Church & Dwight (CHD) Thrives on Solid Brands & Pricing
Church & Dwight Co., Inc. CHD boasts a portfolio of solid brands, fueled by consumer-friendly product innovations and acquisitions. The well-known specialty products company benefits from strategic pricing efforts amid an inflationary cost landscape. These factors drove CHD’s second-quarter 2023 results, with net sales and earnings increasing year over year.
Management anticipates sales and gross margin strength to be sustained in the second half of 2023. Constant brand investments, product innovation and successful execution will likely drive results. For 2023, it expects reported sales growth of nearly 8% and adjusted earnings per share (EPS) increase of 6%.
Factors Driving Church & Dwight’s Growth
Church & Dwight resorted to incremental pricing across its portfolio to counter rising costs. Favorable pricing was an upside to the company’s organic sales in the second quarter of 2023. The company’s organic sales growth was backed by a favorable product mix and pricing of 5.8%.
The company boasts power brands, representing most of its consumer sales. In the second quarter, the company’s U.S. portfolio saw consumption growth in 11 of 17 categories. CHD is focused on product innovation for further development. Management is on track to differentiate its brands to consumers through innovative products, packaging and forms.
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Management strategically increased its presence through acquisitions to grow its portfolio. It recently completed its latest buyout of the Hero Mighty Patch brand (or Hero) and other acne treatment products. In December 2021, CHD concluded the buyout of TheraBreath, a leading brand in the mouthwash category, which marks its 14th power brand.
We note that the FLAWLESS and WATERPIK buyouts have also been prudent additions to Church & Dwight’s portfolio. Another noteworthy acquisition of the company includes Batiste. In December 2020, the company took over Matrixx Initiatives that owns the ZICAM brand. Church & Dwight’s recent buyouts — THERABREATH mouthwash and the HERO brand — performed exceptionally well and witnessed robust consumption and market share gains in the second quarter of 2023.
Higher SG&A Costs Hurt
Church & Dwight has witnessed increasing marketing and SG&A expenses for the past few quarters. In the second quarter, as a percentage of sales, marketing expenses rose 130 basis points (bps) to 9.1%. Adjusted SG&A expenses, as a percentage of sales, increased 60 bps to 14.2% due to increased incentive compensations.
For 2023, management expects considerable increases in marketing and SG&A investments. CHD expects to raise marketing, as a percentage of sales, to about 11% in 2023. It expects a year-over-year rise in SG&A on higher incentive compensations and growth-oriented investments.
Focusing on growth endeavors will likely help Church & Dwight keep its growth story going.
The Zacks Rank #3 (Hold) company’s stock has gained 18.2% year to date compared with the industry’s 1.7% growth.
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McCormick & Company MKC, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. The company has an expected EPS growth rate of 7.5% for three-five years.
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Church & Dwight Co., Inc. (CHD) : Free Stock Analysis Report
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