CHD

Good morning, ladies and gentlemen, welcome to the Church & Dwight's first quarter 2026 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 that are described in detail in the company's SEC filings. I would now like to introduce your host for today's call, Mr. Rick Dierker, President and Chief Executive Officer of Church & Dwight. Please go ahead, sir.

All right. Thank you. Good morning, everyone. Thanks for joining the call. We had a fantastic quarter. I wanna start off by thanking all of our Church & Dwight employees around the world on executing so well in a volatile environment. I'll begin with some thoughts on the macro environment and then a review of our Q1 results. Then I'll turn the call over to Lee McChesney, our CFO. When Lee is done, we'll open it up for questions. Starting with the broader environment, conditions remain dynamic, and the consumer backdrop continues to be mixed. Consumer sentiment remains pressured by inflation, borrowing costs, and geopolitical uncertainty related to the Middle East, which as you know, is also contributing significant inflation in commodities and transportation costs. That said, the consumer remains resilient. Employment remains stable, and our largest categories grew 3% in the quarter.

Our portfolio, with its balance of value and premium offerings, continue to perform well in this type of environment, supported by strong brands and innovation. Turning to the Q1 results. We delivered a strong start to the year and exceeded our outlook across key metrics. Net sales increased 0.2% ahead of our expectation for a decline, and organic sales grew 5%, well above our 3% outlook. This growth was driven by volume. Adjusted gross margin expanded 130 basis points to 46.4% and adjusted EPS was $0.95, up 4.4% year-over-year and above our $0.92 outlook. Overall, this was a high-quality beat driven by strong execution across the business. Now, I'm gonna turn my comments to each of the three divisions. First up is the U.S. consumer business.

Organic sales increased 5.4%, which was primarily all volume. Across the portfolio, our brands continued to perform exceptionally well. Growth in the quarter was led by TheraBreath, Arm & Hammer, Hero, and OxiClean, supported by strong innovation and distribution gains across all classes of trade. Global e-com also remained a key contributor, with online sales now representing approximately 24% of total consumer sales. Innovation and distribution gains continue to be key drivers of our performance. The first quarter of this year is no different. We're confident that our relentless focus on innovation will continue to drive industry-leading growth, distribution gains at shelf, and market share expansion. In fact, we are just finishing tabulating all the distribution gains looking forward, and I'm proud to say Church & Dwight was number one across all of CPG on total distribution points gained year-over-year.

New product launches this year are expected to account for half of our organic growth as we innovate in key categories across our portfolio of industry-leading everyday products. The Arm & Hammer brand had another quarter of growth, with laundry hitting record shares across total laundry detergent. Arm & Hammer laundry detergent consumption grew 4.1% in the quarter compared to category growth of 2.7%. The value segment of laundry continues to grow. Arm & Hammer laundry grew despite a lower level of promotion in the quarter. Our newest innovation in laundry is Arm & Hammer Baking Soda Fresh with 10x the amount of baking soda and is off to a great start with a 4.9 consumer rating, where most laundry items are around 4.5.

Our Arm & Hammer laundry sheets also continue to do well, growing consumption by 30%. We like the category-building potential of Evo, and we are well-positioned to win in value. Next up is litter. It's fantastic results as Arm & Hammer cat litter consumption grew a robust 6.8% and share increased 0.4 points to reach 24.6%. While category promotional levels remain elevated, they did decline sequentially from Q4. OxiClean share declined in the quarter as we continue to be impacted by distribution loss and lapping that from a large club retailer a year ago. The good news is that the trends on OxiClean improved throughout the quarter and sales growth surpassed our expectations. Hero and TheraBreath continue to contribute considerably to overall performance.

TheraBreath achieved another quarter of record share gains, 3.5 points to 24.1, and further solidifying our number two position in total mouthwash. Household penetration remains low relative to the category. In fact, even with these great distribution gains recently, we still have less than 20% of the shelf, so more room to run even in mouthwash. Early days, the TheraBreath toothpaste launch is off to a great start. Hero consumption growth also outpaced the category, leading to share gains and remains the share leader, 2x larger than the next competitor. Hero's growth was driven by distribution expansion, strong Q1 activations led by brand ambassador Jordan Chiles on Mighty Patch Original and Mighty Shield innovation. Mighty Shield is already achieving retailer hurdle rates. Finally, Touchland.

In Q1, consumption continued to grow low double digits, but sales were impacted by a strong Q4 holiday multi-pack sell-through. Recent consumption has slowed as we lap year-ago launches. Internally, we are hard at work on integration and innovation. Turning to international. Our international business delivered organic sales growth of 3.7%, driven by our GMG and our subs. Growth was led by TheraBreath, Hero, and Batiste brands, and partially offset by lower Middle East regional sales. Of note, in April, we went live with our upgraded ERP system. Our project leader, Nicole, said it best: Our customers did not notice the transition. Thank you to the entire team. I'll close by saying that we are very pleased with our start to the year. Our brands remain strong, our portfolio is well-positioned, and our strategic actions continue to support long-term growth.

I'm proud of our Church & Dwight team as we perform well in a volatile environment. As we look forward, our TSA agreement with the VMS business is winding down, and that organizational time that has been freed up is being spent on our forward-looking growth initiatives. We're laying the groundwork for Arm & Hammer expansion, oral care growth behind TheraBreath, and international M&A. With that, I'll turn the call over to Lee for more detail on the quarter.

Thank you, Rick, and good day, everyone. Back in January, at our 2026 Investor Day, we shared an industry-leading outlook for 2026. The highlights of that outlook included organic sales growth of 3%-4% and EPS growth of 5%-8% in line with our evergreen model. As we now share results from the first quarter, we're delighted with the execution of our Church & Dwight team members across the globe. The first quarter highlights once again the many strengths of our portfolio and the team's execution capabilities. Let's jump into the details and provide you an update on our views for the year. We'll start with EPS. First quarter adjusted EPS is $0.95, up 4.4% from the prior year. $0.95 was better than our $0.92 outlook and was driven by higher volume and gross margin results.

Organic sales in Q1 were up 5% above our outlook of 3%. Organic sales are broad-based across the globe, with volume growth of 5.3%, partially offsetting a negative price in mix of 0.3%. Our organic growth was fueled by a steady stream of market-leading innovation and strong distribution wins with our commercial partners. The organic results also drove our reported revenue up to 0.2% versus our original outlook of -1% back in January. I wanna put our reported results in perspective. Due to our portfolio actions, our reported sales results would naturally be down 8%. Our organic growth of 5%, our Touchland acquisition, and some FX favorability fully closed the gap. The first quarter, fueled by volume growth, was certainly a strong start to the year.

Our first quarter adjusted margin was 46.4%, a 130 basis point increase from a year ago. Our results versus last year were driven by 150 basis points from productivity programs, 110 basis points from higher-margin acquisitions, combined with the impact of the strategic portfolio actions. 50 basis points from the combination of volume price and mix, and 10 basis points from FX. These factors offset 190 basis points of inflation and tariff costs. Let's jump to our investments in marketing. Our marketing expense as a percentage of sales was 9.5% or 20 basis points higher than the first quarter of last year. Looking forward, we're continuing to target investments at approximately 11% of net sales in line with our evergreen model.

Q1 adjusted SG&A increased 110 basis points year-over-year. As we noted in our January Investor Day, SG&A in the first half of the year is primarily growing versus last year due to the inclusion of Touchland's SG&A and amortization expense. Adjusted other expense increased by $5.2 million due to lower interest income compared to last year. In Q1, our adjusted tax rate was 20.3% compared to 21.8% in Q1 of 2025, a 150 basis point year-over-year decrease. Our expected adjusted effective tax rate for the year remains at 21.5%. Let's now turn to cash flow. We delivered strong cash results in the quarter as cash flow from operations was $174.8 million.

Our higher year-over-year cash earnings were partially offset by an increase in working capital and supported growth. Capital expenditures for the period were $31.9 million, and we continue to expect full-year capital expenditures to be approximately 2% of sales. Let's now turn to our 2026 outlook. While the macro environment remains dynamic, we remain encouraged with our path forward. The strength of our brands, our strategic portfolio actions in 2025, and our growth initiatives continue to provide us confidence. As we noted in our press release, the situation in the Middle East is fluid and is creating some incremental volume and inflationary pressure on commodities and transportations. For example, we currently are estimating $25 million-$30 million of incremental inflation pressure. Our teams across the globe are responding to these developments and are taking actions across the P&L.

As a result of our mitigating actions, we are reiterating our full year 2026 outlook. We remain on track to deliver full-year organic growth of approximately 3%-4%, and we continue to expect reported sales growth to decline approximately 1.5%-0.5% as a result of the strategic portfolio actions taken in 2025. We continue to expect full-year gross margin expansion of approximately 100 basis points versus 2025, and this outlook reflects the breadth of actions we discussed in January and the balance of incremental headwinds and actions that we've identified since the Middle East conflict began. Marketing as a percentage of sales remains at approximately 11%. SG&A as a percentage of sales will be higher than last year, reflecting the impact of the Touchland acquisition in the first half of the year and our focused growth investments.

Our adjusted EPS expectation for 2026 remains at 5%-8% growth.

If we turn to the second quarter, we expect reported sales to decline approximately 1% with organic sales growth of approximately 3%. We anticipate gross margin expansion of approximately 50 basis points, reflecting transportation cost pressures ahead of the mitigation efforts that will take effect later in the year. In the quarter, we continue to expect higher marketing in SG&A. In 2Q, the investment in marketing and higher SG&A will more than offset the gross margin expansion, resulting in an adjusted EPS of $0.88 per share for the quarter. Recall, we continue to expect flattest EPS growth in the first half of 2026. To conclude, remain confident in our 2026 outlook. We began the year with strong execution and are taking the steps to ensure continued success this year.

My final prepared remark is for the Church & Dwight Associates. Thank you for all your efforts in the first quarter, and congratulations on the robust execution. Well done. Carly, we are now ready for questions.

At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Chris Carey with Wells Fargo Securities.

Hi. Good morning, everybody.

Hi, Chris.

Rick, you mentioned that distribution gains were number one in in CPG. Not exactly sure the timing of those gains, but nevertheless, a very strong number. When you think about your Q1 delivery, you know, how important are those gains to what we're seeing today? I'm really speaking to the durability of some of the volume growth that we're seeing, you know, relative to perhaps some of the tailwinds that may have been caused by some inventory reductions in the base. I just wonder if you could contextualize the quarter as you see it, and what the Q1 means for kind of, you know, go forward top line volume-driven results. I have a follow-up.

Yeah. Sure, Chris. You know, Q1 was phenomenal organic growth, and I think more than anything, it was great to see our categories were growing around 3%, and we grew faster than that a little bit. We talked a year ago about inventory and retail inventory dynamics, and so we had a tailwind of a couple points from that as well. That's how we get to kind of five for Q1. Now, all this distribution gains, that's really just hitting now. It depends how you look at the metric. If you look at it on a kind of average basis over 13 weeks, I think it's like 7% TDP lift.

If you look at it as in more recent time, as these resets are happening in a more recent time, it's closer to 10% or 11%, which is about double what most of the CPG peers are getting. That's not just TheraBreath and Hero, that's across laundry and litter and personal care sets across the whole portfolio. We just believe that's a great tailwind to our business, and it's really a payoff of all the innovation that we're doing. Anyway, it's a tailwind as we look forward, and it gives us confidence.

Okay, great. A follow-up on Touchland, you did note that consumption slowed on year-ago, you know, activity that was strong in the base period. Can you just give us an update on how you're thinking about growth of the business, the sustainability of growth, and whether you think that it has the kind of runway to sustain perhaps double-digit growth into the back half of the year and into next year? Thanks.

Yeah, sure thing. When we look at consumption that kinda shows up for you folks, we understand it shows consumption for the quarter is down 20%. When we look at consumption that is all in, including untracked channels, we were up about 12% or 13%. There is a difference in what you see versus what the entire picture is. It has slowed, and it slowed partly because of all these holiday gift sets that go out and also because of the club class, uh, channel. Overall, we believe that we still are gonna have double-digit growth for Touchland for the full year. The good news is we have great ratings, we have low household penetration, and we're just starting now to advertise.

A lot of our activations with either collaborations or just partnerships are happening in the back half. We feel good about Touchland.

Okay. Thanks, guys.

Thanks, Chris.

Your next question is from Anna Lizzul with Bank of America.

Hi. Good morning. Thank you so much for the question.

Hi, Anna.

Your portfolio actions, I think from last year, helped drive the outperformance here in Q1. Just wondering how you're looking at the portfolio now given the changes on the VMS business and others that you have exited. Just to follow up on Touchland, if you can comment on where it's performing best in terms of the channels. Further on M&A, where are you now more focused in this more challenging consumer environment? Thanks so much.

Yeah. That's three questions. Let me see if I can remember all of them. The first one is how we're, you know, on M&A, I'm not really gonna comment. I would just say that the team is always hard at work. The leadership team spends an inordinate amount of time on looking for great businesses and brands to buy. We've gone through our criteria again and again and again, and I would say the team is hard at work. It's just not in the U.S., it's also internationally. It's not an or, it's an and that's some of the highest and best use of our time. I continue to be optimistic there.

On Touchland, I think you're asking, Hey, what channels are doing well? I would say the channels that are doing better than most are ones that aren't necessarily tracked. The club class trade did extremely well. Amazon does well. I think some of the beauty classes of trade, because of the timing of promotions and also some of the innovation doesn't look as good. Again, some of the other channels that you don't necessarily see are doing better. Your third question, Anna, just remind me what it was.

Yeah. I was just wondering, I guess, in terms of portfolio, you've exited certain, you know, categories and wondering how you're viewing the entire portfolio here based on those changes.

Yeah. I love our portfolio is the short answer. I mean, to be in a world. You know, remember, a lot of growth, a lot of categories out there are not growing or they're going backwards. We've got to choose and select our categories over many, many years as we've bought businesses. The fact that our categories grew 3% this quarter, we grew typically like we typically do faster than that, bodes well. I think when we did the portfolio decisions last year, it provides nothing but tailwinds for us as we look forward.

Okay, great. Very helpful. Thank you so much.

Your next question comes from Rupesh Parikh with Oppenheimer.

Good morning, thanks for taking my question. I guess, just going back to organic sales growth expectations, I know you typically give it by segment, just curious, updated thoughts for the year by segment, including for international.

Yeah, go ahead, Lee.

To your point, we're maintaining the outlook of 3%-4%. Similar to what we talked about back in January, we still have U.S. in kind of approximately a 3% zone. International is probably approximately 7%. It's a little bit softer because of the Middle East situation. SPD is still sitting at about 5%. Again, it's a range. U.S. hits their number. There's others that you end up in the higher end, but we'll see how it goes. It's only one quarter so far gone.

Great. My follow-up question, just as you look at the consumer out there, just curious if you're seeing any changes in consumer behavior? As you look at your portfolio historically, when you see these, you know, spikes in gas prices, do you see any parts that typically benefit?

Yeah, no, it's a good question, Rupesh. I think in my prepared remarks, this is the second quarter in a row I've said it, but I'll just reemphasize it. You know, promotional levels are up in laundry, as an example, for the category. We're hitting all-time share highs, and our promotional levels are down. All three competitors besides us are up. The value segment of laundry is growing. That is and not only do we deliver great cleaning and efficacy, but we do it at a great value, right? That is hitting the mark. Right now in this economy, I think the same concept for litter. Some of our competitors are promoting very heavily, but we are, you know, we're promoting a little bit more, but we're gaining share again and again.

For those two areas of household, products which are more, respondent to, you know, promotions and stuff, that is, a good sign.

Okay, great. Thank you.

Your next question comes from Javier Escalante with Evercore ISI.

Hey, good morning, everyone. My questions have to do with the commodity backdrop, right? I personally was expecting a more muted kind of like outlook for gross margin given all derivatives going into detergent. If you can go back and explain us, you know, your how much, you know, oil derivatives goes into your COGS. I believe that you mentioned that the impact is like $25 million-$30 million. Is that a full year number? Anything that can help us explain the gross margin, you know, expansion going into calendar 2026. I have a follow-up.

Yeah, I'll start and then Lee, if you wanna add a couple comments. It is a full year number, Javier, for that $25 million or $30 million. It's primarily, as you would expect, oil-based derivatives like diesel and resin and surfactants. That's not atypical. Remember, in any given year, we always enter a year about 60% hedged as well. All these are kind of net impacts for us. You know, hopefully, this is transitory and it's not permanent, but we have good coverage for an extended period of time, especially in the foreseeable, you know, 2026. The team is laser-focused on productivity really to offset many of these things.

Yet there will be some RGM and promotional adjustments, but it's largely productivity, and that's really been the hallmark of the company. We've transformed this place on being able to get gross productivity year after year after year. In a perfect world, if that doesn't happen, great, then we continue to spend on marketing even higher and spend that money back that we would have saved, and then it drives the top line even faster behind our innovation. Lee, any other comments you have?

Yeah. I just put it in perspective, keep in mind, we had to have about 160 basis points of inflation in the outlook back in January. You know, we got this 25%-30%, that now brings you up to, you know, 200-ish basis points. To Rick's point, you know, we have these additional offsets we're going after, this is what you see from us. You know, you saw it last year when we did our work on tariffs. You know, we got that number down to a similar number, we worked it down. You know, that's what we're doing here.

You know, I think we're in a good spot, and, you know, that's why we reiterate our outlook for the year.

A follow-up. This is very, very helpful. It's very positive. I feel that is idiosyncratic to you. In terms of, if this externality continues and commodities remain very high, would you expect then, you know, value players, say, the guys in Germany, to lead first calibrating the promotional environment and then potentially leading price increases? Is that a good assumption? Thank you.

Yeah. I think it's probably a better question for those competitors, Javier. In my kind of comments back to Rupesh for laundry, despite all these other competitors promoting a bit more in laundry, which is still kind of within the range of historical numbers, it's not crazy, but they're up, we're down, we're gaining share, the value segment's growing. That's a great position to be in because there's huge macro. When consumers are pressed at the gas tank, they want to make sure their dollar goes further. One way they can do that is they can buy Arm & Hammer laundry detergent. It's half the price of the leading detergent. And it's great efficacy, great value, and that's true not just among laundry, but many of our brands.

That's a great question. I think it's a more pertinent question for kind of the competitors.

Congrats.

Thank you.

Our next question is from Olivia Tong Cheang.

Great. Thanks. Good morning. First question, just relative to your expectations, obviously a very nice beat on the top line. Where did you see the biggest positive surprises in your view? Was it more volume? Was it more price mix? It seems pretty broad-based. I'm just kinda curious how you're thinking about that. Then I have follow-up.

Yeah. As you talked about, it's a broad-based improvement across the globe. Really the only pressure point we saw was international Middle East. You know, I got the question earlier just what do we think about for the year. We're generally the same type of view we shared back in January in terms of how we thought growth's gonna play out across the globe. That's still where we sit today, Olivia.

Yeah. It was a volume- driven beat is what I would say.

Yeah. Yeah.

Got it. As more and more business consolidates into club and online, it feels like the move online should be good for you or at least not a hindrance for you, whereas club typically keeps brand count pretty tight. Given those dynamics, how do you think about your ability to grow in these channels, whether disproportionately relative to your peer set, and then ability to sort of stand out in both club and online? Thank you.

Yeah. I would say there's no grand new strategy. We're performing really, really well online and in the club class of trade. Remember, we started in 2015 as 2% of sales. We're at 24%. We went from a laggard to a leader. We moved really quickly. You got to start even further back than that. You know, we have great brands, especially after the portfolio realignment we did. We have number one, number two brands. Consumers love them. I gave you the quote in our prepared remarks. Even our new launch for Arm & Hammer liquid laundry with the baking soda, 10X, it has a 4.9 review, wherein the average portfolio is a 4.5. That story is playing out across all categories on many of our brands.

That's the starting point. When we do that, we have to make sure we can win with the right pack sizes in the dollar class of trade, the right pack and offerings in the club channel, the right pack and offerings online. We've proven time and time again that we can move faster. That's one of our competitive advantages. Move quickly in order to give the customer what they want, where they want. We plan on trying to win not just in one class of trade, but all classes of trade.

Great. Thank you.

Your next question is from Lauren R. Lieberman with Barclays.

Hey. Great. Thanks so much. I just want to talk a little bit maybe about your perspective on the consumer's ability to absorb pricing, not necessarily in terms of how you'll deal with mitigate, you know, mitigating cost inflation. You've been pretty clear on that front. In general, I feel like a lot of companies there's a mixed bag, let's say, in how companies are factoring in the current state of the world in terms of inflation, expectations for the second half. You know, everyone seems to be treading very lightly on whether they will or whether they won't price.

I'm just curious on your perspective broadly, on the consumer's ability to absorb pricing, should that be where the industry ends up going? Thanks.

Yeah. I think that's a great question, Lauren. Our personal view is the consumer is pressed. If they were pressed three months ago or six months ago or 12 months ago, they're pressed even more today, 'cause, you know, gas costs show up immediately. When that happens, they're gonna retrench. The worst thing to do in an environment like this. We have no plans to try to price through this, you know, $25 million-$30 million offer. We're gonna go offset it with productivity. There's just no appetite out there for the consumer to bear something like this. That's our plan. I think companies who do that will be more successful than companies that don't.

Okay. Thanks so much.

Your next question comes from Steve Powers with Deutsche Bank.

Hey, thanks. Am I live?

Yep.

Okay, great. I guess building on that, to an extent, I mean, I guess two questions. You know, is there any kind of heuristic you could offer as to, you know, if we see volatility in the Middle East, we see further rises in the price of oil or more extended duration and higher cost of oil, you know, what would make that $25 million-$30 million grow, and at what pace? Like, how we can gauge external dynamics and apply it to Church & Dwight is kind of one question.

The second question that follows from that is that if that $25 million, $30 million grows over time, Rick, and you kind of run dry on the ability to kinda press incremental productivity, you know, is there different do you approach pricing across different parts of your portfolio with a different mindset? You know, when I think about value versus premium, is there more ability to push price through the premium and less on the value? Or how you think about pricing, you know, in a scenario where you're forced to kinda at least contemplate something beyond productivity?

Yeah. No, it's a fair question. We're, we're not gonna go through the detail of what does every $5 or $10 of oil translate into an impact on Church & Dwight. I think that's a little bit too nuanced. I will say, you know, my answer to Lauren was based on the question of kind of the current scenario, $25 million-$30 million. We think that's, you know, just like many things in life, we can handle something like that. If it becomes a lot more meaningful, call it $50 million or $100 million or $150 million, you know, who knows where it stops, then you have to solve a different problem with different solutions. So the first stop on the train is productivity.

The second stop on the train is RGM on promotions, that's usually through household. That's where a lot of our promotions are. The third step on the train would be pricing. You're right. Many of our premium products are extremely, you know, premium and high priced, and the consumer loves it, but you gotta do that behind innovation. As we're launching our innovations to really look with a fine-tooth comb on what the price point really should be, is also something that we would look at. You know, for today, my answer would be if it's in this range, and we all hope that it is, and we hope that it's transitory, then that's how we would solve it, through productivity.

If it becomes something else and bigger, then we have other tools in the toolkit if we need to.

Yeah. Okay. Very, very fair. I guess the only follow-up I have is that, you know, if it is transitory, and as you say, hopefully it is the productivity you're putting in place, is it, is it structural or is it more belt-tightening such that if it rolls over, maybe some of it gets reinvested, but some of it, you know, some of it just kinda backfill, you loosen the belt back up?

Yeah. I wouldn't call it belt-tightening. I would call it we kind of accelerate project. You know, we have a three-year pipeline of productivity projects, just like we have a three-year pipeline of innovation. At any given time, we can choose to fast-forward certain projects or slow down other projects, whatever we wanna do. You know, we can influence timing. If the productivity happens, but costs also continue to drop, perhaps we slow some of it back down, or we take that money and go reinvest it in marketing and build the virtuous cycle all over again.

Yeah. Okay. Fair enough. Thank you.

Your next question comes from Andrea Teixeira with JPMorgan.

Thank you for taking my question. Good morning, everyone. I was just hoping to see if you can comment a little bit, Rick, on what you said, you had some, I wouldn't say pull forward, you had an adjustment you called out for the fact that you outperformed on the organic sales growth. The comparison, I think, from a inventory dynamic from against last year. Hoping to see, we saw what you guided for the second quarter, a more aligned with the consumption you called out. Is that something to think, that 2% extra that you got in the first quarter, was more an adjustment, not a pull forward from the second quarter? That's my first question. Then, just a follow-up.

If I understood correctly, you're gonna take some, potentially some price actions to mitigate the $20 million-$30 million, I believe you called out to be the impact of the costs or the Middle East war, or you are just saying potentially you're gonna take some pricing?

Yeah. Let's take that second one first. No, I think I was super clear. The $25 million-$30 million headwind that the Middle East conflict has created in terms of higher commodity costs and inflation, we believe we can offset that with productivity. Okay? When we do that enables us to keep our outlook where it's at. The question that Steve just asked was, Well, what happens if that doubles or triples? Can you still just do that with productivity? The answer was no. With that amount, we can do with productivity. If it goes a lot higher, we would look at RGM type actions on promotions. If it goes a lot higher from there, we would look at potential pricing.

That's kind of the normal sequence of events, and I just said before, at those types of levels, the consumer is pressed, and so we don't plan on raising prices at this point. Okay. That's the.

And-

The pricing point.

Just to fine point that, like the midpoint, and I'm sorry if I missed that, the midpoint of that scenario is oil at which price? You know, what is the, what is that, 100 per barrel or is it 110? Different companies are using different assumptions on their own.

Yeah. We're using a, you know, a reasonable average of what we've seen in the last couple of weeks. Obviously, it changes daily, but it's a good safe bet. It's, you know, $95-$100 is a good base point.

Okay. Thank you, Lee.

Okay. What was your first question, Andrea?

Yeah. Sorry. To second part, but the first question was the fact that you came out as 5%.

Oh

and you did comment-

Got it. Yeah.

... the 2% benefit from potentially like inventory dynamics. Just wondering if that's gonna come out of the third or the second quarter, or it doesn't look like because you're guiding in line with category growth, but I guess, I mean, with market share gains and distribution gains, all of that.

Yeah. Just, you know, rewind the clock 12 months and remember, Q1 2025, every CPG manufacturer said, What's going on? There was a retail inventory pullback, right, because of all the-

Mm-hmm

agenda around, on tariffs and the consumer and whatnot. Everyone called out a number back then. This earnings cycle, most folks aren't talking about it as much, which is fine. We're just trying to be transparent. We called it out a year ago and we said, Hey, that means a year later, then that's worth a 2% help. We grew our business around 3% and we had that 2% help. That's 5% organic. Categories are growing well. We continue to take share. We're getting distribution gains, and that's why we gave an outlook, we think that's really strong for the full year and really solid for Q2.

Okay. That's fair. Thank you.

Our last question comes from Peter Grom with UBS.

Great. Thank you, and good morning, everyone. I was hoping to get some perspective on category growth. I think you mentioned 3%, but some of your peers have touched on growth showing signs of improvement as you move through the quarter. Can you maybe comment on what you've seen from a category standpoint exiting the quarter to date? Rick, related, you've always had a pretty good pulse on what to kind of expect from a category standpoint. Just, you know, given the many things the consumer is dealing with right now, curious how you see that evolving from here.

Yeah. Good question, Peter. You know, for us in the quarter... I just talk about our major categories. I think it's just easier to talk about our seven. We were around 3% for the quarter, three in January, three in February, closer to 3.5 in March. That bodes well. It came down a little bit in April, but we're doing extremely well in April. I would tell you, it was better than we expected. You know, when we were starting the year, we were expecting closer to maybe 2% category growth. Now this is only 90 days, but I am more enthusiastic than I was 90 days ago despite everything else that's happened in the world.

Again, not every company. You can't paint every company with the same brush. The categories really matter. Many of our categories, it's not just one category driving a 3% weighted average, it's almost all the categories are growing 2.5%, at least 2.5%-3%. That's just a great thing.

Great. Thank you so much. I'll leave it there.

There are no further questions at this time. I'll now turn the call back over to Rick Dierker for any closing remarks.

All right. Well, thank you very much. We'll talk to everybody in July.