growth in the quarter.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

March was flat. April was down 1%. It is extremely odd for these categories to be negative. Like, that that that is just not something that we have seen, and we don't expect that to continue, you know, for for a very long period of time. They tend to grow around 3%.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

I get that we're in a volatile environment, weak consumer confidence, a more volatile world than ever. But these categories over time, we still expect to return to growth. And then we have distribution gains happening in the back half. We have innovation, even even incremental innovation that we didn't necessarily share at in New York. We have strong marketing.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We're gonna keep our marketing where it's at. You know, the the long term strength of the business is to drive share over time. We did that well in q one. We expect that to to happen throughout the year.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Okay. Fair enough. And then just back to your commentary on vitamins and the initiatives you're putting in place between now and July. How as we as we as we follow along from the outside, you know, what does success look like in terms of, you know, monitoring things as we go? And then, ultimately, what what is the, you know, what is the, I mean, the expectation?

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Clearly, the ambition is to be is to be, you know, winning and growing. But what what's the expectation as you think about the, the initiatives you're putting in place and the returns you're likely to get, you know, in the back half and then, you know, as we exit '25?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. So look. The the green shoe to the inflection points that we wanna see are things like and they're gonna be very obvious. Like, part of it's gonna be our weekly POS on our multi byte business. Right?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And given all the reformulation work and and the advertising and the trial that we're pushing, we we need to see the trends inflect higher. You know, I would say customer and consumer reviews are a big deal. Like, we are we taking a step up and and are we hitting the mark on what the consumer needs and wants? That's a big deal. Are we are we getting have we stopped the decline in TDPs because the retailers believe in the story of our innovation?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Because we're not just launching a new multivite, we're doing a reformulation across the entire lineup. We're doing a new power plus vitamin. We're doing, sugar free variants. We're doing a GLP offering. So it's a holistic innovation, and is that enough to to give it a shot on shelf?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

So those are some of the the tactical things that that we're gonna be looking for over the next few months. I would say I would say probably the the the most important one for me is are we growing from here? Like, we're we we've made and are making some strategic decisions that we don't need to be in all classes of trade. We don't need to be in every sub segment of vitamins. We wanna make sure we're we're retrenched a bit, but we can grow and are confident of growth here.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so that's what again, over the next three months, we're gonna make that call.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Okay. Perfect. Thanks for the context. Appreciate it. Yep.

[Operator]

Your next question comes from the line of Olivia Tong with Raymond James. Please go ahead.

[Olivia Tong, Managing Director at Raymond James Financial]

Great. Thanks, welcome, Lee. You guys mentioned the potential for pricing, realizing it will be very surgical. But given the macros and declining categories, how do you layer in price? And what's your view on the promotional environment, going forward?

[Olivia Tong, Managing Director at Raymond James Financial]

And then given this backdrop, how do you think you can continue, could you talk about how you continue to drive penetration in your newer categories like Euro and Therabras so that they can continue to contribute in the outsized way that they have? Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Good questions, Olivia. No. On pricing, I'm actually really pleased with, again, the the the commercial organization here at Church and Dwight, and we're handling this just like we did COVID, really, the first few weeks. We have stand up meetings every week, some sometimes multiple times a day, and and we're doing all types of of actions.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Because in this environment, you're exactly right. The last thing you wanna do when categories are flat to down is try to go take price. And it's not good for the consumer. It's not good for for the brand. And so we've worked really hard to mitigate 80% in the short term and probably more than that over the medium term.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so that's gonna enable us not to take price. There might be a couple examples where we we do. And, again, that's gonna gonna evolve based on how the external environment evolves because things change from, you know, Thursday to next Tuesday. So I I'm just happy and and pleased with the culture of this company and how quickly we can move when we need to. But I would say, overall, so far, we've been able to not have to lean in and take take price.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

The second one was on penetration, especially for our some of our new businesses like Hero and TheraBreath. And and that is the story in my mind. We are we are so under indexed still on household penetration. And I think I gave you the the numbers in in the, in the prepared comments, but, like, around 9% for hero and 25% for, acne. And and TheraBreath is a much bigger opportunity for sure.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so that means in an environment like this, we should be doing a couple of things. One, we're reallocating media where needed to hire and best use, and and those two brands have a higher and and and best use for sure. We're we're committed to spending at the 11% of marketing clip even in an environment like this because we wanna go drive awareness and household penetration. And that's the name of the game, and this that means these two businesses have have years of growth ahead of them. So combined with the marketing investment, we're gonna continue to to innovate with those two businesses.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We have global expansion for those two businesses, and we're thrilled with with kind of the growth curve that's happening.

[Olivia Tong, Managing Director at Raymond James Financial]

Got it. Thanks. And then can just following up, can you talk about the drivers for the 85 basis point change in in the gross margin guide to down 60? How much of that is deleverage, potentially some negative mix? You talked about potential for more trade down as the year progresses versus what you've embedded in terms of tariffs.

[Olivia Tong, Managing Director at Raymond James Financial]

It seems like it's mostly tariffs, but just the flexibility, within the rest of the p and l or within the operating guide if, if if you do start to see more trade down and and that impacts the, gross margin line.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Yes. So I'll jump in there. So again, morning. Thanks for the welcome. So I think similar to what you saw in the first quarter, right, we're down 60 basis points and we're saying that actually that's the view for the year as well.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

So behind that obviously we talked about the kind of inflation operations costs being mitigated by productivity, little bit of price mix and then benefit from the mix into acquisition higher margins. As you think about from a full year perspective, productivity is still strong. We're frankly driving incremental productivity. There's bit more inflation still holding in there. There's even a little bit more coming in the marketplace versus months ago, which is weird to think about in this macro environment, but that's the case.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

And then to your point, the big driver though just difference wise is tariffs. And we talked about a little bit earlier the holistic twelve month number and just what we think will settle in into this year. And obviously, as we work through our different actions, there's obviously different timing events to those as well. But that's the primary driver.

[Olivia Tong, Managing Director at Raymond James Financial]

Great. Thank you.

[Operator]

Your next question comes from the line of Peter Grom with UBS. Please go ahead.

[Peter Grom, Equity Research Analyst at UBS Group]

Great. Thanks, operator. Good morning, everyone. Welcome, Lee, as well. Lee, maybe just a quick question for you.

[Peter Grom, Equity Research Analyst at UBS Group]

I mean, I think you mentioned that 2Q U. S. Or domestic sales will be similar to 1Q. Could you just unpack that a bit? I think the guidance assumes market share gains, and I think Rick mentioned that category growth would be down kind of one.

[Peter Grom, Equity Research Analyst at UBS Group]

So I guess I'm just curious how you kind of get to that minus three.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Yeah. No. It's a good question. I mean, to your point, we noted what happened in the first quarter with the inventory impact. And, you know, we certainly don't expect that much impact in the second quarter, but there's still a bit more.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

And then as as Rick talked about, you know, the category, the the consumption levels have continued to slow down. And so, you know, yeah, one's should be less of a a negative, and then one's gonna be a new negative for us to manage. So, you know, that's that's what we're seeing here in April. It's it's again, it's all about us driving share, but, you know, the macro is just a bit softer. So

[Peter Grom, Equity Research Analyst at UBS Group]

Got it. That makes sense.

[Peter Grom, Equity Research Analyst at UBS Group]

And then, Rick, just a question for you. I think you said it's odd what you're seeing in in terms of category growth. You know, I'd just be curious why do you think this is ultimately happening? Why is it happening as quickly as it is? And then just on the April commentary, I I get, you know, different categories, geographic exposure, but it is a bit different from what we've heard from some of your peers.

[Peter Grom, Equity Research Analyst at UBS Group]

So thus far, so what do you think is causing the difference in terms of your April performance or what you're seeing versus maybe what some of your peers are seeing?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. No. Peter, it's a it's a fair question. No. I would just say, usually, our categories are a good bellwether because we're going across so many different categories.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Like, you know, we play in 18 categories. This represents most of those categories. And I would just say it goes back to the core consumer feeling pressed. And I think even before tariffs, the you know, we were seeing signs of the the core consumer being pressed. And we talked, I think, even back in January, maybe at the end of the year, that our you know, our categories were growing four and a half percent, maybe 4% or so, in in the first half of twenty twenty four, and then they were decelerating to two and a half percent.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And we had called that out and, maybe it was at Barclays, and and everyone thought that we were being a bit of, an alarmist, I would say, at the time. But we were just trying to be as transparent as we can, and we said, oh, this is what we're seeing. This is this is, kind of the curve of of what the consumer's doing. And and that started going down a little bit further in in q one.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And then

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

and then the whole tariff noise started happening. And I think that uncertainty exacerbated what was already going on. And when that uncertainty happens, it's going across many different categories, ours included. But I also think it's that type of feelings transitory as this environment hopefully is. And while I think we have a malaise with the consumer for a period of time, maybe, you know, a year or eighteen months, whatever whatever it is.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

I think right now, it's exacerbated, and this volatility is causing people to take a step back. And so that's what we're seeing. That's what the consumer that's this isn't us.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

This is our

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

categories. And, I think more of our peers will start saying that if they haven't already.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Got it. Thanks so much. I'll pass it on.

[Operator]

The next question comes from the line of Lauren Lieberman with Barclays. Please go ahead.

[Lauren Lieberman, Managing Director at Barclays]

Hey. Thanks. Good morning. Sort of boring housekeeping, I'll admit. But in the release, you talked about that as of April 1, you'll exclude the the businesses that you're gonna be divesting or exiting or excluded from results.

[Lauren Lieberman, Managing Director at Barclays]

I was just curious how we should handle that as we model. Like, we putting it in the structural line, or is it is it in net sales or just completely gone? And will you be restating the base just so we, again, know how to how to model?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. This is, we're trying to it's a complicated situation, we're trying to keep it as clean as possible. Our organic outlook excludes the impact from April 1 to December 31 of those three businesses, and our adjusted earnings will exclude the profit from those businesses from April 1 to December 31. The other lines of the p and l, because it's a reported and adjusted p and l, they will have it in there. So we're gonna do our best to be as clear as we can, but for the those are the two lines that I think really matter, and that's how we've laid it out.

[Lauren Lieberman, Managing Director at Barclays]

Okay. So we should think about the adjusted EPS, the absence of those businesses is still a headwind from to EPS?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

The absence of those businesses, we're we're gonna put the in that one time charge, will be mostly the the non cash charges. And as we run out those businesses, there will be a lower sales and profit impact to those businesses. So net sales would be down reported, and, we'll also have a a charge, partially in q two, but for those businesses in q three and q four that represents the the profit for those. So we'll try to delineate that for you.

[Lauren Lieberman, Managing Director at Barclays]

Okay. Alright. Great. Alright. Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And that was not a boring question.

[Lauren Lieberman, Managing Director at Barclays]

For me, it was.

[Lauren Lieberman, Managing Director at Barclays]

For me,

[Lauren Lieberman, Managing Director at Barclays]

it was. No. I appreciate

[Lauren Lieberman, Managing Director at Barclays]

it.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Alright.

[Operator]

The next question comes from the line of Corinne Wolfmeyer with Piper Sandler. Please go ahead.

[Korinne Wolfmeyer, Vice President & Senior Equity Research Analyst - Beauty and Wellness at Piper Sandler Companies]

Hey, good morning. Thank you for taking the question. So I just want to go back to the retailer destocking comment and kind of what's changed between now and a couple months ago when you were anticipating that, those orders to kinda come back over the year progresses? I mean, obviously, like, a lot has has changed with the tariff situation and consumers pulling back. But why do you think the retailers wouldn't restock if the consumption is still, you know, still there?

[Korinne Wolfmeyer, Vice President & Senior Equity Research Analyst - Beauty and Wellness at Piper Sandler Companies]

And then separately, just any updated thinking around the M and A environment. I know you've been talking a little bit more about maybe looking at some international assets to add to the portfolio. Any change in thinking, with with the current macro situations going on? Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Thanks, Corinne. I I would say you hit it on the head. You know, the the pullback in the consumer, the agenda around tariffs, I I think that's what's going on. And that's why categories even in the month of April so far are negative.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And that's why in in March, they were flattish for us. So retail inventory, even a few months ago, we thought would recover because it's exactly that. Our consumption was was running ahead of our shipments. And so we said, oh, okay. Well, that's just a matter of timing.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We've seen that play before and and no problem. But the longer it's going on and the more uncertainty that's out there, it it just feels like, everyone's retrenching a bit is what I would say. And then on international m and a, international m and a is is, yep, still a a strategy. We gotta find the right one. We're looking at different countries.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

In many cases, we we would love to do what we did in in Japan with Graphico as you create really a a subsidy infrastructure, and you can bring your brands there in an easier way. So we're always on the lookout for for those kind of bolt on acquisitions. And meanwhile, you know, the the team is spending the leadership team is spending an awful lot of their time looking for the right acquisition. You know, we've had a bit of a of a of a dry spell, but we still believe the number one use of of cash in capital allocation, as does the board, is m and a. And so this management team spends a large percentage of time looking for the right, acquisition both here in The US and and outside The US.

[Korinne Wolfmeyer, Vice President & Senior Equity Research Analyst - Beauty and Wellness at Piper Sandler Companies]

Great. Thanks so much.

[Operator]

Your next question comes from the line of Komal Gajrawala with Jefferies. Go ahead.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Hey, guys. Good morning. Maybe a follow-up on the inventory levels at retail. I guess what gives you the confidence that inventory shouldn't bounce back or that there shouldn't be a restock? Is there something you're seeing in the market?

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Is it channel mix? Maybe you were high on inventories towards the end of 'twenty four. But the idea of sort of consumption being ahead of inventories and then sort of staying that way for the whole of the year just feels like something that maybe we

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

don't see that frequently. So I'm

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

just curious what what might have changed or what gives you that confidence that, hey. This was a onetime step down. This is where it's gonna be.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. It's a fair question. I would say it's probably the the expectation that q two looks a lot like q one given what we see in in orders, that there's not a bounce back coming. I think when you have negative or flat consumption across many categories, the retailer doesn't, maybe wanna lean back in, to get to what we think is is the right level. And we have heard other retailers, continue to talk about taking down weeks of supply.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Now do I think there's an incremental risk for retail inventory? I absolutely do not, overall, because there's only a certain level that the businesses can be run effectively with. So I don't really feel like it's an incremental risk. Maybe it's a little bit of conservatism, and maybe it will be proven wrong. We just think there's, you know, flat to slowing consumption in the in the near term.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And we said for the back half, we think it's closer to one and a half percent, which is lower than our our 3% typically. So yeah. So, you know, just the the inflection point a little bit is what's driving our thinking there.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Okay. Got it. And I guess in the context of everything you mentioned on the consumer, you talked a bit about promo activity being rational, but, maybe how do you feel like where it's gonna play out over the course of the year? If the consumer stays in the sort of condition that they might be in, would you expect promotional activity to tick up? Or is it not a pricing thing?

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

There's there's just something else going on.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

No. I think, you know, we've seen this play out before back in o eight and o nine. And, if categories are flat for an extended period of time, competitors tend to go after share in a bigger way. And if you look at all the transcripts, everyone's talking about how they're gonna gain share. Well, not everybody can gain share.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

We've proven in an environment like this that we do tend to gain share because we have the right promotional strategy, the right marketing spend, we have the right products and value offering, innovation. And so we're usually set up better than most. But promotional levels do tend to go up, if categories are flat for for a period of time. But what I just said is why we believe that we tend to take share.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Got it. Thank you.

[Operator]

Your next question comes from the line of Javier Escalante with Evercore. Please go ahead.

[Javier Escalante, Analyst at Evercore]

Hi, good morning everyone. I managed to still have a question on the inventory issue. So if you could help us if there is anything to learn about the categories and the type of retailers where you are seeing greater lag in terms of reorders. I'm specifically thinking about the drugstores, very important for vitamins, and there is a lot of changes there, and there is a lot of problems with traffic. Is is this particularly a pressure area?

[Javier Escalante, Analyst at Evercore]

And if so, how that informs the the relaunch of the vitamin business, which is a category that is increasingly going online.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Sure, Javier. You know, gummies in in the drug class of trade are very, very promotional. You know, you walk in and you see a whole aisle full of yellow tags, which are tend to tend to be, you know, buy one get one free. As we're looking to retrench, we're making decisions on what class of trades we wanna play in.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And I would say, you know, the sales and profits are not as appealing in that class of trade typically. So we're kinda retrenching on what SKUs, what offerings, what promote promotion depth that we're willing to go to in that class of trade. And there is a slight traffic, you know, concern in in in drug in the drug class of trade. There's also you know, one of the retailers is is, you know, not as financially stable as as some others. So there is a lot of noise, I guess, going on in the drug class of trade.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

But, again, we we retrench to where we have strength and we grow from there for for vitamins. But the online class of trade is interesting. On online class of trade is actually half of all vitamins. And so we gotta make sure that we're hitting the innovation and and, and advertising, but really also focused on the online class of trade. And so, specifically, it's very fragmented, but half the category.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

So, we are we are looking hard at what the right innovation strategy is and the short term innovation strategy is to make sure that we're going after those subsegments appropriately online. Because if that's where the growth is, that's where the focus needs to be.

[Javier Escalante, Analyst at Evercore]

And, Rick, if I may, if you can expand better on the laundry detergent piece. So there was a very weak read in April. I believe it's the guys in Germany. So if you can unpack a little bit I mean, you mentioned it, but it was very briefly that there is a lot of moving pieces. But if you can unpack what is happening in detergents in the context of your push with deep clean and the trade down into mid tier?

[Javier Escalante, Analyst at Evercore]

That would be very helpful. Thank you.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. So look. The laundry business is healthy. In in q one, you know, we had 3.4 consumption growth for Herman Hammer. I think we had 26, 20 seven percent growth for for unit dose.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Even for some boosters, had 8% plus growth, and extra had positive growth as well. So, largely for us, we continue to gain share in all those sub segments, and so we think we're doing and executing really well. I kind of alluded to it. There is some some noise going on in the category. One competitor is catching up on some of the concentration activities that happened a year to two a year to two a year or two ago.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

One competitor is taking price at the top end and spending a bit more, I guess, in the low and mid mid tiers. And and then and then one major retailer introduced private label at the premium end. So there's a lot of moving pieces, and I would say we're better positioned than ever in this type of environment. What tends to happen in a recessionary like environment and that's why I would start to call this environment that we're in, right, consumer confidence as we look forward to the 12 low, you know, this this turmoil. What tends to happen is is folks trade down to value.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And even deep clean, while it's a mid tier to us, you know, the the consumer doesn't know what mid tier or premium or value really mean. They just know that it's a 20% discount to premium, the premium tier laundry. They know that it's, more expensive than our our most basic offering. But we have a good, better, best strategy so that Base Armor Hammer can do well, Armor Hammer Ahawk can do well, and now DeepClean does as well. So we're well positioned to wherever the consumer trades up or down to.

[Javier Escalante, Analyst at Evercore]

Thank you very much.

[Operator]

Your next question comes from the line of Dara Mohsenian with Morgan Stanley. Please go ahead. Hey, good morning.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

I

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

just wanted to

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

touch on U. S. Share. You guys mentioned you still expect to gain share in The U. S.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Despite the category weakness. But the tracked channels added does look like it's decelerated in terms of your share so far in April. And I would assume the Q2 corporate org sales guidance when you back out international, which is robust as well as presumed growth in SPD, that you're assuming share loss probably implicitly in that Q2 guidance. Can you just shed some light on maybe overall share trends in The U. S.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

As you look at April, your thoughts in the balance of the year here on a go forward basis also? Thanks.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yep. Good question, Dara. I I am never assuming share loss is what I would tell you. I I believe, like I I I talked earlier, because of our portfolio, because of our brands, because of the advertising and the pro promotional program we have in place, we have a long track record of of growing faster than the category. And I fully expect that to happen now.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And as we have a stretched consumer, our brands are made for this time as well. And so all that's gonna help and lead to share gains. April, we're you're right. We're I think I said the category is down 1%. We gained share in q one.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

I expect to gain share in q two. Sometimes it's just promotional timing to some degree, but that's the short answer to the question.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Okay. That's helpful. And then obviously, the external environment changed fairly significantly in recent months. You're taking decisive actions on portfolio structure. I was just hoping you could review capital allocation from here given your strong balance sheet.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Might share repurchases be a greater priority? Perhaps there's more M and A opportunities from an external environment standpoint given the difficult environment and just how you

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

think about those two pieces? Thanks.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. We talk about it a lot. And even though we haven't done a deal in in a couple of years, it doesn't mean that's not number one on the capital allocation priority. So I know I I joked at previous conferences that m and a is number one, two, three, four on the list, and and that's still true. We believe that we have a competency and identifier and acquiring, integrating, growing acquisitions.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And, there's no better value creator, for the company than than just that. So we have a huge amount of firepower. The, you know, the math that we showed at at CAGNY was around $6,000,000,000. We could do a couple deals, and the organization, can tend to do a couple deals even sequentially. So that's the number one capital allocation and focus.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And, you know, if you look back at our history, if we go a long period of time without doing acquisitions, then we tend to look at buybacks. And in some cases, this type of low leverage, we could probably do do both. But number one, I wanna keep the powder dry for m and a. And so if we don't do m and a for a while, we'll we'll look at and talk more about doing maybe any buybacks. Lee, anything to add to that?

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Yeah. I would just add, you know, number one, one reason I came here, I completely believe in this capital allocation methodology. I have whole history of doing m and a, making sure you have a discipline in doing m and a. And we've shown that we find the right acquisitions and we drive value, you know, value enhancing TSR. And then obviously, you know, that's one, two, and three.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

I guess we'll do, behind that is we're continuing to invest in the business even in this environment, whether it's you know, we talked about the marketing side, the innovation side, and then, you know, obviously, you know, things like, you know, debt and shares that Rick talked about would be on the list too. But, you know, every day, we're focused on number one, number two, number three, which, again, you'll find that that right deal for the to bring to the portfolio, but we will remain very disciplined.

[Operator]

Your next question comes from the line of Cilippe Saloni with Citi. Please go ahead.

[Filippo Falorni, Director - Equity Research at Citi]

Hey, good morning, everyone. I had two quick clarification on the guidance. First, within the organic sales guidance of zero to two, can you give us a sense of what you're assuming for the full year for volume and price? You mentioned the price increases, some surgical price increases. Maybe can you give us some sense of timing and and some magnitude there?

[Lee Mcchesney, EVP & CFO at Church & Dwight]

Yeah. I mean, I I would tell you, we talked about, you know, we got a pretty pretty clear position. We talked about price quite a bit. I mean, price has been positive. You know, this points to point two in one q.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

You know, we'll just say it's gonna be flattish for the rest of the year. It's you know, our our outlook is all about volume growth.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

So Yep. And then and then the the price increases that we're talking about, that is over time if we can offset, you know, tariffs. In my mind, we're gonna work like heck to to do just that, and we believe that will be a competitive advantage for other folks.

[Filippo Falorni, Director - Equity Research at Citi]

Got it. That that makes sense. And then on the tariff front, you mentioned the 30,000,000 net, tariff impact after the mitigation. Is that what is embedded in the gross margin and EPS guidance? Or should we think about somewhere around 50 basis points of negative hit on gross margin and then somewhere around, like, 9¢ on EPS?

[Filippo Falorni, Director - Equity Research at Citi]

Is that the right way to put it?

[Lee Mcchesney, EVP & CFO at Church & Dwight]

40

[Lee Mcchesney, EVP & CFO at Church & Dwight]

to 50 basis points. You know, obviously, the exact timing will play out depending on, you know, actions and mitigations and things like that. That's a good number.

[Filippo Falorni, Director - Equity Research at Citi]

Okay. Got it. Thank you so much, guys.

[Operator]

Your next question comes from the line of Kevin Grundy with BNP Paribas. Please go ahead.

[Kevin Grundy, Managing Director at BNP Paribas]

Great. Thanks. Good morning, everyone.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Hi, Kevin.

[Kevin Grundy, Managing Director at BNP Paribas]

Hey, Rick.

[Kevin Grundy, Managing Director at BNP Paribas]

A couple for me. Rick, just getting back to the decisions around the portfolio pruning. So the business lines that you're exiting certainly makes sense, not hugely impactful at about 2% of sales. I think there might have been some sense among some in the market that the divestitures or exits could have been larger. Is this pencils down for the year given it's an annual review process?

[Kevin Grundy, Managing Director at BNP Paribas]

Or would you consider further divestitures in the future? I'm curious what's your commitment to a business like vitamins? Presumably, you wanna exit from a position of strength, so maybe that's the the reason that that is perhaps on hold for now. And a a quick review, maybe just on the criteria at a high level for for hold versus an exit. And I have a question for Lee.

[Kevin Grundy, Managing Director at BNP Paribas]

Thanks.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Well, look, we we do go through a portfolio strategy review every year. We like I said before, we value each and every brand. There's there's a handful that are always on the list and and we then we turn to a few of them and say, can we internally improve those businesses? And some of those things are underway.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so it doesn't mean that if those businesses don't do and and accomplish those KPIs that we want that we couldn't wake up and say, yep. You know, that's that's on the list to do something with. So just because we have an annual review, it doesn't mean that there aren't other things in motion that we're always working on. You know, vitamins, we wanna inflect that business and and turn that positive for all the reasons I gave earlier. And we'll talk more after Q2 on how we're doing with that.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

And so I think that's a better question to ask after that quarter.

[Kevin Grundy, Managing Director at BNP Paribas]

Okay. Fair enough. Lee, welcome. Quick question for you. You mentioned the m and a dynamic and the appeal of that in terms of coming on board.

[Kevin Grundy, Managing Director at BNP Paribas]

What are your early impressions more broadly? Any potential areas where you think your your your background can potentially enhance the way Church is doing things, whether this is around productivity, whether this is around revenue growth management, capital structure, etcetera. Would would would love to get your early impressions and and thoughts. Thanks.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

No. I appreciate you ask you asking that nice question. So, I mean, number one, I'm very impressed with the CHJ team. I mean, obviously, the I I can follow-up from the outside and the track record speaks for itself. But it's and to be inside the building and to meet the people, I mean, the culture, the mindset to execute.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

I mean, I think of my first five weeks, everything we're showing here, you know, the tariff situation continued to be a bigger challenge. And, you know, look at the plan we've laid out here in just, you know, less than two months as everyone's dealing with that. We're you know, the team is very focused on I love where I where I see where it's going on innovation. Certainly, the continued focus on brand development, winning share, those are all things I fundamentally believe in. You know, this business my focus right now is to learn this business.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

This business has been successful, and I I wanna understand that. I wanna, you know, obviously, get more time to get out and meet people and understand what goes on across the globe at our different manufacturing sites. And, you know, my mindset is just to contribute my experience to what we have focused here. I believe in the evergreen model. You know, as I went through the process and got to spend time with Rick and other members of leadership team, you know, I we have very similar thoughts and very focused on, you know, driving share, always making decisions with that in mind.

[Lee Mcchesney, EVP & CFO at Church & Dwight]

But at the same token, follow the facts, you know, find the right balance to protect gross margin, you know, there's efficiency with how we run the business to drive, you know, this overall, you know, high level of cash return. Those are all things that, you know, frankly just match with me. That's that's one of the reasons why I'm here. So, I can just say with, now six weeks in, it's it's everything I thought it'd be and more. So, I'm optimistic as we look forward here.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. And Lee is being humble as well. Like, he has a great pedigree experience on m and a. Right? Decades of experience with m and a on acquiring, integrating.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

He has decades of experience, not just as a CFO, but as a president of different businesses. So to have somebody in the in the seat that's an operating CFO is exactly the culture of this place, and and we're gonna be better off for it.

[Kevin Grundy, Managing Director at BNP Paribas]

Okay. Very good. Thank you. Good luck.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Thank you.

[Operator]

Our last question comes from the line of Robert Moskow with TD Cowen. Please go ahead.

[Robert Moskow, Managing Director at TD Cowen]

Hi, thanks.

[Robert Moskow, Managing Director at TD Cowen]

Rick, you've talked about having the right advertising, the right promo, the right spend. And but but the world's changing quite a bit in the last four months. So other than vitamins, are are there any categories where you've had to shift your tactics, maybe lean in a little more from a promotional standpoint? Or because your market share is good, you feel like, hey, we can just keep executing the plan as it stands?

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Yeah. Not from a promotional perspective, really. I I I'll tell you, we are pivoting a little bit on our advertising. We we just walked the board through it, but Stacy's our our CMO. She's doing a great job, and she laid out how we're shifting our our messaging more towards value in this environment.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Right? Some big steps in doing that, reminding people across the Arm and Hammer brands that we are of value, but across our other brands too. And I think that messaging is gonna be important in times like this. And so that's kinda one one pivot we're making. And we're we're pivoting a little bit on what brands we allocate media to and and where we over index or under index.

[Robert Moskow, Managing Director at TD Cowen]

Okay. Alright. Thank you.

[Operator]

I will now turn the call back over to, Rick Derser for closing remarks. Please go ahead.

[Rick Dierker, Board Member, President & CEO at Church & Dwight]

Great. Well, thank you for your time today. I would just tell you that the company is laser focused on growing share, launching our innovation to delight the consumer, and, we're a stronger company for these portfolio actions and look forward to talking to everybody next quarter. Thanks very much.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.

Participants

Executives

• Rick Dierker, Board Member, President & CEO
• Lee Mcchesney, EVP & CFO

Analysts

• Rupesh Parikh, Senior Equity Research Analyst at Oppenheimer & Co. Inc.
• Anna Lizzul, Vice President, Equity Research at Bank of America
• Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo
• Andrea Teixeira, Analyst at JPMorgan Chase
• Steve Powers, Equity Research Analyst at Deutsche Bank
• Olivia Tong, Managing Director at Raymond James Financial
• Peter Grom, Equity Research Analyst at UBS Group
• Lauren Lieberman, Managing Director at Barclays
• Korinne Wolfmeyer, Vice President & Senior Equity Research Analyst - Beauty and Wellness at Piper Sandler Companies
• Kaumil Gajrawala, Managing Director at Jefferies Financial Group
• Javier Escalante, Analyst at Evercore
• Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley
• Filippo Falorni, Director - Equity Research at Citi
• Kevin Grundy, Managing Director at BNP Paribas
• Robert Moskow, Managing Director at TD Cowen