The Clorox Company (CLX) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates a mixed outlook. Financial performance is expected to improve in the back half of the year, driven by innovations and demand plans, but current trends show muted growth and competitive pressures. Margins are under pressure from costs and ERP disruptions, yet improvements are anticipated. Market strategy focuses on innovation and portfolio management. The Q&A reveals cautious optimism with some concerns about competition and execution. Without a market cap, the overall sentiment is neutral, reflecting balanced positives and negatives.

Key Financial Performance

ERP system launch Successful launch of the new ERP system in the U.S. This foundational step has strengthened the digital backbone and unlocks new value streams for the company. Challenges were presented during the transition, but the team navigated them effectively.

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Operating Highlights

ERP System Launch: Successfully launched a new ERP system in the U.S., strengthening the company's digital backbone and unlocking new value streams. Despite challenges during the transition, the team effectively navigated them, and benefits are already ramping up across operations.

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Risk or Challenges

ERP System Implementation: The launch of the new ERP system in the U.S. presented challenges during the transition, requiring resilience and adaptability from the team. These challenges have been incorporated into the company's outlook and adjustments have been made to strengthen the plan for the remainder of the year.

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Guidance & Outlook

Fiscal Year 2026 Outlook: Management has incorporated the realities of the ERP system implementation into the latest outlook and made necessary adjustments to strengthen the plan for the remainder of the year. The company is focused on its demand creation plan to deliver superior value to consumers and reinvigorate category growth.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you provide perspective on the organic sales cadence for the second quarter and the balance of the year, including category growth assumptions and confidence in sales growth trends?

A:Luc Bellet explained that excluding ERP impacts, organic sales growth in the front half would be negative low single digits, and in the back half, positive low single digits. U.S. retail category growth is expected to remain muted at 0%-1%. Confidence in back-half improvement is driven by major innovations, strong demand plans, and lapping negative trends from the prior year.

Q:What are the specific consumption trends for Q2, particularly in October?

A:Linda Rendle noted that October had a year-over-year comparison issue due to storms and port issues in the first half, leading to significant consumption declines. However, consumption rebounded in the second half of October to low single-digit declines, which is expected to continue for the remainder of the quarter.

Q:Can you discuss the promotional environment and price pack architecture for upcoming innovations?

A:Linda Rendle stated that the promotional environment is competitive but rational, with increased promotions in trash and cat litter categories. Price pack architecture is being used to meet consumer needs at various price points, including innovations in litter and other categories. Adjustments are being made to ensure offerings align with consumer value-seeking behavior.

Q:What is the outlook for gross margins, and how are inflation and costs impacting them?

A:Luc Bellet mentioned that inflation is expected to remain moderate, with input cost inflation projected at $70 million, $20 million better than prior estimates. Tariffs remain a $40 million headwind. Additional expenses from ERP disruptions and increased trade spending are pressuring margins, but robust gross margin expansion is expected in Q3 and Q4.

Q:How is the company addressing market share trends and demand-creating activities?

A:Luc Bellet explained that Q1 organic sales declined 3%, with 3 points of headwinds from out-of-stocks due to ERP issues. Linda Rendle acknowledged market share losses but emphasized plans to grow share through innovation, strong demand creation, and stable household penetration. The company is confident in its back-half plans to recover share.

Q:What are the key innovations planned for the second half, and how will they address challenges in trash bags and cat litter categories?

A:Linda Rendle highlighted innovations across all major brands, including new scents for Glad, modernized Brita pitchers, and expanded Burt's Bees offerings. For trash bags, the focus is on balancing long-term value creation with competitive activity. In cat litter, plans are being developed to address underperformance and regain share.

Q:How are spending plans evolving for the back half, and what is the focus of these investments?

A:Linda Rendle stated that spending plans are being sharpened based on consumer behavior and retailer feedback. Adjustments include increased retail media, advertising, and promotional spending for innovations. The focus is on capturing consumer value and driving returns on advertising investments.

Q:What is the company's approach to portfolio management and potential changes?

A:Linda Rendle emphasized a long-term focus on strengthening core brands and actively reviewing the portfolio with the Board. Recent divestitures include the Argentina business and vitamins, minerals, and supplements. The company remains disciplined and open to opportunities for portfolio evolution.

Q:What is the status of the ERP implementation, and how is it impacting operations?

A:Linda Rendle confirmed that the ERP implementation is largely complete, with fill rates back to normal and inventories rebuilt. The focus is now on leveraging the ERP system for faster insights, better demand planning, and cost efficiencies.

Q:What are the expectations for category growth and consumer behavior?

A:Linda Rendle stated that category growth is expected to remain muted at 0%-1%, with stabilization driven by essential categories. The company is focused on reinvigorating category growth through innovation and strong execution.

Q:How is the company addressing private label competition in specific categories?

A:Linda Rendle noted that private label competition is being closely monitored in categories like Brita filters and bleach. Adjustments are being made to ensure competitive offerings and maintain consumer loyalty.

Q:What are the key drivers for achieving the high end of the organic sales growth guidance range?

A:Luc Bellet stated that achieving the high end of the range would require robust back-half sales, higher category growth, excellent execution of innovation and demand plans, and no supply or external disruptions.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on certain innovations planned for the back half, citing competitive reasons. Additionally, while they expressed confidence in category growth stabilization and market share recovery, they did not provide detailed data or metrics to substantiate these claims.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call summary shows mixed signals: strong earnings growth and organic sales growth are positive, but consumer and retailer pressure, along with inventory destocking and ERP transition challenges, create uncertainties. The Q&A reveals management's confidence in innovation and category growth, but concerns about ERP impacts and price/mix negativity persist. Overall, the sentiment is neutral as positive factors are balanced by potential risks and uncertainties.

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