管理層發言
Hello, everyone. Thank you for joining us, and welcome to Church & Dwight's Second Quarter 2026 Earnings Conference Call. (Operator provided instructions.) I will now hand the conference over to Mr. Rick Dierker, President and Chief Executive Officer of Church & Dwight. Please go ahead, sir.
Thank you. Good morning, everyone. Thanks for joining the call. We had a strong second quarter and first half. I want to start by thanking all of our Church & Dwight employees around the world for executing so well in a challenging environment. I'll begin with some thoughts on the broader environment and then a review of our Q2 results, and 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. However, our categories are growing ahead of our original expectations, and Church & Dwight is growing even faster. Consumer spending remains resilient. Our teams are executing with excellence, and we remain focused on offering high-quality, solution-oriented products to consumers at the right value. Our brands continue to perform exceptionally well, driving a second straight quarter of industry-leading organic sales growth. Turning to the quarter. Net sales increased 1.6%, which was ahead of our outlook, and organic sales grew 5.8%, almost 6%, well above our 3% outlook. This growth was broad-based across all three divisions and was primarily driven by volume growth of 4.3% and positive price/mix of 1.5%. Adjusted gross margin was 45.4%, up 40 basis points, and adjusted EPS was $0.89, above our $0.88 outlook. Overall, this is a great result. With the first half of the year behind us, it gives us great confidence to raise our sales, EPS and cash flow outlook for the full year. In Q2, we also completed the acquisition of the fast-growing MISS MOUTH's brand, the number one stain remover brand on Amazon. We're encouraged by the strong initial sales results from the brand since the June acquisition, and I'm especially excited about the growth opportunities for MISS MOUTH's over the next 12 to 18 months. In the second quarter, MISS MOUTH's consumption grew over 50% and gained almost 3.5 share points. We think this is just the beginning as household penetration for the brand is currently just 2.5% compared to the category, which is 50%. Additionally, ACV for MISS MOUTH's is only 35% compared to 80% for the category, which again indicates plenty of room to expand distribution. Innovation and distribution gains remain a significant competitive advantage for Church & Dwight and were a major contributor to our industry-leading growth. We're confident that our relentless focus on innovation will continue to drive strong growth, distribution gains at shelf and market share expansion. New product launches this year are expected to account for about half of our organic growth as we innovate in key categories across the portfolio. Consumption across our largest categories grew 2.7% in the second quarter, which exceeded our category growth expectations of around 2%. Now I'll turn my comments to each of the three divisions. First up is the U.S. business. Domestic organic sales increased 5.1% with sustained growth in both our household and personal care portfolios. Growth was driven by volume and favorable price/mix with strong performance from THERABREATH mouthwash and toothpaste, HERO, ARM & HAMMER cat litter and ZICAM. The ARM & HAMMER brand had another quarter of growth with laundry maintaining record shares across total laundry. ARM & HAMMER laundry detergent consumption and category consumption grew about 1% in the quarter despite a step-up in competitor promotions and a lower level for ARM & HAMMER. The value segment of laundry continues to grow. Next up is litter, which had continued fantastic results as ARM & HAMMER cat litter consumption grew a robust 7.5% and share increased 0.8 points to reach 24.5%. While category promotional levels declined slightly, they remain at historically high levels. ARM & HAMMER cat litter launched Dual Defense with Microban Clumping Litter earlier this year, and that launch continues to do very well. HERO and THERABREATH continue to contribute considerably to overall performance. THERABREATH achieved another quarter of record share gains, jumping 4.5 points to 25.3% share and further solidified our number two position in total mouthwash. Even with that growth, household penetration remains relatively low at only 14% compared to the mouthwash category of 65%. Our THERABREATH toothpaste launch continues to perform well, and it's still early in the launch. It's off to a great start with a one point share in total toothpaste despite only just fully entering brick-and-mortar in the last several months. HERO consumption outpaced the patch category, and with the cleanser launch just starting now, we're confident in HERO continuing to gain share in total acne. Facial cleansers represent a $650 million category and account for approximately 30% of the total acne category, so there is lots of runway as HERO has relatively low household penetration at 10% compared to the category of 30%, which gives us confidence in the continued growth of this brand. For TOUCHLAND, sales grew in the second quarter and with back-half-weighted innovation, new collaborations and activations, we expect continued sales growth in the second half of the year. Looking further ahead, our international expansion, our innovation in new categories and future distribution opportunities continue to give us confidence in this brand as we look to 2027. Global e-commerce was once again a strong contributor. Global e-commerce grew 22.7% in the second quarter and global online sales now represent 25.5% of total consumer sales. Turning to international. Q2 was another great success with our international business delivering organic sales growth of 9.1%, driven by higher volume and favorable price/mix. Our great international brands are leading to share gains and growth that outpaced local countries' GDP. In addition, our recent U.S. acquisitions are paying dividends across the world in a big way, where brands like HERO and THERABREATH are driving outsized growth. Our ability to scale brands to so many countries so quickly is getting better and better. Overall, our international team is executing very well. Our Specialty Products division also performed well, with organic sales growth of 2.8% due to a combination of higher volume and higher price and product mix. I'll close by saying that we were very pleased with a great first half. The benefits of our strategic actions in 2025 are enabling greater focus on our growth initiatives. I am especially pleased with the time the entire organization is spending focused on the future. Momentum is building. The category work surrounding ARM & HAMMER, our acceleration plans for oral care behind THERABREATH, and the pipeline for M&A within the international business are just a few examples. I'll provide a detailed update in early 2027, but I will say I'm more optimistic about the future than I've ever been. I'm also very proud of our Church & Dwight team as we continue to execute well in a volatile environment. With that, I'll turn the call over to Lee for more detail on the quarter.
Thank you, Rick, and good day, everyone. We appreciate you joining the call. As we now enter the second half of the year, we are encouraged with the results fueled by innovation and share growth, which provides us the momentum to deliver strong Church & Dwight Evergreen model results. The second quarter demonstrates the strength of our portfolio of categories, our leading levels of innovation and the execution capabilities of our teams around the globe. Similar to Rick, I also want to recognize our teams across the globe for their focus and execution this past quarter, very well done. Let's get into the details. We'll start with EPS. Second quarter adjusted EPS was $0.89, exceeding our outlook of $0.88. Stronger-than-expected sales and continued gross margin improvement fueled our results and enabled increased investments in our brands. Organic sales in the second quarter grew 5.8%, well above our outlook of approximately 3%. And growth was broad-based across the business and primarily volume-driven with volume growth of 4.3% and positive pricing and mix of 1.5%. Our power brands once again gained share, fueled by well-received innovation and our robust distribution wins with our commercial partners. Strong organic growth and the contributions from our acquisitions more than offset the impact of our 2025 business exits and led to reported net sales growth of a positive 1.6% in the quarter, ahead of our expectations. Let's now turn to gross margin. Our second quarter adjusted gross margin was 45.4%, an increase of 40 basis points versus last year. Our results were driven by 150 basis points from productivity programs, 110 basis points from our higher-margin acquisitions, combined with the impact of our successful portfolio actions and 180 basis points from the combination of volume, price and mix. These factors offset the headwinds from inflation, tariffs and transportation of 400 basis points. We continue to invest in our brands in the second quarter as marketing expense was $165 million, up $8.2 million or 40 basis points versus last year. And similar to our strategy in past quarters, when our sales and gross margin results exceed our original expectations, we will utilize those opportunities to invest in our brands. Adjusted SG&A was $241.4 million or 15.8% of net sales, a 220 basis point increase versus the prior year. As we've noted in our 2026 outlook, SG&A in the first half of the year is primarily growing to the inclusion of TOUCHLAND's SG&A and amortization expense. Adjusted other expense increased by $9.2 million due to the lower interest income compared to last year. Let's now turn to cash flow. Cash flow remains a significant strength of the company. And for the first 6 months of 2026, cash from operations was $462 million, an increase of 10.8% versus the prior year as we delivered improved cash earnings and executed disciplined working capital results. Capital expenditures were $61.8 million in the first half, and we continue to expect full year capital expenditures of approximately $130 million or roughly 2% of sales. Let's now turn our outlook to the outlook for 2026. And as detailed in our press release this morning, we are increasing our sales, earnings per share and cash flow outlook despite the challenging macro environment. This improvement reflects the strength of our operating fundamentals, which is led by volume-based organic growth, steady market share gains and management's focus on gross margin expansion. Our outlook continues to reflect the impact of transitory cost pressures that developed over the past 100 days. Our latest outlook of approximately $30 million reflects raw materials, transportation costs and various premiums resulting from the conflict in the Middle East. And this outlook assumes a crude oil price of approximately $90 a barrel. Our teams have acted to fully mitigate this headwind this year through increased productivity. And separately, on a positive note, we expect to receive approximately $15 million of Phase 2 tariff refund benefits during the second half of 2026. We will invest these proceeds in primarily consumer-facing business activities. We are raising our full year organic sales outlook to approximately 4% to 5%, up from the prior outlook of 3% to 4%. The improved outlook reflects the strong first half execution and the continued momentum across the portfolio during the second half of 2026. And we now expect adjusted gross margin expansion of approximately 100 to 120 basis points for the year. And marketing investment is now expected to be at or above 11% of sales as we invest behind our brands and continue supporting our growth initiatives. We are raising our adjusted EPS outlook to a growth rate of 6% to 8% versus our prior expectation of 5% to 8%. And we also now expect cash from operations of approximately $1.175 billion, up from $1.15 billion. And turning to the third quarter, we expect organic sales growth of approximately 3% and adjusted EPS of approximately $0.89 per share, representing approximately 10% growth versus the prior year, while we also invested approximately 12% rate of marketing as a percentage of sales. So to conclude, we are very pleased with our first half performance and are confident in our ability to deliver our improved outlook for the balance of 2026. Our portfolio remains strong. Our brands continue to gain share, and our teams are executing well in a dynamic environment. Operator, we are now ready for questions.
分析師問答
(Operator provided instructions.) Your first question from the line of Rupesh Parikh with Oppenheimer.
Also congrats on a nice quarter. So just going back to the organic sales growth delivery for the quarter. Just curious, at a high level, what are some of the areas that drove the significant upside that we saw on that line item?
Yes. Thanks, Rupesh. The good news is it was pretty broad-based. But as we said in the release, I think THERABREATH, cat litter, I would say ARM & HAMMER laundry was kind of flattish. Anything else you would add, Lee?
Sure. I think as Rick said, it's pretty broad-based, home care, personal care across the globe, really good to see international at 9% as well, and that was pretty broad-based across both Europe and Asia and Latin America as well.
Okay. Great. And then my follow-up question, just on the MISS MOUTH acquisition. It sounds like very strong consumption that you are seeing right now. But as we look out over the next couple of years, I know you talked about this business growing double digits; can you give any more granularity on the types of growth rates you expect for the business?
Yes. I think it's a little early to do that. We just bought it in early June. I would say a lot of work is going on to integrate and then accelerate this business. And I don't think we've been more excited about an acquisition in a long time. There's five individuals that came over. They've fit right into our fabric care business. We know fabric care really, really well. And retailers, our internal sales force are clamoring for this brand. And so it's already at a 13% share at a major retailer, and it's only been there for a few months as one example. But I'd just go back to household penetration is 3%, it's 50% for the category. Probably the right time to talk about our North Star on growth ambitions is probably early 2027, but we think there's a lot of enthusiasm around this map.
Your next question comes from the line of Anna Lizzul with Bank of America.
I was wondering if you could comment on the success you're seeing across ARM & HAMMER laundry. I wanted to follow up on the fact that you mentioned in the beginning of this year where you surpassed Tide Original on wash load volumes. And where are you seeing now the share gains for ARM & HAMMER across the value, mid-tier and premium tiers? And then on the premium side for the brands, you touched on TOUCHLAND earlier in the call and the expansion to toothpaste with the rollout. I wanted to see how you're thinking about this specific expansion as we move forward this year.
Yes. And on your second one, are you talking about THERABREATH or are you talking about TOUCHLAND? (Anna Lizzul: Sorry, THERABREATH, you're right.) Yes. Okay. Well, on laundry, look, laundry, in general, the good news or really the great news is despite a significant increase in promotion, I'd say we're back to historical levels of promotion in laundry. The category was up 200 basis points. Henkel was up 1,100 basis points and Procter was up almost 200 basis points as well. Church & Dwight was down 300 basis points on promotion. And so despite that, the value segment grew, and we maintained our share. So just the world we live in these days, ARM & HAMMER is just so well positioned for growth. There's a lot of couponing that happens off of the channel as well, and our competitors are spending on couponing, of course, as well. So ARM & HAMMER to hold share in an environment like that is fantastic. We, over time, will make sure that we're at historical levels of promotion as well. So a lot of optimism on ARM & HAMMER laundry, especially behind our innovations, like we have a good, better, best strategy, and I'd say each of those tiers within laundry are doing well. Even our sheets, as Tide Evo launches and takes shelf space and money behind it, we're the #2 player in the sheet space. So our sheets are up 30% as well, and we're going along for the ride, which is great. So that's on ARM & HAMMER laundry. On THERABREATH, I would say, again, #2 mouthwash, lots of runway. Consumption grew 20% plus. We grew 4.5 share points to 25%. We're less than 1,000 basis points from the market leader who's LISTERINE. Our household penetration is still relatively low at 14% compared to the category at 65%. That is enabling us to go into other parts of oral care like toothpaste. Because of the success of the mouthwash, we got some great shelf space. And as a result, we have a great brand with a great value proposition on fresh breath and cleaning, and it's doing extremely well, and it's already at 1 share point. So I couldn't be more optimistic about our oral care franchise behind THERABREATH.
Your next question comes from the line of Chris Carey with Wells Fargo Securities.
Chris, you might be on mute.
Can you hear me? How about now?
Yes. We can hear you.
Okay. Great. Sorry about that. I wanted to start with the oral care portfolio, specifically the THERABREATH rollout. You said you're getting more than your fair share out of the gates. I was wondering how you think you're tracking relative to the ambitions you outlined at Investor Day; I think it was an incremental $0.5 billion. Do you feel like you're starting out stronger than expected? Was the shipment for that launch a bit stronger in the quarter than you anticipated? I was surprised you didn't call out some of the key drivers of organic sales. Is that something we should be mindful of going forward given the quite robust personal care implied organic sales number this quarter? I have a follow-up.
Yes. THERABREATH pace is off to a good start is what I would say. And it's meeting or slightly beating our expectations. I think there's a lot of great conversations in the works with additional retailers to get behind it, which is fantastic. Those conversations are easier when you have a THERABREATH mouthwash brand and business that's just, again, growing so fantastically well. So yes, I mean, for the quarter, THERABREATH pace was a contributor to net sales for sure. Did it overdeliver a little bit, maybe some. What was the other part of the question, Chris?
I think that was about it. It's starting stronger than you expected. It's early days, and it was a bit of a contributor, a bit more than expected in Q2, if I heard all that correctly. Just interrupt me if...
Yes. You really had asked in terms of the growth initiatives, like it's kind of early to talk about how it's doing first the growth initiatives. But it is laying the groundwork, not just in oral care but all the ARM & HAMMER stuff, too. But that groundwork and the momentum that we're starting to build is fantastic.
Okay. The second question is, I think this is one of the highest inflation numbers that we've seen over the past 4 years or so. How quickly did that develop for you? Was that freight and logistics inflation that happened quicker than you anticipated? And should we be expecting about that kind of number as we go through the rest of the year? Or was that Q2 more of an anomaly? And I'm also struck just by a bit stronger price mix contribution to both top line and gross margin. Is there a bit of a step change in thinking about how you're going to be covering inflation this year with pricing? Or is there a bit of a mix dynamic in that number as well?
Chris, so keep in mind, when we talked about the $25 million to $30 million of kind of Middle East derived inflation, our outlook in 2Q said it was going to be higher in 2Q. There is some transportation costs that were going to happen right away and then you get time to respond to it. Our productivity issues that we kicked off accelerated to mitigate that. We definitely would be more back half. So it's a combination of two things. That number should drop down because there's just some anomalies in the second quarter. And then we have essentially more productivity in the back half. So we have this outlook of 100 to 120 basis points of gross margin improvement. You can see where we are halfway through the year. That implies that gross margin will expand over 100 basis points in the back half of the year. On the price volume mix, that's a good number. Obviously, we always say never overreact to one quarter. The first quarter was just slightly negative. Our mindset is to drive volume growth, and we do drive positive mix. That's part of our algorithm. And then a reminder, this year, we do have the benefit of the portfolio actions that help as well, and that will be a benefit all year.
And I'd probably say in the quarter, when we don't spend as much on promotion on laundry, that helps year-over-year a little bit on the price side of it, too.
Your next question comes from the line of Bonnie Herzog with Goldman Sachs.
I just had a question on your improved outlook for the year. You took up your top line growth guidance by 1 point and now expect higher gross margins. And while you did raise the lower end of your EPS growth guidance, you did keep the high end of the range. So I wanted to understand the drivers of that and maybe how much further you plan to step up reinvestments to drive sustainable top line growth ahead? Also, if you could provide some examples of these investments and any changes you might be making to your strategy given the pressured macro environment would be helpful.
Thanks, Bonnie. That's a good question. I would say, look back at our track record over the last 1, 3, 5 and 10 years. When we feel we're over-delivering and performing well against our expectations and the industry, we tend to reinvest. We could, in theory, beat earnings and EPS in any one year, but we choose to spend more on marketing and other investments. We want to keep the flywheel turning, ensure the virtuous cycle continues, keep gaining share and shelf space, and support the innovations we're launching. Beyond marketing, we've also started to invest in AI, and we have initiatives in place that we'll pull forward so we can scale faster. One of our core competencies and competitive advantages is our speed and agility, so we're going to try to adopt and adapt faster than most people.
Your next question comes from the line of Peter Grom with UBS.
So you mentioned that consumption in your largest categories, I think, grew 2.7% in the quarter, above your expectation for 2%. So obviously, a lot of moving pieces within the quarter itself. So kind of curious if you could speak to what you saw throughout the quarter and maybe more specifically the exit rate? And just kind of as you think about the back half of the year, what are you embedding in terms of category growth?
The short answer is we're still assuming around 2% for category growth. We continue to do better than that, as you saw in the last couple of quarters. I think that's a good, general walking-around number for a while. Our monthly consumption numbers in Q2 were fantastic. June was also good, with the exception of laundry, where we didn't repeat some promotions. Sometimes we choose to do that. We also had a club promotion we didn't run in the quarter. So I would say we achieved that strong growth with a flattish impact from one of our larger businesses. Again, consumption is going really well. Shares are doing really well. It's broad-based, which ties back to my earlier answer to Rupesh's question. There are a lot of things going right. This is the right time for us as a company, especially because we're not distracted by businesses we've sold. Peter, we have the time to focus on the future, and we're laying the groundwork for the three growth initiatives we've discussed repeatedly. A lot of internal time is being spent on the future right now.
That makes sense. And then, Rick, you mentioned we're going to get some more color at a later date, but you did say that you were more optimistic than ever. And I guess just looking at the guidance and the fourth quarter implied exit rate would suggest some pretty nice momentum heading into next year. So maybe putting that all together, can you maybe just discuss why you are as optimistic as you've ever been and maybe what that means as it pertains to top and bottom line growth?
I don't know if it's good to talk about top and bottom line growth yet, but I'll tell you like we're doing all this category work around ARM & HAMMER. We're getting real consumer feedback. We're getting real good buy-in from some retailers on the ideas. We're making great progress on how and why they have a reason for being and have a right to win in a certain category. It's obvious why we're happy about THERABREATH and its success. And meanwhile, internationally, that brand, along with HERO is really developing a business of tens of millions of dollars. So there's good global expansion going on. And then the third growth initiative was really international growth. And a piece of that is international M&A. And we've been talking a lot over the past few years about, hey, we have people here now. We have a process here now, but it's starting to go from theoretical to practical. And we filtered through 100 deals over the last 6 to 12 months now internationally. And so we're being as picky and as fussy as we always would be with any deal. But now we're starting to see the deal flow, which is great. So those are some examples.
Your next question comes from the line of Olivia Tong with Raymond James.
Regarding the competitive backdrop, you mentioned the promotional environment. Everyone is obviously talking about their various investments in affordability. I realize this isn't new to you, though, perhaps there are more tools out there now, whether it's leveraging retail relationships, AI and other tools. So to the extent that your competitors continue to invest in some of the affordability initiatives that they're pushing, can you provide a little bit more in terms of how you think about combating those, particularly if they start to continue to increase?
I think that's a fair question, Olivia. I'd point to our track record over the last decade or two in how we compete in household. We have a strong ability to do that. Sometimes it's trade promotion, but usually it's innovation—getting the price, pack architecture and sizing right. We aim to deliver high quality at a value price for the consumer, and our brands naturally sit at that intersection. That means competitors have to work much harder than we do because we already occupy those positions.
Got it. And then on MISS MOUTH's, sort of similar to HERO, THERABREATH, TOUCHLAND, I know it's early days, but what do you think MISS MOUTH's can bring to you in terms of discussions with new retailers, new categories, geographic opportunities as you sort of assess the ability to grow that business beyond where it sits right now?
Yes, it has the ability to do all of that. When you have a brand that's driving category growth, it's driving usage occasions, it's driving new consumers and young consumers into the category. It has a magic moment. It's actually not even the same consumer as OXICLEAN. OXICLEAN is a little bit more broader based, but MISS MOUTH's is really higher end and just a great see something, do something in terms of the stain. It is additive for every retail conversation that we have, and we're working hard to not just do current capacity, but also what the future of that brand and where it has the right to go because it's going to continue to broaden on forms and maybe even adjacencies.
Your next question comes from the line of Steve Powers with Deutsche Bank.
To start, year-to-date, Rick, the consumption you described, the results you put up of around 5% volumetric shipments for the total company and even in the consumer domestic business, how does that compare to your views on consumption year-to-date? How does that inform your thinking for the back half? Also, it sounds like you made some choices this quarter that benefited the price/mix line and seem unique to the quarter. As we look forward, should we expect a return to a more full promotional stance in the back half?
I would say consumption and our organic, there is no real disconnect. It's around 5% or so on both. So there's great momentum that we experienced in the first half. In the second half, we expect a lot of that to continue. I think even like we pulled the data on a two-year stack as an example. And the two-year stack for organic growth is 5% in the first half and 6% in the second half. So again, just really broad-based more than just one thing going on as a tailwind for the company. And you're right, I kind of referenced a little bit maybe a bit of a pullback in promotion that we had. I wouldn't even say a pullback. I'd say we were at a certain level and there was an acceleration by other competitors. So I don't know about a year-over-year change from a price mix perspective, but a little bit from help from laundry. But there are other things happening in the portfolio. As we have these higher-margin products like THERABREATH or like HERO or even like MISS MOUTH's, as they continue to grow, that's going to be a favorable flow on mix.
I think Rick said it well. We focus on volume growth. If you look at our history on price/mix, it's neutral to positive. It's just a little bit slightly higher in the second quarter. Some of that's a little bit year-over-year. As we look forward, that's going to be the equation. It's going to be volume driven. And we'll benefit from the things Rick talked about, the way we're positioned. We will do what we do on discounting, but we don't have to do as much as the others do.
Perfect. Perfect. And then, Rick, I was hoping you could talk a little bit more about international M&A. As you said, you've been talking about it for a while. It seems from the way you're talking about it now that the excitement and anticipation are building. But I guess, as you've gone along, have you learned anything about where it's harder or easier? Any perspective on the opportunities you see today versus when you first set out to focus on this initiative?
We had been working on it for a little while, and it was all about people and structure. It wasn't a bad approach, but initially we added M&A people and a person in Europe, for example, and it was a little bit disconnected from the management teams. It was almost like a center of excellence on M&A. About six to eight months ago we changed that approach and said the management teams are responsible and the M&A person supports them. All of a sudden the international management teams—the country director and his or her staff in Australia, the same in Southeast Asia, the same in Latin America—have the right and the obligation to go look not just at what they hear from bankers as our M&A contact, but at where they want to go and what brands they'd like to look at. Making it their objective and having them own it was the unlock for us. Our M&A team is enabling and helping, and I think we've gone from first to third gear since we did that.
Your next question comes from the line of Lauren Lieberman with Barclays.
So I had two questions. First was at the risk of being redundant because I got a little bit confused on the way on Chris' question and the answer, which is the gross margin this quarter. I know you gave the bridge. But in total, it did come in below your expectations. And there wasn't a huge change on the inflation guide as you guys pointed out. So just curious on the slight shortfall in gross margins this quarter. And then my second question was just about how TOUCHLAND is trending. It's going to slide into organic sales going forward from here. So I just wanted to get an update on that brand.
All right. So I'll take the first question. Just to answer the question. We had just slightly higher transportation costs in the second quarter, even a little bit higher than we thought. But as we talked about for the year, we're still at $30 million. So same type of impact.
And then on TOUCHLAND, my comments were really we had sales growth in the second quarter. We have a lot of back half weighted innovation, new collaborations with other brands and some activations up and down the channel. We expect sales growth in the second half of the year. And then we have a lot of work going on in innovation into another category or two and some other distribution opportunities, plus international expansion. I think that's a muscle that we've built really well with some of these brands now. It takes a little bit from a regulatory perspective, but that's going to start hitting in 2027 as well. So that should be a tailwind.
Your next question comes from the line of Javier Escalante with Evercore ISI.
I guess the punchline in laundry is that ARM & HAMMER is holding share without promoting or promoting less and while the others promote. But I don't know whether I heard this correctly because it sounded like a big number. But did you say that Henkel increased promotional activity by how much?
Yes, I said it's 1,100 basis points.
Okay. So that's high. So what does that mean right now given how the oil is trending? Have you seen any change given that the category is so slow? Can you clarify that a little bit?
I think I said last quarter, like when commodities are high and they stay high for a while, what tends to happen? Promotion tends to kind of dial back a bit. That is not what happened this past quarter. My belief is a lot of people got tariff refunds and they're spending it back and trying to drive volume. The good news for us is, again, ARM & HAMMER is at that intersection of value and just quality, and we don't need to promote as much in order to hit that kind of price point. And so we held share, which is fantastic. And as we increase promotion a little bit at historical levels, of course, I tend to think that we're going to continue to do what we've done for the last 15, 20 years is gain share in ARM & HAMMER year after year.
And my second one is in cat litter, continue doing really well. You mentioned in Q1 that you got the strongest TDP growth in HPC, and we are seeing it. So any heading into back-to-school, any change in distribution, particularly in this business, if you can comment on that?
Litter is doing extremely well. To have 7.5% consumption growth and almost a full share point gained is great. And we're doing that the right way. We're doing that the way we've always done it, which is innovation. ARM & HAMMER cat litter is just known for innovation. Our new one this year on DUAL DEFENSE with Microban is a great example of that. And some competitors are spending a lot. We're within historical levels, and we're doing all the right things. And we've talked before about some of the attributes of why ARM & HAMMER does so well. We have the orange box, we have the black box. We have premium value. So just again, litter is doing great.
Your next question comes from the line of Robert Moskow with TD Cowen.
One of the many positive surprises here is there's no mention of retailers reducing inventory in your categories. So my first question is, how do you think you dodge that bullet? Do you think it's because of the categories? Or do you think it's just because you, in particular, have the right inventory levels? And then I had another question on TOUCHLAND. You mentioned that it grew, but there's not a lot of commentary on how much it grew. Is the pace of growth decelerating compared to first quarter? Can you be more specific for us?
If you look back at all of our transcripts probably for the last 10 or 15 years, we've talked about retail inventory maybe two or three times, and two of those times were earlier in 2025. There's always dynamics that are happening with retail inventory, but we never believe they are impactful enough for us to comment on or something that we can't overcome. So there's, I would say, some movements, but overall immaterial. On TOUCHLAND, the business is growing and our outlook for that is probably high single digits these days. But again, we're really comforted by the fact that we have this great innovation lineup. We have this great collab lineup coming, a lot of the support that we have in the back half with displays from these retailers. So TOUCHLAND continues to be something we're optimistic about.
Your next question comes from the line of Filippo Falorni with Citi.
I wanted to ask about the international business. Solid performance there. It's now like continue to deliver on pretty tougher comparisons. Maybe can you give us a sense of what regions are driving the growth there? Where are you seeing the strength? And then the second part of the question, as you think about the opportunity for some of the recent acquisitions like THERABREATH, HERO, TOUCHLAND, how much more opportunity do you see for expansion of those brands internationally?
I'll take the brand one, and then I'll let Lee talk about kind of the countries and the regions. We are still in early innings for THERABREATH and HERO and very early for TOUCHLAND. I think we're hitting #1 share positions in many, many countries all over the world. We have great retailer discussions about how we're growing the acne category with HERO. And of course, the mouthwash rollout is a little bit slower than the acne rollout, but they're both doing extremely well. And once they get in market, these brands, because they are a problem solution, because consumers can see them working because they're premium brands for retail, they're driving category growth. Once they're in market, it starts to become kind of a virtuous cycle.
Certainly, HERO, THERABREATH, BATISTE is a great driver in the quarter for us. And then if you think about that, taking those across the globe. That's what we do really well. So you ask like which part is doing well. Quite frankly, very broadly, Europe, for example, Europe, as economy wants to be slower, we're growing at the levels you see at the total level here, doing really well in Asia and Latin America as well. So we said this in the first quarter. First quarter had a little bit of impact in the Middle East. You take it out, it was growing towards mid- to high single digits. The outlook for the business is to be high single digits. That's what it is in the evergreen model, and it was great to see another strong quarter from them.
Your next question comes from the line of Andrea Teixeira with JPMorgan.
I just wanted to go back to what you mentioned about TDPs, Rick, in one of the categories. Could you explore the TDPs on the laundry side and how we're cycling them? You said you're not engaging and your promo levels are below, yet you're still gaining share. I'm curious about volume, specifically volume share, and how to think about TDPs for laundry and for the U.S. for the remainder of the year. When you're cycling that, do you see some of the TDP growth moving into next year, or will some of it cycle in the third quarter?
Remember, last quarter, we talked about our industry-leading TDP growth. It was around 11% or 12%, and most of the industry average was at 5% or 6%. So we were double what most people were getting. At the time, when we talked about TDP growth, I said it was very broad-based. It was across brands and across channels, and that was entirely true. So I think laundry, I don't have it in front of me, but I would guess it was high single digits for ARM & HAMMER. So that all was kind of towards the front part of the year. So it takes a while for that to reset. But so that's into next year is what I would say all those TDP results help with.
Your next question comes from the line of Edward Lewis with Rothschild.
Just a couple from me, please, Rick and Lee. Just on BATISTE, I guess one of your power brands is a bit of a tricky 2025 here in the U.S. and you called out strength in international. But I just wondered how things are going in the U.S. for BATISTE. Is it a category challenge you're facing there? Or is it more of a brand challenge? And then I think you went live on the ERP, didn't you in April. And looking back at what sort of you talked about or in the Investor Day, you talked about it being an engine of growth in the future, at least for aided there who implementing it. And I just wonder, Rick, as the clear optimism you feel about the outlook for the business, how much does this new sort of upgraded ERP sort of feed into that optimism?
For BATISTE, it's really a tale of two cities. BATISTE's international business is doing phenomenally well, growing in the double digits. It's one of the main drivers of growth alongside THERABREATH and HERO, supported by innovation and the right pricing strategy. Our international BATISTE business is doing extremely well. BATISTE in the U.S. is growing, but a little short of the category. The category grew 5.5% while we grew closer to 2% in consumption, so we lost about 1.4 share points, compared with losses of roughly 4 to 5 points in prior quarters. We are making great headway on BATISTE. I've seen the inflection and I'm not worried about BATISTE. We have a strong set of actions already in market or planned for late this year and early next year around sizes, offerings, and price-pack architecture. We have great innovation queued up and a lot of confidence in the BATISTE brand, so it's not something I worry about long term. The ERP system is an underappreciated fact: we have a North American ERP platform that enables us to integrate acquisitions flawlessly and seamlessly. To give you a real-life example, we closed on Miss Mouth around June 1 and will be fully integrated by the end of August. That is lightning fast even for us, and that capability is a significant advantage.
Your last question comes from the line of Kevin Grundy with BNP Paribas.
Two questions for me, Rick, related to the pricing environment, where it would certainly seem like the cost environment and cost inflation we're seeing would justify additional pricing. So a lot of discussion about brand strength broadly from Church and from some of your peers, but it doesn't seem like in certain cases, that the industry is looking at pricing as a lever to offset the cost inflation where there's a clear justification for that. Like for Procter, it's a more premium portfolio than you, Clorox, sort of well documented what's going on from a market share perspective. So I'm just trying to square some of the brand strength discussion and what would certainly appear to be a clear cost justification for additional pricing in this backdrop of a softer consumer environment, particularly in household products and some of the decisions not to take additional price. And what's different in the current environment versus past where the industry seems more inclined to move on price. So just your thoughts there, Rick, on retailers' openness for additional price in your portfolio, how you're thinking about it for Church and what you've included in your outlook?
Thanks, Kevin. My answer is largely the same as last quarter. Consumers are under pressure, and we see that in higher-than-normal elasticities when products go on promotion. Our job is to help offset that. As we said last quarter, we are addressing this through productivity, and we've worked hard and largely achieved that. We also said that if productivity weren't enough and inflation stayed higher for longer, we would consider pricing, and that remains true. We believe and hope the higher inflation environment isn't permanent. In the meantime we are combating it with productivity and by optimizing trade and promotions, and so far we are winning. For example, our gross margin has expanded while many peers are seeing margin declines. Historically, promotional levels ease when inflation hits, but that's not happening now. I think many retailers are passing tariff rebates to other manufacturers and competing them away. That will need to play out a bit, but we are in a great position to win either way.
There are no further questions at this time. I will now turn the call back to Mr. Rick Dierker for closing remarks.
Okay. Thanks, everyone. Looking forward to talking again in the third quarter. And meanwhile, have a great rest of the summer. Bye.
This concludes today's call. Thank you for attending. You may now disconnect.