Zoom Stock – Church & Dwight (CHD) Gains on Pandemic-Led Rise in Demand
Household and personal care products companies such as Church & Dwight Co., Inc. CHD have been gaining from consumers’ increased preference for essential items as well as hygiene and wellness needs amid the coronavirus pandemic. Markedly, strong demand conditions across several product categories coupled with a robust brand image and impressive online sales have been fueling Church & Dwight’s growth. Let’s take a closer look.
Coronavirus-Led Demand is a Boon
Church & Dwight is gaining from strong brand consumption. This was well exemplified in the company’s fourth-quarter 2020 performance, with the top line increasing year over year. Incidentally, the company saw double-digit consumption gains in several domestic categories, particularly in gummy vitamins, pregnancy test kits and baking soda. Also, water flossers witnessed consumption growth during the fourth quarter. The company’s international business has continued to remain strong, backed by broad-based consumption increases across several countries and brands, despite pandemic-led hurdles.
The company expects 2021 to be another solid year, wherein it anticipates a number of categories to continue seeing high consumption. Gummy vitamins have been seeing increased household penetration and management is on track to supplement its manufacturing capacity with third-party assistance to cater to rising demand in this category. Further, the company anticipates a modest improvement in the laundry category. Encouraged with the trends so far, the company provided an optimistic view for 2021. It anticipates sales growth of 4.5% in 2021 and nearly 3% in the first quarter. Moreover, adjusted earnings per share are envisioned to grow 6-8% in 2021, on higher operating income.
Strong Online Sales
Church & Dwight’s e-commerce sales have been rising on the back of consumers’ accelerated online shopping preferences. In 2020, the company’s e-commerce sales surged 60%. Online sales (as a percentage of total sales) contributed 14% to total sales in the fourth quarter, and 13% to full-year 2020 sales compared with 8% to full-year 2019 sales. Going ahead, the company is likely to keep gaining from growing demand for its products in the online realm.
Efforts to Boost Portfolio Bodes Well
Acquisitions have played an important role in boosting Church & Dwight’s portfolio as well as market share. Markedly, the buyout of FLAWLESS and Waterpik have been yielding. Impressively, the company has doubled the Waterpik business in the last three years. Moving on, sales in the FLAWLESS brand contributed to the company’s Consumer International segment results in the fourth quarter of 2020. The brand is poised to keep gaining from the introduction of fresh products, increased boost from influencers and footfall revival. Also, the brand’s spa at home products among others is likely to be a driver, as at-home grooming trends are likely to remain high amid the pandemic. Another noteworthy acquisition of the company includes Batiste. In December 2020, the company took over Matrixx Initiatives, which owns the ZICAM brand. Additionally, the company’s regular innovations help in improving brand positions. Markedly, it has come up with innovative products under banner such as VITAFUSION and OXICLEAN.
We expect Church & Dwight’s strong brand position along with expectations of continued favorable market trends to remain as key growth catalysts. In fact, such upsides are likely to help the company cushion the adversities emerging out of rising costs associated with the pandemic as well as high tariffs.
Shares of this Zacks Rank #3 (Hold) company have increased 3.3% in the past three months compared with the industry’s decline of 13%.
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