Church & Dwight Co (NYSE:CHD) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Church & Dwight Co reported strong Q3 2026 results, with net sales increasing by 1% against a predicted decline, and organic sales growth of 5.1%, driven by volume growth and positive pricing.
The company experienced growth across all divisions, with significant contributions from power brands such as Arm & Hammer and TheraBreath, and international sales growing 7.8% organically.
Gross margin improved by 170 basis points to 46.8%, and adjusted EPS rose by 13.6% to $0.92, exceeding expectations.
Strategic initiatives included continued innovation, expansion in international markets, and a focus on high-growth categories like oral care.
2026 guidance was raised, with expectations of 5% organic sales growth, and the company anticipates continued momentum into 2027.
Management highlighted ongoing productivity improvements and effective cost management amidst inflationary pressures.
A new $1 billion share repurchase program was announced, reflecting a disciplined approach to capital allocation and confidence in future performance.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen, and welcome to the Church & Dwight Co third 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, 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 Durker, President and Chief Executive Officer of Church & Dwight Co. Please go ahead, sir.
Lee McChesney (Chief Financial Officer)
All right, well thank you, Rick, and good day, everyone. We appreciate you joining the call. As Rick just shared, our teams delivered another strong quarter in 2026. Against the backdrop of ongoing industry headwinds and uncertainty, our team has delivered three-quarters of 5%+ profitable organic growth. A big thank you to our team members and all of our retail and distribution partners for driving growth. Really well done. So let’s get into the details.
We’ll start with EPS. Third quarter adjusted EPS was $0.92, an increase of 13.6% versus last year, and it was above our outlook of $0.89. Stronger-than-expected sales and continued gross margin expansion fueled the earnings growth, enabled healthy levels of marketing, and supported our SG&A investments. Organic sales in the third quarter grew 5.1%, well above our outlook of approximately 3%. Growth was broad-based and primarily volume-driven, with volume growth of 4.6% and positive price and mix of 0.5%.
Our consumer domestic business organic sales increased 4.4%. Our consumer international business increased 7.8%, and our specialty products business increased 5%. This steady and broad-based growth continues to demonstrate the strength of our portfolio of categories, our innovation that drives true incremental growth, and the execution mindset of our commercial teams. Let’s now turn to gross margin. Our third quarter gross margin increased to 46.8%, an increase of 170 basis points versus last year. Productivity delivered 150 basis points. Our acquisition mix and portfolio actions drove 160 basis points, and 40 basis points was a combination of volume, price, mix, and FX. These positive contributions were partially offset by the headwinds from inflation and transportation costs of 180 basis points. And this quarter our marketing investment levels reached 11.9% of sales as we continue to invest behind our brands and new products.
Adjusted SG&A was $261 million, or 16.3% of net sales, an increase of 110 basis points versus last year. The increase reflects acquisition-related amortization and our SG&A investments in international, e-commerce, and AI capability building. Adjusted income from operations increased $27 million, or 18.1%, to $298 million, reflecting our strong profitable growth results. Let’s now turn to cash flow. Cash from operations for the first nine months of 2026 was $841 million, which drove a healthy cash flow conversion of 114%. Capital expenditures totaled $92 million through the third quarter, and we expect full-year capital expenditures to be approximately $125 million, or about 2% of sales. And as of the third quarter, total debt was $2.2 billion and cash on hand was $447 million. Our Board of Directors approved a new share repurchase program authorizing up to $1 billion of common stock repurchases.
This program has no expiration date and replaces the prior authorization. This program is consistent with our disciplined approach to capital allocation. It gives us additional flexibility to return capital while continuing to invest in the business and pursue strategic acquisition opportunities. Let’s now turn to our 2026 outlook as detailed this morning in our press release. We are raising our sales expectations and tightening our adjusted EPS outlook. Our outlook reflects the strong year-to-date growth and our confidence in continued fourth quarter momentum. It also includes the latest impact of the Middle East commodity pressures and the latest transportation rates that have both increased further over the past 90 days.
Overall, our outlook for 2026 includes approximately $150 million of inflation, which brings us up to $50 million more than we had in our original outlook at the beginning of 2026 and $20 million more than our July outlook. And this outlook assumes roughly a crude oil price of $100 a barrel. Now, our teams have continued to focus on delivering incremental productivity and leveraging an RGM toolkit to mitigate this pressure, which has helped our business deliver gross margin improvements every quarter in 2026.
So for ’26 we now expect organic sales growth of approximately 5%, at the high end of our prior range of 4% to 5%. We now expect adjusted gross margin to expand approximately 100 basis points inclusive of the latest cost headwinds, and our marketing investments remain at approximately 11% of sales, reflecting our continued commitment to brand investment. SG&A as a percentage of sales is expected to remain above 2025 levels, including acquisitions, our target investments and growth initiatives, AI capabilities, e-commerce, and our international business.
The adjusted tax rate is expected to be approximately 21%, and we now expect adjusted EPS of approximately 7%, tightening on our prior range of 6% to 8%. Our cash from operations outlook remains approximately $1.175 billion, and if we turn to the fourth quarter, we expect organic sales growth of approximately 4%, and the adjusted EPS is expected to increase 17% to 19% versus last year. To close out our remarks, let me reiterate we are very pleased with our third quarter performance and remain confident in our ability to deliver an improved 2026 outlook. Our strong portfolio, continued share gains, and disciplined execution position us well as we look forward to 2027. Matt, we are now ready for questions.
OPERATOR
We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Anna Lezul with Bank of America.
Anna, your line is open. Please go ahead.
Anna Lezul (Analyst at Bank of America)
Hi, good morning. Thank you so much for the question. Rick, your portfolio is clearly performing really well with innovation across categories, which has elevated your mix and made it a bit more premium over time. So I was wondering if you could talk about innovation on the value tier, especially in light of some higher promotional activity you mentioned from peers. And then on the cost side, I wanted to ask how we should start thinking about gross margin expansion into early 2027, just given the heightened inflationary environment and the pressure that you might be seeing there.
Thank you.
Matt (Chief Executive Officer)
Yeah, thanks, Anna. So I think innovation has become a core competency of Church & Dwight Co. We just had Carlos Linares, who was our head of R&D for many years, retire, and what he brought to this company I think is just a great multi-factored way to innovate. And so we built this muscle, and it’s not a muscle that we’ve built just in personal care; it’s in household as well. And we’ve gone through the Arm & Hammer strategy, and part of that’s good-better-best strategy for laundry and for litter.
And there’s a lot of work going on with household innovation. You’ll see some stuff coming in 2027. But in fact I just sat through 2028 probably two weeks ago, and I was really encouraged about the entire innovation portfolio, but especially household for 2028. So I think it’s broad-based. We always want to compete on innovation. Value is not just price; it’s what the consumer’s getting when you intersect value and price. So that’s how you win with innovation over a long period of time.
And then, Lee, you want to take the forward looking? Yeah.
Lee McChesney (Chief Financial Officer)
So, I mean, to your point, we certainly know what commodities are today. That’s certainly what everyone’s faced in the business, and we have some good confidence. As you look forward here, we look at productivity levels of where we are today. We’re going to have a record level of productivity in 2026. And as we sit here today, the same time last year, we’re actually a little bit favorable to that. So that’s a good start for next year. You know, we have our RGM toolkit that’s served us well this year.
Teams are rallied around that for ’27 as well. And then certainly we have a nice positive drive towards good mix from innovation and from the portfolio. So all those things are in play. And, you know, again, it’s all against the backdrop of the inflation we see today. So, you know, as we said, we are optimistic for ’27, and we’ll continue to respond to the macro environment.
Matt (Chief Executive Officer)
Yeah, I would maybe add one or two comments to that. I think the other thing that’s kind of not unique but kind of normal is we actually get fixed cost leverage next year, right? This year our reported sales growth was essentially flat to up 1%. Organically we’re doing great. But remember, we shed $400 million of businesses. Next year our organic and reported numbers will be a lot closer, and that provides some leverage. And as Lee said, we had a record year of productivity.
Looking at what we know right now, we expect another record year next year for productivity. So those are great tailwinds.
Anna Lezul (Analyst at Bank of America)
Okay, great. Thank you both. Very helpful.
OPERATOR
Your next question comes from the line of Peter Grom with UBS. Peter, your line is open. Please go ahead.
Peter Grom (Analyst at UBS)
Great, thank you. Good morning, everybody. Happy Friday. Two top-line-related questions. Rick, you know, first, maybe just to start, would love to get some perspective on what you’re seeing from a category standpoint. You know, obviously there’s a lot of moving pieces across different categories, but curious if you’ve seen any major shifts as we move through the quarter. And I know a lot can change between now and January, but just, you know, any thoughts on how you see category growth progressing over the next, call it, 12 to 18 months.
And then I guess just related to that, you know, the 4Q organic sales guidance, a bit of a step down versus what we’ve seen year to date despite it being an easier comparison. Understanding you have a track record of overdelivering, but curious if that’s just simply, you know, conservatism given the external environment, or is there something else driving that view? Thanks.
Matt (Chief Executive Officer)
Yeah, no, thanks, Peter. You know, I think first of all, categories, I’m actually a little bit more bullish on these days. I think we started the year saying category growth of around 2%. Q1, Q2, and Q3 now have all kind of been at or above 2.5%. Like we had a strong Q1 of around 3.5, Q2 was 2.7, and Q3 was 2.5. So outlook for categories is closer to 2.5%. And also I would say as we look forward to in 2027, we think it’s around 2.5%. So that’s all a good thing.
On Q4, organic sales—look, 4% is still super high compared to the rest of the industry. Maybe we’re being a little conservative. I would say our trends are very strong as we look at October even.
Peter Grom (Analyst at UBS)
Awesome. Thank you so much for that. I’ll pass it.
OPERATOR
Your next question comes from the line of Bonnie Hersong with Goldman Sachs. Bonnie, your line is open. Please go ahead.
Bonnie Hersong (Analyst at Goldman Sachs)
Okay, thank you. Good morning, everyone. I had just a quick follow-up on gross margins and then another question. But first, how hedged are you on commodities heading into next year? Are you guys, you know, below your typical levels? And then I did have a question on your pricing and promotions. You know, as we think about the consumer, you know, consumption pressured, you know, on stretched consumer wallets. So could you talk about how you’re thinking about pricing for the rest of this year and into next year?
Also, you know, with gas prices still elevated, you know, what are you seeing in terms of promotional intensity in your categories? Are there certain categories that are still, you know, more impacted than others? Thank you.
Matt (Chief Executive Officer)
Yeah, why don’t I take the price and promotion question and then we can circle back on gross margin and hedging. So look, the consumer is still stretched. A lot of inflation happening out there. You’re right. Gas prices are up. Disposable income, that means disposable income is down. When you have this amount of inflation, typically promotional levels kind of retreat a bit. That hasn’t happened largely, I think, because manufacturers have spent back kind of tariff refunds to help extend promotional spending.
As I said in my prepared remarks, in laundry, as an example, amount sold on deal for the category went from the mid-30s, typically, to around 40. We also did that. We’re getting share in this environment. The value part of the segment is growing, but promotional spending is up versus historical levels for laundry and litter. But elasticities are still strong. So when that happens, you do see the volumes come in and react. I guess my comments on price and inflation in general is we’ve been very clear. We are first and foremost going after productivity. And you just heard me say we had record productivity this year. We think we’re going to have record productivity next year. That’s what we do first and foremost. We then do what Lee said. We look at our revenue growth management and promotional spending. And when inflation is elevated, typically promotional levels do come down.
That’s what we’ve seen. That’s what I’ve seen over the last 20 years. And then the last is price. And I’ll say if inflation maintains at this type of level, historically, the perspective is companies have to move. If it’s not transitory, if it’s structural, then it starts to make its way throughout the entire cost picture. But we hit number one and number two the hardest. And then if we need to, then we look at number three. Lee, you want to talk about hedging and gross margin?
Lee McChesney (Chief Financial Officer)
Sure. So as Rick and I talked about, got lots of things that help drive gross margin improvement. We’ve always done a healthy amount of hedging in key areas. We talked about earlier this year as some of the inflation came along and then with all the volatility we paused a bit, but we’ve been back at it and hedging going into ’27. I would say at this point right now we’re actually slightly hedged a bit more than we were at this time last year. But you have to consider that we hedge certain key things that we purchase.
Right now you’re just seeing inflation everywhere. So the impact’s helpful, but certainly just the overall inflation bucket is larger as we look forward here. But that’s all part of the math we talked about earlier that we’re looking at and facing into for ’27 with all of our tools.
OPERATOR
Next question comes from the line of Rupesh Parekh with Oppenheimer. Rupesh, your line is open. Please go ahead.
Rupesh Parekh (Analyst at Oppenheimer)
Good morning and thanks for taking my question. So on the Hero business, I was just curious how that continues to perform in international markets.
Matt (Chief Executive Officer)
Yeah, sure. Rupesh, internationally, it’s actually a great growth driver. We should have listed it in the release for international. Maybe that was just an oversight, but it’s definitely a net sales driver. Consumption’s up, sales are up in the U.S. Gained share in patches. Last four weeks we’ve gained share in all of acne cleansers are off to a good start. 4.8/5 stars, consumer reviews. Sales were slightly down in the U.S., but that was, consumption was up, but sales were only slightly down because remember a third of that business is online and some of that shifted as Prime Day had shifted from July to June.
So we feel great about Hero, we feel great about the innovation coming for Hero. So a lot of positive things.
Rupesh Parekh (Analyst at Oppenheimer)
Okay, great. And then I guess my follow-up question, just on Touchland. So your team has cited slowing growth for that business. What are the updated growth expectations for this year? And I guess we’ll probably have to wait for next year. But just curious, as you think about international, if there’s a way to think about the level of growth going forward when you incorporate some of the international opportunity.
Matt (Chief Executive Officer)
Yeah, no, on Touchland, I would say the business is going to be close to flattish all in. But with the confirmed distribution gains that we’ve already heard about in the U.S. and with the international launch plans, which are underway now, we expect growth in 2027. So that’s the good news.
Rupesh Parekh (Analyst at Oppenheimer)
Okay, great. Thank you. I’ll pass it along.
OPERATOR
Your next question comes from the line of Chris Carey with Wells Fargo. Chris, your line is open. Please go ahead.
Chris Carey (Analyst at Wells Fargo)
Hey, thanks so much. One clarification question first. What was the tariff refund benefit in Q3? Did it come through? Is there any remaining impact in Q4? Maybe it’s within that net inflation number, but I just wanted to confirm that and I have a follow-up.
Lee McChesney (Chief Financial Officer)
Yep, sure. So, Chris, it was a net about $15 million in the third quarter. And in the fourth quarter we expect it to be about $5 million.
Chris Carey (Analyst at Wells Fargo)
Great. And that lives in that inflation figure that you gave in the quarter?
Lee McChesney (Chief Financial Officer)
It does, it does. Yep.
Chris Carey (Analyst at Wells Fargo)
Okay, understood. Okay. All right, thanks so much. The bigger question, you know, one of your key strategies is to expand the oral care business. I get the question a lot: how long can TheraBreath sustain growth? I realize you gave some tidbits about household penetration, but maybe you could just expand a bit as we head into next year. Secondly, on the toothpaste side of the business, the growth has been very strong. You obviously got, I think, the distribution you thought you would get, you did get.
As of last call, you were still in that assessing whether it was the distribution and you were still assessing kind of repeat demand. Can you give us a sense of these two items really within the context of the oral care business and how durable you think above average growth can be going into 2027, given your multi-year plans that you laid out at the prior investor day? Thank you.
Matt (Chief Executive Officer)
Yeah, I’ll give you some color. We’re going to go through a lot more detail in January on the growth initiatives, but basically on TheraBreath mouthwash, we think there’s still a ton of room to run. We’re within six or seven share points of Listerine these days. We’re growing double digits. The category is flat. We’re winning with innovation. We’re winning with the shelf space. We’re winning with the marketing and reaching the consumer. Our repeat rate is fantastic.
Customer loyalty is growing. So across the board, we believe that TheraBreath mouthwash has still a long runway. And the one fact that I continue to hit again and again is just household penetration for TheraBreath versus the category. And I think that’s a good approximation. And meanwhile, that’s just talking about the U.S. You know, TheraBreath is a fantastic brand globally. It is starting to win globally. You know, we just introduced that actually in Japan. Remember we bought Graphico, our distributor, a few years back and now we’re putting a few of our brands through the distributor, like Waterpik, like Hero, like TheraBreath. I think TheraBreath has already reached like 15 or 20% of their sales in a matter of 12 months or less.
So that trend, that need, problem-solution brand for mouthwash is not just a U.S. trend or need, that is a global consumer need. So a lot of optimism about the global expansion of TheraBreath. Meanwhile, TheraBreath paste, like I said last call, off to a great start. We have a one share already on the paste. The repeat rate is closing in on 30%, which is actually really good for a toothpaste innovation because there’s high brand loyalty for toothpaste typically. So we got trial and now we’re getting the repeat rate up and we’re laser focused on that. Meanwhile, I think I’ll hold any other further comments to January on how each of the initiatives are going, but I would just say I expect those growth initiatives to be tailwinds in ’27, ’28 and ’29.
Chris Carey (Analyst at Wells Fargo)
Okay, thank you both.
OPERATOR
Your next question comes from the line of Nick Modi with RBC Capital Markets. Nick, your line is open. Please go ahead.
Nick Modi (Analyst at RBC Capital Markets)
Thank you. Good morning, everyone. Rick, can you just, you know, I wanted to follow up on that operating leverage question. You know, you said you’ll start seeing it next year because you know you’re going to be lapping the loss of the revenue. But I suppose you’re also spending a lot of money to try to fix those businesses before you sold them. So if you can maybe give us some context on, you know, if that will be a meaningful, you know, contributor for next year, at least over the next six to 12 months.
And then if you could just provide any more distribution clarity on Touchland, like are you going mass broad? Is it going to be more targeted? You know, any context would be helpful.
Matt (Chief Executive Officer)
Yeah. Okay. Nick, you know, my comment on, you know, the question before I think from Bonnie was really like, hey, help us understand why we think we have some positive tailwinds on gross margin. We have multiple positive tailwinds on gross margin, one of which is just being able to leverage our fixed costs. And I think 2026 versus 2025, you’re right, we had some higher spending that was happening. A lot of that higher spending was actually happening in the marketing line and the gross-to-net line, not necessarily on the cost of goods line.
So that comparable is already good and done with. And then as we move forward, we’re going to have real revenue growth and you should expect some leverage. And that’s a tailwind. That’s really the only point. Not really trying to quantify that. It’s just a normal tailwind for any business as we have real growth. The second question on Touchland, I would say it’s a little bit broader based than where we’re at now. It’s going to be in a couple different classes of trade, which is good. It’s one big step in the right direction and we already have confirmed acceptances for that. And meanwhile, in the beauty class of trade, we’re working hard on making sure we have innovations and exclusives in order to differentiate that a bit. So I would say I’m really, really happy with the progress we’ve made and I’m optimistic.
Nick Modi (Analyst at RBC Capital Markets)
Great. Just one quick follow up on that. Is the spacing going to be, you know, with beauty and mass or, you know, because I know that was a big debate point. I’m just curious where you all fell out on that in terms of where it actually is being placed at retail?
Matt (Chief Executive Officer)
Yeah, that’s where we expect it to be.
Nick Modi (Analyst at RBC Capital Markets)
Great, thanks. I’ll pass it on.
OPERATOR
Your next question comes from the line of Andrea Teixeira with JP Morgan. Andrea, your line is open. Please go ahead.
Andrea Teixeira (Analyst at JP Morgan)
Thank you, operator. And good morning everyone. I was just hoping if you could elaborate a little bit more on the pricing you mentioned. Obviously there could be pressures for 2027 that will be higher. I was wondering if you can comment on how to position now into next year. You have had tremendous success with your productivity program. You just alluded to the pressures being higher, but you being able—kind of like, I want to summarize it, if incorrect me if I’m wrong—that you’re still looking for margin accretion.
I don’t think you took that back from your evergreen models into next year. So just to think, as we put in pricing into next year, how we should be thinking. If not, it will be only with innovation. Just if you can help us think about your negotiations at this point.
Rick
Yeah, thanks for the question, Andrea. I’m not going to make any more comments on pricing than what I’ve already made. And just to reemphasize it, I said first and foremost we focus on productivity and we’ve done that in such a good way this year, hitting record levels. We expect to have record levels for next year and we can see around the corner at that already. Number two, we expect promotions to come down over time as inflation is sustained at these levels.
And then number three, I just said that if inflation remains at these levels, typically the industry has priced in those examples when it becomes more structural, not transitory. That’s the extent to which I’ll talk about pricing. Our evergreen model is to have gross margin expansion. Revenue growth and margin expansion are the two things that are the lifeblood of any organization. And you have to have all the right things in order to do that though. You have to have a productivity program, you have to have the right innovation. You have to have consumer-moving innovation that people want to pay for. So we have some great tailwinds. And our goal each and every year is to expand margin.
OPERATOR
Thank you, Rick. Your next question comes from the line of Olivia Tong with Raymond James. Olivia, your line is open. Please go ahead.
Olivia Tong (Analyst at Raymond James)
Great, thanks. Good morning. Wanted to talk about the top line. Given the upside this quarter and quite frankly all through the year you mentioned obviously the category doing a little bit better. Obviously you’ve gained some share. Can you talk about which elements of these you think are most repeatable and where you think there is still more work to do to sort of maintain momentum across the key categories? Obviously Touchland was a bit of a tough one this year.
You talked about some of the gains next year, but just thinking through the drivers of the top line next year and then my follow-up is just around International. If you could talk about sort of the next 12 months, your thoughts around international expansion from where you are right now. Notice that price/mix obviously swung the other way this quarter. If you could talk about that, whether there was more investment in price/mix or if there was something else that was driving that. Thanks so much.
Rick
Yeah, no problem, Olivia. I would say I’m really encouraged with the top line. I know number one, it matters what categories you’re in. And our categories — I would pick our categories over almost any other company out there. The balance of premium value, the lack of private label exposure in general — there are a lot of good things to say and why our categories are growing around 2.5%. Fantastic. Then we tend to take share over time. Like I said before, innovation muscle is alive and well. Our marketing and commercial teams are doing a great job gaining those TDPs. We were the second-highest TDP growth — I let everyone know that last quarter as an example for 2026. So there’s a lot going right. And our growth isn’t just one brand. It’s broad-based. And I said that in my prepared remarks: laundry, litter, TheraBreath, Waterpik, Batiste, baking soda — I mean there’s a whole host of drivers.
Internationally, like I said before, it’s not one brand or two brands. It’s nine brands that had double-digit growth. They’re doing a great job taking our recent acquisitions like TheraBreath and Hero global. And I gave you the example about Japan. So it’s very broad-based. I believe it’s very sustainable. And then you throw on top of that the growth initiatives that we’ve been working on. Remember all the time that we spent maybe a year and a half or two years ago on fixing businesses that kind of were at structural disadvantages? We’re spending all that time on innovation and on the growth initiatives. And the growth initiatives are — we’re laying the groundwork, and I’m going to announce in January the category that we’re going to go into in the US for Arm & Hammer.
But we have a lot of optimism about that. And then finally for international, it’s all about also M&A. A year or two ago, our M&A portfolio and kind of diligence was all US-based. That’s not true anymore. We’re looking at acquisitions all the time outside the US and moving down the field fairly quickly through the filters. And that process is getting more repeatable and more sustainable. And I’m optimistic. Fantastic.
Olivia Tong (Analyst at Raymond James)
Thanks, Rick. Appreciate it.
OPERATOR
Your next question comes from the line of Kumail Garjarla with Jefferies. Kumail, your line is open. Please go ahead.
Kumail Garjarla (Analyst at Jefferies)
Thank you. Hey guys. Good morning. I guess you answered a little bit of this in your M&A commentary just now, but maybe if you could put that in the context of the buyback as well. Was this just housekeeping and sort of reauthorizing a plan or is there maybe a bigger, broader indication on speed of buyback or how you’re sort of envisioning what may or may not be around for M&A in the future?
Rick
Yeah, I would call it more housekeeping than anything. We were getting to the end of our previous authorization. So you always want to make sure you have flexibility as you look forward into the future. That’s probably how I’d characterize it.
Lee McChesney (Chief Financial Officer)
Yeah, it was a program for ’21s, so it was time to renew. That’s it.
Kumail Garjarla (Analyst at Jefferies)
Okay, got it. And then as it relates to margins, this is gross margin specifically, you’re doing mid-single-digit growth. You’ll have some leverage next year, a bit of pricing it sounds like, but I think you guys, unlike some other companies, do incentivize specifically on gross margins. How are you sort of thinking about what is the appropriate target to shoot for for 2027 in the context of what we’re seeing in various input costs to the consumer environment, all those types of things?
Rick
It’s a great question. I don’t think we’ll get to that level of detail yet. If you want to ask again in January, feel free. But we’re going to have inflation that’s quite large next year. But offsetting that, we’re going to have productivity. We have mix as a tailwind, typically, especially as you think about TheraBreath or Miss Mouth’s, even Touchland globally. And like I said before about fixed cost leverage. So there’s a lot of things going in our direction.
We always believe that we can expand margin. Just not ready to put that out there yet. It’s about two or three months too soon.
Kumail Garjarla (Analyst at Jefferies)
Okay, got it. Thank you.
OPERATOR
Your next question comes from the line of Lauren Lieberman with Barclays. Lauren, your line is open. Please go ahead.
Lauren Lieberman (Analyst at Barclays)
Great, thanks. Good morning. I just wanted to ask about the revised net sales guidance because the implications for 4Q suggested the structural, the puts and takes of acquisitions and divestitures is a net negative. I think the street — we were all expecting that to be positive. And given we kind of knew how to think about VMs and the divestitures, it makes me wonder if Miss Mouth’s is a bit slower. So just curious if you could talk about Miss Mouth’s trends and just sort of conversations on incremental distribution and plans for ’27.
And just also specifically that 4Q dynamic. Thanks.
Rick
Yeah, sure. I don’t remember who asked it previously. Maybe it was Peter. I think if you take all the noise away, we are saying that, hey, we’ve grown 5% for the last three quarters and our outlook for the year is 5%. That makes the math 4%. That was the high end of our range previously. I just don’t think we have a lot to gain by going above our normal range. So maybe we’re a little conservative on the quarter call, but it is what it is at 4%. We think 4% is head and shoulders above almost anybody else out there.
Lee, anything you want to add to that?
Lee McChesney (Chief Financial Officer)
Yeah, I would just say Miss Mouth’s is off to a great start. And, you know, the outlook for the year is still very strong. Great, great consumption numbers — did really well during the Prime Day season. So as we said before, super optimistic. No less optimistic, probably even more optimistic as we look forward.
OPERATOR
Okay, thanks a lot. Your next question comes from the line of Steve Powers with Deutsche Bank. Steve, your line is open. Please go ahead.
Steve Powers (Analyst at Deutsche Bank)
Okay, thank you very much. One quick housekeeping. You know, Lee, you mentioned the $100 oil. Can you remind me if you guys benchmark to WTI or Brent?
Lee McChesney (Chief Financial Officer)
Yeah, it would be WTI is the math. Just keep in mind, we buy products that aren’t always going to be proportional to oil. But that’s a good rough reference for you.
Steve Powers (Analyst at Deutsche Bank)
Okay, yeah, yeah, perfect. And then I guess another kind of follow-up. Rick, you mentioned Touchland finishing, you know, roundabout flattish on the year, I guess. How does that compare with, you know, year-to-date performance? My sense is there’s been growth, so that implies maybe some 4Q declines. So if that’s the case, then I understand the overall optimism looking into next year with distribution international. But maybe just, you know, how quickly you can turn those declines into positives as we think about the progress into next year.
Rick
Yeah, I would say we do expect, I think, growth in Q4. I think in Q3 it was slightly negative. But it’s a sales and shipment timing when you’ve got to get ahead of the different seasons and programs. So for the full year, flattish is the call. I guess I just have a better lens into what retailers have accepted, what programs are in place for displays, how they’re going to be set up. As Nick was kind of alluding to, at least one major retailer — this is in the beauty set and the set is absolutely beautiful. It’s right where we would want it to be. The displays look great, the packaging is right where we want it to be. And we believe that a lot of times consumers are going to the store and they’re looking for this because Touchland’s kind of created a category that didn’t really exist.
And then they don’t have the choice to buy the Touchland brand — there’s only one alternative. And so we believe that once they are in more of an accessible retail distribution, then consumers will pick the Touchland product. I think what we’re seeing internationally is also off to a great start. You know, in one retailer just a couple weeks ago, they sold out in a matter of hours what they thought they were going to do for one week. So we’re trying to make sure we go broad quickly and get through all the regulatory barriers that are in place around the world. And we’ve made a lot of progress in doing that and we think we’re going to have some great success next year.
So that’s kind of why I’m optimistic.
Steve Powers (Analyst at Deutsche Bank)
Yeah, that makes sense. And as does your comments on the exit rate. That helps a lot. Okay, thank you.
OPERATOR
Your next question comes from the line of Filippo Filorni with Citi. Filippo, your line is open. Please go ahead.
Filippo Filorni (Analyst at Citi)
Hi, good morning everyone. I have two quick clarifications — one on the cost inflation, the $150 million that you mentioned. Lee, can you give us a sense of how much is the raw material piece versus the transportation? And just more broadly, I’d love to hear your thoughts on just the transport piece. We’re hearing a lot of companies thinking this is a bit more structural of a headwind given shortages in drivers. So how are you thinking about that potential headwind continuing from here?
Lee McChesney (Chief Financial Officer)
I’ll start. Maybe I would just say they moved from $30 million to $50 million of incremental inflation. It was a mix of commodities and a mix of transportation. Now to your point, the transportation — we’re viewing that as a situation that is mostly linked to the driver rules in the US and just creating a shortage of drivers. So that’s the mindset and accordingly we’re responding around that, trying to make sure we do the most efficient things in transportation.
That’s all part of what we’re looking into as we put together our plans for ’27.
Rick
Yeah. And we’re not transportation experts, but I would say that when spot rates go up 40%, that’s typically transitory, like supply and demand forces balance out over time. And we’ve seen in years past where we’ve had large spikes, but over 20 years or so, on average, usually have 3 to 5% inflation in transportation rates. And so this might be a little bit more stressful for a period of time, but over time it will also balance out. Yep, fair question. I think the criteria is very similar, but there are just a couple asterisks—like, of course you want it to be number one, number two, brand that doesn’t go away. Of course we want it to be gross margin accretive, asset light. You know, what’s the real competitive advantage? I think we’re more willing to accept a plant or a factory in these examples because then you can bring in some of our other products. Potentially we’re more willing to buy an entire business there that you need, the entire back office, for example, especially if you’re going into a different country.
So I think there’s a little bit more latitude, but it all makes sense.
OPERATOR
Your next question comes from the line of Edward Lewis with Rothschild and Company. Edward, your line is open. Please go ahead.
Edward Lewis (Analyst at Rothschild & Company)
Thanks very much. Yes, Rick, I was looking at the e-commerce performance, and it’s up at 25.9% of consumer sales in Q3, in this quarter. And you’ve had quite a significant move in that percentage, I guess, over the past few years. The divestments presumably helped, but how much of an advantage is that giving you at the moment? And is that why, do you think, you’re growing ahead of the categories as we talked about and enjoying the share gains—having this level of e-commerce exposure that, frankly, your peers don’t really have?
Rick
Yeah, I think that’s insightful. I think partially, yes. I think we went from a laggard to leader on e-commerce growth. And so we’ve been ahead of the curve for a while now on typically gaining share with these brands online. And when you look at retail, if you take a big step back, a lot of the growth at retail is—what it’s coming from—e-commerce. So that’s one, I kind of acknowledge that. But number two is mix matters. And some of the businesses that we sold had low exposure to online businesses and sales. And some of the businesses that we’ve bought, like Touchland, like Miss Mouth’s, are over-indexed to online businesses or online sales. And so that’s helped as well. So your portfolio mix also matters. Thanks.
OPERATOR
Your last question comes from the line of Sergio Matsumoto with TD Cohen. Sergio, your line is open. Please go ahead.
Sergio Matsumoto (Analyst at TD Cowen)
Hi, good morning. I’m calling on behalf of Rob Masko. Thanks for the question. Back at the investor day, you discussed some retail sales through licensee partners and that you have through an incubator model and potentially reacquiring those brands. Are there any specific licensing categories that are showing good traction that perhaps makes sense to bring those brands back in-house over the next 12 to 24 months?
Rick
Yeah, Sergio, that is an excellent question. I’m not going to give you as much as you want. I’ll give you an update in January on our analyst day about that. I would say there’s one that we’ve already taken back and there’s two or three that we’re looking at if they can hit some key thresholds. And there’s also a couple that we’re going to ask. Sometimes you go through an innovation process internally and then we think it has legs, but maybe another company is better set to get it off the ground.
So we’re having those conversations as well. So it’s pretty broad-based and comprehensive. And I’ll give you more of an update at our analyst day.
Sergio Matsumoto (Analyst at TD Cowen)
Great. Thanks. Looking forward to it.
OPERATOR
There are no further questions at this time. I will now turn the call back to Mr. Rick Durker for closing remarks.
Rick
All right. Thank you very much. We had some fantastic results in Q3. Wasn’t possible without a whole group of people at Church & Dwight Co to make that happen. So just thanks to the entire team. We’ll speak to everyone soon, late January for analyst day. Really looking forward to that too. Take care.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
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