Church & Dwight Co., Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Environment: Conditions volatile, consumer backdrop mixed; low unemployment, higher priced personal care categories doing well. Categories growing at ~2%, company performing better due to brands, portfolio balance of value and premium, innovation.
• Q3 Results: Organic sales grew 3.4% (exceeded 1%-2% outlook), adjusted gross margin up 10bps, adjusted EPS $0.81 ($0.09 above outlook).
• Highlights: Acquired TOUCHLAND, the fastest-growing hand sanitizer brand in U.S. with strong Q3 growth. Pipeline of new products: THERABREATH launching new toothpaste line, TROJAN launching nonlatex condom TROJAN G.O.A.T. Strategic review of vitamin business, seeking JV, divestiture options with improved velocities in core and positive retailer feedback on new products.

Segment Performance

• U.S. consumer business: Organic sales increased 2.3% with volume growth of 3.7% partially offset by 1.4% price mix. Led by THERABREATH mouthwash, ARM & HAMMER cat Litter, and TROJAN condoms; declined in vitamin business and WATERPIK water flossers. Grew share in 4 of 8 power brands. For example, ARM & HAMMER laundry detergent consumption grew 1.9% vs. flat category, share reached 15%, and household penetration hit an all-time high of 30%. THERABREATH mouthwash consumption grew 17% with 21.8% share. HERO acne care consumption grew 5.2% with 23.6% share.
• International: National business delivered sales growth of 8.4% in the quarter, organic increased 7.7% due to higher volume, price, and mix. Led by HERO, THERABREATH, and BATISTE brands.
• SPD: Organic sales increased 4.2% due to a combination of higher price, product mix, and volume.

Guidance

• Full year organic growth outlook 1% (midpoint of prior range).
• Adjusted EPS for 2025 now $3.49, $0.02 higher than prior outlook due to stronger sales and improved margins.
• 4Q 2025 expected reported sales growth ~3.5%, organic ~1.5%; adjusted EPS $0.83.
• Cash flow from operations outlook increased from $1.1B to $1.2B.

Risks

• Economic uncertainty, promotional intensity, household financial strain due to high borrowing costs and delinquencies.
• Tariff and inflation costs offset by productivity programs.
• Impact of discontinued businesses on sales.
• Port strikes and negative consumption trends in vitamin business.

Q: So TOUCHLAND is coming through better than expected, which is great to see. Can you talk about how you might view the benefits of TOUCHLAND going into 2026?

A: Yes. I mean we're going to -- I guess the first thing is you're right. TOUCHLAND is doing fantastic, even better than we expected, better than our double-digit comment last quarter. Consumption is strong, units per store per week are really strong, innovation is strong, collaborations are strong. I'm not going to really talk too much about 2026 at this point. And I would just say 2025 is doing better than we expected. It means that there's going to be a stronger baseline and as we grow that, of course, will help offset anything from the discontinued businesses or potentially anything with vitamins as well.

Q: The follow-up is just on the competitive environment picking up a bit. I think you mentioned that your laundry promotional activity was actually down a bit relative to last year, just to confirm that. And in general, how would you view the competitive backdrop right now and your potential need to respond, any activity that you're seeing?

A: Yes. Thanks, Chris. Yes, for laundry, in my prepared comments, I said it, and I think it's such an impactful statement. For the first time in 8 quarters, the value tier of laundry grew, and that was -- if you look year-over-year on amounts sold on deal, which again, remember that's depth and frequency. That is -- we were down 400 basis points year-over-year. Our competition was up between 300 and 600 basis points depending on what brand. So I believe that is a trend that's starting to happen in the category as consumers are pressed. They're kind of solely moving to value, which is great. That is one piece of it. Another indication is even the pods category, which is around 23% of the category, it's the most expensive form of water detergent, right, 2x liquid that's been flat the category for the last 6 quarters. So those are just indications that the value matters. And so if promotional intensity does pick up, I think, overall, we're in a great spot. Value is doing well. And even some of our higher-priced competitors, they're twice the cost of our laundry detergent. So they would have to do massive discounts to move any elasticity. So again, I think we're well positioned. I think this is starting to be a little bit of a trend in the category for consumers seeking value.

Q: So I guess just going to international, another strong quarter even on a difficult comparison. So just curious, are you guys seeing any changes there, macro consumer-wise? And how do you feel about sustaining momentum in the International segment for the balance of the year?

A: Yes. As I said, I was just in Argentina a couple of weeks ago with 300-plus people, and there's a ton of excitement about our brands and the growth profile of some of our -- even our new brands like THERABREATH and HERO and TOUCHLAND. So even as the macro GDP starts to slow in some of these countries, the tailwind of these brands, which bring problem solution brands, innovation, new categories, lot of excitement to continue to deliver against our really our evergreen model for international. So a lot of momentum in our international business.