Church & Dwight Q1 Earnings Call Highlights

Key Points

• Q1 results beat expectations: Organic sales rose about 5% driven by volume and adjusted EPS was $0.95 (above guidance), while adjusted gross margin expanded ~130 bps to 46.4% driven by productivity and higher‑margin acquisitions.
• Outlook reiterated but inflation risk noted: Management kept its full‑year 2026 targets (organic sales ~3–4%, adjusted EPS growth 5–8%, ~100 bps gross margin expansion) while warning of a $25–$30 million incremental inflation headwind from Middle East pressures to be mitigated primarily through productivity rather than immediate price increases.
• Brand and distribution momentum: U.S. consumer business delivered broad distribution gains and market share wins (notably Arm & Hammer, TheraBreath and Hero), and Touchland consumption grew low double‑digits with the company expecting double‑digit full‑year growth despite channel mix differences.

Church & Dwight NYSE: CHD reported first-quarter 2026 results that topped the company’s prior outlook, with management pointing to broad-based volume growth, gross margin expansion, and continued distribution gains across the portfolio despite a “dynamic” consumer and cost environment.

“We had a fantastic quarter,” President and CEO Rick Dierker said, while noting that consumer sentiment remains pressured by inflation, borrowing costs, and geopolitical uncertainty tied to the Middle East that is contributing to higher commodity and transportation costs. Even so, Dierker said consumers have remained resilient, with employment stable and the company’s largest categories up 3% in the quarter.

Quarterly results beat outlook on volume and margin

For the first quarter, Church & Dwight said net sales rose 0.2%, ahead of its earlier expectation for a decline. Organic sales grew 5%, well above the company’s 3% outlook, “driven by volume,” Dierker said. Adjusted EPS was $0.95, up 4.4% year-over-year and above the company’s $0.92 outlook.

Chief Financial Officer Lee McChesney said volume rose 5.3% in the quarter, partially offset by a negative price/mix of 0.3%. He added that the company’s portfolio actions also shaped reported results, saying reported sales “would naturally be down 8%” without the contribution of organic growth, the Touchland acquisition, and some favorable foreign exchange.

Adjusted gross margin expanded 130 basis points to 46.4%. McChesney attributed the year-over-year improvement to multiple factors, including 150 basis points from productivity programs and 110 basis points from higher-margin acquisitions combined with the impact of strategic portfolio actions. Those tailwinds were partially offset by 190 basis points of inflation and tariff costs.

Marketing expense was 9.5% of sales, 20 basis points higher than a year ago, and the company reiterated it is targeting marketing investment of roughly 11% of net sales. Adjusted SG&A increased 110 basis points year-over-year, with McChesney again citing Touchland’s SG&A and amortization expense as a driver in the first half of the year. Adjusted other expense rose $5.2 million due to lower interest income, and the adjusted tax rate was 20.3% versus 21.8% a year earlier.

Church & Dwight reported cash flow from operations of $174.8 million and capital expenditures of $31.9 million. McChesney said the company still expects full-year capital expenditures of about 2% of sales.

U.S. consumer: distribution gains and brand momentum

The U.S. consumer business posted organic sales growth of 5.4%, “primarily all volume,” Dierker said. Growth was led by TheraBreath, Arm & Hammer, Hero, and OxiClean, supported by innovation and “distribution gains across all classes of trade.”

Dierker said e-commerce continues to play a growing role, with online sales representing about 24% of total consumer sales. He also said the company was “number one across all of CPG” in total distribution points gained year-over-year, adding that new product launches in 2026 are expected to account for about half of organic growth.

• Arm & Hammer laundry: Dierker said the brand hit record share across total laundry detergent. Consumption for Arm & Hammer laundry detergent rose 4.1% versus category growth of 2.7%. He highlighted a new “Baking Soda Fresh” liquid detergent with “10x the amount of baking soda,” which he said is off to a strong start with a 4.9 consumer rating. Arm & Hammer laundry sheets grew consumption by 30%.
• Arm & Hammer litter: Dierker reported consumption growth of 6.8% and share up 0.4 points to 24.6%. He said promotional levels remain elevated but declined sequentially from the fourth quarter.
• OxiClean: Dierker said share declined as the brand continues to lap distribution loss from a large club retailer a year ago, though he said trends improved through the quarter and sales growth exceeded expectations.
• TheraBreath and Hero: Dierker said TheraBreath posted record share gains, up 3.5 points to 24.1, strengthening its No. 2 position in total mouthwash. He added the TheraBreath toothpaste launch is in “early days” but off to a strong start. Hero continued to outpace its category, remain the share leader, and was supported by distribution expansion and Q1 activations tied to innovation.

On the durability of first-quarter volume, Dierker told Wells Fargo’s Chris Carey that the company also saw a tailwind of “a couple points” related to inventory dynamics, which helped bridge to the 5% organic sales result. He said the distribution gains are “really just hitting now,” estimating a roughly 7% lift on an average 13-week basis and closer to 10%-11% as resets occur more recently.

Touchland: consumption growth, channel mix differences

Dierker said Touchland consumption continued to grow “low double digits” in the quarter, but sales were impacted by a strong fourth-quarter holiday multi-pack sell-through. In response to questions about tracked consumption measures, Dierker said that while some external data show consumption down 20% for the quarter, the company’s view of “all in, including untracked channels,” was up about 12% to 13%.

“Overall, we believe that we still are gonna have double-digit growth for Touchland for the full year,” Dierker said, citing strong ratings, low household penetration, and the fact the brand is “just starting now to advertise.” He told Bank of America’s Anna Lizzul that club performed “extremely well,” Amazon “does well,” and that certain beauty channels “because of the timing of promotions and also some of the innovation doesn't look as good.”

International results and system upgrade

The international business delivered organic sales growth of 3.7%, driven by the GMG and the company’s “subs,” Dierker said. Growth was led by TheraBreath, Hero, and Batiste, and partially offset by lower Middle East regional sales.

Dierker also noted the company went live in April with an upgraded ERP system and said the transition was smooth for customers: “Our customers did not notice the transition,” he said, crediting the implementation team.

Outlook reiterated amid Middle East-driven cost headwinds

McChesney reiterated Church & Dwight’s full-year 2026 outlook despite incremental inflation pressure tied to Middle East conflict conditions. He said the company is estimating $25 million to $30 million of incremental inflation pressure, and management emphasized actions to mitigate the impact.

“We have no plans to try to price through this,” Dierker said in response to a Barclays question about consumers’ ability to absorb pricing, adding that the consumer is “pressed” and the company intends to offset the $25 million to $30 million headwind through productivity. He later described a “sequence of events” if inflation pressure were to become significantly larger: first productivity, then revenue growth management actions tied to promotions, and then pricing as a later step.

For 2026, the company reiterated:

• Organic sales growth of approximately 3% to 4%.
• Reported sales decline of approximately 1.5% to 0.5% due to strategic portfolio actions taken in 2025.
• Gross margin expansion of approximately 100 basis points versus 2025.
• Marketing at approximately 11% of sales.
• Adjusted EPS growth of 5% to 8%.

For the second quarter, McChesney said the company expects reported sales to decline about 1%, with organic sales growth of about 3%. Gross margin is expected to expand about 50 basis points, though transportation cost pressures are expected to be a near-term headwind before mitigation efforts “take effect later in the year.” The company’s second-quarter adjusted EPS outlook is $0.88, as higher marketing and SG&A are expected to more than offset gross margin expansion.

McChesney also provided a segment view of organic growth expectations, telling Oppenheimer’s Rupesh Parikh that the company still sees the U.S. at roughly 3%, international around 7% (noting some softness due to the Middle East situation), and SPD around 5%.

On category growth, Dierker told UBS’s Peter Grom that the company’s major categories were around 3% in the quarter, with about 3% growth in January and February and closer to 3.5% in March, followed by a “little bit” of a slowdown in April. “I am more enthusiastic than I was 90 days ago,” Dierker said, adding that growth has been broad-based across the company’s key categories.

Dierker closed by thanking employees for execution in a volatile environment and said the company would provide its next update in July.

About Church & Dwight NYSE: CHD

Church & Dwight Co, Inc is a U.S.-based consumer products company best known for its Arm & Hammer baking soda business. Founded in 1846 with the manufacture and marketing of sodium bicarbonate, the company has grown into a diversified maker and marketer of household, personal care and specialty products. Church & Dwight is publicly traded on the New York Stock Exchange under the ticker CHD and is headquartered in Ewing, New Jersey.

The company's portfolio spans a range of categories including household cleaning and laundry, oral care, personal care, sexual wellness and health & wellness.

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