CHURCH & DWIGHT CO INC /DE/ Q2 FY2024 earnings call

Q2 was a solid quarter with reported sales growth of 3.9% beating the outlook. Organic sales grew 4.7% with volume accounting for 3.5% of growth. Adjusted gross margin expanded 150 basis points. In the U.S. consumer business, categories like laundry detergent, litter, and personal care (BATISTE, THERABREATH, HERO) showed strong performance. New products were launched, such as ARM & HAMMER Deep Clean and Power Sheets in laundry, BATISTE Sweat Activated and Touch Activated dry shampoos, and THERABREATH Deep Clean Oral Rinse. International business had strong growth in various regions. Specialty Products continued its organic growth trend.

In Q2, the U.S. consumer business achieved 3.8% organic sales growth, with volume growth at 3.3%. Volume has grown for four consecutive quarters in the U.S. For example, ARM & HAMMER liquid laundry detergent consumption outpaced category growth and achieved an all-time high share. International business saw 9.3% organic growth, driven by strong performance in subsidiaries and the Global Markets Group. Specialty Products had 3.9% organic sales increase, and the business is confident of achieving 5% organic sales growth this year. Online sales as a percentage of global sales reached 21.2%.

Adjusted organic revenue outlook was tightened to approximately 4%, with reported sales growth expected to be around 3.5%. Full year adjusted EPS is expected to have 8% to 9% growth, now at the low end. Gross margin is expected to expand by approximately 100 to 110 basis points, up from the previous 75 basis point outlook. Marketing as a percentage of net sales is expected to be approximately 11%.

Consumer may be more price conscious and balancing household budgets, leading to deceleration in category growth. Promotional environment could become more intense, impacting sales. Retail inventory adjustments and changes in retailer inventory management can create uncertainty. Private label competition is a factor in certain categories like gummy vitamins and litter.

Q: Rupesh Parikh asked about the promotional backdrop and slowdown in June and July.

A: Matt Farrell said it was due to anomalies in one brand in liquid laundry and one in litter, and the consumer being price conscious, with the consumer likely balancing household budgets.

Q: Chris Carey asked about dry powder and categories to watch.

A: Rick Dierker said dry powder is for potential further category decline or promotional heat up, and Matt Farrell mentioned focusing promotions on new products.

Q: Bonnie Herzog asked about marketing investment and Q3 spend.

A: Rick Dierker said Q2 marketing spend was as expected, with phasing of spending to support new products.

Q: Peter Grom asked about retail inventory reductions and international business.

A: Rick Dierker talked about retail inventory adjustments in laundry and Matt Farrell said international business is expected to still perform well.

Q: Steve Powers asked about timing differences and promotional risk.

A: Rick Dierker said no known timing differences and Matt Farrell emphasized innovation.

Q: Dara Mohsenian asked about THERABREATH, HERO, and market share.

A: Matt Farrell and Rick Dierker talked about THERABREATH's growth and market share, and market share trends.

Q: Lauren Lieberman asked about market share trends and growth pace.

A: Rick Dierker said market share gains are expected.

Q: Kaumil Gajrawala asked about VMS segment.

A: Matt Farrell and Rick Dierker talked about challenges in the VMS segment.

Q: Andrea Teixeira asked about M&A and WATERPIK.

A: Matt Farrell said they are looking at M&A opportunities and Rick Dierker talked about WATERPIK's consumption.

Q: Filippo Falorni asked about gross margin and commodity outlook.

A: Rick Dierker talked about gross margin outlook and commodity inflation.

Q: Kevin Grundy asked about CMO departure.

A: Matt Farrell said Barry's departure is noted and business continues.

Q: Olivia Tong asked about gross margin deceleration.

A: Rick Dierker talked about factors driving gross margin deceleration.

Q: Jon Keypour asked about pricing and innovation pipeline.

A: Matt Farrell and Rick Dierker talked about pricing and innovation.

Q: Javier Escalante asked about detergent new products and sugar-free in vitamins.

A: Matt Farrell talked about detergent new products and Rick Dierker talked about sugar-free in vitamins.

Q: Robert Moskow asked about new product pipeline.

A: Matt Farrell said new products will continue to be drivers and the portfolio split is unlikely to change.

Q: Mark Astrachan asked about M&A asset prices and vitamins.

A: Matt Farrell and Rick Dierker talked about M&A asset prices and vitamin business challenges