Church & Dwight Earnings: A Moat Remains Elusive Despite Recent Sales and Margin Gains

On the surface, no-moat Church & Dwight’s second-quarter marks (5.4% organic sales growth and 270 basis points of gross margin expansion to 43.9%) might suggest the firm is finally turning the page on what has been a challenging operating landscape. Recall, its discretionary brands (Flawless, WaterPik, and VitaFusion, about 20% of sales) have faltered of late, as consumers have turned their backs on these categories as they’ve worked to rationalize unnecessary spending. But we’d suggest that even the other 80% of its mix includes categories (depilatories, condoms, pregnancy tests) that cash-constrained consumers might opt to forgo (with management citing that just six of its 14 power brands in the U.S. gained share in the quarter), weakening its ability to raise prices to offset the inflationary angst it continues to face.