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- **ERP Implementation**: Successfully launched, causing 7.5-point Q1 sales headwind but enabling Q3/Q4 gross margin expansion.
- **Sales Growth**: Back-half FY26 organic sales +low single digits driven by innovations (e.g., Glad scent platform, Brita filters) and lapping negative trends.
- **Competitive Environment**: Rational competition with increased promotions in trash bags and cat litter; Clorox using price pack architecture to capture value.
- **Gross Margin**: FY26 at lower end of 38-40% range, improving in Q3/Q4 as ERP costs subside.
- **Market Share**: Q1 decline due to ERP out-of-stocks, but rebounding in October; innovation pipeline targeting back-half share recovery.

**【CEO Opening Remarks】**
- Launched new ERP system in the U.S., overcoming implementation challenges to strengthen operations and unlock value streams.
- Focused on demand creation to reinvigorate category growth, with adjustments to outlook reflecting ERP-related disruptions.

**【CFO Financial Commentary】**
- Q1 organic sales decline of 3% (excluding ERP impact), with front-half FY26 sales expected in negative low single digits and back-half in positive low single digits.
- FY26 input cost inflation reduced to $70M (from $90M), with $40M tariff headwind. Gross margin expected to expand in Q3 and Q4, despite near-term pressures.
- FY26 EPS guidance at $5.95-$6.15, with $0.90 EPS impact from ERP-related shipments.

**【Q&A Highlights】**
- **Sales Cadence**: Q2 organic sales expected in low single digits, driven by U.S. retail trends and ERP timing headwinds. Back-half growth from innovation and lapping negative trends.
- **Promotional Environment**: Rational competition, with increased promotions in certain categories (e.g., trash bags, cat litter). Clorox using price pack architecture to capture value across consumer segments.
- **Gross Margin**: FY26 gross margin at lower end of 38-40% range due to ERP expenses and demand creation investments, with improvement expected in Q3/Q4.
- **Market Share**: Q1 market share impacted by ERP-related out-of-stocks, but rebounding in October. Innovation pipeline (e.g., Glad scent platform, Brita pitcher modernization) aims to regain share in back-half.
- **Specific Categories**: Trash bags facing promotional intensity, while cat litter category growing but Clorox underperforming. Clorox prioritizing long-term value creation over short-term share gains.
- **Spending Plans**: Back-half demand creation spending adjusted for consumer behavior, with focus on ROI-driven advertising and merchandising.
- **Portfolio Strategy**: Long-term focus on core brands and disciplined portfolio management, with recent divestitures (Argentina, VMS) reducing volatility.
- **ERP Impact**: Q2 order fulfillment normalized, with minor ongoing adjustments in professional business. FY26 EPS run rate expected to exclude $0.90 ERP impact.

The Clorox Company (CLX) Q1 2026 Earnings Call Transcript

- **FY25 Results**: 8% organic growth driven by 13-14% ERP-related inventory build; underlying sales -5% vs. -3% expectation.
- **FY26 Outlook**: Organic growth -1% to +2%, gross margin flat to +50bps, adjusted EPS growth 2-4% (excluding ERP noise).
- **ERP Impact**: FY25 gross margin reduced by ~100bps; FY26 to lap ERP-related volatility with Q1/Q4 sales impacts of -14% and -3.5-4%.
- **Strategic Focus**: Innovation pipeline, net revenue management, and ERP stabilization to drive FY26+ growth.
- **Long-Term Vision**: 18% operating margin achievable post-ERP; FY27+ targeting 3-5% organic growth through category reinvigoration.

**【CEO Summary Section】**
- Q4 FY25 organic sales growth of 8%, with 13-14% driven by ERP-related inventory build at retailers. Excluding this, underlying sales were -5% vs. -3% expected.
- FY25 gross margin improved due to cost management, but Q4 saw higher-than-expected margin impact (-150bps vs. -50bps guidance) from ERP-related operating leverage.
- FY26 outlook: Organic growth -1% to +2%, gross margin flat to +50bps, adjusted EPS growth 2-4% (excluding ERP noise).
- Key initiatives: Innovation pipeline (back-half 2026), net revenue management, and ERP stabilization.

**【CFO Financial Commentary】**
- FY25 GAAP net income: $420M; Non-GAAP EPS: $1.08 (vs. $0.95 prior year).
- FY25 operating expenses down 5% YoY due to cost control.
- ERP impact: FY25 gross margin reduced by ~100bps; FY26 expected to lap ERP-related sales volatility.
- Tariffs: $40M incremental cost in FY26, partially offset by sourcing, reformulation, and strategic pricing.

**【Q&A Key Highlights】**
- **ERP Transition**: U.S. implementation complete but still in ramp-up phase; FY26 Q1 and Q4 will see year-over-year sales impacts of -14% and -3.5-4%, respectively.
- **Consumer Behavior**: Smaller size buying trends and channel shifts driving promotional activity adjustments.
- **Kingsford Performance**: Q4 execution issues (e.g., Memorial Day merchandising) but July improvement; innovation pipeline to address size preferences.
- **Long-Term Targets**: 18% operating margin achievable post-ERP stabilization; FY27+ focus on 3-5% organic growth through category reinvigoration and share gains.
- **Digital Investment**: $0.35 EPS of one-time ERP-related costs in FY25; FY26+ to return to normal R&D and CapEx levels.

The Clorox Company (CLX) Q4 2025 Earnings Call Transcript

- **Resilient Performance**: 10th consecutive quarter of gross margin expansion despite category declines, no significant private label trade-down.
- **Tariff Impact**: $100M annual tariff impact, with $10-20M in Q4 FY25; ERP transition adds 2-3% FY25 organic sales headwind.
- **Consumer Trends**: Consumers prioritize convenience (e.g., premium products) and value, with no long-term trade-down risk observed.
- **Margin Confidence**: Tools like price-pack architecture and ERP-driven efficiency will sustain margin expansion beyond FY25.

**【CEO Opening Remarks】**
- Despite macroeconomic challenges, the company maintained market share and delivered the 10th consecutive quarter of gross margin expansion.
- Consumer sentiment weakened in mid-February, leading to category declines, but no significant trade-down to private label observed.
- Fiscal year 2025 outlook reflects cautious consumer behavior, with continued focus on reinvesting in brands and innovation.

**【CFO Financial Insights】**
- Tariffs are expected to impact gross margin with a 12-month run rate of $100 million, with $10-20 million affecting Q4 FY25.
- ERP transition will drive 1.5 weeks of inventory build in Q4, impacting organic sales by 2-3% for the full year.
- Gross margin for Q4 is expected to remain stable at ~44%, aligning with the full-year average of 44.5%.

**【Key Q&A Highlights】**
- **Consumer Behavior**: No trade-down to private label; consumers prioritize convenience and value (e.g., smaller sizes, premium innovations like Bahama Bliss trash bags).
- **Tariff Mitigation**: Limited exposure to tariffs, with strategies including supply chain adjustments and targeted pricing.
- **ERP Transition**: Retailers are building inventory ahead of the ERP go-live, with the majority of inventory adjustments reversing in Q1 FY26.
- **Margin Management**: Holistic margin management tools (e.g., price-pack architecture) will help offset headwinds and maintain margin expansion trajectory.


The Clorox Company (CLX)-5 May 25-2025 Q3 Earnings call transcript

- **Gross Margin Recovery Confirmed**: On track for 44% FY25, with 25-50bps EBIT margin expansion starting FY26.
- **ERP-Driven Growth**: Q4 FY25 organic sales +mid-high single digits, reversing in FY26 front-half.
- **Competitive Resilience**: Glad share growth despite elevated promotions; private label share stable/down.
- **International Momentum**: +10%+ organic sales driven by Cleaning and new market entries.
- **Cash Flow Strength**: FY25 free cash flow ~11-13% of sales, with FY26+ upside from ERP savings.

**【CEO Opening Remarks】**
- Announced CFO transition: Kevin Jacobsen retiring, Luc Bellet stepping into CFO role starting April 1, 2025.
- Highlighted Kevin's 30-year contribution to Clorox's IGNITE strategy and transformation.
- Confirmed confidence in achieving 44% gross margin target for FY25 and 25-50bps EBIT margin expansion starting FY26.

**【CFO Financial Update】**
- Q2 FY25 organic sales down 9.5% vs. guidance of low-teens decline, driven by strong demand creation and Kingsford shipment timing.
- Gross margin recovery on track, with FY25 target of 44% achievable.
- FY25 EPS guidance raised to $5.20-$5.40 (from $5.10-$5.40), reflecting ERP-related benefits and tax rate improvement.
- FY26 outlook includes 1-2pts of organic sales growth from ERP transition, offsetting front-half inventory normalization.

**【Q&A Key Themes】**
1. **Gross Margin Expansion**: 
   - Confident in FY25 44% target, with FY26+ EBIT margin expansion via productivity (ERP), design-to-value, and net revenue management.
   - FY25 supply chain inflation lower than expected, offsetting 1pt FX headwind.

2. **ERP Transition Impact**: 
   - Q4 FY25 organic sales +mid-high single digits (vs. Q3 low single digits), driven by 1-2pts ERP-related shipment.
   - FY26 front-half will reverse this benefit, with no long-term margin impact.

3. **Competitive Dynamics**: 
   - Glad trash bag category seeing elevated promotions, but Clorox growing share via innovation (e.g., Bahama Bliss).
   - Litter category promotional environment normalized to pre-COVID levels.
   - Private label share stable or declining across core categories.

4. **Tariffs & Supply Chain**: 
   - Minimal exposure due to nearshored manufacturing; no tariffs baked into FY25 guidance.
   - Flexibility to adjust promotions based on competitive activity (e.g., Glad spending increased in Q2).

5. **International Growth**: 
   - International organic sales +10%+ driven by Cleaning category strength and new market entries (e.g., Cat Litter in Europe/Asia).
   - Professional business +mid-single digits via new verticals (government, healthcare).

6. **Cash Flow & Capital Allocation**: 
   - FY25 free cash flow ~11-13% of sales, with FY26+ upside from ERP cost savings.
   - $50-100M cash impact from ERP transition in Q4 FY25, fully reversing in FY26.
   - Glad JV buyback ($530M fair value) to occur FY26, unlocking 20% margin expansion.


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