On Friday, Church & Dwight Co (NYSE:CHD) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/339105132
Summary
Church & Dwight Co reported a strong Q1 2026 with net sales up 0.2% and organic sales growing 5%, driven by volume. Adjusted EPS was $0.95, surpassing the $0.92 outlook.
The company’s US consumer business saw a 5.4% increase in organic sales, led by brands like Therabreath, Arm and Hammer, Hero, and Oxiclean. Online sales now account for 24% of total consumer sales.
Church & Dwight Co reiterated its 2026 outlook for 3-4% organic growth and 5-8% EPS growth, despite potential inflation pressures from the Middle East conflict, which are expected to add $25-$30 million in costs.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Church & Dwight Co’s first quarter 2026 earnings conference call. Before we begin, I have 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 forecast. 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 Durkee, President and Chief Executive Officer of Church and Dwight. Please go ahead, sir.
Rick Durkee
All right, thank you. Good morning everyone. Thanks for joining the call. We had a fantastic quarter. I want to start off by thanking all of our Church & Dwight Co employees around the world on executing so well in a volatile environment. I’ll begin with some thoughts on the macro environment and then a review of our Q1 results. Then I’ll turn the call over to Lee McChesney, our CFO, and when Lee is done we’ll open it up for questions starting with the broader environment. Conditions remain dynamic and the consumer backdrop continues to be mixed. Consumer sentiment remains pressured by inflation, borrowing costs and geopolitical uncertainty related to the Middle East, which as you know, is also contributing significant inflation in commodities and transportation costs. That said, the consumer remains resilient, employment remains stable and Our largest categories grew 3% in the quarter. Our portfolio, with its beautiful balance of value and premium offerings, continue to perform well in this type of environment, supported by strong brands and innovation. Turning to the Q1 results, we delivered a strong start to the year and exceeded our outlook across key metrics. Net sales increased 0.2% ahead of our expectation for a decline and organic sales grew 5%, well above our 3% outlook. This growth was driven by volume. Adjusted Gross margin expanded 130 basis points to 46.4% and adjusted EPS was 95 cents, up 4.4% year over year and above our 92 cent outlook. Overall, this was a high quality beat driven by strong execution across the business. Now I’m going to turn my comments to each of the three divisions. First up is the US consumer business. Organic sales increased 5.4% which was primarily all volume. Across the portfolio. Our brands continue to perform exceptionally well. Growth in the quarter was led by Therabreath, Arm and Hammer, Hero and Oxiclean, supported by strong innovation and distribution gains across all classes of trade. Global E Comm also remained a key contributor with online sales now representing approximately 24% of total consumer sales. Innovation and distribution gains continue to be key drivers of our performance and the first quarter of this year is no different. We’re confident that our relentless focus on innovation will continue to drive industry leading growth. Distribution Gains at Shelf and Market Share expansion. In fact, we are just finishing tabulating all the distribution gains looking forward and I’m proud to say Church and DWight was number one across all of CPG on total distribution points gained year over year. New product launches this year are expected to account for half of our organic growth as we innovate in key categories across our portfolio of industry leading everyday products. The Arm Hammer brand had another quarter of growth with laundry hitting record shares across total laundry detergent. Arm and Hammer laundry Detergent consumption grew 4.1% in the quarter compared to category growth of 2.7%. The value segment of laundry continues to grow. Arm and hammer laundry grew despite a lower level of promotion in the quarter. Our newest innovation in laundry is Arm and Hammer baking soda fresh with 10 times the amount of baking soda and is off to a great start with a 4.9 consumer rating where most laundry items are around 4.5. our Arm and Hammer laundry sheets also continue to do well growing consumption by 30%. We like the category building potential of EVO and we are well positioned to win in value. Next up is litter. Fantastic results as Arm and Hammer cat litter consumption grew a robust 6.8% and share increased 0.4 points to reach 24.6%. While category promotional levels remain elevated, they did decline sequentially from Q4. OxiClean share declined in the quarter as we continue to be impacted by distribution loss and lapping that from a large club retailer a year ago. The good news is that the trends on Oxiclean improved throughout the quarter and sales growth surpassed our expectations. Hero and Therabreath continue to contribute considerably to overall performance. Therabreath achieved another quarter of record share gains 3.5 points to 24.1 and further solidifying our number two position in total mouthwash. Household penetration remains low relative to the category. In fact, even with these great distribution gains recently we still have less than 20% of the shelf so more room to run even in mouthwash early days. But the Therapreath toothpaste launch is off to a great start. Hero consumption growth also outpaced the category leading to share gains and remains the share leader two times larger than the next competitor. Hero’s growth was driven by distribution expansion, strong Q1 activations led by Brand Ambassador and Jordan Chiles on Mighty Patch Original and mighty shield innovation. Mightyshield is already achieving retailer hurdle rates. Finally, Touchland in Q1 consumption continued to grow low double digits but sales were impacted by a strong Q4 holiday multi pack sell through Recent consumption has slowed as we lapped year ago launches. Internally we are hard at work on integration and innovation. Turning to international Our international business delivered organic sales growth of 3.7% driven by our GMG and our subs. Growth was led by Therabreath, Hero and Batiste brands and partially offset by lower Middle East regional sales. Of note, in April we went live with our upgraded ERP system. Our project leader Nicole said it best our customers did not notice the transition. Thank you to the entire team. I’ll close by saying that we are very pleased with our start to the year. Our brands remain strong, our portfolio is well positioned and our strategic actions continue to support long term growth. I’m proud of our Church & Dwight Co team as we perform well in a volatile environment. As we look forward, our TSA agreement with the VMS business is winding down and that organizational time that has been freed up is being spent on our forward looking growth initiatives. We’re laying the groundwork for Arm and Hammer expansion, Oral Care growth behind Therabreath and International M and A and with that I’ll turn the call over to Lee for more detail on the quarter.
Lee McChesney (Chief Financial Officer)
Thank you Rick and good day everyone. Back in January at our 2026 Investor Day, we shared an industry leading outlook for 2026. The highlights of that outlook included organic sales growth of 3 to 4% and EPS growth of 5 to 8% in line with our evergreen model. As we now share results in the first quarter, we’re delighted with the execution of our Church & Dwight Co team members across the globe. The first quarter highlights once again the many strengths of our portfolio and the team’s execution capabilities. Let’s jump into the details and provide you an update on our views for the year. We’ll start with EPS. First quarter adjusted EPS is $0.95 up 4.4% from the prior year. $0.95 was better than our $0.92 outlook and was driven by higher volume and gross margin results. Organic sales in 1Q were up 5% above our outlook of 3% and organic sales are broad based across the globe with volume growth of 5.3% partially offsetting a negative price and mix of 0.3%. Our organic growth was fueled by a steady stream of market leading innovation and strong distribution wins with our commercial partners. The organic results also drove our reported revenue up to 0.2% versus our original outlook of negative one back in January. I want to put our reported results in perspective. Due to our portfolio actions, our reported sales results would naturally be down 8%. However, our organic growth of 5%, our touch on acquisition and some FX favorability fully closed the gap. The first quarter, fueled by volume growth was certainly a strong start to the year. Our first quarter adjusted margin was 46.4%, a 130 basis point increase from a year ago. Our results versus last year were driven by 150 basis points from productivity programs, 110 basis points from higher margin acquisitions. Combined with the impact of the strategic portfolio actions, 50 basis points from the combination of volume, price and mix and 10 basis points from FX. These factors offset 190 basis points of inflation and tariff costs. Let’s jump to our investments in marketing. Our market expense as a percentage of sales was 9.5% or 20 basis points higher than the first quarter of last year. Looking forward, we’re continuing to target investments at approximately 11% of net sales. In line with our Evergreen model, Q1 adjusted SGA increased 110 basis points year over year. As we noted in our January Investor Day, SGA in the first half of the year is primarily growing versus last year due to the inclusion of Touchland’s SGA and amortization expense. Adjusted other expense increased by $5.2 million due to a lower interest income compared to the last year in Q1. Our adjusted tax rate was 20.3% compared to 21.8% in Q1 of 2025. 150 basis point year over year decrease and our expected adjusted effective tax rate for the year remains at 21.5%. Let’s now turn to cash flow. We delivered strong cash results in the quarter as cash flow from operations was 174.8 million. Our higher year over year cash earnings were partially offset by an increase in working capital and supported growth and capital expenditures for the period were 31.9 million and we continue to expect full year capital expenditures to be approximately 2% of sales. Let’s now turn to our 26 outlook. While the macro environment remains dynamic, we remain encouraged with our path forward. The strength of our brands, our strategic portfolio actions in 2025 and our growth initiatives continue to provide us confidence. And as we noted in our press release, the situation in the Middle East is fluid and is creating some incremental volume and inflationary pressure on commodities and transportations. For example, we are currently estimating 25 to 30 million dollars of incremental inflation pressure. Our Teams across the globe are responding to these developments and are taking actions across the P and L. As a result of our mitigating actions, we are reiterating our full year 2026 outlook. We remain on track to deliver full year organic growth of approximately 3 or 4% and we continue to expect reported sales growth to decline approximately 1.5 to 0.5% as a result of the strategic portfolio actions taken in 2025. We continue to expect full year gross margin expansion of approximately 100 basis points versus 2025 and this outlook reflects the breadth of actions we discussed in January and the balance of incremental headwinds and actions that we’ve identified since the Middle East conflict began. Marketing as a percentage of sales remains at approximately 11%. SGA as a percentage of sales will be higher than last year, reflecting the impact of the Touchland acquisition in the …
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