Church & Dwight Co., Inc. Q2 FY2025 earnings call

• Q2 results: Organic sales grew 0.1% exceeding the outlook of minus 2% to flat; adjusted gross margin was down 40 basis points, exceeding the outlook range; adjusted EPS was $0.94, $0.09 higher than the outlook. - Strategic actions: Exited FLAWLESS, SPINBRUSH and WATERPIK showerhead business; undergoing strategic review of vitamin business including supply chain streamlining, potential JV and partnership opportunities and divestiture options. - Business performance: Brands continue to perform well with most achieving dollar and volume share gains; International continues to take share globally; online sales as a percentage of global sales reached 23%; Touchland acquisition performed strongly in Q2 outpacing the category and gaining share.

The U.S. consumer business had organic sales decline 1% with volume growth offset by negative price mix. Volume growth was muted by continued retail destocking in Q2, but consumption was positive for the quarter and 5 of 7 power brands grew share. The International business delivered sales growth of 5.3% in the quarter, organic increased 4.8% due to higher volume, price and mix, with growth led by HERO, THERABREATH and FEMFRESH and all power brands growing share. SPD organic sales increased 0.1% due to a combination of higher price and product mix offset by volume.

• Full year organic growth outlook remains 0% to 2%. - Adjusted EPS outlook is 0% to 2% including the Touchland acquisition, product recall cost and wind down of exited businesses. - Q3 expected organic sales growth of approximately 1% to 2%, adjusted gross margin contraction of approximately 100 basis points primarily from inflation and tariff costs and lower margins of exited businesses.

• Macro environment uncertainty including U.S. consumer and global economy uncertainty. - Frequent changes in tariff policies. - Uncertainty surrounding the vitamin business with mixed results and strategic review ongoing.

Q: Can you give more insight on the strategic review of the vitamin business and potential outcomes?

A: There are 3 options: divestiture, joint venture partnership, or radically shrink the business. Some green shoots are seen in the multivitamin business but it's still early to fully evaluate.

Q: Can you expand on what's going right in the Laundry business and strategies for market share performance?

A: Category growth is improving, share gains are working. Sizing strategy is important with consumers trading up into larger sizes and correct price points; Laundry and Litter have a pricing sizing value equation that the company is good at and can move quickly on.

Q: Is there a way to quantify the magnitude of retailer destocking headwind and its broad-based nature?

A: Ballparked around 100 basis points in Q2 and maybe slightly there in Q3 and Q4; it's a slight impact as inventory levels are pretty good and related to mix component of sales.

Q: What are the bigger priorities for Touchland in the balance of the year?

A: Driving category growth, new users, household penetration; incremental innovation on fragrances and body mist; expanding to international; team is energized and moving with speed to pursue new opportunities.

Q: How do you see the consumer environment and expectations for improvement while peers expect acceleration in the second half?

A: Have a lot of confidence in growth as it's not just a category story but also a share story; many brands are gaining share over time as per long track record.

Q: Thoughts on promotional environment and net price realization in the Consumer Domestic segment?

A: Promotion in Laundry is within historical norms; depth of promotion hasn't changed; majority of negative price in Q2 was related to recall.

Q: How to think about innovation and value share in the portfolio?

A: Innovation is a growth driver with deep innovation in Laundry, Litter, BATISTE, etc. driving growth; value portfolio continues to do well with brands like orange box in Litter and ARM & HAMMER laundry performing well.

Q: Details on tariff impact and input cost basket?

A: Tariffs impact is managed proactively with countries like Korea, Thailand, Vietnam, Europe being major; inflation is still holding in there and managed through productivity programs and targeted pricing.

Q: Update on International business and brand performance?

A: International growth is strong with mid-single digits or higher; local brands and recent acquisitions like HERO and THERABREATH driving growth; brands continue to grow in various countries despite economic malaise.

Q: Balance of timeliness and getting best value for Vitamin business and minimizing risk of further leg down?

A: Run the Vitamin business as if owning it forever with focus on innovation and promotional pricing; strategic decision will be made considering time and energy spent relative to benefit, and communicate with retailers about the business's potential.