The paragraph is an introductory segment of Church & Dwight's First Quarter 2025 Earnings Conference Call. The operator briefly introduces the call, noting that forward-looking statements will be made, and then hands it over to Rick Dierker, the President and CEO. Rick Dierker outlines the agenda, which includes discussing Q1 results, portfolio changes, tariff management, U.S. consumer spending, and a revised full-year outlook. He notes that organic sales fell by 1.2%, missing the expected range due to retail destocking and weakening consumer demand. Despite these challenges, the company experienced strong brand performance, gaining market share in nine out of fourteen major brands and achieving online sales growth, with online sales nearly 23% of global sales.

The paragraph discusses Church & Dwight's financial performance and strategic decisions. The company reported an adjusted EPS of $0.91, exceeding expectations. They are considering strategic alternatives for the Flawless, Spinbrush, and Waterpik showerhead businesses due to low profitability and high tariff exposure. This move is meant to streamline their portfolio and reduce tariff costs, which are projected at $190 million over 12 months. They plan to stop sourcing Waterpik flossers from China to cut down tariff exposure. Despite a positive U.S. consumption trend, the company saw a 3% decline in organic sales due to retail destocking, with overall U.S. consumer spending weakening since mid-2024.

In Q1, overall category growth was 1.5%, but certain categories underperformed. ARM & HAMMER liquid laundry detergent performed well, with consumption growing 3.4% and gaining market share. ARM & HAMMER unit dose saw a significant 26.9% consumption growth. ARM & HAMMER litter outpaced its category growth, while the gummy vitamin business struggled with a 19% decline despite the category's growth. The company plans to introduce new products and marketing strategies by May. BATISTE's consumption fell 5% due in part to supply chain issues and competitor price increases, though it maintains its position as the global leader in dry shampoo and is launching a new product, BATISTE Light, to boost household penetration.

In the mouthwash and acne care markets, THERABREATH and HERO are performing exceptionally well. THERABREATH experienced a 26% increase in consumption, capturing a 20.3% market share, while HERO's market share grew by 280 basis points during the quarter, despite a category decline. Both brands aim to increase household penetration. Upcoming innovations include HERO's expansion into body care in 2025. Internationally, sales grew by 2.7% overall, with organic sales up 5.8%, driven by brands like THERABREATH, HERO, and WATERPIK. SPD's organic sales increased by 3.2%. The company expects 0% to 2% full-year organic growth due to a weaker U.S. consumer but anticipates continuing brand momentum supported by new product launches and marketing investments.

The paragraph discusses Church & Dwight's financial performance and outlook. The company does not foresee improvement in U.S. consumer trends or a recovery from Q1 retailer destocking. They expect adjusted EPS growth between 0% to 2%, impacted by lower sales and tariffs. Despite a slowdown in consumption, their brands are strong, gaining market share with a mix of value and premium products. Strategic actions position them well for the future, and they are looking for acquisitions. Lee McChesney thanks Rick and the team for their warm welcome and highlights execution focus in addressing current macro challenges. In the first quarter, adjusted EPS was $0.91, slightly above expectations, but down 5.2% from the previous year. Revenue decreased by 2.4%, and organic sales declined by 1.2% due to a 1.4% drop in volume, partially offset by pricing and mix improvements. The adjusted gross margin decreased by 60 basis points to 45.1%, affected by commodity inflation, higher manufacturing costs, and lower volume, despite improved productivity and positive mix.

In Q1, the company experienced a gross margin improvement with positive contributions from productivity, mix and price, and acquisitions, although these were slightly offset by FX and other headwinds. Marketing expenses were reduced, and the company aims to target 11% of net sales for the year, continuing to gain market share. SG&A increased slightly due to volume changes, while other expenses dropped due to changes in interest expenses. The effective tax rate increased in Q1 compared to the previous year. Operating cash flow decreased due to lower earnings and timing impacts on working capital, while capital expenditures also fell, with expectations to maintain a CapEx level of around $130 million for the year. The company's outlook for organic revenue growth was adjusted down from 3%–4% to 0%–2% due to slower category growth and retailer inventory reductions, and gross margin is expected to decrease by 60 basis points compared to 2024.

The article discusses a revised financial outlook for a company, noting a reduction in expected full-year adjusted EPS from 7%-8% to 0%-2% due to lower sales and tariff pressures. Cash flow from operations is now estimated at $1.05 billion, considering lower EPS and one-time charges. For the second quarter, the company anticipates organic sales between -2% and flat, with adjusted EPS forecasted at $0.85 per share, a 9% decrease from the previous year. The EPS growth is expected to improve in the latter half of 2025. Additionally, the outlook excludes charges related to the Flawless, Spinbrush, and Waterpik businesses. During a Q&A with Oppenheimer's Rupesh Parikh, the company confirmed that international performance for Q1 was as expected, with 6% organic growth internationally and 3% for SPD.

The paragraph discusses the company's expectations and outlook for both international and domestic markets, highlighting that international markets may face some macroeconomic pressures. The domestic business experienced a negative 3% performance in the first quarter, and a similar outcome is anticipated for the second quarter, with an improvement expected in the latter half of the year. This will contribute to a projected 0% to 2% organic growth overall. The conversation shifts to promotional activities, specifically in the laundry and litter categories, where the promotional levels have remained stable compared to previous quarters, despite stagnant category growth. The company feels well-positioned with its promotional strategies, adjusting its category growth expectations from 2.5% to 1.5% for the year.

In this discussion, Anna Lizzul asks Rick Dierker about market share growth expectations and the impact of software trends on different business segments. Rick explains that the company expects organic growth at a midpoint of around 1%, with a slight decline in the first and second quarters and anticipated growth in the latter half of the year. He notes a revision in their growth expectations for certain categories and explains that, contrary to expectations, there hasn't been significant consumer trade-down behavior. He mentions that mid-tier products are performing well, especially due to new innovations like Deep Clean, and anticipates that their value products will do better if economic conditions persist, indicating the company is well-positioned for the current market environment. Anna acknowledges the response, and the operator opens the floor to the next question.

The paragraph discusses the impact of tariffs on Church & Dwight's earnings, emphasizing strategic decisions to mitigate these effects. Rick Dierker explains that the company faces a $190 million gross impact from tariffs on a 12-month run rate but has been proactive in addressing this. By reassessing certain business operations and making strategic decisions, such as moving Waterpik flosser production out of China and potentially divesting or shutting down marginally profitable businesses, they've reduced the tariff impact substantially. The company projects lowering the effect to $100 million, and eventually to around $40 million. These actions align with long-term strategies discussed with the Board and are not solely a reaction to tariffs.

The paragraph outlines a strategic plan to address supply chain and pricing challenges, aiming to reduce costs by around $30 million by 2025. It acknowledges ongoing issues but expresses confidence in managing them within the next 12 months. The conversation shifts to the vitamin business, highlighting challenges such as negative consumption and lower distribution growth. It emphasizes a focus on innovation, reformulation, marketing, and trial incentives to improve performance. The paragraph notes that consumer loyalty in the vitamin category is low, but the introduction of new products like Power Plus is expected to attract and retain customers.

In the paragraph, Andrea Teixeira from JPMorgan asks about HERO and customer inventory destocking after a significant 300 basis points reduction in domestic consumption. She seeks insight into HERO's growth amid tough competition and the differences between HERO and the vitamin segment. Andrea also asks about distribution points and brand growth. Additionally, she requests clarification on promotional activities, specifically regarding their depth and duration in light of category leadership in laundry. Rick Dierker responds, noting that HERO still sees strong consumption with a 13% increase in the quarter, although it faces challenges with dependence on a few retailers experiencing foot traffic issues.

The paragraph discusses the performance and outlook of a product called HERO. It highlights that despite a decline in foot traffic at some retailers, HERO is experiencing strong double-digit consumption growth and is often among the top-selling items, alongside water and paper towels, at certain retailers. The company believes it is underrepresented on retail shelves, suggesting potential for further growth through improved distribution. There are also references to promotional strategies and pricing adjustments, deemed temporary due to changes in product sizes and SKUs. The company's current performance aligns with expectations, but they plan to provide more details in the second quarter. Following this, a question is posed by Steve Powers of Deutsche Bank regarding the company's optimistic guidance for organic growth in the latter half of the year, questioning how this aligns with the expectation of static consumption levels and no further destocking.

In the paragraph, Rick Dierker discusses a unique situation where certain categories have shown negative growth, which is rare. Despite a volatile environment and weak consumer confidence, he expects these categories to return to their typical growth rate of around 3%. He highlights distribution gains, innovation, and strong marketing as strategies to drive long-term business growth. Steve Powers asks about the success metrics for vitamin initiatives being implemented. Rick Dierker mentions key indicators such as weekly point-of-sale data, consumer and customer reviews, advertising, and reformulation efforts to monitor progress and ultimately achieve growth by 2025.

The paragraph discusses Church & Dwight's strategic focus on innovation and growth in response to consumer needs and retail challenges. They are reformulating their product lineup, introducing new offerings, and making tactical decisions to support their presence in the market. Key considerations include whether these efforts will halt the decline in total distribution points (TDPs) and support sales growth. The company is also selectively determining where to compete within the vitamin market and focusing on categories where they are confident about growth. In response to a question from Olivia Tong, they acknowledge the need for strategic pricing amidst declining categories and a promotional environment, while aiming to drive penetration in new categories such as HERO and THERABREATH. Rick Dierker expresses confidence in their commercial approach, comparing it to their response to COVID-19.

The company is actively conducting frequent standup meetings to manage challenges in a flat or declining market without raising prices, which they see as unfavorable for both consumers and the brand. Currently, they have successfully avoided price increases by mitigating costs, except in rare cases. They emphasize the significance of increasing household penetration for their new businesses, HERO and THERABREATH, which currently have low penetration rates but significant growth potential. To capitalize on this, the company is reallocating media resources and maintaining a robust marketing investment of 11% to drive awareness and penetration. They are focused on innovating and expanding these brands globally, expecting continued growth.

In the paragraph, Lee McChesney discusses the factors impacting an 85 basis point decrease in the gross margin guide, which is expected to be down 60 basis points for the year. Key influences include inflation and operational costs, which are being mitigated by productivity initiatives, and some price mix benefits. However, tariffs are identified as the primary driver behind the margin decline. The discussion mentions the unexpected persistence of inflation and its impact on the market. McChesney also notes that productivity remains strong, and they are driving incremental improvements. Olivia Tong and Peter Grom, participants in the conversation, acknowledge Lee's comments, with Peter Grom also welcoming Lee McChesney.

In the discussion, Lee McChesney addresses a question about the anticipated market share gains and the projection of a 3% decline, explaining that although inventory impacts are expected to be less severe in the second quarter compared to the first, category consumption levels have continued to slow. Despite efforts to drive market share, the overall market is softer. Rick Dierker adds that the decline in category growth is due to the broader economic pressures on consumers, which has been an ongoing trend even before tariffs were introduced. While their categories span diverse areas and historically serve as good indicators, they have observed a deceleration in growth, initially projected at 4-4.5% for early 2024, slowing to 2.5%. Dierker also notes this performance might differ from peers because of their broader category involvement.

In the paragraph, a discussion takes place about consumer behavior and market conditions, noting that initial concerns about a downturn were dismissed as alarmist. However, with the impact of tariffs and market uncertainty, consumer activity has worsened, causing volatility and caution. The speaker suggests that this situation, although likely temporary, could last a year or 18 months. Moreover, many businesses, including theirs, are experiencing this trend, and the speaker anticipates that more peers will acknowledge it soon. The conversation then shifts to a logistical query from Lauren Lieberman about how to model financial data due to upcoming business divestitures from April 1. Rick Dierker clarifies that from April 1 to December 31, any impact from those businesses will be excluded from organic outlook and adjusted earnings, aiming for clarity despite the complexity of the situation.

In the paragraph, Lauren Lieberman and Rick Dierker discuss the impact of discontinuing certain businesses on adjusted EPS and the Profit and Loss statement. Lauren inquires about the headwind of these changes and Rick explains that the absence of these businesses will primarily involve non-cash charges and impact sales and profits, with these charges being spread across Q2, Q3, and Q4. Korinne Wolfmeyer then questions Rick about retailer destocking and the changes in order expectations due to tariff situations and consumer pullback. Rick acknowledges these factors as the main reasons affecting retailer decisions and also discusses the potential for mergers and acquisitions, mentioning interest in international assets amid current macroeconomic conditions.

The paragraph discusses declining retail inventory levels and the expectation of a recovery, as consumption has been surpassing shipments, which initially seemed like a timing issue. However, ongoing uncertainty has led to retrenchment. The company is focused on international mergers and acquisitions (M&A) as a primary strategy, aiming to replicate successes like the one in Japan with Graphico by finding suitable acquisitions and creating infrastructure in new countries. The management team, along with the Board, prioritizes M&A as the top use of cash and capital allocation, dedicating significant time to finding suitable acquisitions both domestically and internationally. The following inquiry from Kaumil Gajrawala questions the basis of their confidence regarding inventory levels and potential restocking.

In the paragraph, Rick Dierker addresses concerns about potential changes in retail inventory levels and consumer behavior. He explains that, based on current orders, the second quarter is expected to resemble the first, with no significant bounce-back in consumption. Retailers may be cautious in increasing inventory when consumption is flat or declining across categories. Dierker does not see significant incremental risk in retail inventory levels, although a conservative approach is noted. He anticipates flat to slowing consumption in the near term, with growth projected to be lower than usual. Kaumil Gajrawala asks about potential changes in promotional activity if consumer conditions remain unchanged. Dierker suggests that if categories remain flat, competitors may aggressively seek market share, as seen in past economic downturns like 2008-2009, but not all competitors can simultaneously increase their market share.

The paragraph discusses the challenges and strategies related to inventory and reorders in the vitamin category, specifically within drug stores. The speaker, Rick Dierker, highlights that the drug store channel is highly promotional, often featuring buy-one-get-one-free offers, and expresses concerns about the profitability and appeal of this channel. Due to flat traffic and stability issues with one of the retailers, the company plans to focus on strengthening its position where it is already strong and being selective about which products and promotions to pursue in this channel. Additionally, the vitamin business is increasingly shifting online.

The paragraph discusses the dynamics in the online market for vitamins and developments in the laundry detergent sector. It highlights that half of the vitamin sales occur online, emphasizing the need for targeted innovation and advertising in this fragmented market segment. In the laundry detergent sector, the commentary by Rick Dierker notes healthy growth in Q1 for ARM & HAMMER, particularly in unit dose products and scent boosters. He mentions market challenges, such as competitor actions related to product concentration, pricing strategies, and the introduction of a premium private label by a major retailer. Despite these challenges, the company believes it is well-positioned in the current market environment.

In the article paragraph, the discussion revolves around consumer behavior in a recessionary-like environment, where people tend to opt for value products. Despite the economic challenges and a drop in consumer confidence, the company, using ARM & HAMMER products, believes it is well-positioned to cater to various consumer segments through its "good, better, best" strategy. Javier Escalante and Dara Mohsenian engage in a conversation about U.S. market share, with Dara noting a slowdown in share growth as seen in April. Rick Dierker responds by emphasizing confidence in their brand portfolio, advertising, innovation, and promotional efforts to continue growing faster than the category despite economic pressures.

The paragraph discusses the company's capital allocation strategy, emphasizing that mergers and acquisitions (M&A) remain the top priority. Despite not engaging in any deals recently, the company sees M&A as its primary value driver and has significant financial capacity, estimated at around $6 billion, to pursue acquisitions, even multiple deals concurrently. If a long period passes without acquisitions, the company may consider share buybacks, but the current focus is on retaining resources for potential M&A opportunities. The balance sheet is strong enough to potentially allow both acquisitions and buybacks if necessary.

The paragraph discusses a company's approach to capital allocation and investment strategy. The speaker emphasizes their belief in a disciplined M&A (mergers and acquisitions) process, highlighting their history of successful acquisitions that enhance total shareholder return (TSR). They mention ongoing investments in marketing, innovation, debt management, and shares, while maintaining a focus on finding the right deals. The conversation then shifts to questions from Filippo Falorni at Citi, who seeks clarification on their guidance for organic sales growth and pricing strategy. Rick Dierker responds that while prices have been positive, they expect flat pricing for the rest of the year, focusing on volume growth. Lee McChesney adds that the company aims to offset tariffs over time as a competitive advantage. Falorni also inquires about the impact of tariffs on gross margin and EPS guidance, mentioning a €30 million net tariff impact after mitigation.

In the paragraph, Lee McChesney and Filippo Falorni discuss a potential 40 to 50 basis points negative impact on gross margin, equating to about $0.09 on EPS, with the specifics depending on timing and actions taken. Kevin Grundy asks Rick Dierker about the company's portfolio pruning, noting that the divestitures, which represent about 2% of sales, are smaller than some market expectations. Rick explains that they conduct an annual portfolio strategy review and evaluate each brand. Some brands are under consideration for improvement, and decisions on divestitures are ongoing. If certain business lines don't meet key performance indicators (KPIs), they may be considered for future divestiture, indicating a flexible approach despite the annual review process.

In this paragraph, Lee McChesney shares his initial positive impressions of the Church & Dwight Co., Inc. (CHC) team, expressing admiration for their track record, culture, and focus on innovation and brand development. He emphasizes his current goal of learning about the business and understanding its global operations, aiming to contribute his experience to their successful model, the Evergreen strategy. McChesney highlights the company’s strengths, including their handling of challenges like tariff issues, and expresses a desire to become more integrated and contribute to the company’s ongoing success.

The paragraph discusses a conversation about business strategies focused on driving market share and protecting gross margins while maintaining efficient operations for high cash returns. Lee, a new addition with extensive experience in mergers and acquisitions (M&A) and as a CFO and President, is praised for fitting well into the company's culture. The discussion shifts to advertising strategies, with Rick Dierker mentioning a pivot in messaging towards value, especially in challenging economic times, to reinforce their brand's market position.

In the call, Rick Dierker discussed the company's strategic focus on adjusting media allocations for different brands and emphasized efforts to grow market share through innovation. He expressed confidence in the company's strengthened position due to recent portfolio actions and looked forward to future discussions. The call concluded with an operator's note that participants could now disconnect.

This summary was generated with AI and may contain some inaccuracies.