Q1 2024 Church & Dwight Co Inc Earnings Call
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Operator: Good morning, ladies and gentlemen, and welcome to Church & Dwight's first quarter 2024 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 are described in detail in the company's SEC filing. I'd now like to introduce your host for today's call, Mr. Matt Farrell, Chairman, President, and Chief Executive Officer of Church & Dwight. Please go ahead, sir.
Speaker Change: Good morning, ladies and gentlemen, and welcome to Church <unk> Dwight first quarter 2024 earnings Conference call.
Operator: Before we begin I've 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.
Operator: I'd now like to introduce your host for today's call Mr. Matt Farrell, Chairman, President and Chief Executive Officer of Church <unk> Dwight. Please go ahead Sir.
Matthew Thomas Farrell: Good morning, everyone. Thanks for joining us today. I'll begin with a review of the Q1 results, and then I'll turn the call over to Rick Dierker, our CFO. And when Rick is done, we'll open the call up for questions.
Matthew Thomas Farrell: Good morning, everyone.
Matthew Thomas Farrell: Thanks for joining us today I'll begin with a review of the Q1 results and then I'll turn the call over to Rick Dierker, our CFO and when Rick is done we'll open the call up for questions Q1 was another solid quarter for church <unk> Dwight.
Matthew Thomas Farrell: Q1 was another solid quarter for Church & Dwight. Reported sales growth was 5.1%, beating our outlook of 4% thanks to stronger results across the board from domestic, international, and specialty products. Organic sales grew 5.2%, which exceeded our 4% Q1 outlook with volume accounting for a very healthy 70% of our growth. Gross margin expanded 220 basis points at the same time we increased marketing spending in the quarter and gained market share in a majority of our categories. Adjusted EPS was $0.96, which is $0.11 higher than our $0.85 forecast.
Matthew Thomas Farrell: Reported sales growth was five 1%, beating our outlook of 4% thanks to stronger results across the board from domestic international and specialty products.
Matthew Thomas Farrell: Panic sales grew five 2%, which exceeded our 4% Q1 outlook with volume accounting for a very healthy 70% of our growth.
Matthew Thomas Farrell: Gross margin expanded 220 basis points at the same time, we increased marketing spending in the quarter and gained market share in a majority of our categories.
Matthew Thomas Farrell: Adjusted EPS was <unk> 96 cents, which is 11 cents higher than our 85 cent outlook. The results were driven by higher than expected sales growth gross margin expansion and a lower tax rate.
Matthew Thomas Farrell: The results were driven by higher-than-expected sales growth, gross margin expansion, and a lower tax rate. We continue to grow in the online class of trade, with online sales as a percentage of global sales now reaching 20.5%. In March, we signed a definitive agreement to acquire Grafico, our Japanese distributor, for approximately $35 million. We expect the acquisition to close later this year. Graphico's annual sales are approximately $38 million. The business is based in Tokyo and has 59 employees.
Matthew Thomas Farrell: We continue to grow in the online class of trade with online sales as a percentage of global sales now reaching 25%.
Matthew Thomas Farrell: In March we signed a definitive agreement to acquire a graphical our Japanese distributor for approximately 35 million Bucks.
Matthew Thomas Farrell: We expect the acquisition to close later this year.
Matthew Thomas Farrell: Graphic <unk> annual sales are approximately $38 million the businesses based in Tokyo and has 59 employees. Since 2008 graphical has partnered with church and Dwight and driven oxiclean to be the number one powder prewash additive in Japan.
Matthew Thomas Farrell: Since 2008, Graphico has partnered with Church & Dwight and Driven OxyClean to be the number one powder pre-wash additive in Japan. The acquisition is expected to contribute to a greater expansion of Graphico's business in Japan and the greater APAC region. We intend to leverage the capabilities of the Grafico team to bring additional Church & Dwight brands to Japanese consumers. Now, I'm going to turn my comments to each of the three businesses. First up is the U.S.
Matthew Thomas Farrell: The acquisition is expected to contribute to greater expansion of our business in Japan, and the greater APAC region, we intend to leverage the capabilities of the graphical team to bring additional church and Dwight brands to Japanese consumers.
Matthew Thomas Farrell: Now I'm going to turn my comments to each of the three businesses first up is the U S. The U S. Consumer business had four 3% organic sales growth of three 3% of that was volume driven and making this the third consecutive quarter of U S volume growth five of our seven power brands gained market share in the quarter.
Matthew Thomas Farrell: The U.S. consumer business had 4.3% organic sales growth, and 3.3% of that was volume-driven, making this the third consecutive quarter of U.S. volume growth. Five of our seven power brands gained market share in the quarter, and private label market share in our categories remained relatively stable. Now let's look at a few important categories in the U.S., starting with laundry. Arm & Hammer liquid laundry detergent consumption was flat, while the category grew 2%. Many of you may recall we pulled back on promotional activity in Q4, and that continued into early Q1.
Matthew Thomas Farrell: And private label market share in our categories remained relatively stable now, let's look at a few important categories in the U S starting with laundry.
Matthew Thomas Farrell: As our promotional activity normalized, Arm & Hammer Liquid Laundry saw share gains late in the quarter, and the brand has continued to perform well in April. Now, elsewhere in laundry, Arm & Hammer Unit Dose and Arm & Hammer Scent Boosters both grew faster than their categories and grew share in the quarter. Our Extra Liquid Laundry brand, which is our extreme value offering, grew consumption 6.3% and increased market share to 3.8%. Regarding new products, we have launched two new products into the detergent category.
Matthew Thomas Farrell: Arm <unk> hammer liquid laundry detergent consumption was flat while the category grew 2% Manny.
Matthew Thomas Farrell: Many of you may recall, we had pulled back on promotional activity in Q4 and that continued into early Q1 as our promotional activity normalized arm <unk> hammer liquid laundry saw share gains late in the quarter and the brand has continued to perform well in April now elsewhere in laundry arm <unk> Hammer unit dose and arm.
Matthew Thomas Farrell: <unk> Hammer scent boosters, both grew faster than their categories and grew share in the quarter, our xtra liquid laundry brand, which is our extreme value offering grew consumption six 3% and increased market share to three 8%.
Matthew Thomas Farrell: Arm & Hammer Deep Clean and Arm & Hammer Power Sheets. The first, Arm & Hammer Deep Clean, is our most premium laundry detergent, entering the mid-tier of liquid laundry and delivering a superior clean at a price consumers can afford. The second new product is Arm & Hammer Power Sheets Laundry Detergent, which was launched online in August of 2023. Arm & Hammer was the first major brand to offer this new unit dose form in the U.S. Now, due to its online success, PowerSheets is now available in select brick-and-mortar retailers. PowerSheets continues to grow online. It now has 9,000 reviews with a 4.5 rating.
Matthew Thomas Farrell: Regarding new products, we have launched two new products into the detergent category.
Matthew Thomas Farrell: Arm <unk> hammer deep clean and arm <unk> Hammer power shifts the first arm <unk> Hammer deep clean is our most premium arm <unk> hammer laundry detergent entering the mid tier of liquid laundry and delivering a superior clean at a price consumers can afford.
Matthew Thomas Farrell: The second new product is arm <unk> hammer power sheets, laundry detergent, which is launched which was launched online in August of 2023.
Matthew Thomas Farrell: Arm <unk> Hammer was the first major brand to offer this new unit dose form in the U S. Now due to its online success power sheets is now available in select brick and mortar retailers parachutes continues to grow online and now has 9000 reviews with a $4 five rating and both deep clean and parachutes.
Matthew Thomas Farrell: And both DeepClean and PowerSheets are off to a great start in 2024, and we're excited about the early results we're seeing. Now, over in Litter. Arm & Hammer Litter grew consumption 5% in Q1, which was in line with category growth. Our new lightweight Arm & Hammer Hardball Clumping Litter is now expanding nationally after a successful in-market test in 2023. We expect this new litter to help Arm & Hammer capture a greater share of the lightweight litter category. Let me give you a couple of facts.
Matthew Thomas Farrell: We're off to a great start in 2024, and we're excited about the early results we're seeing.
Matthew Thomas Farrell: Now over in litter arm <unk> Hammer litter grew consumption, 5% in Q1, which was in line with category growth, our new lightweight arm <unk> Hammer Hardball clumping litter is now expanding nationally after a successful end market test in 2023.
Matthew Thomas Farrell: We expect this new leader to help arm <unk> hammer capture a greater share of the lightweight litter category does it give you a couple of facts here lightweight.
Matthew Thomas Farrell: Lightweight litter today accounts for 16% of the clumping litter category. Our share of lightweight clumping litter has grown from 4% to 6% since year-end 2023, but that compares to our 29% share in regular weight litter, so we still have a long way to go. Turning to personal care, Batiste continues to see strong consumption growth, with consumption up 19% in Q1, growing its share to 47.5%. Batiste continues to be the global leader in dry shampoo. We are meeting consumers' desire for long-lasting results with the launch of Batiste Sweat Activated and Batiste Touch Activated dry shampoos. And so far, consumers are posting excellent reviews for both of these new innovations.
Matthew Thomas Farrell: Lightweight litter today accounts for 16% of the clumping litter category, our share of lightweight clumping litter has grown from 4% to 6% since our year end 2023, but that compares to our 29% share and regular weight litter. So still a long way to go.
Matthew Thomas Farrell: Turning to personal care Batiste continues to see strong consumption growth with consumption up 19% in Q1.
Matthew Thomas Farrell: Growing share to 47, 5%.
Matthew Thomas Farrell: <unk> continues to be the global leader in dry shampoo, where.
Matthew Thomas Farrell: Meeting consumers' desire for long lasting results with the launch of Batiste sweat activated and batiste touch activated dry shampoos and so far consumers are posting excellent reviews for both of these new innovations.
Matthew Thomas Farrell: Now mouthwash. TheraBreath mouthwash and Hero continue to perform extremely well. TheraBreath is the number one alcohol-free mouthwash brand and is now the number three brand in total mouthwash with a 16% share. TheraBreath recently entered the antiseptic segment of the category with the launch of TheraBreath Deep Clean Oral Rinse, which represents 30% of the category.
Matthew Thomas Farrell: Now our mouthwash their breath mouthwash and hero continued to perform extremely well thorough breath as the number one alcohol free mouth mouthwash brand and is now the number three brand in total mouthwash with a 16% share.
Matthew Thomas Farrell: <unk> recently entered the antiseptic segment of the category with the launch of Thoroughbred deep clean oral rents.
Matthew Thomas Farrell: Which represents 30% of the category here.
Matthew Thomas Farrell: Hero continues to drive the majority of growth in the acne category and has grown to become the number one brand in the larger acne category with 19% share. Hero continues to launch innovative solutions and patches combined with adjacent consumer needs, such as the recently launched Dissolve Away daily cleansing balm. Now there are two businesses, Gummy Vitamins and Waterpik, that created a drag on Total Company Organic Growth in Q1. First, Waterpik.
Matthew Thomas Farrell: <unk> continues to drive the majority of growth in the acne category has grown to become the number one brand in the larger acne category with 19% share.
Matthew Thomas Farrell: <unk> continues to launch innovative solutions and patches combined with adjacent consumer needs such as.
Matthew Thomas Farrell: The recently launched dissolve away daily cleansing bomb.
Matthew Thomas Farrell: Now there are two businesses gummy vitamins awarded pick that created a drag on total company organic growth in Q1.
Matthew Thomas Farrell: The good news for Waterpik is that consumption for our water flossing business is healthy. However, flosser shipments were affected by retailer inventory adjustments in the first quarter. This, combined with lower showerhead consumption, accounted for a 1% negative drag on organic revenue. But we expect this to be, The second is gummies, which also created a 1% drag.
Matthew Thomas Farrell: First waterpick the good news for water Pik as consumption for our waterflood or business is healthy however, flush as shipments were affected by retailer inventory adjustments in the first quarter. This combined with lower showerhead consumption accounted for a 1% negative drag on organic revenue growth.
Matthew Thomas Farrell: While we expect this to be transient the second is gummies, which will also create a 1% drag.
Matthew Thomas Farrell: The Gummy Vitamin category declined 5% in Q1, which was actually worse than our expectations for the category, and our consumption was even greater, down 12%. We continue to move forward with our plan to stabilize our vitamin business through changes to packaging, messaging, and greater market investments that we've talked about with you in the past. I will close my comments on the U.S. by saying that overcoming the drag from these businesses and still posting 5% organic sales growth for the overall company just illuminates the strength of our portfolio.
Matthew Thomas Farrell: The gummy vitamin category declined 5% in Q1, which was actually worse than our expectations for the category and our consumption was down even greater down 12%.
Matthew Thomas Farrell: We continue to move forward with our plans to stabilize our vitamin business through changes to packaging messaging and greater marketing investments that we've talked about with you in the past.
Matthew Thomas Farrell: I will close my comments on the U S by saying that overcoming the drag from these businesses still and still posting a 5% organic sales growth for total company just illuminates the strength of our portfolio.
Matthew Thomas Farrell: Turning now to international and specialty products, our international business delivered organic growth of 8.8% in Q1. This was driven by strong growth in the subsidiaries, just a few call-outs, especially Mexico, Germany, the UK, and France, and also growth from our global markets group. And finally, specialty products. Specialty products organic sales increased 7.2%, primarily due to record sales in our Eurasia business as SPD continues to expand globally. I want to wrap up my remarks by reiterating that the company is performing well in all three divisions, delivering strong growth, and I want to thank our global employees for their great efforts each and every day.
Matthew Thomas Farrell: Turning now to international and specialty products, our international business delivered organic growth of eight 8% in Q1. This was driven by strong growth in our subsidiaries just a few call outs.
Matthew Thomas Farrell: Specialty, Mexico, Germany, UK, and France, and we also have growth from our global markets group, and finally specialty products, especially products organic sales increased seven 2% primarily due to record sales in our Eurasia business as SPD continues to expand globally.
Matthew Thomas Farrell: I want to wrap up my remarks by reiterating that the company is performing well with all three divisions delivering strong growth and want to thank our global employees for their great efforts each and every day now we rarely raise our full year outlook after only one quarter, but given our fast start we raised our outlook for gross margin and EPS grow.
Matthew Thomas Farrell: Now, we rarely raise our full-year outlook after only one quarter, but given our fast start, we raised our outlook for gross margin and EPS growth, and we have confidence in our new full-year forecast. Now, I'm going to turn it over to Rick to give you some more color on the quarter.
Matthew Thomas Farrell: And we have confidence in our new full year forecast and now I'm going to turn it over to Rick to give you some more color on the quarter.
Richard A. Dierker: Thank you, Matt, and good morning everybody. First quarter adjusted EPS was $0.96, up 12.9% from the prior year. The $0.96 was better than our $0.85 outlook, primarily driven by higher than expected sales growth, gross margin expansion, and a lower tax rate. Reported revenue was up 5.1%, and organic sales were up 5.2%. Organic sales were driven by volume of 3.7% and positive product mix and pricing of 1.5%.
Rick: Thank you, Matt and good morning, everybody, we'll start with EPS first quarter. Adjusted EPS was <unk> 96 up 12, 9% from the prior year. The 96 cents was better than our <unk> 85 cent outlook, primarily driven from higher than expected sales growth gross margin expansion and a lower tax rate.
Richard A. Dierker: Revenue was up five 1% and organic sales were up five 2% organic sales were driven by volume of three 7% and positive product mix and pricing of one 5% seven.
Richard A. Dierker: 70% of our organic growth was volume-driven, and as Matt mentioned earlier, this makes three consecutive quarters of U.S. volume growth. Our first quarter gross margin was 45.7%, a 220 basis point increase from a year ago, primarily due to productivity, volume, mix, and pricing, net of the impact of higher manufacturing costs. Let me walk you through the Q1 Brit. Gross margin was made up of the following, a positive 130 basis points impact from price volume mix, and a positive 130 basis points from productivity. This was partially offset by 10 basis points from currency and 30 basis points from inflation. Moving to marketing,
Richard A. Dierker: 70% of our organic growth was volume driven and as Matt mentioned earlier. This next three consecutive quarters of U S volume growth.
Richard A. Dierker: Our first quarter gross margin was 45, 7%, a 220 basis point increase from year ago, primarily due to productivity volume mix and pricing net of the impact of higher manufacturing costs. Let me walk you through the Q1 bridge gross margin was made up of the following positive 130 basis points impact from <unk>.
Richard A. Dierker: Volume mix and a positive 130 basis points from productivity. This was partially offset by 10 basis points from currency and 30 basis points from inflation.
Richard A. Dierker: Marketing was up 29.7 million year over year. Marketing expense as a percentage of net sales was 10.1%, or 150 basis points higher than Q1 of last year, and led to share gains. For SG&A, Q1 Adjusted SG&A increased 80 basis points year-over-year. Other expenses all in was $20.9 million, a $2.2 million decrease primarily due to lower outstanding debt and higher interest income.
Richard A. Dierker: Moving to marketing marketing was up $29 $7 million year over year marketing expense as a percentage of net sales was 10, 1% or 150 basis points higher than Q1 of last year and led to share gains.
Richard A. Dierker: For SG&A Q1, adjusted SG&A increased 80 basis points year over year.
Richard A. Dierker: Other expense all in was $20 9 million, a $2 $2 million decreased primarily due to lower <unk>.
Richard A. Dierker: We now expect other expense for 2024 to be approximately $80 million for Income Tax. Our effective rate for the quarter was 19.9% compared to 24.4% in 2023, a decrease of 450 basis points due to a high level of stock option exercise in Q1 of 2024. We continue to expect the full-year rate to be approximately 23%. And now to cash.
Richard A. Dierker: Outstanding debt and higher interest income, we now expect other expense for 2024 to be approximately $80 million.
Richard A. Dierker: Our income tax.
Richard A. Dierker: Our effective rate for the quarter was 19, 9% compared to $24. Four in 2023, a decrease of 450 basis points due to a high level of stock option exercises in Q1 of 2024, we continue to.
Richard A. Dierker: We expect the full year rate to be approximately 23%.
Richard A. Dierker: For the first three months of 2024, cash from operating activities increased to $263 million, a decrease of $10.1 million with higher cash earnings offset by higher working capital. We now expect full-year cash flow from operations to be approximately $1.5 billion. Slightly from our previous 1 billion, capital expenditures for the first three months were $46.3 million, a $21 million increase from the prior year as capacity expansion projects proceed as planned. We expect 2024 CapEx of approximately $180 million as we complete the major capacity investments that were initiated in 2023, and we expect capital spending to return to historical levels of 2% of sales in 2025.
Richard A. Dierker: And that of cash for the first three months of 2024 cash from operating activities increased to $263 million a decrease of $10 1 million with higher cash earnings offset by higher working capital. We now expect full year cash flow from operations to be approximately $1 50.
Richard A. Dierker: Up slightly from our previous 1 billion outlook capital expenditures for the first three months were $46 3 million a $21 million increase from the prior year as capacity expansion projects proceed as planned we expect 'twenty 'twenty four capex of approximately $180 million as we complete the major capacity investments that were initiated.
Richard A. Dierker: In 2023, and we expect capital spending to return to historical levels of 2% of sales in 2025.
Richard A. Dierker: And now for the full year outlook. We continue to expect the full year 2024 organic sales growth to be approximately four to 5%. We now expect full-year EPS in the range of eight to 9%. This is up from our previous 7-9% and is inclusive of costs related to the exit of a Megalac business as well as Grafico transaction costs. We now expect full year gross margin to expand approximately 75 basis points, up from the previous range of 50 to 75.
Richard A. Dierker: And now for the full year outlook, we continue to expect the full year 2024 reported and organic sales growth to be approximately 4% to 5%.
Richard A. Dierker: Now expect full year EPS in the range of 8% to 9%.
Richard A. Dierker: Growth. This is up from our previous 79% and is inclusive of costs related to the exit of the <unk> business as well as graphics out transaction costs.
Richard A. Dierker: Now expect full year gross margin to expand approximately 75 basis points up from previous range of 50 to 75 basis points given our outstanding Q1 margin expansion of 220 bps. This outlook implies moderate gross margin expansion for the remainder of the year.
Richard A. Dierker: Given our outstanding Q1 margin expansion of 220 bps, this outlook implies moderate gross margin expansion for the remainder of the year. We continue to expect an increase in manufacturing costs to be more than offset through productivity, mix, higher volume, and carryover of product prices. We continue to expect marketing as a percentage of net sales to be approximately 11%.
Richard A. Dierker: We continue to expect an increase in manufacturing cost to be more than offset through productivity mix higher volume and carryover product pricing.
Richard A. Dierker: We continue to expect marketing as a percentage of net sales to be approximately 11%.
Richard A. Dierker: SG&A is now expected to be flat as a percentage of net sales compared to 2023, reflecting the investments we're making in international e-commerce infrastructure and costs related to the Grafico acquisition Matt discussed earlier. For Q2, we have a strong outlook and expect reported sales growth of approximately 3.5%, and organic sales growth of approximately 4%. We had a really strong April from a consumption perspective, so some might be expecting a higher organic growth outlook.
Richard A. Dierker: SG&A is now expected to be flat as a percentage of net sales compared to 2023, reflecting the investments we are making their international e-commerce infrastructure and costs related to the graphical acquisition, Matt discussed earlier.
Richard A. Dierker: For Q2, we have a strong outlook and expect reported sales growth of approximately three 5% organic sales growth of approximately 4%.
Richard A. Dierker: Our 4% outlook reflects higher coupons and trade promotion in support of new products, we're fully lapping 2023 price increases, and we're lapping a year ago distribution gains for heroes. Moving on to the rest of the P&L, we expect moderate gross margin expansion in the quarter in Q2 as we have less of an impact from carryover prices. Increased marketing spending support or innovation pipeline, higher SG&A expense, and a significantly higher tax rate of 24% compared to the prior year of 17.9, which benefited from a high level of stock option exercise.
Richard A. Dierker: We had a really strong April from a consumption perspective, so some might be expected a higher organic growth outlook, our 4% outlook reflects higher coupons and trade promotion and support of new products for fully lapping 2023 price increases more lapping a year ago distribution gains for hero.
Richard A. Dierker: Moving on to the rest of the P&L, we expect moderate gross margin expansion in the quarter and Q2 as we have less of an impact from carryover pricing increased marketing spending to support our innovation pipeline higher SG&A expense and a significantly higher tax rate of 24% compared to the prior year of $17 nine which benefited from a high level of stock option.
Richard A. Dierker: This represents a roughly 7 cent drag on EPS. As a result, we expect adjusted EPS of 83 cents per share, down 10% versus last year's adjusted Q2 EPS. And with that, Matt and I would be happy to take any questions.
Richard A. Dierker: Sizes.
Richard A. Dierker: This represents a roughly <unk> <unk> drag on EPS.
Richard A. Dierker: As a result, we expect adjusted EPS of <unk> 83 per share down 10% versus last year, adjusted Q2, EPS and with that Matt and I will be happy to take any questions.
Operator: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question. And we'll take our first question today from Chris Carey with Wells Fargo Security.
Speaker Change: Thank you at this time, if you'd like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star two.
Christopher Michael Carey: Again that is star one to ask a question.
Operator: And we'll take our first question today from Chris Great, Chris Carey with Wells Fargo Securities.
Christopher Michael Carey: Hi, good morning, everyone. Just regarding the queue for Outlook for organic sales to be below the,
Christopher Michael Carey: Hi, Good morning, everyone, Hey, Chris.
Christopher Michael Carey: Just regarding the <unk>.
Christopher Michael Carey: Q4 outlook.
Christopher Michael Carey: Or organic sales to be below.
Christopher Michael Carey: Sure.
Christopher Michael Carey: The run rate that we're seeing in scanner trends, Rick you mentioned.
Christopher Michael Carey: Yes.
Christopher Michael Carey: Trade promotion lapping of euro or excuse me I think that their breath.
Christopher Michael Carey: Distribution gains if you could confirm that.
Christopher Michael Carey: How would you contextualize the drivers of those two items.
Christopher Michael Carey: For the organic sales outlook in Q2 being below what we could see and they can come to the trends of that.
Matthew Thomas Farrell: Thanks for the question, Chris. You're right.
Christopher Michael Carey: Sure.
Christopher Michael Carey: Yeah. Thanks for the question Chris.
Matthew Thomas Farrell: April was around six 5% consumption growth really really strong and we said three three things really driving a lower organic outlook of around 4% which is.
Matthew Thomas Farrell: April was around 6.5% consumption growth, really, really strong, and we said three things really drove a lower organic outlook of around 4%, which, in the grand scheme, lapping a year ago on distribution gains as we went national for Hero was probably the biggest one. And then, number two, not getting any contribution from pricing, we've fully lapped 2023 pricing actions by, you know, as we enter into Q2. And then the third one would be higher coupons for and Trade for supporting our new products because this is one of our best years.
Christopher Michael Carey: Probably in the Grand scheme hero lapping year ago distribution gains as we went national for hero was probably.
Matthew Thomas Farrell: The biggest one and then number two not getting any contribution from pricing we've fully lapped 2023 pricing actions by as we enter into Q2 and then the third one would be higher coupons for.
Matthew Thomas Farrell: And trade for supporting our new products. Because this is one of our best years of innovation.
Christopher Michael Carey: Okay, that's helpful. The second thing would just be, you know, we're seeing an improvement sequentially in laundry volumes. Obviously, there's been some noise in this category with compaction and stepped-up promotional activity in the year ago base. How would you, you know, characterize your expectation for laundry sequentially from here? Clearly, we're seeing improvement as those laps normalize. Would you expect to continue to see that improvement going forward? And do you just have any expectation for how volumes might shape up in laundry specifically over the next couple of quarters? And, if I could sneak in, are you starting to see any competitive activity in your litter business, which is what we're hearing from one of your competitors? Thanks.
Matthew Thomas Farrell: Okay.
Speaker Change: That's helpful. The second thing would just be.
Christopher Michael Carey: We're seeing an improvement sequentially in laundry volumes, obviously theres been some noise in this category with compaction with stepped up promotional activity in the year ago base, how would you.
Christopher Michael Carey: Characterize your expectation for laundry sequentially from here clearly, we're seeing the improvement as those lapsed normalized would you expect to continue to see that improvement going forward.
Christopher Michael Carey: You just have any expectation for how volumes might shape up in laundry specifically over the next couple of quarters, then if I could sneak in are you starting to see any.
Christopher Michael Carey: <unk> activity at your Youre litter business, which is what we're hearing from one of your competitors. Thanks.
Matthew Thomas Farrell: Yeah, you've got a lot of questions there, Chris. I promise that. Yeah. So if you look at the laundry category, you've got a lot going on. They've got liquid laundry, you got unit doses, you got scent boosters. So if you look at the categories, the last three quarters for each of those liquid laundry categories, there's sort of decelerated year-over-year growth in Q3, Q4, Q1, it's like up 5, up 2, up 2. And so it has decelerated.
Speaker Change: Yeah, you've got a lot of questions there.
Matthew Thomas Farrell: Chris.
Matthew Thomas Farrell: Okay.
Matthew Thomas Farrell: Yes, so if you look at.
Matthew Thomas Farrell: Laundry category <unk> got a lot going on to get liquid laundry, you've got unit dose.
Matthew Thomas Farrell: You got the scent boosters. So if you look at the categories. So last three quarters for each of those.
Matthew Thomas Farrell: Liquid laundry has sort of accelerated year over year growth Q3, Q4, Q1, it's like up five up to up to.
Matthew Thomas Farrell: And so so it has decelerated.
Matthew Thomas Farrell: The reason we feel good about where we stand right now is we know we lost some share early in the quarter. Then we normalized the trade spend. And then we're gonna have even more couponing and trade going forward. Why?
Matthew Thomas Farrell: And we feel good about where we stand right now as we know we lost some share in the early in the quarter.
Matthew Thomas Farrell: When we normalize the trade spend and then we're going to have even more couponing and trade.
Matthew Thomas Farrell: Going forward why because we get deep clean.
Matthew Thomas Farrell: Because we've got Deep Clean that we've launched nationally. So, and we think that, you know, we make that stick in the high, mid-tier, and that could provide years of growth for us. So, I think the horse to ride this year in laundry is gonna be Deep Clean.
Matthew Thomas Farrell: We've we've launched nationally so and we think that we make that stick.
Matthew Thomas Farrell: In high mid tier.
Matthew Thomas Farrell: That could provide years of growth for us so.
Matthew Thomas Farrell: I think the horse to ride this year.
Matthew Thomas Farrell: <unk> is going to be it's going to be deep clean.
Matthew Thomas Farrell: As far as unit dose and SIN boosters go, you know, unit dose has decelerated as well. Last three quarters, eight, five, three. But we, you know, our unit dose grew 34% in the quarter. So, we had a lot of success, a lot of trade going on there. And then SIN boosters, which is a very discretionary category.
Matthew Thomas Farrell: As far as unit dose and simply through Cisco.
Matthew Thomas Farrell: Unit dose that's decelerated as well last three quarters 85 three.
Matthew Thomas Farrell: Our unit Trust grew 34%.
Matthew Thomas Farrell: In the quarter. So we had a lot of success on trade down going on there.
Matthew Thomas Farrell: And then scent boosters, which is a very discretionary category last three quarters is 211.
Matthew Thomas Farrell: You know, the last three quarters were two, one, one. As far as annual growth, we grew 7% because we are a value in that category. So we are in a good position, both in unit dose and in boosters. So when you talk about how promotional things are right now, Liquid Laundry, if you went to Q4 versus Q1. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com, So we would still say that if you go back to pre-COVID times, if you went back to say 2018, it's about a 40% sold on deal.
Matthew Thomas Farrell: The year over year growth and we grew 7% because we're a value in that category. So we're in a good position both in unit dose and at some posters.
Matthew Thomas Farrell: And when you talk about.
Matthew Thomas Farrell: About the.
Matthew Thomas Farrell: Promotional things are right now.
Matthew Thomas Farrell: Liquid laundry, if you went through Q4 versus Q1.
Matthew Thomas Farrell: That 70 bps or was it just isn't measured channels of course, where she can't see coupons as well feel good IRI or Nielsen, but.
Matthew Thomas Farrell: Those are the sold on deal went from 33, 2% to 33, 9% sequentially.
Matthew Thomas Farrell: You wouldn't say well, that's not that big a move but year over year Q1 to Q1, it's up 180 bps.
Matthew Thomas Farrell: We would still say that if you go back to pre pre Covid times. If you went back to say 2018.
Matthew Thomas Farrell: At a 40% sold on deal. So we're a long way from being where we where we're used to be but I would say trend wise you draw a trend line you'd said it is inching up.
Matthew Thomas Farrell: So we're a long way from being where we used to be, but I'd say trend-wise, if you drew a trend line, you'd say that it is inching up over the last... 6 to 8 quarters.
Matthew Thomas Farrell: Over the last.
Matthew Thomas Farrell: Six to eight quarters.
Matthew Thomas Farrell: You mentioned litter as well.
Matthew Thomas Farrell: Litter same sold on deal in Q1, as Q4 was $15 three but still up year over year, 40 bps, but a long way from where it was.
Matthew Thomas Farrell: Went back years ago, if you were more around 20% so but it is obviously we had one competitor that was out of stock for a while so you'll need to I suspect promoting to win back went back share but.
Matthew Thomas Farrell: Okay.
Matthew Thomas Farrell: The horse we're right in there as.
Matthew Thomas Farrell: As a hardball.
Matthew Thomas Farrell: We got a lot of opportunity.
Matthew Thomas Farrell: And the lightweight litter category. So that's.
Speaker Change: A long question. So it's kind of a long answer, but I hit most of the points Chris.
Christopher Michael Carey: That's perfect. I will cede the floor. Thank you very much.
Speaker Change: That's perfect I will I will.
Speaker Change: I'll cede the floor. Thank you very much okay. Senator thank you.
Christopher Michael Carey: Yes.
Operator: Our next question will come from Rupesh Parikh on Oppenheimer.
Christopher Michael Carey: Our next question will come from <unk> <unk> with Oppenheimer.
Rupesh Dhinoj Parikh: Good morning and thanks for taking my question. Also, congrats on a nice quarter. So just going back to the vitamin category, just curious what continues to weigh in the category and then how should we think about expectations for the balance of the year versus, I guess, the double-digit consumption decline we just saw.
Rupesh Dhinoj Parikh: Good morning, and thanks for taking my question also congrats on a nice quarter. So just going back to the vitamin category. Just curious what continues to weigh on the category and then how should we think about expectations for the balance of the year versus I guess, a double digit consumption decline. We just saw in Q1.
Matthew Thomas Farrell: Yeah, well, if you look at the category, Q4 and Q1, just round numbers, are both down 5%. You know, down five, down five, and normally, you would expect, because of New Year's Resolutions and people wanting to get healthy, that would be a boost to the category. I didn't see it.
Rupesh Dhinoj Parikh: Well, if you look at it feels that the category.
Matthew Thomas Farrell: Q4, and Q1, just round numbers are both down 5%.
Matthew Thomas Farrell: Down five down five and normally you would expect.
Matthew Thomas Farrell: These resolutions and people wanted to get healthy.
Matthew Thomas Farrell: Would be a boost to the category I didn't see it in Q1 so.
Matthew Thomas Farrell: Q1. So I, there's two things. It's still probably the tail from, you know, post COVID. But also, you could also argue that for many people, it's discretionary.
Matthew Thomas Farrell: It was two things is still is probably the tail from post COVID-19, but also you could also argue that for many people. It's the discretionary. So so the third thing, though is people moving from gummies to other forms and that is.
Matthew Thomas Farrell: Powders and also things like <unk> and we're launching <unk>.
Matthew Thomas Farrell: So, the third thing, though, is that people are moving from gummies to other forms, and that is powders and also things like chewables. And we're launching a chewable this year, so we could do some of that shift to other forms. But I would say those are the dynamics that we're looking at. As far as our performance, yeah, we had double-digit declines in Q4 and Q1, so obviously, I'm not happy about that.
Matthew Thomas Farrell: <unk> this year so.
Matthew Thomas Farrell: See some of that shift to other forms.
Matthew Thomas Farrell: But I would say those are those are the dynamics that we're looking at as far as our performance. Yeah. We've had double digit decline in Q4 and Q1. So obviously not happy about that takes a while to turn that around.
Matthew Thomas Farrell: It takes a while to turn that around, but you probably are starting to see new packaging in stores, not only new packaging but higher marketing spend as well. We are seeing signs of retailer support with respect to shelf placement and facings, pre- and post-resets. So we hope that this is the year we're going to stabilize. We're really hoping that in the second half of this year, this business will inflect and start to grow. We were down in Q4 and Q1, as I said.
Matthew Thomas Farrell: We are starting to see new packaging and in store.
Matthew Thomas Farrell: No new packaging, but higher marketing spend as well we are seeing signs of retailer support with respect to the shelf placement and.
Matthew Thomas Farrell: And facings.
Matthew Thomas Farrell: And post reset so.
Matthew Thomas Farrell: We hope that this is the year, we're going to stabilize.
Matthew Thomas Farrell: We're really hoping that in the second half of this year that this business will inflect and start to grow but.
Matthew Thomas Farrell: We've been down Q Q4, and Q1 as I said.
Rupesh Dhinoj Parikh: Unknown Speaker Right, and then maybe just one quick follow-up for Rick. So you guys raised the bottom line but still kept the same top line guide, even you know, with the Q1B and sounds like strong momentum in April. So just curious in terms of is it just conservatism for reaffirming the guide? Or is it still just early in the year?
Speaker Change: Great and then maybe just one quick follow up for Rick. So you guys raised the bottom line guidance, but still kept the same topline guide even with the Q1 beat and it sounds like strong momentum in April. So I'm just curious in terms of is it just conservatism for reaffirming the guide or is it still just early in the year.
Richard A. Dierker: Yeah, I think Matt's comment was spot on in his prepared remarks. Usually, after Q1, we don't touch the outlook. Gross margin was so strong in Q1, we felt like we had to reflect that, and as a result, earnings were very strong as well. So that's why we adjusted it, you know, four to five, which is a great guide. You know, we said four and a half pretty much throughout the year. So, you know, I would expect us to talk more about the outlook.
Speaker Change: Yes, I think Matt's comment is spot on in his prepared remarks is usually after Q1, we don't touch the outlook.
Richard A. Dierker: Gross margin was so strong in Q1, we felt like we had.
Richard A. Dierker: To reflect that and as a result earnings was very strong as well. So that's why we adjusted it in a fortified with it's a great guide, we said four five pretty much throughout the year. So.
Richard A. Dierker: I would expect us to talk more about the outlook in July.
Rupesh Dhinoj Parikh: Great. Thank you, Al-Faisal.
Speaker Change: Great. Thank you I'll pass along.
Operator: Our next question will come from Dara Mohsenian with Morgan Stanley.
Rupesh Dhinoj Parikh: Our next question will come from Dara <unk> with Morgan Stanley.
Dara Warren Mohsenian: Good morning. So first, just a clarification on Waterpik. The 100 basis point issue you mentioned in Q1, is that something that fully comes back in the balance of the year? Is that embedded in the Q2 guidance? Or is it more spread out in the balance of the year? Or was that just a shipment issue?
Dara Warren Mohsenian: Hey, good morning.
Operator: <unk>.
Dara Warren Mohsenian: First just a clarification on water pick the 100 basis point issue you mentioned in Q1 is that something that fully comes back in the balance of the year is that embedded in the Q2 guidance is it more spread out in the balance of the year was that just <unk>.
Matthew Thomas Farrell: Or is there some form of retail sales weakness also? And then maybe just broader, Matt, on the U.S. business, you're obviously excited about innovation this year. You mentioned couponing in Q2. Can you talk about the level of contribution you're expecting from innovation this year? And maybe on some of the key early ones, the reception you're seeing so far from a trade and consumer standpoint?
Dara Warren Mohsenian: Shipment issue or is there some form of retail sales weakness also.
Matthew Thomas Farrell: And then maybe just broader Matt on the U S business. You are obviously excited about innovation. This year you mentioned the couponing in Q2 can you talk about the level of contribution you're expecting from innovation this year and maybe on some of the key early ones. The reception, you're seeing so far from a trade and consumer standpoint.
Matthew Thomas Farrell: Yeah, okay. Another multi-parter. Let's take Waterpik first. I'll make a few comments about that, and Rick can build on that.
Speaker Change: Yeah, Okay, another multi partner with us.
Matthew Thomas Farrell: <unk>.
Matthew Thomas Farrell: Take take water pick first does it make a few comments about that and Rick and build on that and we'll come back to.
Matthew Thomas Farrell: And we'll come back to what we're expecting for the US. As far as Waterpik goes, yeah, it was down in the first quarter, but we still expect, on a full year basis, this business to be up and to hit its targets. So I wouldn't be completely alarmed about the Waterpik activity in Q1. The fact that foster consumption is healthy is a real positive for us. That's a really strong way to start the year.
Matthew Thomas Farrell: What we're expecting for the U S.
Matthew Thomas Farrell: As part of Waterpick goes yes.
Matthew Thomas Farrell: Down in the first quarter, but we still expect on a full year basis, this business to be up and to hit its plan. So.
Matthew Thomas Farrell: I wouldn't I wouldn't be completely alarmed about above the.
Matthew Thomas Farrell: Water Pik.
Matthew Thomas Farrell: <unk> in Q1.
Matthew Thomas Farrell: The fact that the flush of consumption as healthy as a real positive for us.
Matthew Thomas Farrell: Really strong way to start the year, yes, I mean consumption for water Pik as high up high single digit low double digit. So consumption is great. We had to work through some inventory that was higher than.
Richard A. Dierker: Yeah, I mean, consumption for Waterpik is up high single digits, low double digits. So consumption is great. We had to work through some inventory that was higher than, I guess, at retail. And that's been worked through now. So we feel like it's in a good spot as we move forward.
Richard A. Dierker: I guess at retail and that's been worked through now so we feel like it's in a good spot as we move forward.
Speaker Change: Yeah, and as far as our expectations for the year.
Richard A. Dierker: Called the 4% to 5% organic growth for the year and we.
Matthew Thomas Farrell: Yeah, and as far as our expectations for the year, we called 4-5% organic growth for the year, and we expect just a ballpark, about 2% of that. 2012 University of Georgia College of Agricultural and Environmental Sciences, Thoroughbreds launching with Intercepted being 30% of the category, that's gigantic.
Richard A. Dierker: We expect just ballpark about 2% of that.
Matthew Thomas Farrell: Yes.
Matthew Thomas Farrell: Driven from from new product launches.
Matthew Thomas Farrell: Which is a big number.
Matthew Thomas Farrell: But if you kind of roll through we've got deep clean launching in.
Matthew Thomas Farrell: Laundry.
Matthew Thomas Farrell: Arm <unk> Hammer, we're going national with arm <unk> Hammer litter, we're going national with Hardball. So those are our two big businesses on the household side of the house.
Matthew Thomas Farrell: And then when you get into personal care.
Matthew Thomas Farrell: Third breath launching with with being 30, intercepting being 30% of the category. That's gigantic. So we're only just getting started there.
Matthew Thomas Farrell: So we're only just getting started there, and the Batiste I mentioned is the number one dry shampoo in the world. Patrice Touch, and Batista Sweat are getting really high ratings, and in the early days, the velocities for virtually everything that we've launched are meeting or exceeding expectations. So, I would suggest we feel good about, at least after one quarter, that we're going to hit that 2% number for organic sales growth in 2020 and 2024. And that will probably be one of our biggest years ever, as far as the contribution of organic sales from new products is concerned.
Matthew Thomas Farrell: And then Patese I mentioned, we're the number one dry shampoo in the world.
Matthew Thomas Farrell: Bt's touch Batista sweat.
Matthew Thomas Farrell: Getting really high ratings and.
Matthew Thomas Farrell: And early days the velocities virtually everything that we've launched are meeting or exceeding expectations.
Matthew Thomas Farrell: That would suggest we feel good about at least after one quarter that we're going to hit that 2% number for <unk>.
Matthew Thomas Farrell: Again sales growth in 2022.
Matthew Thomas Farrell: 2024, and that will probably be one of our biggest years ever.
Matthew Thomas Farrell: Or is the contribution of our organic sales from new products.
Matthew Thomas Farrell: Okay.
Dara Warren Mohsenian: Great, thanks.
Speaker Change: Great. Thanks, Greg.
Operator: Our next question will come from Andrea Teixeira of J.P. Morgan.
Dara Warren Mohsenian: Our next question will come from Andrew <unk> with Jpmorgan.
Andrea Faria Teixeira: Thank you. Good morning.
Andrea Faria Teixeira: Thank you good morning.
Andrea Faria Teixeira: All of Us can.
Andrea Faria Teixeira: Talk about like the dynamics as you set up your shelf. If there is anything you would call out in terms of the.
Andrea Faria Teixeira: So I was hoping you could talk about the dynamics as you set up your shelves. If there is anything you would call out in terms of any pull forward in shipments and consumption, I understand that obviously you had a very strong quarter, but you're guiding more conservatively into the second quarter, just trying to understand the puts and takes or anything that you see as a lapse. And I appreciate when you gave us the lapse on some of the components last year.
Andrea Faria Teixeira: Any pull forward in shipments and consumption I understand that obviously, you had a very strong quarter, but you're guiding more conservatively.
Andrea Faria Teixeira: Conservatively.
Andrea Faria Teixeira: The second quarter, just trying to understand the puts and takes or anything that you see the lab can I. Appreciate when you you gave us the lapse on on some of the components last year, but also if you are seeing.
Andrea Faria Teixeira: But also, if you're seeing your competitors being more, I would say, more aggressive in littering or things like that, that some of them have suffered from, obviously, the cyber attack and all of that. How are the dynamics in terms of market share as we think into the second quarter and the balance of the year?
Andrea Faria Teixeira: Your competitors being more.
Andrea Faria Teixeira: I would say more aggressive in later or things like that that some of them had suffered from.
Andrea Faria Teixeira: Obviously at this type of attack and all of that how are the dynamics in terms of market share as we are thinking through the second quarter and the balance of the year. Thank you.
Rick: Hey Andrea, it's Rick. I'll give you a couple of comments if Matt wants to add anything. So first of all, for the Q2 call, I went through a little bit of the details, but really, it's a new product, coupon, and trade promotion is kind of a little bit of a step down or step up in Q2, so that's impacting net sales. We had hero gains a year ago as we went national, that's what I said before.
Speaker Change: Hey, Andrea <unk> I'll give you a couple of comments and Matt wants to add.
Rick: So first of all for the Q2 call.
Rick: They are a little bit of the details but really.
Rick: It's a new product.
Rick: Couponing and trade promotion.
Rick: Kind of a little bit of a step down.
Rick: Up in Q2, so thats impacting net sales, we had a year ago hero gains as we went national and that's what I said before.
Rick: And then we're lapping some of the price increases. Almost all of our volume, all of our organic growth from here forward will be almost 100% volume driven. Okay, so we had 70% in Q1, but as we move forward, it's closer to 100%. And then, as for litter, Matt went to the Mt. Sutherland deal. It's, you know, has picked up a little bit privately and blown up a little bit more spending, but buy and buy our shares are strong.
Rick: And then we're lapping some of the price increases almost all of our volume all of our organic growth from here forward is almost 100% volume driven.
Rick: So we had 70% in Q1, but as we move forward, it's closer to 100%.
Rick: And then as for as for litter, Matt went through the amount sold on deal.
Rick: <unk> has ticked up a little bit private label is up a little bit more.
Rick: Spending is up a little bit, but buying by our shares are strong and litter.
Matthew Thomas Farrell: Yeah, and as far as you mentioned the supply difficulties of, you know, other competitors. Yeah, sure.
Matt: Yeah, and as far as you mentioned the supply difficulties of.
Matthew Thomas Farrell: Other competitors, yes.
Matthew Thomas Farrell: Obviously, we and other brands in a category can benefit and have benefited from that difficulty. And when you have repeat purchases over and over again, oftentimes those changes stick. So naturally, that's our expectation that, yeah, we're going to hang on to some of those new consumers that have moved our way, but some will be tempted back by promotion.
Speaker Change: Yes sure obviously.
Matthew Thomas Farrell: Other brands in the category.
Matthew Thomas Farrell: Okay can benefit and have benefited from from that difficulty.
Matthew Thomas Farrell: And when you have a.
Matthew Thomas Farrell: <unk> purchases over and Oregon's oftentimes those changes stick.
Matthew Thomas Farrell: So.
Matthew Thomas Farrell: Naturally that's our expectation that yeah, we're going to we're going to hang on to some of those those new consumers that moved our way, but with some will be will be tempted back by by promotions.
Andrea Faria Teixeira: That's super helpful. Thank you.
Speaker Change: That's super helpful. Thank you.
Operator: Our next question will come from Nick Modi with RBC Capital Markets.
Andrea Faria Teixeira: Our next question will come from Nik Modi with RBC capital markets.
Sunil Harshad Modi: Yeah, good morning, everyone. Just two quick questions, Rick, maybe on just the marketing guidance. I guess, based on our map, the rest of the year would imply, you know, kind of, you know, reduced marketing, of course, off of very big increases from a year ago. But just wanted to get kind of philosophical, if you kind of saw the upside, would you have a bias to reinvest more given the consumer environment? Or, or would it be more flowing through to the bottom line?
Sunil Harshad Modi: Yes, good morning, everyone.
Sunil Harshad Modi: Yes.
Sunil Harshad Modi: Two quick questions, Rick maybe on just the marketing guidance.
Sunil Harshad Modi: Yes based on our math the rest of the year would imply kind of.
Sunil Harshad Modi: And then the second question is really around reinflation, right? We're starting to see some commodities across the energy complex reinflate, and I would just be curious about kind of how you think about managing that against this consumer backdrop in terms of price.
Sunil Harshad Modi: Reduced marketing of course off a very big increases from a year ago, but just wanted to get kind of philosophically do you kind of saw the upside would you have a bias to smaller given the consumer environment or where would.
Sunil Harshad Modi: Would it be more flowing through to the bottom line.
Sunil Harshad Modi: And then the second question is really around we inflation right. We're starting to see some commodities across the energy complex. We in fleet and I would just be curious on kind of how you think about managing that against this consumer backdrop in terms of pricing.
Richard A. Dierker: Thanks for the question, Nick. For marketing, we were up 150 basis points in Q1. We expect to be up in Q2 and then up in Q3 and Q4, with Q3 probably up, and then Q4 down. And why is that?
Rick: Yeah. Thanks for the question for marketing, we were up 150 basis points in Q1, we expect to be up in Q2.
Richard A. Dierker: And then Q3 and Q4.
Richard A. Dierker: Q3 up probably in Q4 down and why is that we spent a lot of marketing in Q4 year ago, We wanted to move and shift part of that to the front half as we supported our new product. So we did that in a meaningful way feel really good about that on an absolute basis marketing in Q4 would still be a high number. So we feel like we're supporting the brands great add to the extent.
Richard A. Dierker: We spent a lot of marketing in Q4 a year ago. We wanted to move and shift part of that to the front half as we supported our new product. So we did that in a meaningful way, and feel really good about that. On an absolute basis, marketing in Q4 would still be a high number, so we feel like we're supporting the brands really well.
Richard A. Dierker: Then we over deliver and have the momentum we've typically look to reinvest in marketing to drive share it drives organic growth into a virtuous cycle.
Richard A. Dierker: To the extent that we over deliver and have the momentum, we typically look to reinvest in marketing because it drives share, it drives organic growth, and it's a virtuous cycle. On inflation, I would say for us, it's largely unchanged. You know, inflation expectations aren't moving much at all. Ethylene is down a little bit, HDPE is up a little bit, but net-net, we're right where we were when we talked three months ago. So we don't have, you know, if there's a theoretical question, if there's inflation, what do we do? I would tell you our productivity program is very strong right now, and we think that's
Richard A. Dierker: On an inflation I would say for us it's largely unchanged.
Richard A. Dierker: Inflation expectations arent moving much at all ethylene is down a little bit <unk> is up a little bit but net net we're right where we were when we talked three months ago.
Richard A. Dierker: So we don't have if there is a theoretical question if there's inflation what can we do I would tell you. Our productivity program is very strong right now and we think that's going to be evergreen as well.
Matthew Thomas Farrell: Yeah, just to add to that, Nick, as you know, we have a portfolio of value brands. So, to the extent that there has been a decline in consumer sentiment, you know, over the past, you know, few quarters, they seem to be somewhat resilient. And those are some of our bigger growers right now. So I still think we're pretty well positioned at least for the remainder of 2024.
Speaker Change: Yeah, and just to add to that Nick as you know, we've got a portfolio of value brands. So.
Matthew Thomas Farrell: To the extent that.
Matthew Thomas Farrell: That interest rates stay where they are obviously, we have some defense against that.
Matthew Thomas Farrell: We have found that hero and <unk> are really high rings, but really been unaffected by.
Matthew Thomas Farrell: But any.
Matthew Thomas Farrell: Decline in consumer sentiment over the past few quarters. So.
Matthew Thomas Farrell: They seem to be somewhat resilient.
Matthew Thomas Farrell: Our some of our bigger growers right now so we still think we're pretty well positioned at least for for the remainder of 2024.
Sunil Harshad Modi: Great. Thanks, guys. I'll pass it on.
Speaker Change: Great. Thanks, guys I'll pass it on okay.
Sunil Harshad Modi: Okay.
Operator: Our next question will come from Peter Grom with UBS.
Sunil Harshad Modi: Our next question will come from Peter Grom with UBS.
Peter K. Grom: Thanks, operator. Good morning, everyone, and I hope you're doing well.
Peter K. Grom: Thanks, operator, and good morning, everyone and hope Youre doing well I was hoping you could just follow up on the <unk> organic sales outlook. Rick you mentioned fully lapping pricing you touched on the couponing many times throughout this call. So within that 4% can you maybe unpack what we should expect from a price versus volume perspective, and then kind of the same question for <unk>.
Peter K. Grom: I was hoping to just follow up on the 2Q organic sales outlook. Rick, you mentioned fully lapping pricing; you touched on couponing many times throughout this call. So within that 4%, can you maybe unpack what we should expect from a price versus volume perspective? And then, kind of, the same question for the full year? I think previously the expectation was that volumes would be kind of two-thirds of the full year organic sales growth. Has that changed? Or is that still the right expectation?
Peter K. Grom: Thanks.
Peter K. Grom: For the full year I think previously the expectation was that volumes would be kind of Q3. The full year organic sales growth has that changed or is that still the right expectation. Thanks.
Richard A. Dierker: Thanks, Peter. You know, in Q1, it was 70% volume and 30% price. And I just made the comment that on a go-forward basis, Q2, Q3, Q4, they'll likely be closer to 100% volume and minimal price, if anything. And if you rewind the clock, you know, pre-COVID, you go back 10 years ago, and that was our track record, you know, 100% volume-driven growth. And actually, sometimes, in the past, it was maybe 110% volume-driven growth and a little bit more than that.
Speaker Change: Thanks Peter.
Richard A. Dierker: One it was 70% volume and a 30% price and I just made the comment that on a go forward basis, Q2, Q3, Q4 will likely be closer to 100% volume and minimal price if.
Richard A. Dierker: Anything and if you rewind the clock now pre Covid you go back 10 years ago, and that was our track record track record and a 100% volume driven growth.
Richard A. Dierker: It actually sometimes in the past it was maybe a 110% volume driven growth and a little bit more trade as we went national for some of our brands.
Richard A. Dierker: That's the expectation as we look forward and so for the full year I, probably wouldn't change that.
Speaker Change: Outlook, we gave you on the mix.
Peter K. Grom: Great, and then maybe just a quick follow-up on Dara's question. You know, just kind of on Waterpik and the fact that you expected it to kind of reverse and grow for the year, a pretty nice rebound. So maybe thinking about the sales data from a brand perspective, just in that you have over delivered versus the full year outlook despite that drive. What really gets worse from here? Is it simply just cycling the top comps and moderating growth between Hero and TheraBreath, or are there other brands where you're kind of expecting things to grow sequentially?
Speaker Change: Great and then maybe just a quick follow up on <unk> question.
Peter K. Grom: Just kind of on water Tech and the fact that you expect it to kind of reverse and growth of the year pretty nice rebound. So just maybe thinking about the sales data from a brands perspective.
Peter K. Grom: Over delivered versus the full year outlook, despite that drive what really gets worse from here or is it simply just cycling the tough comps and moderating growth in hero Airbus or are there other brands, where youre kind of expecting things to slow sequentially.
Speaker Change: No look we think the.
Peter K. Grom: Not much changed from our original outlook can we beat the quarter on organic sales growth. Despite some of these things that were dragging us down. It's just early in the year to call any incremental upside and we typically don't do that so let's see how consumption goes in.
Speaker Change: Continue to do well on a share perspective, and I think we're very optimistic about the year on the topline.
Peter K. Grom: Thanks so much. I'll pass it on.
Speaker Change: Thanks, So much I'll pass it on.
Operator: Our next question will come from Anna Lizzul with Bank of America.
Peter K. Grom: Our next question will come from Andrew <unk> with Bank of America.
Operator: Okay.
Anna Jeanne Lizzul: Hi, good morning. Thank you for the question. With the solid volume growth that you saw in Q1, I was wondering if you're seeing a more significant benefit from trade down? I think you mentioned some in laundry in response to Chris's question, but I was wondering if you're seeing this elsewhere as well. And then we've been hearing from some companies this earnings season that the lower-income consumer appears to be more challenged. I was wondering how you think about the broad health of the consumer across your different income tiers in relation to your categories and volume growth.
Anna Jeanne Lizzul: Hi, Good morning, Thank you for the question.
Anna Jeanne Lizzul: The solid volume growth that you saw in Q1 I was wondering if youre seeing a more significant benefit from trade down I think you mentioned Simon laundry in response to Chris's question, but Im wondering if youre seeing that elsewhere as well and then we've been hearing from some companies. This earnings season that the lower income consumer appears to be more challenged I was.
Anna Jeanne Lizzul: How youre thinking about sort of the broad health care consumer across your different income curious in relation to that.
Anna Jeanne Lizzul: Yes category volume growth.
Matthew Thomas Farrell: Well, with respect to the consumer, you've probably heard us say on other calls that our big barometer is always unemployment. Unemployment has consistently been low.
Anna Jeanne Lizzul: Well with respect to the consumer you've probably heard us say on other calls that are big barometer as always unemployment.
Matthew Thomas Farrell: And unemployment has been.
Matthew Thomas Farrell: Incidentally low.
Matthew Thomas Farrell: Yeah, interest rates have risen, but they've been high now for a while, so we don't see any change other than maybe people are disappointed that they're not coming down as fast. We all know that student loans have started to rise again as well, so there's other pressures on the consumer. Credit card debt is rising, and delinquencies are rising. We're all looking at the same data, but that's going to be translating down into consumption for our products, as you've seen in the first four months of the year. I think that's probably because you've got to go category by category and brand by brand.
Matthew Thomas Farrell: Yes.
Matthew Thomas Farrell: Interest rates have risen, but they've been high now for a while so we don't see any change other than maybe people are disappointed that they are not coming down as fast so.
Speaker Change: Yes, and there is.
Matthew Thomas Farrell: We all know that that student loans started to restart as well so there's other pressures.
Matthew Thomas Farrell: On the consumer.
Matthew Thomas Farrell: Credit card debt is rising until it goes with the.
Matthew Thomas Farrell: <unk> are rising we're all looking at the same data, but it doesn't seem to be translating down into into consumption for our for our products as you've seen in the first four months of the year I think that's probably because of it's got to go category by category and brand by brand. So.
Matthew Thomas Farrell: Like I said earlier, I do think we're well-positioned for the remainder of the year. What was the first part of your question?
Speaker Change: Like I said earlier I do think we're well positioned for the remainder of the year what was the first part of your question.
Anna Jeanne Lizzul: Just wondering if you're seeing broad trade down, you mentioned some in laundry. Any other categories? Yeah, well, look, the...
Speaker Change: I was wondering if this thing Brian trade down you mentioned, London laundry any other categories.
Matthew Thomas Farrell: Yeah, well, look, the predominant portion of our portfolio that is value is laundry and litter. And, you know, in laundry, we have, obviously, we have Arm & Hammer, but we also have Extra. And Extra grew in the first quarter. It was in my prepared remarks, so you'll feel real good about that.
Anna Jeanne Lizzul: Yes.
Anna Jeanne Lizzul: Looked at the predominant.
Matthew Thomas Farrell: A portion of our portfolio that has value as well.
Matthew Thomas Farrell: Andre and litter.
Matthew Thomas Farrell: In laundry we have.
Matthew Thomas Farrell: Obviously, we have arm <unk> hammer, but we also have extra and extra group in the first quarter.
Matthew Thomas Farrell: It was in my prepared remarks so.
Matthew Thomas Farrell: It will feel real good about about that and that may be an indication of.
Matthew Thomas Farrell: And that may be an indication of more pressure on the consumer when you see the deep value brand growing. And then over in litter, yeah, we have both a high price litter, meaning premium litters; we call it the black box. And we have the orange box, which is value. So we keep people in that category. So we may, people may trade down, but they'll trade down within Arm & Hammer, which actually supports our top line. So, like I said before, we have some good dynamics in those two big categories that we think are going to help us for the remainder of the year.
Matthew Thomas Farrell: More pressure on the consumer when you see the deep value brand growing and.
Matthew Thomas Farrell: And then over in litter, yes, we have both a high price leader meeting premium letters can we call. It the black box and we have the Orange box, which is value. So we keep people in the category. So when you meet people may trade down, but they'll trade down within arm <unk> Hammer, which actually supports our topline. So like I said before that we have some good dynamic.
Matthew Thomas Farrell: And those two big categories that we think are going to help us for the remainder of the year.
Speaker Change: Great. Thanks very much.
Operator: Our next question will come from Bonnie Herzog with Goldman Sachs. All right, thank you.
Matthew Thomas Farrell: Our next question will come from Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: All right, thank you. Good morning. I had a quick follow-up on laundry. Curious to hear how you guys think about managing the balance between driving share and profitability. You know, I guess I'm thinking about as you step up trade spend, you know, and also, especially as you look at it in the context of curtailing some of the ineffective promos you mentioned earlier.
Bonnie Lee Herzog: Alright, Thank you good morning.
Bonnie Herzog: I had a quick follow up on laundry curious to hear how you guys think about managing the balance between driving share and profitability.
Bonnie Herzog: I guess I'm thinking about it you've got the trade spend and also as you, especially as you look at it in the context of curtailing some of the and if I can promise you mentioned earlier.
Rick: Hey, Bonnie, it's Rick. I just want to be really, really clear, you know; in Q4 of last year, we didn't repeat some bad promotions. And that it carried over a little bit into January, and then we were pretty stoked about that. We have a great balance between what we think the right trade spending is and the right growth, and we're just getting back to what we would say was normal before we kind of canceled some of those bad promotions. So it's not like we're hiking up trade spend to be above category levels or anything like that. We are just, you know, pumping it back from an artificial low. Yeah,
Rick: Hey, Bonnie it's Rick.
Rick: Just want to be really really clear in Q4 of last year.
Rick: Didn't repeat some bad promotions and that carried over a little bit into January and we're pretty pumped up about that.
Rick: We have a great balance between what we think the right trade spending is in the right growth and we're just getting back to what we would say it was normal before we kind of called some of those bad promotions. So its not like were hiking up trade spend to be above category levels or anything like that.
Rick: We are just pumping it back from an artificially low.
Matthew Thomas Farrell: Yeah, our practice generally is that we're generally below the category average in liquid laundry from a sold-out deal perspective.
Rick: Our practice generally as we're generally below the category average and liquid laundry.
Matthew Thomas Farrell: Sold on deal perspective.
Bonnie Herzog: Okay, that's awesome. Then I kind of... Another question on international business, you know, your sales growth in the quarter was quite strong at nearly 9%, and the growth really seems pretty broad-based and balanced. So just curious to hear how much of the volume growth was driven by distribution expansion versus, you know, just maybe strengthening your existing distribution.
Bonnie Lee Herzog: Okay. That's helpful and then I just had a.
Bonnie Herzog: Another question on International business, you know your sales growth in the quarter was quite strong at nearly 9% and the growth really seems pretty broad based and balanced. So just curious to hear yes.
Bonnie Herzog: How much of the volume growth was driven by distribution expansion versus just.
Bonnie Herzog: Strengthen your existing.
Speaker Change: Mark I think.
Matthew Thomas Farrell: Yeah, I think one of the things to point to in international, and you're right, that all six subsidiaries grew as well as the GMG, so they clearly ran the table. But what we're seeing the benefit of is that we're being very selective about what brands we're going to support and what retailers we want to grow with. And we're leveraging revenue growth management far more than we have historically. And that's true in the last 18 months, and it's really showing up in the first quarter. You know, in the past, you may have heard us talk about Global Markets Group.
Speaker Change: Yes, I think one of the things to point to in International and you are right that all six subsidiaries grew.
Matthew Thomas Farrell: Grew as well as the gmg, So clearly ran the table, but what what.
Matthew Thomas Farrell: We're seeing the benefit of is that we're being very selective about what brands, we're going to support it.
Matthew Thomas Farrell: And what retailers, who want to grow with and.
Matthew Thomas Farrell: We're leveraging revenue growth management.
Matthew Thomas Farrell: Far more than we had historically and that's true in the last 18 months and it's real.
Matthew Thomas Farrell: Really showing up in the first quarter.
Matthew Thomas Farrell: In the past you may heard us talk about global markets group.
Matthew Thomas Farrell: It's grown 15% annually for a lot of year as well.
Matthew Thomas Farrell: And it.
Matthew Thomas Farrell: As the global markets group that generally would be driving the international number well at it.
Matthew Thomas Farrell: That's not true in Q1 Q1 of its subsidiaries that are driving it and it's for those three reasons that I gave of being selective with respect to brand with respect to retailer and using all the tools of revenue growth management.
Matthew Thomas Farrell: Yeah, the second thing that's helping international sales is a couple of these new brands, Hero and TheraBreath. And, you know, typically, it takes us two to three years to get new brands, new acquisitions out internationally, and we're doing it rapidly, and there's been a great response from many countries and many distributors for those brands. Yeah, we think that'll build throughout the rest of the year.
Matthew Thomas Farrell: Second thing Thats, helping international is a couple of these new brands.
Matthew Thomas Farrell: Hero and thorough breath.
Matthew Thomas Farrell: No.
Matthew Thomas Farrell: Typically it takes us two to three years to get new brands, new acquisitions out internationally and we're doing it rapidly and there has been a great response to many countries and many distributors for those brands.
Matthew Thomas Farrell: Yeah, we think that'll build throughout the rest of the year, but that's a nice tailwind on top of what I said in my earlier remarks.
Matthew Thomas Farrell: That will build throughout the rest of the year.
Matthew Thomas Farrell: That's a nice tailwind on top of what I, what I said in my remarks.
Speaker Change: Okay. Thank you.
Operator: Our next question will come from Olivia Tong, with Raymond James.
Matthew Thomas Farrell: Our next question will come from Olivia Tong with Raymond James.
Unknown Attendee: Thanks. Good morning.
Unknown Attendee: Great. Thanks, Good morning wanted to ask you about the Graco acquisition and.
Unknown Attendee: Turning to that and there are other markets that have distributor relationships and does that seem like an area, where you may be interested in more deals and then just on the.
Unknown Attendee: Thoughts on your on the M&A environment overall, particularly in goods what youre seeing.
Unknown Attendee: And and.
Unknown Attendee: Interesting. Thank you.
Matthew Thomas Farrell: Transcribed by https://otter.ai If you go back a few years, the way we got established in Germany was we had a very small distributor that introduced us to... Graphico is a public company in Japan, obviously a micro-cap, but they have been working with OxyClean for 25 years, even before Church & Dwight bought the business back in 2008. They have a very capable team that's driven the brand to be the number one pre-wash additive and powder in Japan. We benefit then from just buying a critical mass of talent in Japan so that now we can introduce our other products into Japan. The thing to keep in mind is that oftentimes we have multiple distributors.
Matthew Thomas Farrell: I want to ask you about the Gratco acquisition. And you know, what drew you to that? There are other markets that have distributed relationships, and does that seem like an area where you may be interested in more deals? And then just on your thoughts on the M&A environment overall, particularly in goods, what you're seeing, and interest there. Thank you.
Unknown Attendee: Yes.
Matthew Thomas Farrell: If you go back a few years the way we get established in Germany was we had a very small distributor that had introduced.
Matthew Thomas Farrell: Batiste into Germany, and that wound up being the basis for starting very small subsidiary in Germany, which has grown over time.
Matthew Thomas Farrell: This one is different in that.
Matthew Thomas Farrell: <unk> as a public company and in Japan, obviously, a microcap, but they.
Matthew Thomas Farrell: <unk> had been working with oxy claim for 25 years, even before.
Matthew Thomas Farrell: The church and Dwight bought the business back in 2008 and.
Matthew Thomas Farrell: They have a very capable team that's driven the brand to be number one.
Matthew Thomas Farrell: Prewash additive and powder in Japan.
Matthew Thomas Farrell: So we benefit them from getting just buying a critical mass of talent in Japan and now we can.
Matthew Thomas Farrell: Introduce our other products into Japan, and keep in mind is when you when you're oftentimes we have multiple distributors.
Matthew Thomas Farrell: Country.
Matthew Thomas Farrell: Because.
Matthew Thomas Farrell: Some distributors or household personal care they are experts in different areas.
Matthew Thomas Farrell: And this enables us to concentrate.
Matthew Thomas Farrell: Our brands through one subsidiary will there be other distributors in Japan, yes, there could be a couple of others, but.
Matthew Thomas Farrell: This is one where we can have a base of operation we.
Matthew Thomas Farrell: Should have this should be a really big business for us given the size of the economy and the population in Japan, but also really nice beachhead for us in <unk>.
Matthew Thomas Farrell: Southeast Asia from which to grow so we're really really enthusiastic about it.
Matthew Thomas Farrell: Got a great team that we're that's coming on board as a result of this acquisition.
Matthew Thomas Farrell: And then just thinking through about the M&A environment overall.
Matthew Thomas Farrell: And then just thinking through about the.
Matthew Thomas Farrell: The M&A environment overall.
Unknown Attendee: Uh, well, Olivia, you know we're always on the hunt. It's the highest and best use of cash for the company. We always have a disproportionate amount of our cash that goes towards acquisitions. And there's always something for sale, but that's about as far as I can go right now.
Speaker Change: Well look.
Unknown Attendee: We're always on the hunt.
Unknown Attendee: It's the highest and best use of cash.
Unknown Attendee: For the company.
Unknown Attendee: Have a disproportionate amount of our cash that goes towards towards acquisitions, and there's there's always something for sale, but that's about as far as I can go right now.
Matthew Thomas Farrell: Great, thanks. And then just one on following up on Bonnie's question about promotion. You talked about it continuing to creep up, but still obviously well below pre-COVID norms. Is your expectation that it does get back there? Or just continue to show a creep through the year? And then on the couponing, just a point of clarification, is this more than normal or more a function of the timing of new products and the trial building couponing that goes with that to support the launch? Yeah, that's really more than I expected.
Speaker Change: Great. Thanks, and then just one on <unk>.
Matthew Thomas Farrell: And up on Brian's question around promotion.
Matthew Thomas Farrell: You talked about it continuing to creep up but still obviously well below pre COVID-19 norm.
Matthew Thomas Farrell: Station that it does get back there or just continue to show of the year and then on the couponing standpoint.
Matthew Thomas Farrell: The clarification is it more than normal or more a function of the timing of new products in the trial building couponing couponing that goes with that to support the launch.
Matthew Thomas Farrell: Yeah, it's really more of your second question. It's more your second explanation.
Matthew Thomas Farrell: Yeah, that's really more on your second question is more your second.
Matthew Thomas Farrell: Explanation, it's incremental couponing to support.
Matthew Thomas Farrell: Higher and more new products.
Matthew Thomas Farrell: It's incremental couponing to support, you know, higher and more new products. On your first question about the amount of promotion and really trade spend, I think it's a very good question, saying that we told Bonnie, it's... The forward look for promotion for laundry is always dependent upon how category growth is, and if category growth is stable, then normally promotion stays in line. Right now, category growth is great. Yeah, I do have a thing to...
Matthew Thomas Farrell: The short story on.
Matthew Thomas Farrell: On your first question on <unk>.
Matthew Thomas Farrell: Out of promotion.
Matthew Thomas Farrell: Trade spend I think it's.
Matthew Thomas Farrell: Okay.
Matthew Thomas Farrell: Saying that we need to be told Bonnie it's.
Matthew Thomas Farrell: Yeah.
Matthew Thomas Farrell: The forward look for.
Matthew Thomas Farrell: Promotion for laundry is always dependent upon how category growth is doing and if category growth is stable then normally promotion stays in line and.
Matthew Thomas Farrell: Right now category growth is great.
Speaker Change: Yes, the other thing too.
Matthew Thomas Farrell: Keep in mind, Bonnie, all those price increases that went through in the last couple of years were really, you know, unusual for all, you know, CBG and food companies. So yeah, that does obviously make it more expensive for the product, but it didn't necessarily expand gross margins for people. So yeah, I don't, like Rick said, we have to react to what's going on in the category. We're certainly not going to telegraph what our plans might be for the remainder of the year.
Matthew Thomas Farrell: Keep in mind.
Matthew Thomas Farrell: Yes.
Matthew Thomas Farrell: All of those price increases that went through the last couple of years they were.
Matthew Thomas Farrell: They were really.
Matthew Thomas Farrell: Unusual for all CPG and food companies so.
Matthew Thomas Farrell: Yeah that does.
Matthew Thomas Farrell: Obviously, it make it more expensive for the product but.
Matthew Thomas Farrell: Didn't necessarily expand gross margins for people so yes I don't.
Matthew Thomas Farrell: Like Rick said do we have to react to what's going on in the category. So it's you can't really predict or.
Matthew Thomas Farrell: We're certainly not going to telegraph, what we might be our plans might be for the remainder of the year.
Speaker Change: Got it thank you.
Operator: Our next question will come from Lauren Lieberman with Barclays.
Matthew Thomas Farrell: Our next question will come from Lauren Lieberman with Barclays.
Lauren Rae Lieberman: Great. Thanks. Good morning. I was curious about the gross margin progression from here and for the rest of the year. One of the things you called out with regard to sales. Unknown Attendee, Olivia Cheang, Filippo Falorni, Richard Dierker, Bryan Adams, Barry Bruno, [inaudible] Yeah, no, no problem, Lauren. This is Rick. Yeah, that is an...
Lauren Rae Lieberman: Great. Thanks, good morning.
Lauren Rae Lieberman: I was curious thinking about the gross margin progression from here and for the rest of the year one of the things you called out with regard to sales.
Rick: Slowing down, particularly starting next quarter was that lapping on distribution gains from hero. So I was just.
Speaker Change: Well, we can see in Nielsen, which I know isn't.
Speaker Change: Representative of the full distribution of the brand is that like let's call. It same store sales, so really really strong.
Speaker Change: But is some of this slowing down that's implied in hero also impacting that gross margin forecast going forward, because I imagine and we know its super accretive and so just wanted to think about.
Speaker Change: Talk about how to think about the contribution of hero to that gross margin build as we move from here and start to lap the distribution.
Rick: Yeah, no, no problem, Lauren. This is Rick. That isn't really in our thinking as we move forward. The two things that are driving gross margin are, and then number two, we talked about it during our Analyst Day in January, we're adding more fixed costs to the system for capacity reasons, like new distribution centers. Those are coming online as we move through the year.
Lauren Rae Lieberman: Yes, no problem more and this is Rick that isn't really in our thinking as we move forward. The two things that are driving gross margin too.
Rick: I think maybe not grow as fast would be less carryover pricing.
Rick: Kind of what I talked about from the organic revenue side too. So we're fully through all the carryover pricing and then number two we talked about it during our analyst day in January we're adding more fixed cost to the system for capacity reasons like new distribution centers those are coming online as we move through the year. So those are the two things.
Operator: Our next question will come from Javier Escalante with Evercore ISI.
Rick: Our next question will come from Javier Escalante with Evercore ISI.
Javier T. Escalante Manzo: Hi, good morning everyone. I do have a follow-up on the gap between... retail sales that we see and the reported domestic number; you flag water peak as a point of impact. But we use Cercana, and I believe that you guys do too. The retail takeaway is more about seven, 8%. So that is a little bit of a still kind of like a two point gap. Do you think that is related to slow retailer reorders? As your competitor in laundry mentioned earlier in the season, and I have a follow-up question.
Javier T. Escalante Manzo: Hi, good morning, everyone.
Javier T. Escalante Manzo: Do have a follow up on the gap between.
Javier T. Escalante Manzo: Retail sales that we see on and on and on.
Javier T. Escalante Manzo: The reported domestic number you flag, what our peak point of feedback.
Javier T. Escalante Manzo: We use it and I believe that you guys do too.
Javier T. Escalante Manzo: The retail takeaway is more about seven 8% so that is a little bit of.
Javier T. Escalante Manzo: Still kind of like a two point gap do you think that is related to as low retailer reorders.
Javier T. Escalante Manzo: Your competitor in laundry mention earlier in the season and I have a follow up.
Javier T. Escalante Manzo: Yeah, are you comparing Q1 when you're asking your question? Correct. Yes, correct. Exactly. Correct. It's just trying to understand whether this is something of the accounting for the coupon effect or something weird that basically we are overestimating your retail sales growth and, and therefore your shipment growth. Yep, I got it. No, it's interesting.
Speaker Change: Yeah are you comparing Q1 when your for your question correct, Yes, correct exactly correct is just trying to understand whether there is something of the accounting of the couponing or something weird is that basically we had over a stadium you have retail sales growth.
Javier T. Escalante Manzo: And therefore your shipment growth.
Richard A. Dierker: I know we all have similar databases. Internally, our shipment number, of course, is organically 4.3. And then IRI, our number is around 6.3. So our gap is closer to one and a half percent. Part of that's the coupon. Part of that is the Waterpik consumption that we've talked about, working through retail inventory, and yeah, I mean, those are the two.
Javier T. Escalante Manzo: Yes.
Javier T. Escalante Manzo: Yes, I got it.
Javier T. Escalante Manzo: Interestingly I know we all.
Richard A. Dierker: I'll have similar.
Richard A. Dierker: Databases are internally our shipment.
Richard A. Dierker: <unk> of course is organic this $4 three.
Richard A. Dierker: And then IRI our number is around 6%. So our gap is closer to one 5% part of that is the couponing.
Richard A. Dierker: Part of that is the waterpick consumption that we've talked about working through retail inventory and.
Richard A. Dierker: Yes, I mean those are the two biggest.
Richard A. Dierker: Biggest pieces.
Unknown Speaker: Unknown Speaker And when it comes to the gross margin getting better, [inaudible]
Richard A. Dierker: And when it comes to.
Unknown Speaker: The gross the gross margin getting better.
Unknown Speaker: Dennis <unk> and I know that price mix with an issue.
Unknown Speaker: The driver is is it more kind of like the change in the portfolio, meaning Richard sales from hero thereof rent what was the driver of the better gross margin out there for the earnings.
Unknown Speaker: <unk>.
Richard A. Dierker: Yeah, that's a good question. I think it was really the two things it was, mix was a little bit more helpful, and volume was helpful. I mean, price came in as expected, manufacturing costs came in as expected, productivity was in line. So it was really higher volumes, which helped with throughput and efficiencies, and then a little bit of a favorable mix.
Speaker Change: Yeah. That's a good question I think it was really the two things. It was mix was a little bit more helpful and volume was helpful. When the price came in as expected manufacturing cost came in as it is.
Richard A. Dierker: <unk> productivity was in line. So it was really high.
Richard A. Dierker: Higher volumes, which help with throughput and efficiencies in and then a little bit of favorable mix.
Javier T. Escalante Manzo: Okay. Thank you very much, guys.
Speaker Change: Okay. Thank you very much guys.
Operator: Our next question will come from Filippo Falorni with Citi.
Javier T. Escalante Manzo: Our next question will come from Felipe <unk> with Citi.
Filippo Falorni: Hey, good morning everyone. I wanted to follow up your point about the cycling of the distribution gate for Hero and maybe extend it to TheraBreath as well. Can you comment on how much incremental shelf space you get this year compared to last year in the US? And then I think at Cagney you talked about more international opportunities for those brands, so maybe you could give us some sense of the potential contribution from international? Thank you.
Filippo Falorni: Hey, good morning, everyone.
Filippo Falorni: Follow up point on the cycling of the distribution gave for hero and may be extended to better breadth as well.
Filippo Falorni: Can you comment like how much incremental shelf space that you got in this year.
Filippo Falorni: Compared to last year.
Filippo Falorni: And then I think at Cagny, you talked about more international opportunities for those brands. So maybe can you give us some sense of the potential contribution from international. Thank you yeah, Okay well.
Matthew Thomas Farrell: Yeah, okay. Yeah, when you think about TheraBreath and Hero, you know, TheraBreath, we bought that business in 2021, Hero in 2022. So for TheraBreath, you know, resets this year; we're getting more doors, but I would expect that the distribution gains from a number of doors perspective are going to plateau for Therabreath this year. And that we're going to be getting; the way to look for distribution gains in the future is going to be more facings.
Filippo Falorni: When you think about.
Matthew Thomas Farrell: Cerro breath and hero third breath, we bought that business in 2021.
Matthew Thomas Farrell: Zero in 2022 so.
Matthew Thomas Farrell: For <unk> <unk>.
Matthew Thomas Farrell: Sets this year, where.
Matthew Thomas Farrell: We're getting more doors.
Matthew Thomas Farrell: But I would expect that.
Matthew Thomas Farrell: <unk>.
Matthew Thomas Farrell: Distribution gains from a number of doors perspective is going to plateau for a thorough breath this year.
Matthew Thomas Farrell: And that we're going to be getting the way to look for distribution gains in the future is going to be more facings.
Matthew Thomas Farrell: And we are seeing that already from some existing retailers where we already have good distribution but maybe not the amount of facings that we should. And you mentioned international. So international is an area where we're running to launch Hero and TheraBreath. Hero we're planning on launching in 40 countries in 2024. And that'll happen throughout the year. And then, of course, sales growth will start to build in subsequent years. But I think the other thing that's probably worth pointing out is that...
Matthew Thomas Farrell: And we are seeing that already from some existing retailers, where we already have good distribution, but maybe not.
Matthew Thomas Farrell: <unk> Suisse.
Matthew Thomas Farrell: Reserve, and then innovation, which will so I think more facings and innovation are going to drive future growth for <unk>.
Matthew Thomas Farrell: Plateau with respect to the number of doors.
Matthew Thomas Farrell: For hero since we've owned it a little bit less year or less than the third breath.
Matthew Thomas Farrell: There is still some distribution gains to come.
Matthew Thomas Farrell: Some decent.
Matthew Thomas Farrell: Decent sized retailers, but we expect the same thing to happen.
Matthew Thomas Farrell: But with.
Matthew Thomas Farrell: With respect to hero what will be start to do is start to move from just patches in acne.
Matthew Thomas Farrell: <unk>.
Matthew Thomas Farrell: Adjacent consumer needs.
Matthew Thomas Farrell: Such as skincare.
Matthew Thomas Farrell: Pre and post them acting in.
Matthew Thomas Farrell: You mentioned international.
Matthew Thomas Farrell: So international is and.
Matthew Thomas Farrell: As an area, where we're running to.
Matthew Thomas Farrell: To launch hero and thorough breath hero, we're planning on launching in 40 countries in 2024 and that will happen throughout the year and then of course, the sales growth, we're starting to build in future years.
Matthew Thomas Farrell: I think the elephant, it's probably worth pointing out is that.
Matthew Thomas Farrell: Both Heroin and TheraBreath are high-ring products. And so, if you're a retailer, you really like a high-ring product with a growing brand. And consequently, you do want to give that brand more exposure and listen to innovation. So we think the dynamics for each of those brands are going to bode well for growth not only in 2024 but in 2025.
Matthew Thomas Farrell: Both heroines thorough breath are high ring.
Matthew Thomas Farrell: Products and so if you're a retailer you really like.
Matthew Thomas Farrell: Hi ring product.
Matthew Thomas Farrell: Growing brand and consequently, you do want to give that.
Matthew Thomas Farrell: Brand more facings and listened to innovation. So we think the dynamics for each of those brands are going to bode well for our growth not only in 2024, but in 2025.
Filippo Falorni: Thank you guys, I'll pass it on.
Speaker Change: Thank you guys I'll pass it on it yes, okay.
Operator: Our last question will come from Brett Cooper with Consumer Edge Research.
Filippo Falorni: Our last question will come from Brett Cooper with consumer edge research.
Brett Cooper: Good morning. I was hoping to dig more into the hero business in the US. The distribution is up significantly, making sort of the underlying rate of demand a bit difficult. So I was hoping you could click one level below and see and talk about what you're seeing with respect to existing consumer demand, new users, trial and repeat, and other drivers. Thanks.
Brett Young Cooper: Hi, good morning.
Brett Young Cooper: I wanted to dig more into the hero business in the U S. The distributions have significantly making sort of the underlying need of demand a bit difficult. So I was hoping that you could click one level below and see and talk about what you're seeing with respect to existing consumer demand new users trial and repeat and other drivers. Thanks.
Brett Cooper: I didn't hear the first part of your question. I'm sorry.
Speaker Change: Could you just I didn't hear the first part of your question I'm sorry.
Brett Cooper: It's the hero business in the U.S., so huge distribution gains, so you see significant sales growth. So just trying to understand, I guess, one level below, and what you see from consumers that have been in the business for a while, and then what you're seeing with respect to new users, trial and repeat, and any other drivers of sales growth.
Speaker Change: It was just if the hero business in the U S. Right. So huge distribution gains right. So you see significant sales growth. So I'm just trying to understand I guess, one level below and what you see from consumers that have been in the business for a while and then what youre seeing with respect to new users trial and repeat and any other drivers on the sales growth.
Matthew Thomas Farrell: Look, volumes for this business continue to grow, so it's not a price-driven business, and awareness and household penetration are still ahead of us for this brand. You may remember that when this, when the, back in, before patches hit the scene, it was really ointments and lotions and etc. that people were using to address acne. It's patches now that are driving the category, and our ability to grow is going to be going into adjacencies. And I would probably say, you know, on all channels,
Brett Cooper: Well look the volumes for this business.
Matthew Thomas Farrell: <unk> to gross or some incentive price driven business.
Matthew Thomas Farrell: Awareness and household penetration is still ahead of us for this this brand you may remember that when this when the Bakken before patches hit the scene. It was really a ointments and lotions and et cetera that people were using to address acne. It's patches now that are driving the category and.
Matthew Thomas Farrell: Our ability to grow is going to be going into adjacencies.
Matthew Thomas Farrell: And I would probably say, you know, in all channels, we are growing and have positive growth, even in channels that are declining, because of some maybe macro or secular trends. So that bodes well.
Matthew Thomas Farrell: And I would probably say in all channels.
Matthew Thomas Farrell: We are growing and have positive growth even in channels that are declining.
Matthew Thomas Farrell: Because of some maybe macro or secular trend. So that's.
Matthew Thomas Farrell: Well for this brand.
Matthew Thomas Farrell: That will conclude today's question and answer session. I will now turn the conference over to Mr. Farrell for any additional closing remarks.
Matthew Thomas Farrell: That will conclude today's question and answer session I will now turn the conference over to Mr. Farrell for any additional closing remarks.
Matthew Thomas Farrell: Well, thanks for joining us today. We had a great quarter. We'll see everybody in July.
Farrell: Thanks for joining us today, we had a great quarter and we will see everybody in July.
Operator: This does conclude today's conference call. Thank you all for your participation. You may now disconnect.
Farrell: This does conclude today's conference call. Thank you for your participation you may now disconnect.
Operator: Hum.
Operator: Okay.