(Bloomberg) — The maker of Arm & Hammer baking soda and Trojan condoms cautioned about a possible recession in its first-quarter earnings report.
Church & Dwight Co. told investors Thursday that it’s “well positioned for a potential recessionary environment given that 40% of our portfolio is considered value products.” The U.S. economy unexpectedly shrank in the first quarter, with gross domestic product contracting at a 1.4% annual rate.
Consumers and businesses are spending at a healthy clip, the Commerce Department’s figures showed Thursday, but a swollen trade deficit was a big drag on growth. Church & Dwight’s cautionary language stands out because few consumer companies have brought up a “recession” in their earnings reports. Several have pointed to strong underlying demand despite inflation.
A recession is generally defined as at least two consecutive quarters of negative change in GDP. Economists put the chance of a recession in the next 12 months at 27.5%, according to 40 respondents in a Bloomberg survey in early April.
Read more: U.S. economy posts surprise contraction, belying strong consumer
Church & Dwight has raised prices on 80% of its products over the past year and plans more increases for fabric care and cat litter in July, but they haven’t been enough to stem rapidly rising costs.
The company said it would incur an additional $85 million in expenses for 2022 primarily due to higher oil and transportation prices, bringing its full-year inflation forecast to $240 million. That will result in earnings per share growth of 4%, at the low end of the prior guidance.
“We expect to experience higher inflation at a faster rate than our price increases take effect,” Chief Executive Officer Matthew Farrell said in a statement. Church & Dwight also plans to combat rising costs with productivity initiatives and changes in product pack sizes.
Shares of Church & Dwight declined 4.2% at 9:54 a.m. in New York. The stock had risen 23% in the 12 months through Wednesday’s close, while the S&P 500 Index was little changed over that time.
(Updates with economic data starting in second paragraph, shares in eighth.)
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