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Church & Dwight Co.Inc.  (NYSE:CHD)
Q1 2019 Earnings Call
May. 02, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Church & Dwight First Quarter 2019 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 forecasts. 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 conference, Mr. Matt Farrell, Chief Executive Officer of Church & Dwight. Please go ahead, sir.

Matthew T. Farrell -- President, Chief Executive Officer

Good morning, everyone. Thanks for joining us today. I'll begin with a few comments on the quarter. Then I'll turn the call over to Rick Dierker, our CFO. When Rick is finished, we'll open up the call for questions.

Q1 was an outstanding quarter for our Company, as we saw strong organic sales growth and gross margin expansion. Q1 reported sales grew 3.8%, organic sales growth was 4.5%, which exceeded our outlook of 3.5% to 4%. Earnings per share was $0.70, which exceeded our outlook by $0.04. In the US, organic sales grew 4.5% with volume growth and positive price. Our categories are growing and our market shares are healthy. 10 of our 14 Domestic categories grew during the quarter and, beyond category growth, our share results were solid with 8 out of 11 power brands growing share.

We continue to have success in the online class of trade, global consumer online sales continues to grow rapidly and we expect it to exceed 8% of our sales in 2019. Our International Consumer business delivered another terrific quarter with 8.5% organic growth. International is a growth driver and a bright spot for Church & Dwight unlike many of our peers. Canada, Germany and our Global Markets Group, which we formally referred to as Export, had particularly strong quarters. Our new partnership with Shanghai Jahwa is off to a good start and it is clear that the investments that we've made in our International business continue to pay off.

Now, turning to Specialty Products, Q1 was a challenging quarter for us with a 4.2% decline in organic sales. We are seeing lower demand for animal productivity products from our dairy customers, who continue to be hurt by low milk prices. So, in the short-term, we are less optimistic about a sales recovery in 2019. However, we still feel good about our long-term 5% organic sales algorithm as a result of our acquisitions of businesses serving other species, like poultry, cattle and swine.

Now, let's go back to the US business for a moment and call out a couple of the bright lights in the quarter. In Household, the laundry category grew 1.7%. ARM & HAMMER laundry consumption was up 8.2% and gained 0.7 share points. As anticipated, the promotional environment moderated a bit in Q1. We reduced ARM & HAMMER laundry percentage sold on promotion by a 110 basis points, while maintaining growth. And we plan to reduce promotional levels more in the coming quarters.

Over in Personal Care, BATISTE continued to gain share with the 28% consumption growth in the dry shampoo category, nearly doubling the category growth of 15%. BATISTE is the number one dry shampoo for the 13th consecutive quarter.

Now, let's have an update on pricing. Late last year, we raised price in several of our Household categories in the high single-digit range. The impact on volumes so far has been better than expected. Over the last few months, we have had additional conversations with our retail partners regarding price increases in Personal Care categories, such as dry shampoo and condoms. These products are currently shipping with the new pricing.

And finally, we closed FLAWLESS acquisition yesterday. We are excited to own the market leader in women's electric hair removal products, FLAWLESS is a fast-growing brand, which complements our specialty hair care business. We expect it to contribute to our long-term growth, both domestically and internationally. And Rick will comment more on the impact of FLAWLESS to our 2019 outlook in a moment.

So in conclusion, we had a terrific quarter. We're feeling really good about the rest of the year and our evergreen business model is healthy.

Next up is Rick to give you details on the first quarter and the outlook for Q2 and the full year.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Thank you, Matt, and good morning everybody. We'll start with EPS. First quarter EPS was $0.70 per share compared to $0.63 in 2018, up 11%. The $0.70 was better than our $0.66 outlook, primarily due to higher gross margin. Reported revenue were up -- was up 3.8%, organic sales were up 4.5%, exceeding our Q1 outlook of approximately 3.5% to 4%. The organic sales beat was driven by our global consumer growth of 5.2%. We're extremely pleased with our results. This is a third consecutive quarter of global consumer product growth in excess of 5%.

Now, let's review the segments. First Consumer Domestic. Organic sales increased by 4.5% due to higher volume and positive price and product mix as we see the benefit of our price increases flowing through. Growth was led by ARM & HAMMER liquid, unit dose laundry detergent, ARM & HAMMER clumping cat litter, TROJAN condoms, extra liquid laundry detergent, L'IL CRITTERS gummy vitamins and BATISTE dry shampoo. ARM & HAMMER liquid detergent continues to grow sales and gain share, while decreasing the amount sold on promotion.

International organic growth was up 8.5% driven largely by FEMFRESH, BATISTE, STERIMAR and ARM & HAMMER liquid laundry detergent in the Global Markets Group. ARM & HAMMER clumping cat litter and liquid laundry detergent in Canada, BATISTE in Germany and WATERPIK in several countries. For our Specialty Products division, organic sales declined 4.2%. Although demand for our products continue to grow in the poultry industry, demand in the dairy industry continues to be challenged.

Turning now to gross margin. Our first quarter gross margin was 45.1%, a 20 basis point increase from year ago due to price increases, volume growth and productivity programs, partially offset by higher commodity and manufacturing costs. This exceeded our expectations and you will hear later that we are raising the full year gross margin outlook.

Moving now to marketing. Marketing was down $1.8 million year-over-year. Marketing expense as a percentage of net sales decreased 50 basis points to 9.4%, largely due to timing. But as you heard from Matt, both our share performance and net sales are strong. For SG&A, Q1 SG&A decreased 50 basis points year-over-year. Net operating profit, the operating margin for the quarter was 23.1%. This represents 120 basis point increase over Q1 2018.

Other expense all-in was $17.4 million, primarily driven by interest expense. And for income tax, our effective rate for the quarter was 21.9% compared to 21.4% in 2018, an increase of 50 basis points. And net cash, for the first three months of 2019, net cash from operating activities was $137.6 million, a $17.6 million decrease from the prior year. As higher cash earnings were more than offset by an increase in working capital that's largely timing related.

I'd like to talk to -- to take a minute and talk about our FLAWLESS acquisition and the accounting treatment. As you know, typically when we do deals, we buy the inventory on day one. Based on the agreement, FLAWLESS will continue to operate the business during the transition period with their systems, which will last approximately four months. During this period, operating results will be recorded in the Company's net sales line, impacting many of our metrics as we detailed in the earnings release. For the remaining four months, FLAWLESS results will be consolidated with within specific P&L line items. So the total FLAWLESS impact on the Company is net sales is expected to increase by 200 basis points, gross margin increases by 20 basis points, marketing decreases by 10 basis points and SG&A increases by 50 basis points. From a cash perspective, the expected increase in cash earnings 4% accretion is offset by one-time inventory purchase at the end of the transition period and a one-time working capital build, which will be approximately $30 million in total. And as a result, the full year effect of the acquisition on 2019 operating cash flow is neutral. Additionally, as previously discussed, there will be quarterly adjustments to the FLAWLESS earn-out, which will impact the P&L. These will be excluded from our adjusted results, but will impact the reported numbers.

Now, turning to the second quarter outlook, we expect Q2 organic sales growth of approximately 3.5%. We expect second quarter earnings per share of approximately $0.52, 6% increase over last year's quarter. And now for the full year, we continue to expect organic sales to be approximately 3.5%. In terms of organic outlook by division, we now expect 3% for the domestic business, 7% from International and flat for SPD. We now expect reported sales growth of approximately 5% to 6%. We now expect full year gross margin to be up 50 basis points. This represents a 40 basis point increase from our previous guidance of plus 10 basis points. Half of the increase is driven by the previously discussed FLAWLESS impact and the other half is a combination of Q1 gross margin coming in better as well as the additional pricing actions, which will impact the second half of the year.

While we were pleased to see first quarter gross margins above prior year, we still anticipate the impact of commodities, transportation and manufacturing costs to negatively impact gross margin. One example of this is surfactants, where we saw market pricing below prior year in Q1, but a forecast for double-digit increases for the balance of the year. As a result of the amortization and transition expenses related to the FLAWLESS acquisition, SG&A as a percentage of sales is expected to be approximately 13.8%. We continue to expect 2019 adjusted EPS range of $2.43 to $2.47 per share or adjusted EPS growth of 7% to 9%. And as we discussed a month ago, the FLAWLESS impact to EPS in 2019 is neutral. The gross margin expansion in the base business is being offset by reduction on our share buyback activity, as we stated, we would do with a larger acquisition.

And with that, Matt and I would be happy to take any questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from Rupesh Parikh with Oppenheimer. Your line is now open.

Erica Eiler -- Oppenheimer -- Analyst

Good morning. This is actually Erica Eiler on for Rupesh. Thanks for taking our question. So I actually wanted to touch on the promotional backdrop. I was just curious if you could elaborate a little bit more about what you're seeing right now in the promotional side. And do you still expect promotional activity to abate further this year?

Matthew T. Farrell -- President, Chief Executive Officer

Okay. And thinking about the promotional environment, we're generally talking about Household categories. So, if you look at the laundry category and look at what the percentage sold on deal was year-over-year, it was down about 340 basis points. So it went from like 40.3% down to 36.9%, so it's quite a drop. So the average for the category is 36.9%. Where we are right now for ARM & HAMMER liquid laundry is 34%. So, we were down 100 basis points year-over-year. So, it's quite a move down year-over-year, so I would expect that to be sustained for the rest of the year. And as I said in my opening remarks, we expect also to reduce more in the next three quarters. The other category to pay attention to is litter. So on litter category of Tidy Cats, Clorox and Church & Dwight and all of those brands are down year-over-year as percentage sold on deal. The category is down 400 basis points and went from like 21.9% to 17.7%. So down quite a bit. So as expected, all -- seems all the manufactures have pulled back quite a bit on promotions. Recall that last year that everybody experienced commodity increases in transportation increases, big jump from '17 going to '18, '18 going to '19, not as bad, but still up. So this behavior is consistent with the ability of the suppliers to offset those cost increases.

Erica Eiler -- Oppenheimer -- Analyst

Okay, great so much -- thank you so much.

Operator

Our next question comes from Bill Chappell with SunTrust. Your line is now open.

Bill Chappell -- SunTrust -- Analyst

Thanks. Good morning.

Matthew T. Farrell -- President, Chief Executive Officer

Good morning, Bill.

Bill Chappell -- SunTrust -- Analyst

Could you talk a little bit just about what you're seeing on the commodity front? I mean, we've heard some sign of improvement on three logistics. I mean, though, I know you still have some kind of lagging inflation that's going to hit you, I mean, is the outlook getting any better there or is it pretty status quo?

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. This is Rick. Hey Bill. I would say that transportation as an example, status quo, I think we said mid single-digit increases for us last time we talked back in February and that's still our expectation. Like we've talked about many times, we are largely hedged, about 75% hedged for a lot of our commodities. That piece that does float. We had some favorability in Q1, right, and I think I alluded to in my remarks that ethylene, as an example, was actually down year-over-year in Q1. Now, the forecast has it going up in Q2, Q3 and Q4. But so far, April looks a lot like Q1. So I think we're optimistic that first time in long time commodities were actually abating.

Bill Chappell -- SunTrust -- Analyst

Got it. And just a second question, trying to understand that the liquid laundry environment, I mean, are you still seeing -- did you expect it to abate throughout the year in terms of promotional levels? Do you expect -- I mean, there's certainly one player in Europe that it kind of comes back time and time again. So I'm just trying to understand, how long do you think this lasts?

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. Look, in the first quarter, even the company referred to that's in Europe was down sold on deal. We can't predict what the competition is going to do, but this isn't just one quarter Bill, we've kind of started to see this trend in the second half of 2018. That's continued into '19. So it's not obvious that that is just going to turn around very quickly.

Bill Chappell -- SunTrust -- Analyst

Okay. And then last one from me just I'm actually surprised that litter is -- everybody is down on promotion because it seems to be a kind of a major battlefront for all the players with new introductions and pricing and promotion and advertising. Is that starting to abate?

Matthew T. Farrell -- President, Chief Executive Officer

When you have all these price increases, you also have to keep in mind that people aren't going to be dealing it back. Right? So, it's somewhat consistent that you're not going to see as much sold on deal. People want to see the price increases take hold and be able to drop it down to gross profit.

Bill Chappell -- SunTrust -- Analyst

Got it. But you're not seeing any real change in the competitive environment on litter?

Matthew T. Farrell -- President, Chief Executive Officer

No, no, we're not.

Bill Chappell -- SunTrust -- Analyst

Okay, thanks so much.

Matthew T. Farrell -- President, Chief Executive Officer

All right. Okay, Bill.

Operator

Our next question comes from Steve Powers with Deutsche Bank. Your line is now open.

Steve Powers -- Deutsche Bank -- Analyst

Yeah. Hey. Great. So, I missed some of the statistics that you opened with Matt on the number of categories and brands that are growing or gaining share. Maybe just run through those again briefly and just talk about some of the categories or brands that aren't in the green. Obviously, great results overall, but are there any surprises or disappointments that you'd call out at the category brand level? And if so, are they kind of according to plan more or less or are there pockets where you could actually see incremental improvement?

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. I think that one day, I'm not going to get that question when it's 14 out of 14 that are...

Steve Powers -- Deutsche Bank -- Analyst

Correct.

Matthew T. Farrell -- President, Chief Executive Officer

It was 10 out of 14, the categories were up in the first quarter. Some of the categories that are struggling would be like condoms, for example. The secular reasons for that for the last couple of years is because there are alternative contraceptives to condoms, including Plan B and uterine devices, et cetera. Kids is down as well year-over-year, the category. I'd say, those are -- that's also -- you could argue that that maybe also related to birth rates, but I'd say the sexual health side of the house is where we see some weakness. So, that's probably where I -- where I'd spend most of my time.

Steve Powers -- Deutsche Bank -- Analyst

Okay.

Matthew T. Farrell -- President, Chief Executive Officer

As far as the shares go, our power brands, 8 out of 11 grew share in the quarter, so spectacular. Last year, we had 7 out of 11 on a full year basis. So I feel great about the strength of the brands.

Steve Powers -- Deutsche Bank -- Analyst

Okay, cool. And then you'd spent a lot of time at the Investor Day on the -- that More Power to You campaign. Can you just talk a little bit about metrics, measurements that you're tracking against that campaign? And just how they're -- how you're assessing the ROI there and how that ROI is trending versus what your expectations were?

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. Well, I'll say it this way, Steve. We're just turning that campaign on right now. As I said, when we're down at the stock exchange, that is going to be a multi-year program. The other thing we've hit upon something that resonates with consumers is you're going to start seeing it hit in the next couple of months both on television as well as in print and digital as well, but it's -- this is something that we think is going to be a big boost for us because ARM & HAMMER is across so many different categories. So it's laundry, it's litter, it's toothpaste, underarm deodorant. It's a phenomenal brand because it trades in so many different categories. So this campaign is going to halo all of those categories. So hope to give you an update on that in future quarters to let you know how it's going, but it's only just kicking off right now.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. And I would just add Steve, this is Rick, that it's always encouraging that when we're spending our lowest quarter of the year in terms of marketing spend to have the results that we just had. So that's another good indication.

Steve Powers -- Deutsche Bank -- Analyst

Okay, great. Thanks so much.

Operator

Our next question comes from Steve Strycula with UBS. Your line is now open.

Steve Strycula -- UBS -- Analyst

Hi, good morning. Two questions. First would be on the Personal Care segment. I believe last quarter, WATERPIK drove about 100% of organic sales growth. Is that the case again in the first quarter of this year?

Rick Dierker -- Executive Vice President, Chief Financial Officer

No, it's not.

Steve Strycula -- UBS -- Analyst

Okay. So some of the other business, did they get sequentially better? Would you mind commenting? And then the second piece would be, should we think about, since you're calling out surfactant costs being escalating this quarter, is that open negotiations for another round of price increases there? Thank you.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. So really, we did have some strength in a couple different Personal Care areas. I quoted L'IL CRITTERS, as an example. And I quoted BATISTE dry shampoo in the release, so those are kind of leading the way from a PC growth perspective. Now, WATERPIK was slightly positive, but the price increases and volumes kind of offset. Your second question was on surfactants and another round of price increasing. Well, surfactants were actually, like I said, ethylene was actually down year-over-year in the quarter. It's expected to be up in Q2, Q3, Q4, consistent to how it was three months ago when we gave our outlook and we've said many times that we're not going to lead with any type of price increases in our laundry category, but what you're seeing in the laundry category is promotions being peeled back and you're seeing coupon reductions kind of what Matt was alluding to before.

Steve Strycula -- UBS -- Analyst

Okay, thank you.

Operator

Our next question comes from Jason English with Goldman Sachs. Your line is now open.

Cody Ross -- Goldman Sachs -- Analyst

Good morning. This is actually Cody Ross on for Jason English this morning. Thank you for taking our question. Sticking with the Household Products segment. This segment's revenue acceleration was exceptional this period, even in the wake of some of your competitors announcing increased investment in your product categories. What do you think is driving your growth in liquid laundry? Why do you think you've been able to take market share? And given your recent market share gains, are you expecting any step up in competitive activity as the year progresses?

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. We've talked about this many times before ARM & HAMMER liquid laundry detergent. To keep in mind that ARM & HAMMER liquid laundry is a value detergent. It's on the high end of the scale, but it is a value detergent. And the brands that we compete against are Purex and Sun, others and they are unadvertised brands. So we have a distinct advantage in the way we compete in that our brand has a lot of brand equity and those resonate with the consumer. And we've been growing the ARM & HAMMER liquid laundry share year-over-year for years. So -- and this is -- and we did -- again, we grew this quarter quite a bit at the same time that we reduced our promotional spend year-over-year. So it's -- and behind that, we have our More Power to You campaign coming, which is also going to help us. I think this is largely due to brand equity more than it has to do with promotions.

Cody Ross -- Goldman Sachs -- Analyst

Great, thank you. And just to juxtapose that to your Personal Care segment. This segment growth decelerated quite significantly, despite the strength that you guys called out in BATISTE and WATERPIK. Is this all really your condoms slowdown or what else have you seen in the market in this segment that has caused the slowdown? Thank you.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. It's really two things. I think Matt alluded to, the sexual health business has been a slower grower and then it's also our WATERPIK business isn't -- we took a big price increase and so volume elasticity has happened. And so the net result is the WATERPIK business has grown a little slower. So we think that's kind of transitory as the price increase takes hold, but that's what happened in Q1.

Cody Ross -- Goldman Sachs -- Analyst

Great, thank you very much.

Operator

Our next question comes from Bonnie Herzog with Wells Fargo. Your line is now open.

Bonnie Herzog -- Wells Fargo -- Analyst

All right, thank you. Good morning. I had a question on your gross margins. They inflected positive in the quarter, which is great. So hoping you guys could talk through your outlook for gross margins for the rest of the year. And any of the key drivers have changed here and just really now wondering if your guidance for gross margin could actually end up being conservative. Do you see more upside now?

Rick Dierker -- Executive Vice President, Chief Financial Officer

Well, we hope so, Bonnie. Remember, our outlook for gross margin when we met back in February for the full year was plus 10 basis points and the detail of that back in February was we're counting on plus 125 basis points from price volume mix, right, largely as we're getting these price increases through on -- at the time 30% of the portfolio. We said we were going to have 100 basis points of improvement from productivity, we said we're going to have minus 190 basis points for inflation and then minus 25 basis points for the tariff. That's how we got to the plus 10 basis points back in February. Now, I'd say there's really two small changes in our outlook. The base business, we would say, is plus 30 basis points now, not plus 10 basis points, plus 30 basis points. So the 20 bps of a change, 10 bps comes from better price mix and volume and then 10 bps comes from a little bit lower inflation. So that's how you get to plus 30 basis points and then the other plus 20 basis points is really from the acquisition impact in the transition accounting. So, I think we're off to a great start. We feel really good about it. To have plus 20 basis points in the first quarter, we think we will be down slightly in the second quarter, first half is flat, second half is probably up 100 basis points, so that's how we get to our 50 basis points.

Bonnie Herzog -- Wells Fargo -- Analyst

Okay, that's helpful. And then my second question, I know it's a small business for you guys, but hoping you could drill down a little further on the pressures you're seeing in Specialty Products and then maybe what changes you're making, if any, to deal with the headwinds? And you mentioned you don't expect much recovery, but you're going to be lapping easier comps in that business. So just kind of trying to understand if we should expect continued organic sales declines for the remainder of the year or do you expect some kind of recovery possibly Q4? Thanks.

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. Just a little bit of color on the dairy market. So dairy price -- the dairy industry is influenced by the price of milk. So if you look at Class III milk in 2018, it was pretty low, it's $14.60 per hundredweight, that's how it's sold, 100 pounds. Q1 seemed less and that was $14.30. So dairy farmers are definitely struggling. If you look at last year, I mean, '17 going to '18, there was a 7% drop in the number of licensed dairy farms in the US. The number of cows didn't decline as much, they only declined 1%. So all those cows got distributed around to those other dairy farms, but that was the single largest drop recorded by the USDA. So obviously, you have tough going right now for the dairy industry. What we've been doing is we've been diversifying away from dairy over the past three years. So last year, what we said was that about 25% of our Specialty Products sales -- let me narrow that, sales of our animal productivity business, 25% was for non-dairy. So absent that, we would have it even in a greater difficulty. If you went back three years, 2015, 100% of our animal productivity business was dairy. So it is a worry for us, obviously, but we think long-term and we know this is a cyclical business, so it does come back eventually. But in the meantime, we continue to expand the businesses that are directed toward cattle, swine and poultry. For the full year -- on a full year basis, we started out saying -- I think we said 9% organic growth. That is not going to happen, I think it's going to be flat for the full year for the Specialty Products business.

Bonnie Herzog -- Wells Fargo -- Analyst

All right. Thank you.

Matthew T. Farrell -- President, Chief Executive Officer

Yeah.

Operator

Our next question comes from Lauren Lieberman with Barclays. Your line is now open.

Lauren Lieberman -- Barclays -- Analyst

Great, thanks. Good morning. Just wanted to talk a little bit about pricing, again. Clearly, you got -- you're having very good flow through and like you commented volumes has held in very, very well. I was just curious about, I guess, your perspective on some of the gross margin pressures that retailers are facing and what that may mean in terms of sustainability in terms of pricing from an industry standpoint, not just Church specific? But given it's gone so nicely for you. And I was just curious, how that's going? What you're seeing day to day? Retailers, many are opting to absorb the price increases that you guys are putting through on a cost justified basis, but I just worry about sustainability for the industry. So anything you could offer there would be really helpful. Thanks.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. Look, I think we all know that retailers are challenged. And oftentimes, retailers have to turn to suppliers for some help with respect to their profitability. And different brands are in a better position to deal with those asks than others. And the reason we focus on having a number one and number two brands is so that when that conversation takes place, that we can work -- we actually have something to bring to the party. And so, if the retailer says, hey, I need X, then we might say, hey, you need an end cap, you need to be moved up to high level. When you're number one or number two brand, you can have those conversations with the retailers. And when you are the number three, four and five brand, that's far more difficult. So, I think those are the brands that are going to be far more at risk than the brands that are in number one or number two. But what you described Lauren is something we've been dealing with for the last several years. You might say, OK, it's going to become more acute now if you raise price, but you would expect that some -- the penny profit for the retailer is also going to go up as well. So, all that profit is not winding up in our pockets.

Lauren Lieberman -- Barclays -- Analyst

Okay, all right. Great. And then just one more thing was on the vitamin category. There was a recent article in the journal just about potentially increased regulation from the FDA over claims and so on. Anything that you've seen in terms of competitive activity in the space so far from some of the smaller players that might be facing increased scrutiny or changes in terms of retail shelf space as there maybe then different level of scrutiny on the category?

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. Hey, we'd love to see that. I can't talk specifically about the journal article, I don't remember seeing that. But when we bought the business, it had a handful of competitors. And today, it's got 30. So we stand to benefit to the extent that there's going to be more scrutiny regarding disclosure and content of their gummy vitamins that we compete with.

Lauren Lieberman -- Barclays -- Analyst

Great, thank you so much.

Matthew T. Farrell -- President, Chief Executive Officer

Okay.

Operator

Our next question comes from Olivia Tong with Bank of America. Your line is now open.

Olivia Tong -- Bank of America -- Analyst

Hey, thank you. Can you talk about any change in your view on the makeup of your organic sales growth target just effectively in terms of price mix versus volume, particularly in Consumer Domestic? And then also a little bit in terms of how much of that price mix is lower promo versus actual list price increases? And then, were there any categories where promo didn't decline or potentially was up? Thank you.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Hey, Olivia, Rick. A lot of questions there. First question was really just a split between volume and price mix. For the Company, we said it was for Q1 about half, 50%-50%. For the Domestic division, it was 1% volume, 3.5% for price mix. So maybe 25%-75%, I'd expect that trend to continue throughout the year. I think that's a good ballpark. Second question was maybe some other categories that we're being promoted as much, was that it?

Olivia Tong -- Bank of America -- Analyst

Yeah.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Well, I would just say (Multiple Speakers)

Olivia Tong -- Bank of America -- Analyst

Sorry. Just if there were any categories where promo didn't go down or it was actually up.

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. No -- well, the big ones are -- we went through earlier. When you look at liquid laundry detergent and litter, those are the big ones. And that Personal Care side of the house is less driven by promotion and it is far more driven by marketing. So, that's generally not a topic for conversation in Personal Care.

Olivia Tong -- Bank of America -- Analyst

Got it. And then in terms of International, I know it's not as big, but on price mix there, I know it's an elevated comp in Q1. But given the FX moves, I guess, I was a little surprised to see that it was down year-over-year. So, can you talk about what's driving that? Is that trial building, is it just the mix of businesses? Anything else there to call out.

Rick Dierker -- Executive Vice President, Chief Financial Officer

No, you hit it on the head, more than anything, it's a comp issue. If you look at that business, it was -- price-mix was positive 5.2% in Q1. In 2018 for the year, it was 2%. So, if you just -- almost at the stack bar. If you had the stack up in Q1, 5.2% minus 1.7%, it's 3.5%. So, that's -- 2% to 3% is right where that business is usually at for price mix. So, it's more of a comp issue. Back in 2018, we did have some favorable price mix as we were exiting and had to reverse some charges from our China venture, so it's really just a comp issue.

Olivia Tong -- Bank of America -- Analyst

Got it. And then just lastly in terms of Consumer Domestic, obviously, a lot better than you expected, Specialty worse. But net-net, you're obviously not changing, you're maintaining your full year total Company expectations. So can you just update us in terms of your expectations by segment from a full year basis?

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. I did it in my prepared remarks, but just to do it real quick again. Previously, we had said for the full year back in February, where we said 2.5% Domestic, 6% International and 9% for SPD, that's 3.5% organic. Now, we're saying 3% Domestic, 7% International and flat for SPD to get to the 3.5%.

Olivia Tong -- Bank of America -- Analyst

Got it. Thank you so much.

Matthew T. Farrell -- President, Chief Executive Officer

Yeah.

Operator

Our next question comes from Joe Altobello with Raymond James. Your line is now open.

Joe Altobello -- Raymond James -- Analyst

Thanks. Hey guys, good morning.

Matthew T. Farrell -- President, Chief Executive Officer

Hey, Joe.

Joe Altobello -- Raymond James -- Analyst

First question on the pricing that you guys took in dry shampoo and condoms. I believe that's incremental to your prior guide, so is there any EPS impact from that? And was it cost justified or was it more innovation-driven?

Rick Dierker -- Executive Vice President, Chief Financial Officer

Yeah. I'll take the EPS question, Joe. It's -- it was called -- every single price increase that we talk about has to be cost justified in this environment. So, it was cost justified, the answer to the first question. In terms of gross margin, if you exclude FLAWLESS because sometimes it's just easier to think of it like that. Let's just strip out all the noise from FLAWLESS. We would have raised our gross margin from 10 to 30 basis points of improvement. Right? So that 30 basis points is made up of partly the new pricing that we got in the back half of the year for these Personal Care categories. We would have stayed at 10 basis points, down from marketing, would've stayed at 30 basis points of leverage for SG&A and we would've been at 70 basis points of op margin expansion. And you say, OK, well, where does that flow through for EPS? Well, remember, back in February, I said if we did a larger deal, we will take our $300 million buyback program and just do $100 million of it, and that's what we did. So, EPS is neutral, but operating margin is higher.

Joe Altobello -- Raymond James -- Analyst

Okay. So it's lower share count effectively. Secondly, just out of curiosity, Amazon going to one-day delivery for Prime members. Does that have an impact you think on the industry in terms of e-com sales? Or do you think same day is really the game changer that has to happen?

Matthew T. Farrell -- President, Chief Executive Officer

I think yeah, it's a game changer. I think everybody is going to have to move toward one-day and maybe same day at some point in the future. I think that Amazon just keeps turning up the heat on all the bricks and mortar retailers. So that will be a competitive advantage for them until such time as others catch up. Now, it may not matter to some consumers at some point that while they get it same day or next day, but the -- having the option may matter to people, but -- and it's definitely something to watch, something we're watching closely too, Joe.

Joe Altobello -- Raymond James -- Analyst

But does it help you get to 10% faster for example?

Matthew T. Farrell -- President, Chief Executive Officer

10% of online sales?

Joe Altobello -- Raymond James -- Analyst

Of total sales, yeah.

Matthew T. Farrell -- President, Chief Executive Officer

It's -- I don't know that's going to get us there, if -- whether it's two-day or one-day, that's going to change consumer behavior as far as buying online. We were up 40% year-over-year in the first quarter in our online sales, so we got a big jump. So, we're easily going to pass the 8% for the year. So, we're all happy with the direction we're going and the skills that we're developing to compete digitally and online.

Joe Altobello -- Raymond James -- Analyst

Okay, great. Thank you.

Matthew T. Farrell -- President, Chief Executive Officer

Okay.

Operator

Our next question comes from Andrea Teixeira with JPMorgan. Your line is now open.

Andrea Teixeira -- JPMorgan -- Analyst

Hi, thank you. Good morning. So can you comment on the performance of the non-tracked channels? I believe the gap of growth had narrowed last quarter and Rick spoke to that on the Analyst Day, but it seems that it accelerated again this quarter. How is the rate of growth for e-commerce and club? I know just in the context of one of your competitors gaining more shelf space in laundry at some -- at one of the clubs and just trying to see if the 3.5% organic that you called for the second quarter is just being more conservative as you just printed 4.5%. I was just trying to -- because the tone about pricing and positioning into the second quarter has been I think more benign than what we heard from competitors. And also a modern question if I can just ask on the mechanics of the revenue recognition for FLAWLESS because the old operator is still operating here, so I don't want to think it's not going to go obviously in organic growth. I was just wondering, how to account for the different divisions and how would be accounted in growth? Thank you.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Okay. Let's start with the track and then track channels. So if you look at our -- if you look at Nielsen, our consumption growth would have been around 4%, unmeasured would add about 1.5% or 150 basis points. We had really strong growth in the e-commerce as Matt alluded to. And in other untracked channels as well. That would get offset though by couponing of around 70 basis points and all other around 30 basis points. So that's how you get to the 4.5% organic that we're talking about. You also alluded to just a deceleration in Q2 for organic growth and really to -- through maybe the back half of the year. Well, remember, we are pulling back on promotions as we've talked about many times as we go through the year. So that does have an impact on volume, but we feel like we're in such a good spot that we can do that. Your third question was on FLAWLESS and that was related to helping on the divisional breakout. We're not ready to do that yet. This is -- we just closed yesterday, we try to go into a lot of the detail on the kind of the transition portion of FLAWLESS for four months and then when it goes through everyone of the P&L for four months and the best guide we can give you right now is plus 200 basis points or so to net sales for the Company.

Andrea Teixeira -- JPMorgan -- Analyst

And that is implying the 15% kind of run rate of growth for that business?

Rick Dierker -- Executive Vice President, Chief Financial Officer

It is. It's -- we've said that business was $180 million trailing. If you times that by 15%, you get low 200s. Divide that by 12 months times by 8 months, since we closed on May 1st, that's around $140 million, that's around 300 and some basis points, but remember the funny accounting is that we can only recognize the operating profit and net sales for the first four months. And so it's really less than -- it's around half of that. So we can go through it in more detail if you like offline, but it's -- that's why it's less than maybe what you think.

Andrea Teixeira -- JPMorgan -- Analyst

Okay, perfect. That's helpful. Thank you.

Operator

Our next question comes from Mark Astrachan with Stifel. Your line is now open.

Mark Astrachan -- Stifel -- Analyst

Thanks and good morning everybody. Wanted to go back to the Specialty segment. So I guess, some of the moving parts behind it, but I'm curious about just the dramatic change and expectations from February to now. What does it kind of say about the visibility that there is in the business and does some of that incremental volatility perhaps make you, I don't know, reconsider the segment itself or accelerating the change away from cattle to other animals, other categories within that? I know you've talked about it, but it doesn't seem like it's enough to potentially stem some of that volatility.

Matthew T. Farrell -- President, Chief Executive Officer

I wish you should think about that business's drag, it's got mid to high 30s gross margins. And so it's moved up quite a bit over the last few years, as we have made acquisitions into other categories. When you say, hey, you went into the year looking for 9% and now you're looking for flat. There's some of the things that informed us about 2019 were, A, that the milk prices would be recovering. There's industry estimates that come out that predict what -- essentially what they are milk futures and so predicts what milk prices are going to do in the back half of 2019. We're less optimistic that that actually is going to happen right now. The other thing that's hurting the business is the tariff war. So for example, China is the number one importer of weigh protein from the United States. So obviously that's depressing milk prices and as the NAFTA 2 still hasn't been ratified, so that -- all those changes haven't wound up helping the dairy farmers. So, looking at that now in April, we're seeing -- we feel more like it's going to be flattish for the year. But long-term, we still feel good about the business because we are effectively making the move diversifying away from dairy.

Mark Astrachan -- Stifel -- Analyst

Got it. That's helpful. Thanks. And also wanted to go back to the prior question on the retailer dynamics and kind of the puts and takes of the pressures that they're dealing with. Perhaps help us in reminding how the business has trended or how the pricing dynamics have fared in historical periods, where input costs are lessening as price increases are accelerating, but the underlying inputs are actually becoming a bit more benign. So is there any chance that the retailers pushed back a bit more on price or is that some of that is given back in the form of increased promotions going forward? So anything there certainly based on historical views would be helpful.

Rick Dierker -- Executive Vice President, Chief Financial Officer

Hey, it's Rick. I just want to correct one thing. Commodities are not abating right now. Right? Commodities are up year-over-year. We said Q1 for ethylene as an example was a little bit favorable to what our outlook was. That's it. In general, commodities are up significantly still from '19 to '18 . So that's -- in this environment, oil as you guys know is back up to around $64 to $65 a barrel. So that's not what the narrative is right now. Price increases are happening because of commodity inflation that's existing out there.

Matthew T. Farrell -- President, Chief Executive Officer

Yeah. Abating doesn't mean going backwards. But look, these things move like glaciers kind of over time. So what you're talking about is, at some point if commodities now go in a down cycle, what happens? Well, what happens historically is it creates a price umbrella and it gives suppliers the ability to promote, but we're a long way away from that.

Mark Astrachan -- Stifel -- Analyst

Thank you.

Matthew T. Farrell -- President, Chief Executive Officer

Okay. All right. I think that's it. Folks, hey, we had a great quarter. Sales are up, gross margin expanded and we'll talk to you all at the end of the second quarter.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Duration: 48 minutes

Call participants:

Matthew T. Farrell -- President, Chief Executive Officer

Rick Dierker -- Executive Vice President, Chief Financial Officer

Erica Eiler -- Oppenheimer -- Analyst

Bill Chappell -- SunTrust -- Analyst

Steve Powers -- Deutsche Bank -- Analyst

Steve Strycula -- UBS -- Analyst

Cody Ross -- Goldman Sachs -- Analyst

Bonnie Herzog -- Wells Fargo -- Analyst

Lauren Lieberman -- Barclays -- Analyst

Olivia Tong -- Bank of America -- Analyst

Joe Altobello -- Raymond James -- Analyst

Andrea Teixeira -- JPMorgan -- Analyst

Mark Astrachan -- Stifel -- Analyst

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