Despite Soaring Sales, Investors Should Avoid Stocking Up on Church & Dwight's Inflated Valuation

Church & Dwight has clearly been a beneficiary of consumers’ penchant for cleaning, disinfecting, and health and wellness fare. Organic sales popped 4.3% in the fourth quarter, on top of nearly 11% gains in the year-ago period. However, given a rash of inflationary headwinds, higher prices and favorable mix (6% benefit) drove the entirety of the sales uplift, as fill rates remained in the low-80s versus the high-90s it boasts in a normalized environment. And these pressures will likely persist, as management is expecting a 5%-6% increase in its cost of goods sold this year, on top of a 9% hike in fiscal 2021. As such, its likely Church will continue to seek out opportunities to raise prices, though we expect volumes will remain tepid, in line with historic precedent.