We’re seeing 4% to 5% gross margin expansion again back to back. This new product pipeline is the best in my 17 years with the company. And then international is the future for us. You saw we’re only 17% of our sales. Most of our competitors are 40% or higher. That’s the future. And then e-commerce of 20% of our sales are ordered online today. We believe by the end of the decade, it will be 30%. So we got to get ready for that. And then finally, we generate lots and lots of cash so we’re always on the hunt for new brands. And we’re going to bring the whole crowd up here now so we can play the band. All right.
A – Matt Farrell: Steve Powers, you’re up.
Steve Powers: Yeah, Steve Powers from Deutsche Bank. Thank you. Two questions on laundry. The first one is just when we look at track data, market shares have been under some pressure across all formats for Church & Dwight of late. It looks like both sort of at the high-end of PNG and as well as the private label. Maybe just some perspective on what you see going on there, if that’s emblematic all channels or just sort of what we see in the track data. And then looking into 2024, specifically with Deep Clean, a little bit more details on the rollout there. Do you expect it to be incremental in terms of phasings for the ARM & HAMMER brand on the shelf, et cetera? Thank you.
Matt Farrell: Okay. Your first question is probably with respect to the weakness in the fourth quarter with respect to ARM & HAMMER on laundry. If you recall back when we did our Q3 call, by the way, this sounds a little right now. Does that sound okay? If you think back to our Q3 call, we said, hey, we had — because of revenue growth management, we identified a lot of promotions that we had in Q4 of 2022 that we’re not going to repeat in Q4 of 2023. So that cost us. So we lost some share but it was the right thing to do. And if you look at the most recent four weeks ended, say, mid-January, the same is true, like so we cut back as well. So we had a very low deal in the first couple of weeks of January. So it’s not unexpected from inside out.
Your second question is with respect to Deep Clean. So Deep Clean is that we’re entering into the high tier, something going on with this thing. We’re entering into mid-tier where historically we’ve played in value. And yeah, we are going to be getting incremental share in there. And we do think it’s going to be contribute to our share growth in 2024. But Barry, if you’d like to add anything?
Barry Bruno: Yeah, sure. Matt, I think you covered it largely, right? So we’re going to support the launch of Deep Clean, as you’d expect, as well as fabric sheets. Part of that is going to be part of the share growth story that you’re going to see in the months and weeks ahead. And if you look at the last week of track data, share’s up in just the last week, if you’re bored.
Matt Farrell: Carlen, do you want to pile on it all?
Carlen Hooker: [indiscernible]
Matt Farrell: We probably need a mic up here, too, for those in the crowd. Okay, Dara?
Dara Mohsenian: Dara Mohsenian, Morgan Stanley. So Matt, if you go back over time, there’s a number of examples in the CPG industry of companies raising long-term top line guidance and then sort of disappointing, kind of analogous to the SI coverage inks, you get confident and unexpected things happen. So maybe in that vein, just obviously, numerically, you’ve answered the division’s international higher growth, domestic a bit higher growth numerically. But what gives you the confidence behind raising the evergreen long-term top line growth target at this point? Maybe give us a little bit of detail within those divisions, what’s giving you the confidence. And then also, Rick, margins didn’t change in the evergreen target. Top line went up, earnings didn’t go up. Is that just rounding? Do you have more confidence in the earnings growth and evergreen, but just that specific question would be helpful.
Matt Farrell: Past is prologue. So we had a slide up here that showed if you looked over the last 10 years, so what’s been our organic growth rate average? It’s been 4%. And almost every year, it’s above 4%. And often at these meetings, we get the question, how come it’s 3%? So we finally fessed up and said, yeah you know what, going forward it’s going to be 4%. I mean, it’s as simple as that. Now why would we have confidence there? Because we did change how we’re going to get to 4%, right? So we said 3% US, 8% international, 5% Specialty Products. International is going to be a juggernaut for us. It’s 8% growth. It’s in our one big component is Global Markets Group, and that’s been doubling every five years. So we do have such great brands.
And what we’re doing is what our competitors did 30, 40 years ago, is take your products on the road. So I think a lot of faith in the international number. And just international and US are going to benefit from our two most recent acquisitions, which is THERABREATH and HERO. And we’re going to be launching HERO in 40 countries in 2024. And we just got so much runway there. So I got total confidence in our ability to grow the top line 4%. Yeah. I guess you can’t rest on your laurels since you did 4% for the last 10 years. But given where I stand today and the innovation that we have, I think it’s in the bag.
Mike Read: Yeah. And then in terms of gross margin, really, you’re talking about operating margin, right, 50 basis points didn’t change from the prior evergreen model to the current evergreen model. Gross margin, we’re raising a lot of confidence. We talked about productivity is offsetting moderate inflation, best productivity program that we’ve ever had. When Rick came in, our sites were too low on productivity. And so we’ve made a turn, and the ship has turned and so that’s a great place to be in. Inflation is moderating, so good confidence there. But we’re going to go spend some of that money back on SG&A for those growth investments to cement this higher evergreen model into the future. And so that’s why operating margin doesn’t change. But it helps give us more degrees of flexibility, which is great.
