Household products company Church & Dwight (NYSE:CHD) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 2.4% year on year to $1.47 billion. On the other hand, next quarter’s outlook exceeded expectations with revenue guided to $1.5 billion at the midpoint, or 1.3% above analysts’ estimates. Its non-GAAP profit of $0.91 per share was 1.4% above analysts’ consensus estimates.
Revenue: $1.47 billion vs analyst estimates of $1.51 billion (2.4% year-on-year decline, 2.9% miss)
Adjusted EPS: $0.91 vs analyst estimates of $0.90 (1.4% beat)
Adjusted EBITDA: $363.4 million vs analyst estimates of $361.7 million (24.8% margin, in line)
Revenue Guidance for Q2 CY2025 is $1.5 billion at the midpoint, above analyst estimates of $1.48 billion
Adjusted EPS guidance for Q2 CY2025 is $0.85 at the midpoint, below analyst estimates of $0.95
Operating Margin: 20.1%, in line with the same quarter last year
Free Cash Flow Margin: 11.5%, down from 14.4% in the same quarter last year
Organic Revenue fell 1.2% year on year (5.2% in the same quarter last year)
Market Capitalization: $22.94 billion
StockStory’s Take
Church & Dwight’s first quarter performance was driven by a combination of ongoing retailer destocking in the U.S., muted consumer demand, and specific category underperformance, most notably in gummy vitamins. Management attributed the organic sales decline to a 300 basis point drag from retailer inventory reductions, while noting share gains in core brands like ARM & HAMMER and THERABREATH. CEO Rick Dierker pointed out, “80% plus of our business grew volume share in the quarter,” signaling resilience in key product lines despite the challenging environment.
Looking ahead, the company is focusing on mitigating tariff exposure and executing strategic portfolio changes, including the divestiture or exit of lower-margin businesses. Management’s guidance for the next quarter reflects continued caution regarding U.S. category growth and a lack of near-term recovery catalysts. CFO Lee McChesney explained that, “full year organic revenue outlook is now 0% to 2%, driven by a weaker U.S. consumer,” and that EPS growth will be limited by both lower sales expectations and ongoing tariff headwinds.
Key Insights from Management’s Remarks
First quarter results reflected both external pressures and internal actions, with management emphasizing portfolio streamlining, category performance, and decisive tariff mitigation. The revenue shortfall versus consensus was primarily driven by U.S. retailer destocking and softer consumer demand, while profitability was supported by cost controls and selective pricing.
Portfolio streamlining: Management announced plans to exit or sell the Flawless, Spinbrush, and Waterpik showerhead businesses. These brands represent about 2% of total sales and have below-average profitability. The move is expected to sharpen focus on core brands and materially reduce tariff exposure.
Tariff mitigation actions: Church & Dwight projected a gross 12-month tariff exposure of $190 million but expects to reduce this by about 80% through portfolio changes and supply chain adjustments, such as moving Waterpik flosser production out of China for U.S. markets.
Brand share gains: Despite overall sales declines, the company reported share growth in nine of its 14 major brands, with ARM & HAMMER laundry and litter as well as THERABREATH and HERO delivering consumption growth above their respective categories.
Category-specific challenges: The gummy vitamin segment remained a significant drag, with consumption down 19%, despite overall category growth. Management is introducing new products, reformulations, and enhanced marketing to address the decline, with progress expected from May onward.
International and SPD growth: The international segment delivered 5.8% organic growth, and Specialty Products Division (SPD) posted a 3.2% organic gain, partially offsetting U.S. weakness. Growth was driven by higher volumes and continued brand momentum abroad.
Drivers of Future Performance
Management’s outlook for the coming quarters is anchored in category trends, portfolio focus, and ongoing cost discipline, while acknowledging that consumer and retailer behavior remain unpredictable.
Tariff and supply chain actions: The company expects its efforts to reduce tariff exposure—through both divestitures and sourcing changes—to limit gross margin pressure, but ongoing commodity cost inflation could remain a headwind.
Innovation and brand investment: Management is relying on new product launches and continued marketing investment, particularly in underpenetrated brands like HERO and THERABREATH, to drive household penetration and share gains.
U.S. consumer and retailer trends: Persistent weakness in U.S. category growth and retailer inventory reductions are expected to weigh on near-term sales, with management stating that no recovery in destocking is assumed. Selective pricing and promotional activity will be closely managed to balance share gains with margin protection.
Top Analyst Questions
Rupesh Parikh (Oppenheimer): Asked for updated segment expectations and the impact of promotional activity; management indicated international met expectations and U.S. sales will likely remain under pressure, with promotional intensity stable for now.
Chris Carey (Wells Fargo): Sought clarity on the magnitude and timing of tariff impacts; management detailed that the gross $190 million exposure should fall to about $40 million after mitigation, with most effects captured in 2025.
Andrea Teixeira (JPMorgan): Queried the sustainability of HERO’s growth and promotional depth; management noted HERO’s double-digit consumption growth and ongoing distribution expansion, while promotional depth remains transitory.
Steve Powers (Deutsche Bank): Probed the assumptions behind the implied back-half recovery in organic growth; management cited distribution gains, incremental innovation, and continued marketing but acknowledged no improvement in consumer demand is assumed.
Olivia Tong (Raymond James): Asked about pricing strategy and brand penetration; management said price increases will be limited and targeted, while marketing and innovation will drive penetration in brands like HERO and THERABREATH.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will monitor (1) the pace and impact of portfolio pruning, specifically the exit of lower-margin brands and associated tariff mitigation, (2) effectiveness of new product introductions and reformulated offerings, particularly in the gummy vitamin and acne care segments, and (3) U.S. category consumption trends and whether retailer destocking stabilizes. Execution on international growth initiatives and further supply chain adaptation will also be central to assessing progress.
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