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Church & Dwight Co Inc CHD

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Morningstar’s Analysis

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Economic Moat

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Despite Improving Sales, Profit Pressures Sprout Up in Church & Dwight's Q1; Shares Not a Bargain

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Even though the robust sales growth marks that have come to characterize no-moat Church & Dwight’s business over the past several quarters persisted at the start of fiscal 2021 (up 4.9% on an organic basis), we surmise nontrivial headwinds are on the horizon. For one, commodity cost inflation is poised to build. In the quarter, increased distribution, manufacturing, and COVID-19-related costs constrained gross margins to the tune of 360 basis points (partially offset by higher volumes, stepped up pricing, and productivity savings), leading to a 120-basis-point downdraft in the metric to 44.5%.

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Company Profile

Business Description

Church & Dwight is the leading producer of baking soda in the world. Beyond baking soda, the products in its portfolio have vast category reach, including laundry products, cat litter, oral care, deodorant, and nasal care, which are all sold under the Arm & Hammer brand umbrella. Its mix also includes Xtra, Trojan, OxiClean, First Response, Nair, L’il Critters/Vitafusion, Orajel, and Water Pik, which together with Arm & Hammer constitute more than 80% of its annual sales and profits. In early 2019, the firm announced the addition of Flawless, which manufactures electric shaving products for women. The firm acquired Zicam at the end of 2020, a leading brand in the cough/cold shortening category. Church & Dwight derives about 85% of its sales from its home turf.

Contact
500 Charles Ewing Boulevard
Ewing, NJ, 08628
T +1 609 806-1200
Sector Consumer Defensive
Industry Household & Personal Products
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2019
Stock Type Aggressive Growth
Employees 5,100

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