2, 2026 CALL PARTICIPANTS Chair and Chief Executive Officer - Linda RendleChief Financial Officer - Luc BelletVice President of Investor Relations - Lisah Burhan Net Sales -- $1.91 billion, growing 33% year over year and reflecting a 15-point contribution from the GOJO acquisition.Organic Sales -- increased 18%, driven primarily by the comparison to a prior-year period impacted by an ERP transition inventory drawdown.Adjusted EPS -- $1.55, representing an 82% increase due to higher net sales and cost savings.Gross Margin -- 40.4%, a decrease of 130 basis points primarily caused by higher commodity, manufacturing, and logistics costs.Input Cost Inflation -- $240 million for the fiscal year, an increase of $40 million from previous expectations due to broad commodity and transportation pressures.Health and Wellness Net Sales -- $918 million, an increase of 62% resulting from higher volumes and the inclusion of GOJO results.Household Net Sales -- $423 million, up 17% as the company lapped the prior-year inventory drawdown.Lifestyle Net Sales -- $283 million, growing 16% on higher shipment volumes.International Net Sales -- $281 million, an 11% increase supported by strong shipments in Latin America.Operating Cash Flow -- $143 million year to date, representing a 54% increase versus the prior year.Full-Year Organic Sales Guidance -- 3.5% to 4.5% growth, which includes a benefit of more than 3.5 points from lapping the ERP transition.Full-Year Adjusted EPS Guidance -- $5.70 to $6.00, reflecting an expected growth rate of 3% to 8%.Full-Year Gross Margin Guidance -- 41.5%, updated to reflect higher inflationary headwinds and negative product mix.GOJO Synergies -- $50 million target, with management reporting line-of-sight to the full amount and potential capture of some synergies in the first year.Advertising and Sales Promotion -- 10% of net sales, with the retail business specifically targeting approximately 12%.Home Care Market Share -- increased more than 0.5 percentage points, driven by innovation and back-to-school merchandising.Hidden Valley Market Share -- grew nearly 2 percentage points despite category pressure from a cyclospora outbreak.Brent Oil Assumption -- $100 per barrel annual average, utilized as a variable in the company's updated inflation projections.Effective Tax Rate -- 23%, maintained as the outlook for the full fiscal year.SG&A Expenses -- 15.5% of net sales, adjusted to reflect accelerated synergies from the GOJO acquisition.
Need a quote from a Motley Fool analyst? Email [email protected] Bellet warned that "the $240 million is about 2.5x higher our historical annual average rate," noting that inflationary pressures extend beyond energy to resin and transportation.Rendle noted, "The continued story on Litter...
continued to be a drag from a company perspective," highlighting the segment as a primary area for share improvement.
The Clorox Company (CLX +2.16%) reported first-quarter results that exceeded management's expectations despite an increasingly difficult inflationary environment.
Management reported significant net sales growth driven by the integration of the GOJO acquisition and favorable year-over-year comparisons following a prior-year software transition.
The company updated its full-year outlook to account for approximately $240 million in projected input cost inflation, which is roughly 2.5 times higher than its historical annual average.
Leadership emphasized a focus on volume-led growth, margin recovery through productivity initiatives, and the strategic transition to a new chief executive officer in early 2027.
The Board of Directors appointed Fabian Garcia as the next Chief Executive Officer, effective Jan.
5, 2027, to succeed Linda Rendle.Management indicated that the company is transitioning from a period of heavy investment in its Enterprise Resource Planning (ERP) system toward a phase focused on optimization and value creation.The company implemented a high single-digit price increase for Glad Trash products in July to mitigate rising resin costs.CFO Bellet reported that the first quarter delivered one of the highest levels of quarterly cost savings on record for the company.Management expects the majority of new product innovation to launch in the third and fourth quarters, including a significant cycle for the Cat Litter business.
INDUSTRY GLOSSARY Basis Points: A unit of measure for interest rates and percentages, where 100 basis points equals 1 percentage point.Brent: A major trading classification of sweet light crude oil that serves as a global benchmark price.ERP: Enterprise Resource Planning, an integrated software system used to manage core business processes.GOJO: GOJO Industries, Inc., the parent company of the Purell brand acquired by Clorox.RGM: Revenue Growth Management, a set of strategies used to optimize pricing, promotion, and product mix.
Full Conference Call Transcript Operator: Good day, ladies and gentlemen, and welcome to The Clorox Company Fiscal Year 2027 First Quarter Earnings Release Conference Call.
[Operator Instructions] As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference call, Ms.
Lisah Burhan, Vice President of Investor Relations for The Clorox Company.
Burhan, you may begin your conference.
Lisah Burhan: Thank you, Jen.
Good afternoon, everyone, and thank you for joining us.
On the call with me today are Linda Rendle, our Chair and CEO; and Luc Bellet, our CFO.
Please note that our earnings release and prepared remarks are available on our website at thecloroxcompany.com.
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 2027 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 statements section, which identifies various factors that could affect such forward-looking statements, which have been filed with the SEC.
In addition, please refer to the non-GAAP financial information section of our earnings release and the supplemental financial schedules in the Investor Relations section of our website for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.
I'll now turn it over to Linda.
Linda Rendle: Thanks, Lisah, and thank you for joining us today.
We entered fiscal year '27 focused on steadily improving performance and market share while navigating continued input cost pressures.
We made good progress in the first quarter, delivering better-than-expected results through strong execution and some favorable timing benefits.
Importantly, the underlying trajectory of the business continues to move in the right direction with steady progress in organic sales growth and market share.
At the same time, we continue to advance the priorities that will strengthen our performance over time.
We are improving superiority and innovation across our portfolio, integrating GOJO to unlock the full potential of Clorox Purell ProCare, continuing to evolve our portfolio and advancing our transformation efforts from a period of significant investment toward one of optimization and value creation.
Together, these priorities are focused on building a stronger business that delivers more consistent profitable growth.
While we are encouraged by the start to the year, we recognize that the operating environment remains challenging and uncertain.
Consumers continue to seek value.
Competitive activity remains elevated and increased commodity and transportation costs are putting additional pressure on margins.
We have a strong track record of managing cost pressures, and we're taking balanced actions to mitigate their impact while continuing to invest in improving our top line trajectory.
The pace of that improvement will be driven in large part by our continued progress on superiority.
Our updated outlook reflects these realities, along with the actions we're taking to mitigate their impact.
Our focus remains on strengthening brand superiority improving the consistency of our performance and creating sustainable value over time.
As you saw in our announcement on Thursday, the Board has appointed Fabian Garcia as Clorox's next CEO.
Through the process, I've had the opportunity to get to know Fabian, and I've been impressed by both his experience and his perspective on our business.
He is an accomplished global consumer product leader with a strong track record of building brands, evolving portfolios, developing talent and delivering disciplined growth.
Between now and January, I remain fully focused on executing our strategy, delivering our commitments and maintaining momentum while supporting a smooth transition and helping Fabian hit the ground running.
With that, we'll open the line for questions.
Operator: [Operator Instructions] And our first question today will come from Peter Grom with UBS.
Peter Grom: Great.
Linda, if this is your last earnings call, I just wanted to say thank you for everything and best wishes moving forward.
Linda Rendle: Thanks, Peter.
I appreciate that.
Peter Grom: Yes.
Thank you, Linda.
So maybe just to start, just on the commodity outlook, the commentary in the prepared remarks is very helpful.
But just given how volatile the external environment is, can you unpack the underlying assumptions embedded in the updated guidance? Is there anything you can share on the phasing of that cost pressure as we think about the balance of the year? Luc Bellet: Sure.
I can take that, Peter.
So as you've read in our prepared remarks, we now expect input cost inflation for the fiscal year to be about $240 million.
And that's about $40 million more than we expected at the beginning of the year.
This -- the increase is mainly driven by just a range of commodities as well as transportation costs.
And so for perspective, the $240 million is about 2.5x higher our historical annual average rate.
Now what I would say is while oil remains an important variable, it's important to recognize that inflation we're dealing with is broader than energy alone, right? And so we're seeing -- commodities, we're seeing resin being a significant driver.
We're also seeing inflation across a wide range of commodities.
Beyond commodities, we are seeing inflation in broader areas of supply chain, including supply -- supplier cost increase as well as transportation and other logistic costs.
Now from an oil standpoint, we are assuming that the Brent annual average price would be around $100.
But again, keep in mind that the inflationary pressures are proving much more persistent and extend beyond the oil headline.
From a phasing standpoint, we expect inflation will be more pronounced in the first half and -- than in the second half.
And then in the second half, we'll also see many of our mitigation actions stacking up and starting ramping up over time.
So that's why you're seeing an imbalance between the front half gross margin and the second half gross margin.
Peter Grom: That's really helpful.
And then second, you noted some of the moving pieces around 2Q organic sales including a shipment comparison and some merchandising and timing dynamics that will push organic sales to be flat to minus 2%.
And I know it all depends on where you fall within these ranges, but at first glance, it seems like that would imply a return to growth in the back half of the year to kind of get to flat to up slightly.
Maybe first, am I thinking about that the right way? And if so, can you maybe unpack what drives the confidence that this will improve in the back half of the year? Luc Bellet: Sure.
Maybe let me actually just get us grounded in the full year then talk about the phasing of both halves and I can briefly touch on the timing for the second quarter.
So for the full year, our organic sales growth rate is expected to be 3.5% to 4.5%, and that includes about 3.5 points of benefit from lapping the ERP transition.
So essentially, our guidance is organic sales growth, excluding the impact of the ERP, is flat to plus 1% for the full year.
As you mentioned, from a phasing standpoint, we expect organic sales growth, excluding the ERP to be down slightly in the front half and up slightly in the back half.
Now the way to think about it, there's a little bit of noise, especially in the front half between organic growth and consumption.
But -- and some of it is driven by the Kingsford trough, some of it is driven by some of the ERP lap.
But if you really look at the annual retail consumption, it's essentially flat in the front half and then becomes up slightly in the back half.
And as a reminder, last fiscal year, we started in low -- negative low single digits.
And so we've been improving sequentially to the front half of this year and continue to improve in the back half of this year.
So essentially, while we're not where we want, you could see that the outlook assumes that the business is moving in the right direction, reflecting steady progress on market share and consumption.
So that's for the phasing.
Now specifically to the second quarter, most of it is really reflecting timing and relapping dynamic.
If you exclude that, again, you get to what I mentioned, which is U.S.
retail consumption about flat and then for our Pro and international business being outside contributors.
Operator: And we'll take our next question from Anna Lizzul with Bank of America.
Anna Lizzul: Thank you for the question.
And Linda, congratulations on your amazing career at Clorox.
We will all miss you.
Linda Rendle: Thank you, Anna.
Anna Lizzul: I was wondering here if you could elaborate more on the mitigation efforts in light of the cost outlook.
Just how much of the mitigating actions are coming from cost savings? And then how confident are you in your ability to take that incremental pricing you mentioned in the second half of the fiscal year? And also you noted your category growth on top line is within your expectations, is that still around flattish as you kind of started the year here? Luc Bellet: Anna, I'll just take your first question on some of the mitigating actions and then Linda can just add anything and talk about the category growth.
So as you -- given the inflationary outlook, as we talked about last quarter, we're leaning strongly in a holistic margin management set of tools.
And the majority is still going to come -- margin recovery is still going to come from productivity and cost savings.
We have actually really strong cost savings plan this year.
First quarter, we're off to a good start.
This was one of the highest cost savings -- quarterly cost savings on record.
But we are also going to implement targeted pricing in the front half and some in the back half as well as some RGM initiatives.
And some -- most of those will actually play out more in the back half than in the front half.
As you think about the recovery, I guess I've mentioned 2 things.
The first is balance.
We're really going to continue to pay some actions thoughtfully and balance rebuilding the margin while maintaining and accelerating the progress we're making on market share.
And then the second is that we have confidence.
We're confident in our ability to rebuild margin over time.
We have a strong track record of doing so successfully in a much more challenging environment.
And we actually feel that we have a much stronger set of tools and capabilities today.
And as we look at our pipeline, and the actions that are ahead of us, we feel confident in our ability to bring margin over time.
Now for the fiscal year, I was stating to Peter, like, it's going to take time and some of this is going to phase in the back half.
And so we're seeing gross margin compression on average for the full year, but we'll expect to exit the year with much stronger gross margin.
Linda Rendle: On the category side, Anna, we continue to see the category in line with the expectations we set for the year.
And that was certainly true in the first quarter.
And as the fundamentals of the category are playing out as we've expected.
So recall, we said the category flat to up 1, was certainly within that range this quarter.
And moving forward, we're seeing consumers continue to behave in ways that we expect lots of value-seeking behavior, buying larger sizes, smaller sizes, delaying purchases, et cetera, but in line with what we expect we've seen competitive activity generally in line with what we expect.
Retailer activity, again, generally in line with what we expect.
So no indication that our assumptions on category won't hold up for the year.
And then I would just note, because we continue to expect that in the back half, that implies that we would see better share performance in the back half of the year as well.
Operator: And our next question will come from Robert Moskow with TD Cowen.
Robert Moskow: I was hoping for a little more detail on where specifically you're seeing the market share improvement that you talked about, like what categories are you seeing some momentum? Where are you gaining share right now? Linda Rendle: Sure, Robert.
So when we talk about market share improving, we're looking at an aggregate number, but I can break that down by category as well.
So if you look at Home Care, which is our largest business, we have continued share momentum on that business with a very strong quarter, up over 0.5 share point and that is in large part due to great activation on innovation as well as our back-to-school merchandising.
We saw strong share growth in Brita, that also was correlated to our back-to-school, back-to-college merchandising and broad-based strength across promotions as well as innovation.
Hidden Valley grew almost 2 share points this quarter.
And I think you all know that, that category was under a lot of pressure due to the cyclospora outbreak and category was down, we had -- saw weeks that were down strong double digits.
But Hidden Valley, given we are a condiment used on more than just salads, was able to win and deliver strong execution.
So very strong share growth in Hidden Valley.
I know Burt's Bees was about flat, Glad Trash, about flat.
So a number of the businesses showing positive share momentum.
The continued story on Litter, although we have some green shoots that we're happy about as the plans come in, and we are still far from the place we want to be on share.
That continued to be a drag from a company perspective.
And then the final note is on Kingsford, while the category continues to be under stress, given weather, et cetera, we did see a very strong Labor Day for Kingsford, delivered very strong high single-digit growth for that period as well as share growth.
So that's a good indicator that as we have made some adjustments on execution, it bears well for fiscal year -- or excuse me, season year '27 for Kingsford, but that business also highly event dependent and share you have to win the key holidays to do that, and it was a good indication that Labor Day delivered.
Robert Moskow: Okay.
And a quick follow-up.
You said that you have good line of sight for synergies for GOJO, and it's moving faster than you expected.
At some point, do you think you can raise your accretion estimate for first year on that? Luc Bellet: I can take that, Robert.
So first on the accretion and then maybe -- and then I'll talk a little bit about the synergies.
So at the time of the acquisition, we had estimated that the adjusted EPS impact on year 1 will be about neutral.
And we revised this to positive, right? We didn't share any specific.
And this is really a factor of 2 things.
First, the base business is actually continuing performing very well.
And second, we're actually just progressing very nicely on integration and started accelerating some of the synergies.
If you remember from a cost synergy standpoint, we had estimated about $50 million and our initial estimate assumed that we would capture that mostly in year 2 and 3.
And because the good news is we're -- now have, like, line of sight to the entire $50 million, which gives us great confidence that we will get at least that and potentially more.
But in addition, because we've been making the progress on integration, we're able to actually start seeing some of those later in the first year, which is in fiscal year '27.
So net, I think we feel really good about the progress of both the base business as well as the integrations and that's starting showing up in our financials.
Operator: And our next question will come from Andrea Teixeira with JPMorgan.
Andrea Teixeira: So, Linda, congratulations on your amazing career at Clorox and wish you all the best in the next chapter.
I was hoping to -- if you can elaborate a little bit more on what you said about some of the categories where you were able to get -- regain share with basically a lot more merchandising and also potentially promotions.
As you think about recovering -- continuing to recover in the path of getting growth -- organic sales growth in the second half.
Can you talk about like how you're planning those actions? And then if there is anything in particular that you're counting on in terms of like additional phasing of innovation that would give us confidence that this path is going to materialize? Linda Rendle: Sure.
Thanks, Andrea, and thanks for your comments.
So if you look at the share results, first, I want to acknowledge that fiscal year '26 was certainly really noisy for the company.
We underwent our ERP transition, which is never easy, had a bit of bumpiness in part of that.
And so a lot of the businesses were facing not only a heightened competitive environment, a weakening consumer, but they were also focused on just operational execution and ensuring that we were able to deliver to retailers and keeping stock, et cetera.
And so a lot of what you're seeing is us getting back to executing with excellence, now that, that noise is well behind us, delivering on our superiority plans, which we invested incrementally behind this year, as well as ensuring that we execute with excellence behind merchandising.
And I just want to make sure that I'm clear, the merchandising that we have in the system is the typical merchandising we do just executed very well.
So back-to-school, we always have strong promotional activity during that time.
The team actually made a bet on back-to-school that it would occur a little later this year, given the consumer stress that it was under that was a good bet.
We actually saw the timing of consumers' consumption move to later on that, and we were prepared for it.
So I would just want to make sure I note this is not us investing a lot in extra merchandising or price reduction outside of targeted activities we've taken, but just executing the things we have to do with excellence.
So as we move into the back half, there's a few more things that will enhance what we've seen in the front half, and that is most of our innovation launches in the back half.
And that happens throughout Q3 and Q4.
And we have one of our strongest innovation plans on record this year, and we're hoping it will be a record year on innovation.
And we've seen good retailer sell-in.
And many of these innovations had very, very strong consumer testing behind them.
So we go in with a lot of confidence that, that innovation will work.
In addition, some of the innovation is building on current platforms that have been successful like Clorox PURE, the allergy removing platform that we have.
So we already know we have success in market, and we can turn that success into additional areas that those products can deliver on for consumers.
The other thing I would note is, as Anna mentioned, we expect the category continue to be in line with our expectations.
But we are seeing consumers continue to focus on value.
And at the beginning, we talked about the fact that we saw consumers stocking up more or buying a smaller size, but we are also seeing them begin to shift their behavior in terms of timing, like I mentioned for back-to-school.
So those are the things we're watching really closely as we execute in the back half.
But we feel like we have them well handled and well managed.
But those are the things that are kind of as we look to executing that are on our mind, ensuring we deliver our superiority plans, delivering on innovation, executing with excellence against merchandising and new distribution and then watching the consumer really closely as they continue to navigate a difficult environment.
Andrea Teixeira: Linda, this is super helpful.
Can you talk about like the pricing magnitude that you including? And I think Luc had said some selective pricing, and you....
