Church & Dwight (CHD) Q2 EPS Beats 9%

Church & Dwight (CHD 0.06%), a consumer products company known for household and personal care brands, reported results for Q2 2025 on August 1, 2025. The headline news: the company posted earnings per share of $0.94 (Non-GAAP), outpacing analyst expectations of $0.86 (non-GAAP) and its own guidance of $0.85 adjusted EPS. Net sales (GAAP) came in at $1,506.3 million, exceeding GAAP revenue estimates by $19.1 million but down slightly (0.3%) from the same quarter the prior year (GAAP). While Non-GAAP EPS and GAAP revenue both beat forecasts, growth was subdued as Gross margin tightened, and certain product categories, such as vitamins, continued to struggle. Overall, the quarter showed better-than-expected performance but persistent challenges in margin and category growth.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

Church & Dwight builds its business around a group of “power brands” that account for approximately 70% of its net sales and profits for the year ended December 31, 2024. These include well-known names in laundry detergent, cat litter, stain removers, mouthwash, vitamins, acne treatment, and hand sanitizer. Its success depends on expanding these brands, keeping products available in physical stores and online, and reaching a wide range of consumers.

Recently, the company has focused on broadening its portfolio through acquisitions, expanding internationally, and fine-tuning its brand mix. Key factors for ongoing success are steady growth of its power brands, efficient distribution, targeted product innovation, and navigating regulatory demands. Pruning underperforming businesses and investing in higher-margin brands is another aspect of its ongoing strategy.

Quarter Highlights and Financial Developments

In the quarter, The company outperformed analyst expectations on both its non-GAAP earnings and GAAP revenue results. Earnings per share came in at $0.94 (Non-GAAP), beating the consensus by $0.08 (non-GAAP), while Net sales (GAAP) reached $1,506.3 million, which was $19 million above analyst estimates. However, net sales (GAAP) dipped 0.3% year over year, with Consumer Domestic net sales (GAAP) decreased by 1.4%, but international sales were up 5.3%.

Organic sales growth—measuring growth after stripping out the effects of currency, acquisitions, and divestitures—was 0.1%. Volume drove growth (+0.8%), but price and product mix subtracted 0.7% from organic sales. In the domestic market, organic sales remained negative at (1.0%), though this was an improvement over the previous quarter. International organic sales grew 4.8%.

Gross margin—a metric showing how much profit remains after direct costs—was squeezed by rising manufacturing costs, tariffs, and product promotions. On a reported basis, Reported gross margin fell to 43.0%, mainly because of charges from business exits, while adjusted gross margin stood at 45.0% (down 0.4 percentage points from last year) (non-GAAP). Management cited cost pressures from tariffs, inflation on raw materials, and promotional intensity in categories such as laundry detergent and cat litter.

Several material one-time events shaped the quarter. The company recorded approximately $51 million in pre-tax charges (GAAP) related to planned exits from underperforming businesses: FLAWLESS (hair removal), SPINBRUSH (electric toothbrushes), and WATERPIK showerheads. These exits aim to narrow the company’s focus and reduce exposure to additional tariffs. Also in the quarter, $300 million was used in share buybacks, signaling priority for capital returns in the absence of large acquisitions.

Five of seven power brands grew market share during the quarter. HERO (acne products), ARM & HAMMER (liquid detergent, cat litter), and THERABREATH (mouthwash) were named as key growth drivers. The newly acquired Touchland, specializing in hand sanitizer, contributed notable growth and became the company’s eighth power brand. In terms of e-commerce, Online sales made up 23% of total consumer sales, up from 22% in Q2 2024.

The company’s vitamin business continued to underperform, offsetting gains in other brands. Management is conducting a review of this segment, considering options ranging from restructuring to potential divestment, with a decision expected by the end of fiscal 2025. Marketing investments increased, rising to $157.1 million, or 10.4% of sales, a move aimed at accelerating share and consumption growth across brands.

International business was a bright spot, rising 5.3% in reported sales and 4.8% organically, with HERO, THERABREATH, and FEMFRESH (feminine care) brands fueling growth. In the Specialty Products Division—which sells animal nutrition and specialty chemicals—sales dipped by 3.0% for Consumer Domestic (GAAP), but Organic sales growth was 0.1%.

Gross profit and cash flows softened, reflecting the impact of margin pressure and lower cash earnings. Cash from operations for the first six months of 2025 fell by $83.4 million, to $416.5 million, due to working capital changes and lower operating earnings. Capital expenditure was curtailed to $39.0 million over the first six months of 2025, in line with cautious investment.

The quarterly dividend was raised by 7.1% to $0.30 per share.

Looking Ahead: Outlook and Guidance

For fiscal 2025, management expects total net sales and organic sales growth in the range of 0% to 2%. Adjusted earnings per share are also set to rise 0% to 2%. Management forecasts adjusted gross margin to contract by about 0.6 percentage points compared to FY2024, mainly due to tariffs and input costs, partially offset by productivity and new, higher-margin brands. Marketing spending should remain near 11% of net sales, while full-year cash from operations is projected at $1.05 billion and capital expenditures at $130 million.

In the nearer term, guidance for Q3 2025 calls for reported and organic sales growth of 1% to 2%, but Adjusted earnings per share are expected to fall to $0.72, down 9% from the prior year's adjusted Q3 EPS, as tariffs and higher marketing costs weigh on profits. Management attributes continued gross margin pressure to tariffs—estimated at a $30 million net impact—and elevated input costs. Decisions on strategic alternatives for the vitamin business will be made by year-end.

Investors should watch for continued brand performance in core product families, the impact of supply chain changes and tariff mitigations, progress in international sales, and the outcome of the vitamin business review. While portfolio pruning, increased marketing, and acquisitions like Touchland provide avenues for stabilization and growth, the pace of recovery in U.S. consumption and margin improvement will remain important factors in the outlook for the next few quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.