Church & Dwight Inc.
expects sales of condoms and dry shampoo to revive in 2021 with the easing of social distancing measures put in place to counter the spread of COVID-19.
Church & Dwight is the parent company of brands including Trojan condoms, Batiste dry shampoo, Arm & Hammer detergent and Nair hair removal cream.
Referring to them as “social interaction categories,” there were certain products in the Church & Dwight portfolio that were hurt by COVID-19. As the vaccine is rolled out to more people, the company expects those categories to reinvigorate.
“One of them is dry shampoo, where we have seen category decline due to store closures and not browsing in store,” said Britta Bomhard, chief marketing officer for Church & Dwight, on the latest earnings call, according to a FactSet transcript.
“An even more eagerly awaited bounce back of sales is in the condom category as condoms mean pleasure. Eighteen-to-24-year-olds can’t wait to get their social lives back. And with college campuses reopening, 2021 looks promising,” she said.
Church & Dwight reported fourth-quarter net income of $150.2 million, or 59 cents per share, up from $144.4 million, or 58 cents per share, last year. Adjusted EPS of 53 cents was a penny ahead of the FactSet consensus.
Sales of $1.295 billion were up from $1.144 billion last year and ahead of the FactSet consensus for $1.262 billion.
“The pandemic drove double-digit consumption growth in many domestic categories, especially gummy vitamins, pregnancy test kits and baking soda,” said Matthew Farrell, chief executive officer of Church & Dwight, in a statement. First Response pregnancy testing kits, Vitafusion vitamins and Waterpik oral health products are also in the company’s brand lineup.
Sales of pregnancy tests and baking soda are expected to pull back in 2021.
The company says the share of gummy vitamins rose by one-third during the pandemic. Bomhard provided data on the call showing that 57% of consumers are now taking vitamins daily and another one-third plan to add more types of vitamins to their shopping trips, including those that improve the immune system.
“Consumption of water flossers was positive in Q4, after experiencing double-digit declines earlier in the year. ” This category is expected to grow in 2021.
The laundry category was up 5.5% in 2020.
Church & Dwight declared a quarterly dividend of $0.2525 per share, up 5.2% from 24 cents per share, which will be payable on March 1, 2021 to shareholders of record as of the close of business February 16, 2021.
And the company is guiding for 2021 adjusted EPS of $3.00 to $3.06, up 6% to 8% from 2020, reported sales growth of 4.5% and organic sales growth of 3%.
The FactSet consensus is for EPS of $3.05 and sales of $5.139 billion, suggesting 5% growth.
JPMorgan analysts say Church & Dwight will continue to benefit from the pandemic landscape for the time being. But things could change going forward.
“[A]s we try to frame Church & Dwight’s growth opportunity over the balance of 2021 (as social mobility improves), we think the mixed market share performance in 2020 (seven out of 13 power brands grew share) may indicate that the competitive environment for the company has intensified, particularly in the social mobility categories such as condoms, dry shampoo and water flossers,” analysts said.
“As these categories will likely play a larger role in driving top-line growth in the back half of the year, we would not be surprised if Church & Dwight had to increase its marketing spend or promotional activity more meaningfully than anticipated, which would further strain earnings growth.”
JPMorgan rates Church & Dwight stock underweight with a $79 price target.
Church & Dwight shares are down 7% over the last three months, but have gained 10% over the past year.
The benchmark S&P 500 index
is up 17.8% for the last 12 months.