Clorox Company's Q1 fiscal year 2026 earnings call highlighted the successful launch of their new ERP system, a significant step in their transformation journey, while acknowledging temporary challenges and outlining strategies to reinvigorate category growth and market share through innovation and demand creation.
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Good day, ladies and gentlemen, and
welcome to the Clorox Company first
quarter fiscal year 2026 earnings
release conference call. At this time,
all participants are in a listen-on
mode. At the conclusion of our prepared
remarks, we will conduct a question and
answer session. If you would like to ask
a question, you may press star one on
your touchtone pad at any time. If
anyone should require assistance during
the conference, please press star zero
on your touchtone pad at any time. As a
reminder, this call is being recorded. I
would now like to introduce your host
for today's conference call, Miss Lisa
Burhan, vice president of investor
relations for the Clorox Company. Miss
Burhan, you may begin your conference.
>> Thank you, Jen. Good afternoon and thank
you for joining us. On the call with me
today are Linda Rendle, our chair and
CEO, and Luke Belle, our CFO. Please
note that our earnings release and
prepared remarks are available on our
website at the chlorox company.com. In
just a moment, Linda will share a few
opening comments and then we'll take
your questions. During this call, we may
make forward-looking statements,
including about our fiscal year 2026
outlook. These statements are based on
management's current expectations, but
may differ from actual results or
outcomes. In addition, we may refer to
certain non-GAAP financial measures.
Please refer to the forward-looking
statement section which identifies
various factors that could affect such
forward-looking statements which has
been filed with the SEC. In addition,
please refer to the non-GAAP financial
information section in our earnings
release and the supplemental financial
schedule in the investor relations
section of our website for
reconciliation of non-GAP financial
measures to the most directly comparable
GAAP measures. Now, I'll turn it over to Linda.
Linda.
>> Thank you for joining us today. In Q1,
we reached a major milestone in our
transformation journey with the
successful launch of our new ERP system
in the US. This foundational step has
strengthened our digital backbone and
unlocks new value streams for our
company. Launching the ERP was a
significant undertaking. And while the
transition presented some challenges,
our team's resilience and adaptability
allowed us to navigate them effectively
and we're already beneing the benefits
ramp up across our operations.
As we move forward, we've incorporated
the realities of the implementation into
our latest outlook and made the
necessary adjustments to strengthen our
plan for the remainder of the year.
Importantly, as we move past these
temporary challenges, we are fully
focused on our demand creation plan to
deliver superior value to our consumers
and reinvigorate category growth. With
that, Luke and I are happy to take your questions.
questions.
>> Thank you, Miss Randall. Ladies and
gentlemen, if you have a question,
please press star one on your touchtone telephone.
telephone.
And our first question today will come
from Peter Grum with UBS.
>> Great. Thank you. Good afternoon
everyone. Um so I just wanted to to
touch on the organic sales cadence and I
get there are a lot of moving pieces but
just was hoping to get some perspective
on the second quarter as well as a
balance of year. So just first c can you
just help us understand what you're
including or embedding from a category
growth perspective and then second you
touched on returning to kind of sales
growth or consumption growth in the back
half as a result of the strong demand
creation plan. So can you maybe just
unpack that a bit more and just what
drives the confidence that trends will
inflect versus what we're seeing today?
>> Thanks Peter. Uh this is Luke and I I
can take that. Um, so I think when we
look at the phasing for the fullear
outlook, it might be easier to just
exclude the impact of the RP in both Q1
and Q4. And if you do so, organic sales
growth in the front AL would be negative
low single digits and organic sales
growth in the back would be positive low
single digits.
The um the assumptions around the
category remain the same. We're assume
that you know our US retail category
remain you know muted kind of on average
growing 0 to 1% still below historical
average um and so the improvement in the
back is really uh driven by improvement
in consumption driven by um improvement
in market share and there's two main
lovers here the first one is that we're
launching a few major in innovations in
some key businesses in some case we're
actually launching new platform in other
expanding existing platform. I think we
talked about it last quarter. We're
excited about innovation plans in the
back alalf and we have strong demand
plans in place. And then the second
thing is we are lapping uh some pretty
negative trends that started in the back
alpha of last fiscal year and that's for
US retail and outside US retail uh we
feel we feel really good about the um
the momentum of both the international
and the professional business in the
back. Now Q2 low single uh you asked the
question about Q2. So frontal would be
low single digits and we expect Q2 to be
in the low single digits mostly largely
expect a continuation of the US retail
consumption trends that we you know that
we've seen in the first quarter. Um that
as well as about a point of headwinds
from the timing of early shipments in
the first quarter.
>> Okay, that's super helpful. And just
maybe more specifically on 2Q um just on
that consumption point um the decline
you're expecting. Can you maybe just be
more specific on what you've seen
through October and how you see kind of
consumption trending from here? Is it
more or less what we've seen through the
majority of one Q or do you see any or
are you embedding any sort of
improvement from here?
Yeah, Peter, there's some dynamics in
October that would be helpful to cover
um because there's definitely a
difference if you're looking at the data
between the first half of October and
the second half. The first half is
marked by uh a lap of what we saw last
year with some storms, hurricanes, as
well as port issues. And although they
weren't very material to the quarter
last year, they do create a
year-over-year comparison issue. So you
could see we were down uh fairly
significantly in consumption in the
first two weeks which we expected. Now
you've seen in the third and fourth week
of October that's rebounded
significantly back to what we expected
and you can see consumption down low
single digits in um MUO. So th that
would be the dynamic I would expect is
that current rate that we've seen over
the last two weeks to continue um for
the remainder of the quarter. But
outside of that you know we don't have
any u material things that you should
focus on um outside of what we provided
in the outlook.
Great. Thank you so much. I'll pass it on.
on.
>> And our next question will come from
Andrea Terara with JP Morgan.
>> Thank you. Good afternoon. I was hoping
if you can uh touch a little bit on the
environment for promotions. I mean, I
understand you you mentioned in the
prepared remarks that you continue to
see consumers being cautious and and and
value seeking, but hoping to see how um
the competitive environment unfolds um
and unfolded through uh this spe back
half of October to Peter's question and
then um if you can also comment on um
the price back architecture that you're
looking to do uh for this innovation
that is coming in the back hand back
half of the here. Uh should we see you
becoming more I would say meeting where
the consumer is at in terms of like
price point? Uh anything to add there or
in general what's embedded in your price
um in the price algorithm for the
organic sales growth in the second half?
>> Hi Andrea. Uh I'll start with your first
one on the environment. So, we're seeing
the environment largely in line with
what we had expected uh when we started
the year and a continuation of what we
saw in the back half of last year. As
you noted, the consumer continues to be
under stress, definitely reacting to the
level of volatility and uncertainty
that's out there and we're seeing that
in their shopping behaviors. So while in
aggregate the entire consumer wallet has
been fairly stable, the changes within
that wallet have been quite significant
um and varying week to week and quarter
to quarter. What that's meant for our
categories um is you know we've seen a
generally more competitive environment
although I would say it varies business
to business um category by category and
what we're seeing in the specific
competitive responses
um we have seen increased promotions for
example in the trash business and cat
litter business um not different than we
would have expected given the dynamics
of those two categories uh we've seen
some price changes both things that
looked like promotional price changes
turning permanent um as well as some
minor price price increases and so again
it varies by category but I would say on
average the competitive environment
seems pretty rational right now. Um if
you look at the overall promotional
spending um again in some categories it
was up but in aggregate across our
categories not that material. Um and so
what we are just re responding to and
and continuing to watch very closely is
will there be a change in the consumer
environment that makes people become
more competitive, put more money in the
system, etc. Um we've seen retailers do
some additional support on private
label, although it hasn't yielded any
private label share results um as of
last quarter. So those are the things
we're watching carefully. Uh but again
it's still it still remains a a fairly
rational environment but I think people
getting very sharp uh on value depending
on what matters to them and their
portfolio and and and the category uh
that we compete in. There are a couple
places u maybe that I would just call
out that I think are you know we're
watching really carefully and one of
them is food. Um in average on average
the food category at large has been um
challenged and specifically when we look
at the food category that we're in with
salad dressing that category has been
declining low single digits and very
variable. Um we've made adjustments to
our plan. I think you saw in the
prepared remarks that uh large and small
sizes in that business are working
really well. Um, but that's a good
example of a place Andrea will be using
price pack architecture fully to ensure
that we're capturing the consumer
wherever they are and offering them a
hidden valley offering that is right for
if they want to get the very best value
per ounce or if they can't afford to get
that large size and they just need
something in their pantry um that's
going to to get them through the next
few meals. Um I'd also note on the price
pack architecture for the new innovation
similar to what you saw in the prepared
remarks that's how we've approached all
of these programs. Um so we've talked
about we have some innovation coming in
litter that will definitely have
components of price pack architecture
built into it thinking about what are
the right price points we need to be at
etc. Um as will all the innovations that
we launch in the back half. Uh our teams
have those tools now embedded in our
innovation process and they're using
them to ensure that we capture the full
spectrum uh at launch and we can talk
more about those when those innovations
launch in the back half.
>> That's helpful. And if I can squeeze in
uh one for Luke on the gross margin
side, I understand that obviously there
was a lot of um operation of the
leverage. Uh but you also mentioned
commodities coming in I think slightly
better uh if I'm not mistaken. Anything
to to add to that uh in terms of like
your flexibility uh to perhaps you know
get into um a better range than than
guided. I understand some of these
ranges will go into the low end, but I
was curious to see what has changed from
a cost perspective that would inform you
to be at the low end.
>> Sure, Andrea. Maybe let me just speak
first about what we're seeing from an
inflation in general, both commodity and
supply chain, and then talk about the
different puts and tax as we look at the
gross margin drivers for the fullear
outlook. So um we if I look at overall
inflation we expect it to continue to
remain moderate I would say for the year
uh but it you know we did mention it's
slightly more favorable than um our
prior estimate in July. If you remember
in at the beginning of the year we
assume that input cost and inflation
would increase a little under $90
million for the full year with about
half coming from commodities and half
coming from supply chain both
manufacturing and logistics. Um our
latest projection assumed that input
cost and inflations would increase about
$70 million. So about $20 million more
favorable and again about half of that
is really coming commodities and half of
that is coming from the rest of the
supply chain. Um now we also have to
contend with tariff and you know right
now our estimates on tariff is remain
the same. It's about a headwind of $40
million you know for the year. So, you
know, looking at uh you know, all of it
together, uh this is, you know, about
$110 million or about 20 million more
favorable than what we thought at the
beginning of the year. Now, there's a
few other um puts as we look at the
gross margins for the full year. one, we
did have to incur additional expenses
during the first quarter to deal with
the disruptions on the the demand
fulfillment related to the ERP ramp up
being a little slower than expected. So
that's incremental expenses uh that
offset some of you know the benefits and
then second we're um as the teams are
finalizing and optimizing their demand
creation plans for the innovation in the
back uh the we increased a little bit
both uh trade spending and advertising.
So the trade spending is also putting a
little more pressure. So at this point
it's a little more towards the lower end
of the range but keep in mind it's you
know there's there's we expect to have
like more movement going through the
year. What's important is we generally
feel good about our ability to meet our
gross margin outlook. And if I may say
um if I look at the back half of the
year you know you should see pretty
robust gross margin expansion in both Q3
and Q4.
>> Uh thank you Linda. Thank Luke. I'll
pass it on
>> and we will move next to Cuomo Gaja
>> Hey guys. Um I've been digging in just a
little bit on, you know, maybe your
report card because there's so many
moving parts with ERP and shipments and
all of that. When you're when you're
making adjustments for it, how do you
feel about your market shares? Um are
they trending in, you know, direction
that you prefer, the opposite? Uh it's
just a little hard to read given
everything that's going on. Curious
where you are and and layered I guess on
top of that uh you sort of hinted at a
few things on you know more demand
creating activities. Do you do you have
the all clear from an infrastructure
perspective to go and pursue them and uh
and if so maybe just some more details
on what it is and how much you expected
to contribute.
Yeah, maybe what I can do come is just
unpack a little bit what what was the
underlying performance of the first
quarter because there was so much noise.
So let me start there and then um you
know maybe Linda can provide a little
more perspective on the um on the
performance in the market. So if we look
at Q1 uh organic sales excluding the
impact of the LRP the the ERP sorry
we decline about three points and even
within this three point there was a few
things happening you know one there was
a you know one favor point of timing
which is really just the timing shifts
between Q2 and Q Q1 related to some
early shipments uh for merchandising in
the second quarter. But we also had the
impact of the out of stock which you
know impacted you know both our market
share and maybe to certain extent c some
categories in some businesses and that
was about three points of headwinds.
So again if you unpack that you know the
three the negative the decline of three
points in the first quarter and exclude
those two lovers like the underlying
performance was about ne negative one
right. So that gives you some context
and also kind of just fairly consistent
with what we signaled around the
frontals being in the you know negative
go ahead.
>> Yeah. Yeah. Go ahead. I was just going
to I was just going to ask you to
>> Perfect. So on on share and just how
that translates to the market, you know,
unfortunately with the ramp up that we
had on our ERP, it did cause us to lose
more market share than we had
anticipated and you saw that primarily
impact August in a material way. Uh we
saw September a bit better and again
October continues that trend, but you
know, we can't say we're satisfied with
that. you know, we intend to grow market
share over the long term and so we are
laser focused on that as we head into Q2
and the back half of the year and that's
why you're seeing us uh continue to
refine and and tune our plans which we
feel good about in the back half feel
great about the innovation that we have
um feel good about the spending levels
we have and I think what that also
connects to is the other parts of the
scorecard that will make up share and
give us confidence in our ability uh to
to grow share again in the back half and
that's household penetration which
remains stable. Um in fact if you look
at our biggest mega brand that's up in
household penetration the Clorox brand
and up fairly significantly. Our
consumer value metric remains higher
significantly higher than it was
precoid. Um and again we have all of the
right spending and tools and innovation
in that plan to drive market share
performance. So while not satisfied
right now um I feel like we have the
right plans to to get that turned around
and the fundamentals of our business
Got it. Thank you. And
And
>> we'll move next to Filippo Flori with City.
City.
>> Hi, good afternoon everyone. Uh so maybe
following up on Camille's question uh
just on the second half uh Linda you
mentioned a lot of the improvement is is
based [clears throat] on the innovation
plans that you have that you have for
the for the second half of the year. Can
you give us a little bit more color on
what categories the innovation is going?
What's differentiated? Kind of what
gives you that confidence that
innovation will work and then maybe you
can give us specific like drill down a
little bit more on trash bag and caler.
Those continue to remain two of the the
most challenge uh categories. Uh and you
mentioned increased promotional
activity. So maybe just a review on the
plans on those two particular categories
as well. Thank you. Sure, Filippo. You
know, in innovation, maybe I'll talk
about some of the ones that we just
launched that are in market now. Um, and
that we have the ability to speak a bit
more about, you know, in Glad we're
continuing to build on the very
successful scent platform that we have.
Uh you've heard us talk about uh Bahama
Bliss which was you know the last big
scent um that we had released and we're
following that with a fall scent um
which we think will do very well for
Glad and continue to attract that
consumer that's looking for that you
know extra piece of treat at home given
what they're going through. Um in Brida
we've active are actively moni uh
modernizing our pictures with new
colors. We're also ensuring that we're
doing price pack architecture there to
ensure we're capturing consumers um who
can't afford to buy a larger picture at
the moment. So we've launched um some
smaller sizes for both uh pictures and
filters and that gives consumers um you
know a reason to not turn away from a
Brit pitcher on Berts. Uh we've expanded
a very successful platform. Um, we
launched a boosted balm a while back and
we're increasing the uh footprint of
that and launching that into body. Um,
and we just launched innovations uh
including a lotion, a butter and
moisturizing melt. They're quite they're
quite delightful. Um, and I think the
consumers are really going to like them.
So, those just came out. Um, and we're
feeling good about those. We will have
additional innovations. And the way I
would think about it, Fippo, is that we
will have innovations across all of our
major brands this year. Um and so you'll
see those coming in the back half. Uh
some of these innovations are brand new
spaces for us in terms of um what we are
going after from a a consumer
perspective and and what you know
problems we're trying to solve for them.
Um and then some of them build again on
existing capabilities that we already
have. And I know you you can understand
that I can't get into exactly where
those are right now, but I think the key
takeaway is innovation across all major
brands. feel really good about the
innovation that we launched uh in Q1,
very good about the back half. We have
the right spending. Um and I think they
are the the right mix between continuing
to improve the base um and bringing new
to world innovations that are superior
value to consumers um and that we think
we can create you know years and years
>> Great. And maybe just uh just on
um on trash bags and later um we've seen
continue pressure from a market share
standpoint. So maybe can you give us a
sense of your assessment of those
categories and uh how sustained this
promotional environment can can remain
in those categories. Thank you.
>> Yes. on both of those categories.
They're largely what we expected to see,
which is very competitive, more
promotional activity,
um, you know, continued innovation. Uh,
and we're seeing about in line with what
we expected to see in both of those. Of
course, Q1 was impacted by our
implementation of the ERP, so we saw a
bit more share decline than we had
expected. Um but obviously once we're
back in stock and we for the most part
are now we've began to see those shares
rebound. But both of those continue to
be marked by higher than normal
competitive activity. And we see that in
pricing. We see that in additional
promotional spending. Um and what we're
trying to balance in both categories and
particularly in trash would be the
long-term value creation aspects of
this. We we do not want to get into a
place where we're destroying value in
the category uh because we just don't
see people create a lot more trash um
when a trash bag is more discounted. And
what we're trying to do is ensure that
we preserve the right to grow this
category through innovation and better
consumer ideas and experiences. Um and
so we're being very choiceful. There are
places where we have increased our
investment in GLAD. We're being very
surgical about that. Um and there are
places where we're willing to lose a bit
of share in the short term um in service
of that long-term objective. So that's
what we think we're getting the balance
right on now. Um we're going to watch it
really carefully in Q2 and and the back
half. Uh we want to execute our
innovation with excellence. But I would
say you know that that category is is
very much what we expected to see.
Litter of course you know in a place
where the category is growing and we're
not getting our fair share of that.
That's highly disappointing to all of
us. Uh we feel good about the plans we
have on litter in the back half. Um
we'll we'll talk more about those uh in
our next call. Um but we will go after
all of the things that we think aren't
working quite right for us in litter
right now. Um and um we were we're
hopeful that that will show a mark
turnaround in the back half once we get
that implementation in market.
>> Got it. Thank you very much. >> Thanks.
>> Thanks.
And our next question will come from
>> Hey everyone. Um
my first question is just around the uh
like spending plans for the back half.
I'm mostly curious how these have
evolved, you know, since since you
started the year. And and what I'm
specifically interested in is are we
talking about you have these great
innovations, you'll be leaning in more
and you're basically funding that with
the the the incremental cost savings
that you're getting from, you know, more
favorable commodities or are you looking
at the broader suite of of activities as
and thinking that you can drive, you
know, greater outcomes, you know, beyond
even even those innovations and and and
just is there is there a way you're
thinking about it between promotional
activity and advertising. And I have a followup.
followup.
>> I'll start Chris. Um, so yeah, on the
spending plans for the back half, you
know, we started the year, we felt very
good about them uh to begin with. We
have pretty sophisticated tools that
allow us to put money um uh where we
know we're going to get a good return.
You've heard us lot talk about the
personalization engine that we've built
that allows us to target consumers in a
way that gets some messaging that's uh
driving very good ROIs and we have one
of the leading ROI uh in the industry
from an advertising perspective. So we
already felt strongly about our plans
heading into the back half. What we took
an opportunity to do is as consumers are
adjusting their their behaviors, we've
adjusted our plans um to sharpen that
spending in the back half. I'll give you
some examples. Some of it is innovation.
As we've gotten clearer on what
distribution looks like and what
retailers plan to do, we've made
adjustments in spending on retail media.
We've made adjustments in spending on
advertising or how we might do a
promotional kickoff in a retailer. Those
are the things the teams have done. In
addition, um I'll give you an example.
In Kingsford, we saw that many consumers
um are doing exactly what they are in
other categories from a value
perspective. They're either trading up
to larger sizes or they're looking for
an opening price point. So for really
the first time in July 4 and Labor Day,
we had much more merchandising on
smaller sizes and larger sizes. It
actually grew household penetration as a
result of that plan. And we adjusted
that spending based on the learnings we
had from Memorial Day where we we talked
about, you know, the the merchandising
plan did not go as we had anticipated
and we didn't execute to the degree we
wanted to. We made those adjustments in
July 4th and Labor Day and are taking
those forward as we look at the back
half of the year. So, it's across a
number of things, Chris. We're using the
tools that we have, the consumer
understanding that we're getting and
making real-time adjustments with
retailers uh to try to capture as much
of the change as we possibly can. Um,
and because we feel very confident about
our ability to to deliver strong returns
on that on that advertising, we feel
confident about the choices uh that
we've made. And frankly, we'll probably
continue to make adjustments as we learn
more. Um, and our business units are
fully empowered to do that and and
they're watching the consumer carefully
and uh we'll make adjustments if they
need to to to support innovations or the base.
>> Okay. Thank you. One followup. We've
seen an increase in um
uh portfolio actions, I guess we can
call them, at a number of companies
across consumer staples to respond or or
maybe adjust to different demand
backdrops. Um you know, I'm conscious
you have a a fairly diverse portfolio,
a very clean balance sheet. you you
you've called out certain categories
that have been more volatile than what
you wanted. Perhaps there are others
where you'd want to play more in. So
just you know in this environment with
uh with the balance sheet you have and
um the volatility we're seeing can you
give us maybe a sense of how you're
thinking about you know the concept of
portfolio and and and what you're really
trying to accomplish with your own and
and how you think about maybe you know
any future evolution. Thanks so much. >> Sure.
>> Sure.
You know, first I think the most
important principle we have is we always
take a long-term focus when it comes to
our portfolio. And so there's certainly
a lot of things going on right now. Some
of which is just noise and temporary. Um
and some of which we'll see, you know,
does it turn more permanent? Is there a
change in the consumer environment that
we need to account for or any company
needs to account for? Uh but we're
staying very disciplined in taking a
long-term portfolio focus. And that that
plays itself out in two very important
ways. The first and the most important
is that we strengthen our core and that
we take the brands that we have that are
in the vast majority of US households
and in households all around the world
and we offer better value to consumers.
We invest in those brands um and we get
to the place where we're, you know,
pretty consistently growing market
share, growing household penetration,
etc. and we've seen moments of that over
the last several years and it's
certainly been choppy given the external
environment um and some of the
challenges we've had on our own. But
that's our our number one focus and I
feel you know better than I have in a
long time around the innovation plans
that we have um and the ability for
those to continue to grow our market
share and household penetration over the
long term. uh we have plenty of
opportunities on our core business to
get better and sharper um and deliver
profitable growth. Of course, the second
component of that is actively with our
board all the time uh looking at our
portfolio to ensure that you know we
have the right uh portfolio moving
forward and you've seen us make a few
moves albeit on the smaller side but
very important. uh we devested our
business in Argentina which had driven
uh the vast majority of the currency
volatility we had experienced as well as
devesting the business uh for vitamins,
minerals and supplements which
unfortunately did not contribute what we
had anticipated it would uh in a series
of the two acquisitions that we made and
that is delivering real results um uh
every day in the portfolio and we are
always looking with our board at all
options for our portfolio whether that
be tuckins continuing to expand on uh
categories that we play in today or or
looking of course at more
transformational things um just as you
would expect us to with our board but we
will remain disciplined. The good news
is we do have a strong balance sheet. So
if there is something that we think is
attractive from a shareholder
perspective, we have the ability to act
on it. Um but we want to make sure that
we are taking a long-term view always um
and not chasing some short-term
temporary disruption um and uh setting
ourselves up for for good long-term
>> Okay. Thank you. Our
Our
next question will come from Anna Lzul
with Bank of America.
>> Hi, good afternoon. Thanks so much for
the question. Um, just want to ask,
we're hearing from peers in the space
that there's some destocking here from
certain retailers and I suppose with the
ERP transition, you're not as exposed to
that right now, but was wondering if you
can comment on this inventory trend and
as we see retailers shift to club and
online from consumers. I was wondering
how you're looking to increase your
exposure here. Um, you've mentioned in
the past that GLAD was a brand that had
significant competition from the club
channel. Um, and any innovation you can
mention with this in mind in terms of
your offerings to have these retailers
pick up new products and new pack sizes.
Thank you.
>> Sure. And on detocking, you're right to
assume that our ERP would of course have
the opposite effect because we were
rebuilding inventories with retailers as
we got through that period. Um, so
largely we're not seeing any material
detocking behavior impacting results.
Uh, and and largely what we continue to
see from retailers is they're doing the
good structural work you would want to
reduce inventories across the value
chain. Um, and that's good for everybody
over the long term, but we don't see
anything in the short term. And again,
that could change as retailers planes
change uh that are impacting our
business. and we have largely um
recovered our inventories from the
period during the ERP implementation
disruption. Um but again at this point
we're not seeing anything material that
we that would that we would call up for
this quarter uh or for the remainder of
the year on the club business. We have a
very strong club business um across many
of our businesses. And we do focus on
specific innovation for the club member
and shopper just like we do for uh the
grocery channel and for the dollar
channel and for e-commerce. We're
looking to combine, you know, the moment
of truth um with what the product
offering needs to be and and so we work
very closely with our club customers and
others to ensure that we're getting the
right member value for them. Um and
we've been doing that for for many many
years which means we have very strong
positions in club. Now you're right that
we've called out glad as being a place
where we have less of um a position in
club. We continue to work on
opportunities there um to ensure that
we're providing the right value and and
potentially unlock different
distribution opportunities. But for now
what we're focused on is ensuring
consumers who want a large uh count of
trash bags can get them in other places.
Um, so obviously we have very strong
distribution across other channels that
also sell large sizes and so we're
focused on that and focused on on the
club customers where we have good
distribution. Um, but I think I feel
very good largely about where we are in
club and our ability to specifically
target innovation that's uh that
provides great member value.
>> Okay. And just one followup on private
label. Um while the overall share is
more muted in terms of growth um we're
still seeing some increases in
categories like wipes. So I'm curious
for your thoughts here you know relative
to private label share and the increase
that we're seeing versus on the branded side.
side.
Uh yeah, so in aggregate we have not
seen private label make any material
inroads uh in aggregate but there are a
couple categories we call it I actually
wouldn't call it wipes as being one of
the categories that we have concern
about um or are watching carefully but
actually BRA is one that we're watching
carefully right now. We've seen some
consumers um trade down to private label
filters and smaller sizes. And so we
have reacted with ensuring that we have
the right lineup of pictures um and
filters and making sure that we're
having the right value there. But that's
one place we're watching very carefully.
Um we've seen this behavior in the past
when consumers are under stress. Um they
may make a substitution here and there
um for a lower price private label
filter, but uh that's that's a place
that we've been watching uh pretty
carefully. Um and then I would say in
bleach would be the other place that
we're watching very carefully. Generally
our cleaning portfolio is doing very
very well. Um particularly against
private label and we're seeing consumers
across the whole value spectrum all the
way from dilutables up to wipes um
looking for that premium experience. We
continue to see uh good overall share
performance in home care. Obviously it
was impacted by the out of stocks that
we had in Q1. Um but we're seeing that
bounce back. But bleach is a place we're
watching carefully. Um we've seen a bit
of private label uptick. We feel like we
have good bleach plans in the back half
and that's a place where we have have
targeted strengthening the plan in the
back half. Uh but those are two
categories that we're watching very
carefully. Um and watching particularly
lower income consumers to see what their
behaviors are and and adjusting our
plans to make sure that we have an
offering from Clorox that meets their needs.
needs.
Our next question will come from Bonnie
Herszog with Goldman Sachs.
>> Thank you. Hi everyone. I um I wanted to
circle back on your guidance, your
organic sales growth guidance. You know,
of the declines that are expected of neg
5 to 9%.
You know, just hoping for a little bit
more color on the puts and takes of
that. you know, you highlighted your
current expectations are for, you know,
to be at the lower end of the range, but
just curious that the high end of this
range is achievable and if so, what
would the drivers of that be? And then
just a quick clarification of the
inventory unwind. Was there, you know,
maybe a greater unwind than you expected
in any areas of your business? Thanks.
>> Yeah, thanks Money. I can I can take
that. Um first on your last questions I
think we generally feel good about our
inventory positioning at the end of
first quarter. So um that you probably
noticed we refine the estimates of the
incremental shipment associated with the
RP transitions uh from a range of seven
to eight points of negative cell win in
fiscal year 26 to a point estimate of
seven and a half. And just the
background there, I think we talked
about it last quarter, but we had a
pretty robust uh proc uh tracking
process in place to track those
incremental um orders. But you know,
there's also an element of
triangulation. As you as you probably
know, some of our customers have
algorithm based ordering systems and so
we really needed to wait for the end of
the first quarter to kind of finalize
those estimates. So again, feel good
about the current retail inventory
position at the end of the Q1. And we
feel also good about the uh now having
finalized the estimate of the ERP
transitions. Having said that um you
know maybe when we look at you know
looking at the outlook for the organic
sales growth range I think a few things
that's worth mentioning. one, we're
still early in the year and second, you
know, it's a pretty wide range, you
know, in that, you know, given the
environment. Um, and that was, you know,
the breath of the range was the delivery
choices because it allows us to really
remain agile and and realistic as we
navigate the market dynamic and external
environment during the year. So, it is a
wide range. So when you look at the
higher end of the range, having said
that, um it's fair to say that we would
need you know everything to eat on the
all assumptions to eat on the high end
for us to to meet the higher end and it
would be you know a pretty robust uh
sales in the back. So that means
category growth would be on the higher
end of our estimates either one point on
average for US retail or higher. Second,
we would have a great execution on
innovation and demand creation plan. And
then third, of course, you know, then
assume no supply or extranous issues,
you know, coming up as uh as we continue
through the year. So, yeah, that's uh
that's why we need to be true.
>> We'll move next to Olivia Tong with
Raymond James.
>> Great. Thanks. Good, good evening. Um
first um you mentioned in your prepared
remarks that category growth rates have
stabilized even if they're lower than
historical. Um what are you seeing that
underlies your confidence in that
stabilization because many of your peers
seem concerned that things could get
worse through basically first half of
calendar 26 and I think you mentioned
flat to plus one category growth at the
moment. Are you expecting that to get
better as time progressing progresses or
is it more about your innovation other
actions that are driving that share
driving some share opportunity to um to
continue the stabilization? Thanks.
>> Hey Olivia. >> Hi.
>> Hi.
>> On the category growth piece, we've been
talking for a while about uh the stress
that the consumers on under and have
been calling mutate muted category
growth rates for quite a while. And
basically what we have seen which we've
estimated 0 to1 it's been in that range
for a number of quarters. Um now it's
been on the higher end of that range and
then it's been on the lower end. And if
you look at this quarter it was on the
lower end if you exclude beauty which we
don't have a very big business in. You
know we obviously compete in Burks but
that's relatively small. Um category
growth was about flat. Now, to be fair,
we were out of stock in some places. And
so, you know, how much of that is
attributed getting to that lower end of
the range to us, you know, regardless,
it wasn't the the situation that we
would have uh hoped for. Um, and we
could have expected category to be a
little bit better than that and maybe
more in line with what we had seen in
the previous two quarters. So, our
confidence that that will continue is
we're in essential categories. You we're
fuel people's everyday lives. They need
to clean their house. They need to take
care of their pets.
um they need to take out the trash and
so that's why we feel there's been a
floor on the categories that we compete
in um keeping them in that range and in
addition to that just as you call out
Olivia we feel very good about our back
half plans and of course you know our
number one focus is reinvigorating
category growth and then two our focus
is on growing share uh in those
categories through better ideas and
better execution. So
that being said, we're watching the
consumer carefully because there's a lot
of things going on right now. Um, many
of which are still playing out and are
uncertain and that can mean the consumer
would react differently. But again,
given the dynamics that we know today,
uh, what we see as the most likely
scenario and how consumers have been
responding over the last number of
quarters, we feel pretty good about that
category estimate of 0ero to one.
>> Got it. Thanks. And then just on the ERP,
ERP,
um could you just talk about how the
organization is adjusting to all these
um changes? Um you know, do you expect
any disruption to extend beyond Q2 other
than obviously the comp issues in Q4
that that you've got to um deal with?
But just thinking about the organization
and what's the next step after this and
and um and um whether you're expecting
any any big, you know, pull forwards,
push backs, etc. um for the remainder of
the year. Thanks.
Perfect. Yes, on the ERP, you know,
we're through the hard part is the way
that I would put it. Um, we did the the
heavy lifting in Q1 and we had one
additional implementation that happened
later in the quarter that went without a
note. We have another smaller
implementation happening coming up here.
And again, we would expect expect based
on what we've seen that that would be of
no consequence either. Um, and so now
the entire company is focused on using
that new ERP to drive value and then
getting laser focused on rein
reinvigorating category growth and
executing the plans that we have for Q2
and beyond. Um, I think generally we're
all really excited. We've been waiting
for this moment for a long time. This
unlocks so many things for us to be able
to do when it comes to creating superior
value for consumers. faster insights,
faster ability to react when consumers
have changing behaviors, the ability to
see end to end in our supply chain,
which will just make us better at
reacting to what's going on from
retailers and consumers. And of course,
on the savings side, there's a lot to be
had here from an efficiency perspective.
That ability to see end to end allows us
to remain take costs out. It fuels our
ability to do net revenue management and
all the tools that, you know, we've
talked about over the over the last
couple of years. So generally the
organization's very optimistic and laser
focused on now that we've gotten through
this period, it is time to put that to
work uh and time to ensure that we are reinvigorating
reinvigorating
categories and giving consumers uh the
very best value we can at a moment they
need it more than ever.
>> And our next question will come from
I just wanted to just confirm um given
the uh you know the the issues related
to ERP in first quarter are your
customer fill rates now back to normal
uh or are are you still like a little
bit below normal in your second quarter?
And then secondly I had a question on
price mix. Yeah, there's there's three
straight quarters now with price mix
negative and a lot of commentary on the
call about uh competitive pressures,
value seeking behavior
uh across many categories at once. So is
there a path for price mix to inflect
positively or is this going to be kind
of like a negative environment although
albeit modest uh while while working
through this value seeeking environment?
>> Thanks Robert. I'll take the first and
then I'll pass it over to Luke for price
mix. So on uh Q2 order fulfillment, we
are back with retailers um able to fill
the orders that they need and we have
largely rebuilt inventories nearly
everywhere. On the margins, there's some
small things that we're continuing to
work out. Professional is a good example
of that. Um where just given the
distribution network, it's taking a a
little bit longer than the average to to
fully rebuild inventories. But yes, you
know, with a c from a customer
perspective, they're experiencing more
of a normal Clorox um and we're able to
get back to the type of fill rates um
that they expect from us.
>> Yes. And on price mix, um Robert, you're
right. We you know la last year we
actually saw about two points of price
mix negative price mix and this was
really a lot of it was really driven by
the value uh value seeking behaviors
from consumers and and channel shifting
as well uh altogethers along with some
incremental promotions as we uh both
normalize promotion and and saw
increased competitive activity this year
outlook contemplate still a headwind but
lesser about a point and really
essentially it's the continuation of
value seeeking behavior and channel shifting
shifting
promotions are like fairly stable
year-over-year. And then uh we're
actually seeing some uh benefits from
some of the net revenue management
activities that were taking place, but
not fully offsetting the headwinds of um
the value seeeking behavior and channel
shifting. Now, it be about a point for
the year. It was about a point for the
first quarter. It might, you know, it
might move quarter by quarters, but I
think, you know, we're seeing good
momentum and then we'll have to see
where we at after after next year.
>> And our next question will come from
>> Great. Uh thanks. Uh good evening
everyone. Um question probably for Luke,
but Linda, I'd like to get your thoughts
as well. Um so it's kind of twofold.
Number one on run rate EPS, how we
should still be thinking about that, but
then sort of relative to adequacy of
investment levels. So Luke, I think you
said before we should be thinking about
adding back the entirety of the ERP
transition. EPS now seems like it's
going to be the low end of the range,
like a 595 number, and then we just sort
of gross that out for for the ERP uh
transition as we're thinking about sort
of run rate going forward. And I want to
kind of take your temperature on whether
you both still feel comfortable with
that thinking. And I and I ask in the
context that market share is not where
you'd like it to be. Uh promo is
ramping. it seems like the cost of
business is moving higher. A lot of
categories are are slower. So, um do you
still feel comfortable with that sort of
thinking? And I guess the question
really gets to um as you're thinking
about the investment factors that may
potentially hold back that kind of
thinking for investors and that is that
the entirety of the 90 cents should be
thought about in sort of base earnings
or is there a potential here that
investment levels need to move higher in
the current environment. So, love to get
your thoughts there on that. Thank you
very much.
>> Sure, Kevin. I'll start.
You know, the way that we look at this
is the year outside of the fact that we
had a blip in the implementation on
order fulfillment is largely playing out
as we expected. We're seeing the
consumer largely in line with what we
expected, categories largely in line,
competitive activity largely in line.
Um, our execution largely in line. uh we
are seeing some nuances by category
which is typical in a portfolio like
ours where we play in so many different
categories but I would say the
environment the competitiveness the
consumer generally what we thought it
would be um and so nothing has changed
in our confidence and our ability to
navigate that environment um to deliver
the performance that we expect of
ourselves and then of course as we come
out of this um to accelerate all of the
things that we know will add value uh
like innovation
continuing to invest sharply and deeply
in our brands which we are this year. Um
and we feel like we have the right
investment level given everything all
the factors that we spoke about. Um so
generally we see the world very much
like we saw the world the last time we
talked about this. Um and the change is
that we you know from a quarter
perspective we tred up our outlook to
account for the fact that uh we had a
blip in our implementation but largely
all the other stuff remains true. Um,
you know, what we're watching really
carefully, Kevin, is when will when can
we and others reinvigorate category
growth and that's what we aim to do in
the back half and can we get our
categories growing back to the two two
and a half% range we're used to seeing.
Um, even if they don't, and this is a
prolonged period, we still see the
opportunity for our brands to play a
leading role in the categories and
deliver good value creation and earnings
for our shareholders, albeit even if
it's at a lower topline growth number.
Um, but it's too early to call that yet.
you know, we're focused on 26 and making
progress in Q2 and the back half. Um,
but I would say nothing has changed in
our thinking or confidence in our
ability to come out of this year and
continue to deliver good earnings
performance for our shareholders.
>> Yeah. And Kevin, on um on the earnings
run rate, your um your understanding is
correct. Uh we would, you know, we would
see the 90 cents uh being added to
wherever we finish this year as a
starting point next year. And again, as
a reminder, we essentially ended up
shifting two weeks of sales out of
fiscal year 26 into fiscal year 25. So
the absolute the absolute sales dollars
and you know and EPS dollars in fiscal
year 26 are understated and as you lap
that you will see a step up in fiscal
year 27.
>> Okay, very good. Thank you both. Good luck.
luck.
>> Thank you.
>> Thank you.
>> And this concludes the question and
answer session. Miss Rendle, I would now
like to turn the program back to you.
>> Thanks, Jen. As we wrap up today's call,
I want to emphasize that our team is
actively navigating a rapidly changing
consumer environment. We recognize that
consumers are facing ongoing challenges
with spending habits shifting quickly
across all income levels. While we
anticipated many of these changes, new
patterns continue to emerge, and we're
closely monitoring these developments.
By leveraging more real-time insights,
we are adapting our strategies with
agility and focus to meet evolving
consumer needs. Our portfolio of trusted
brands with strong consumer value,
loyalty, and stable household
penetration will help to reinvigorate
category growth and enable us to recover
market share. Looking ahead to the
second half of the year, we have a
robust pipeline of innovation supported
by significant demand creation
investments. We are laser focused on
continuing to deliver and enhance
superior value experiences with our
brands for consumers in a time they need
it more than ever. Our strong holistic
margin management program enables us to
reinvest in our brands, balancing
immediate actions with a long-term
perspective to ensure their ongoing
health and success.
To support our focus on delivering
superior value with speed, our new ERP
system gives us real-time visibility,
enhances demand planning, and enables
faster execution. With the majority of
the implementation complete, our focus
is on rebuilding growth momentum. The
choices we're making today are shaping a
stronger, more resilient Clorox, setting
the stage for sustained growth and
stakeholder value in the years ahead.
Thank you for your time and questions.
We look forward to sharing our continued
progress in the quarters to come.
>> And this concludes today's conference
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