Clorox at Barclays Conference: Navigating Challenges and Innovations

On Wednesday, 03 September 2025, Clorox Co (NYSE:CLX) presented its strategic insights at the Barclays 18th Annual Global Consumer Staples Conference 2025. The company reported a mixed fiscal year, with underperformance in top-line revenue but exceeding expectations in margins and earnings, attributed to a robust margin transformation program. Clorox highlighted its commitment to digital transformation and innovation, despite facing challenges like consumer behavior shifts and a past cyberattack.

Key Takeaways

• Clorox over-delivered on margin and earnings but under-delivered on revenue.
• New ERP system implementation caused shipment issues but is now resolved.
• The company is investing over $550 million in digital capabilities and data analytics.
• A strong innovation pipeline is planned for the latter half of the year.
• Long-term goal to expand EBIT margin by 25 to 50 basis points.

Financial Results

• Revenue and Earnings: Under-delivered on revenue but over-delivered on margins and earnings.
• Q1 Expectations: Positioned at the low end of the range, with a 17% to 21% sales decline expected due to ERP and VMS divestiture impacts.
• Gross Margin: Successfully recovered a 900 basis point loss caused by inflation through digital initiatives.
• ERP Impact: ERP implementation is expected to improve supply chain and working capital.

Operational Updates

• ERP Implementation: The U.S. version is now in place, covering 85% of the business, with initial shipment challenges resolved.
• Category Performance: Fluctuations noted in food categories, with a focus on larger sizes and value SKUs due to consumer caution.
• Share Performance: Gains in international and professional segments, with some losses in Kingsford and food categories.

Future Outlook

• Guidance: Anticipates a low start in Q1 but potential recovery throughout the year.
• Category Growth: Expected to return to 2% to 2.5% growth, with continued consumer stress influencing promotions.
• Innovation Pipeline: Multi-year investments in new platforms, with a focus on AI and consumer insights for faster product development.

Q&A Highlights

• Category and Share Performance: Acknowledged share losses due to execution delays but noted gains in cleaning and international businesses.
• Promotional Activity: Competitors remain rational, with strategic promotions aimed at increasing household penetration.
• Transformation Efforts: Focused on building digital capabilities to stay ahead of consumer trends.
• ERP Implementation: Expected to enhance supply chain productivity and unlock top-line growth.

Clorox remains optimistic about its future, focusing on digital transformation and innovation to navigate a challenging environment. For more details, readers are encouraged to refer to the full conference transcript.

Full transcript - Barclays 18th Annual Global Consumer Staples Conference 2025:

Linda Rendle, CEO, Clorox: Back to school for everybody. I hope that’s going well for those of you that have kids. And if not, it’s great to talk about the business at this time. We continue to be very optimistic about our business despite what we all can acknowledge is a pretty difficult environment. We’ve made significant investments over many years to strengthen our company, and we’re starting to see those investments bear fruit, although we certainly have more work to do to ensure that we deliver the growth that we expect of ourselves as a company.

If we look at last fiscal year, our fiscal year ’twenty five, which ended in June, that year was a mix for us. We delivered less than we had expected to from a top line perspective, but we over delivered on both margin and earnings behind our strong margin transformation program. Q4 looked much the same, where we had delivered strong margin and earnings performance but under delivered on top line. And if you look at the shape of the year, really the first half of the year, our consumer assumptions were about what we expected them to be, category assumptions were what they expected them to be, and our share assumptions were the same. In the back half of the year, though, around February, when we saw the consumer take a turn, given all the uncertainty that’s out there, we definitely had an impact in our business.

And we can talk more about what we expect for fiscal year ’twenty six and all the things that we’re doing to invest to ensure that we have strong categories and we can continue to win with the consumer. Also importantly, in Q4, we began the implementation of our U. S. Version of our ERP, which is not just an upgrade, but we did a greenfield implementation of a new ERP. And of course, our U.

S. Business is big, so it’s 85% of our company’s business. And that generally went very well. The prebuild in Q4 went well. And then we had a number of modules that happened in Q1 beginning in July.

We had some bumpiness in August, which we can talk about. So as we were on the order fulfillment part, as you’re bringing retailers up, we saw bumpiness in getting inventories where they needed to be. So you’re actually seeing that in scanner data in August. The good news is we’re past that, so we are now shipping well above consumption. We’re rebuilding inventories.

And what that means, Lauren, and for everybody is that we expect to be at the low end of our range for Q1. And that’s based on what we know right now, but expecting to see, as we have for the last couple of weeks, those shipments rebound, and we’ll see consumption rebound here in September. And we’ve already seen that in the last weeks of data. With that, maybe I’ll hand it over to you for taking off some questions.

Lauren Lieberman: Okay. Perfect. Just to follow-up on that in particular because I know it’s only Q1, and you said you’re through it. So low end for Q1, but you expect to catch up. I mean, the range is still the range for the year, but you expect to catch up, and we should think

Linda Rendle, CEO, Clorox: We have lots of room left in the year. So at this point, we’re just letting you know we think it’s the low end of the range for Q1. Obviously, that’s well within what we contemplated. And we’ll see how the rest of the year plays out. But at this point, we’re just in the low end of the range for Q1, and we’ll continue to keep people updated if there are changes to the full year.

Lauren Lieberman: Okay. Perfect. So let’s go back to a high level then. Yes. Okay.

Great. So there’s been lots of volatility since COVID, obviously. But first, I’d love to talk about what you see as long term category growth, where Clorox competes, what more recent trends have been at a category level, and what you think causes that sort of below long range

Linda Rendle, CEO, Clorox: performance dynamic. Yes. So typically, our categories on average grow about 2% to 2.5% in The U. S. And I’m excluding our Professional business and then obviously excluding our International business, where we have markets that grow at differing rates of that.

But in The U. S, excluding Professional, about 2% to 2.5%. And we have seen around that average high ups and downs. Certainly during COVID, we saw significantly higher category growth. And in times where the consumer is stressed, we’ve seen lower, but it does tend to have a floor.

We tend to see flattish as about the floor in our categories. And they typically are pretty steady. What we’ve seen over the last six months is not wildly out of line without Lauren, but definitely more volatile. And we’re seeing in categories we typically don’t see volatility in. For example, food is a good example for us, which has been very steady.

We’re just in the salad dressing and condiments and dips part of the business, and that’s typically fairly steady. And that’s been more bumpy. But we’re still expecting our categories to be flattish to slightly growing this year. That’s about what we see. So it’s not out of line with what we’ve seen in past times with the consumer.

I think the volatility is what’s different and difficult to predict right now. When we look at maybe starting in February, I mean, we saw some category numbers that we hadn’t seen before, down low to mid single digits for short periods of time and then bouncing back. The good news is we’ve seen it stabilize in Q4, and that’s continued in Q1, but albeit at those lower growth rates of about flattish. And again, it depends on the week. Certainly, our inventory position in those few weeks in August impacted the categories.

We’re starting to see them bounce back a little bit as our inventories come back. As we look ahead, though, I think it’s safe to say that consumer is definitely under stress. Although they continue to have decently healthy incomes, etcetera, they’re starting to see some they’re afraid of inflation. They’re starting to see a bit. And I think the thing that’s most difficult is there’s just so much uncertainty for them in a myriad of facets in their life.

And so we think they’re going to continue to be cautious. In our categories, what cautious looks like is they tend to trade within our own portfolio to larger sizes. They look for more value SKUs. That can compress category growth, right? So instead of buying let’s say you’re buying normally 90 ounces of something, you’re buying 60 ounces and you’re trying to make it stretch.

That inherently slows category growth down while you’re in that mode. So what we’re focused on is strong category investments and then also winning share at the same time, but really focused primarily job number one is getting those categories back to that 2% to 2.5%, which we don’t have any reason to believe that won’t happen in the future once we get through this rough time from a consumer perspective. Okay.

Lauren Lieberman: Let’s talk also, though, about Clorox versus the categories a bit, so outside of the August dynamic. Because consumption in 4Q was down around 3%. In Nielsen, it’s been that way. And you’ve just shared why August, but we saw it in July as well. So and the underperformance kind of broad based.

So why is it you think that Clorox is currently losing share in so many spots? It’s pretty broad based.

Linda Rendle, CEO, Clorox: We are in a few categories. There are some categories that are doing really, really well right now. And maybe I’ll start with where we’re doing well, but I do want to get to your point, which is an important one. Certainly, our business in international and professional, which I know people have less visibility to, continues to do well, and we continue to grow share in both of those segments. In addition, our cleaning business continues to perform very well, and we continue to grow share.

That’s a highly competitive category for us. Innovation is working really well. Our brand investments are working really well. So there are a number of places in the company where it’s going very well, and share is not a concern for us. And we’ll see the normal ups and downs as we see competitive activity, but we feel great about our plans.

Particularly in Q4, there were a couple of places we just didn’t execute well. Kingsford’s one we spoke about on the call. And what does that really mean? What does not executing well, not well mean? It means in an environment where the consumer is changing rapidly, we must change as rapidly our plans to adjust, and that’s where we just fell a little short in Kingsford.

For example, we saw a lot of consumers who couldn’t afford to buy larger sizes, which is typically what we merchandise in a time of when they’re grilling for Memorial Day or for the July 4. What we adjusted our plan for later in the year was to account for that. So we had smaller sized merchandising, making sure that we had that right level. And also, our merchandising levels were just down a little bit based off of what retailers were doing. That’s what we mean by execution, and that’s what sharpened in July 4.

So if you look to the category, and we bounced back in the category bounced back, we bounced back in July 4. We’re hoping the same for Labor Day, which just happens, and that data will come out in a couple of weeks. But those are the kind of examples of as the consumer is moving, we need to move a bit faster. That accounts for most of what we saw from an execution perspective. In addition, there were just some of our categories that had shifts that we didn’t anticipate.

Food is a good example where we’ve grown share consistently for years. And that’s a place where it’s been pretty heavily impacted by consumers. Again, in the long run, we don’t see any change materially in what we think their behaviors are going to be. But in the short term, they’re making trade offs, and we just didn’t move as quickly as we needed to, to adjust. Again, we feel good about our plans, innovation and spending.

But I would say Q4 was a few categories where we didn’t execute well. We know why. And it really is about speed and making sure we adjust our plans as we see the consumer move really fast.

Lauren Lieberman: Okay. You’ve had so many both the volatility, so operational challenges that come with that volatility, the work that you’ve been doing on greenfield on SAP, the reorg type work, do you think the organization is distracted?

Linda Rendle, CEO, Clorox: I wouldn’t say distracted, but I think this is a really important point. And maybe we can spend a bit of time on it, just our transformation, what we’re trying to accomplish, and then, yes, what the organization is trying to take on and their trade offs we’re making. So making zero excuses because I don’t believe in excuses, but I certainly think the context is important. We had COVID, which we were disproportionately impacted by. Our categories were significantly impacted, and it took quite a bit of time to catch up.

And we lost share during that period as all these little brands came in and just filled the holes when there weren’t enough disinfecting products to go around. Once we recovered from COVID and we really said we needed to wholeheartedly transform the company because we needed modern capabilities, we needed a modern digital foundation and all of the tools and capabilities you would expect from a company of our size, we announced our investment and our transformation. Then we had a period of incredible inflation where, again, we were disproportionately impacted given our portfolio and U. S. Footprint.

We were able to recover all of that margin over the last three years through the capabilities we built. Of And course, unfortunately, we were hit by a fairly substantial cyber attack in 2023. So again, not making any excuses. But we’re trying to deal with all of those shocks as well as what’s going on with the consumer, and we’re trying to transform so that we can better deal with those shocks. So our transformation is about investing hundreds of millions of dollars, well over $550,000,000 in rebuilding the digital foundation of the company.

So we did all the things that you would want us to do. We rebuilt our data lake and foundation so that all of the data that we have, we can actually use in the way that we want to do that. And we can get the insights so that we can move as fast as the consumer is moving, so that we can remove costs like we have been known for, for many, many years that we can invest back in our business or return to shareholders. So we began that journey about three or four years ago, so we’re doing all those things in tandem with that transformation. In addition, we intend to accelerate growth.

And we had periods over that time where we did. If you look at ’twenty three, right before the cyberattack, we had rebuilt our share positions in many cases, and we had started to see that translate into growth. And then, of course, we had to recover from the cyberattack. What I would say is all of those instances show the strength of our brands, that we were able to get through that. I think certainly the cyber attack showed how incredibly strong our brands are.

We were able to get all of our distribution back, in fact, grew distribution after that, regained the vast majority of our share. We still have work to do, particularly in a few categories we’ve spoken about, and that we’re making the right investments to ensure the company is stronger. So all sites continue to be focused on in that transformation, finishing the job on digital. It’s not done yet. We are in the stabilization phase right now.

We feel good about where we are. We have additional modules that will come from a manufacturing side in the next couple of quarters, but those went very well in Q1. We would anticipate them to go very well for the remainder of the year. And then we have to extract the value out of all of those investments we made transformation, and that will continue to fuel us. So I wouldn’t say the organization has been distracted because this is the most important work that we do, is building strong capabilities for the company, but we’ve had a lot going on.

That being said, though, in a time where the consumer is stressed, in a time where we need to ensure the categories are healthy, and of course, we intend you’ve heard us talk much more about share in the last eighteen to twenty four months than we have in many years past. We are absolutely laser focused on getting our categories growing again and then, of course, winning in those categories. And I feel confident in the innovation plan we have this year, particularly in the back half. We’ll be launching some new platforms. And obviously, continuing in fiscal year ’twenty seven, we have a very strong pipeline in getting that growth renewed.

Our brands are stronger than they’ve ever been. Arguably, we have a consumer value metric that says we continue to have stronger brands than we did pre COVID. But now we need to do all of that work to ensure that we’re extracting the value from those brands. And I’m sure we can talk more about superior value and all those things that, that means. But I want to just pause again.

I don’t think this is a distraction. It’s the most important work we do. There’s been a lot going on. And we intend, just like we did on margin, for those growth plans to begin to take hold. And particularly, we’ll begin to see that in the back half of this year.

Lauren Lieberman: Okay. I do want to talk about innovation, but first, one more question on the transformation, which was around reimagine work. So I think that work started six years ago now ish with the IGNITE Strategy. And I know it takes time for people to adapt to new ways of working. But I was wondering if you could help just briefly describe kind of how things function now versus then, right?

And is reimagine work kind of fully actioned so that you’ve got the org structure the way you want it versus what the vision was six years ago?

Linda Rendle, CEO, Clorox: Six years ago was a lifetime. A lifetime, really. And what was contemplated by that team at the time, which I was part of, was not what we are doing right now. So reimagine work back then, we wanted to be digitally enabled. We wanted to move at the speed of the consumer.

But really, when COVID hit, I took over as CEO, and our management team looked at each other and said, reimagine work means a very different thing. There’s not one person in the Chorus company that can work like they are today in the future. We won’t be fast enough. We won’t respond quick enough to customer and consumer requirements. We do not have the digital foundation to be able to do that.

And then frankly, as we started to see technologies emerge around AI, we wouldn’t be ready for those things. And so reimagine work went from we need to move as fast as the consumer and over time will do this, too. We fundamentally need to reinvent the capabilities of the company. And we have gone systematically to do that with a digital foundation as the core because that’s what gives you all of the insight to be able to do it. What you started to see is that come to life in I would give you the margin work that we’ve done.

So we lost about 900 basis points of gross margin from the effects of inflation. And we were able to get that all back in a shorter period of time than we thought because we had begun to put those digital pieces in place and we rebuilt capabilities. We didn’t have a holistic net revenue management program, etcetera. We’re starting to get the fruit of those labors really this year as we began to build it. So we have been going capability by capability to reimagine work.

We’re building the next level of capabilities in marketing. So we talked about personalization was our big journey. We met our goal last year. And now we’re looking at one to one as our next goal. How are we going to continue to drive the type of ROIs that we’ve experienced?

We’re in the top quintile of ROI from an industry perspective on marketing, and we want to continue that investment. And then in places where, Lauren, frankly, we were just really behind, we needed to rebuild those capabilities to ensure they could deliver the value. So it follows really the path of what we announced back four years ago than it does when we were in 2019. And so I’ll give you an example. I think this is really tangible.

In June, thousands of people in the company worked one way: how how they took orders, processed them, how they worked at a manufacturing plant, how the business units planned, how they decided how much volume they had, what merchandising was. And we flipped the switch. And in July, everybody works differently now, completely differently. And that’s bumpy, right? You have a person who’s used to doing something manually in systems, and now they have to let it happen in a system that’s guided, etcetera.

So that’s what reimagine work means right now is making sure everyone has those tools, that they’re working as fast as the consumer is. And I would say we’ve made great progress, more to do, but this is really now when we get to the value creation part of the space. We made the investment phase and the execution phase, and now we’re in the let’s extract the value from these investments.

Lauren Lieberman: Okay. Great. Let’s switch to innovation. So I know embedded in the guidance is a second half step up, where you just mentioned the stronger pipeline. I guess, to the degree you can talk about it, because I know it’s early from that standpoint, but kind of what differentiates the upcoming launches versus what you’ve had from the innovation slate in the past?

We had talked

Linda Rendle, CEO, Clorox: a lot about back in 2019, Lauren, when we announced our IGNITE Strategy that the things that we saw in common that worked for innovation were having platform launches versus one off launches that may or may not work. What we wanted to do was really find a big consumer idea that we can invest behind for many, many years. We called that platform innovation and ensure that our investment made good sense and that the consumer had a really good understanding of where the brand was taking them over a number of years. We did good work around that over the last few years, and last year’s innovations built off of many platforms that already existed in the company. For example, we launched a new great flavor of our Glad HorseFlex trash bag in Bahama Bliss.

Did very well, but it wasn’t a new to life innovation. It was building off of a current platform we had. What’s different this year is we will be launching new platforms. And of course, you can’t do that on every brand every year, so we will have different brands. Every year, we’ll have type of that refresh.

But you’ll see from us some new consumer spaces that we’re getting into with the current brands that we have that we’re excited about. And again, because those are so new, won’t talk about them now, but excited to talk to you about them when they ship in the back half of the year. And that’s really what the team is looking at. Can we get more innovation that is truly incremental? We want to do the great work that we have done on new flavor expansions and claims, etcetera, but we want to combine that with also getting into new spaces spaces where our brands have a right to win.

And so that’s what differentiates this year. I would also talk about the fact that from a platform perspective, these innovations, because we built this model, are well funded. And we intend for these to be multiyear platforms that you would see additional launches in fiscal year ’twenty seven, fiscal year ’twenty eight that we’ll continue to invest behind. Okay.

Lauren Lieberman: And has anything changed in your approach to consumer insights, sourcing ideas for innovation, consumer testing? And also maybe you

Linda Rendle, CEO, Clorox: can talk a little bit about speed. Yes. A lot has changed in that. And so with the investment that we’ve made in that data foundation that I spoke about as well as our technology, we’ve fundamentally changed the way that we are doing innovation. We’ve built what we call a digital core, and that allows us to shrink the time that it would typically take for us to have a concept to launch dramatically.

So we’re talking less than half the time that we used to. And we’re doing that in the ideation form. So we’re using AI and GenAI to scan trends in the marketplace. We’re able to pinpoint and identify where those trends are on their curve. So are they very early and probably not to a place where we could drive value out of them?

Are they at just the right place, where if we were to launch something, there’s a lot of value to be had? Or is maybe the trend passed, and it’s something that we just need to walk away from, we were too late? Then we can also take after we have those insights, we can create product concepts in a matter of just days, and we can test it with thousands of consumers, millions if we wanted to, to gain insight. And they help us name the product, say what claims make sense to them or this is a great or a bad idea. And so that insight window that we have, the speed, the amount of information that we can get from consumers is dramatically increased.

Kind of gone are the days where you bring 10 people around a table, and that’s the way that you gain insight because you hand them a prototype and they say they like it or they don’t. You hope you get the right 10 consumers. We have massive amounts of data on our hand that help us move with that type of speed and give us better insight. And we talked about an innovation, the first one we had launched about one years point ago, which was our Clorox toilet bomb. That’s a great example of an innovation we would have never named, Clorox Toilet Balm, without consumers telling us that’s what it should be called.

And so these are the types of things that our marketers now have at their fingertips, our innovators have at their fingertips, more real time consumer insight that can help them move with speed. Now what we’re figuring out, Lauren, is how do we continue to scale that and how do we ensure that we are putting the right attention on the right businesses at the right time and how do we make sure we think about what are the right kind of platform ways that we would do this going forward. So for example, how do you test if a platform has reached the end of its growth curve versus just an item? And those are the things that we’re working on with Gen AI now.

Lauren Lieberman: In this vein, on the fourth quarter call, you mentioned brand superiority a number of times. I’m just curious, what does superiority mean at Clorox in practice, how it’s being measured?

Linda Rendle, CEO, Clorox: And I guess maybe flag areas of strength versus those that are more lacking. Superiority is the foundation for strong categories and for share growth and having strong brands. And it’s something that we believe very deeply in, and we have a framework that we use internally to ensure that our brands are strong. You’ve heard us talk about our consumer value metric before. That is a proprietary in market data assessment of where superior.

So when we say 60% of our portfolio has a superior consumer value metric, it’s actually based off of velocity and data in the market. The way that we look at superiority, though, is much broader than that, and it’s around our 5P model. So we need to ensure that we have the right product, we have the right package, we’re in the right place, we have the right proposition. All of these things have to come together to create superiority. And we’ve reinvigorated this behind this model with our team.

So each one of our business units is responsible for going through and scorecarding themselves where they are on the superiority framework. Is it that perhaps they don’t have the right presence in e commerce and how are they going to deal with that in order to be superior? Is the proposition if competitors have made a move, does our proposition continue to hold up? Is it superior? And our teams are doing that assessment.

And then their plans for innovation and cost savings, product improvements are all based off of that superiority plan. This work went we just rekicked this work off in earnest over the last year to say, are we all clear where we want to be and where we want to go? And we are tying that to an innovation plan. But that’s what it means to us, is that entire experience for the consumer is superior so that when they get to the shelf, digital or physical, they say, I love that, and I have to have it. And that’s how we win.

That’s how categories grow over categories. And there are places, Lauren, where we have been superior for a long period of time, and you’ve seen that. In many of our cleaning businesses, for example, you see clear superiority, and you see even if we have ups and downs as competitors launch innovation or they spend, we’re able to continue to grow over time and grow share because we maintain that superiority. Litter is a good example where we have not had superiority. You can absolutely see results of that.

And we’re rebuilding that right now. And we’ve made progress, but we have more work to do, as we’ve talked about. But that fundamentally, when we were coming back from the cyber attack, that was not only where there are just category issues and dynamics going on with e commerce, but we fundamentally weren’t superior. And so that’s what the team is focused on is, first, we had to get our distribution back, get our plans stable, and now it is systematically improving that superiority across those five Ps.

Lauren Lieberman: Okay. Let’s talk a bit about promotional activity. During earnings season, we heard a couple of companies mention Watchpoints. I think you, in particular, Brent mentioned, if you need trash and litter specifically. Just curious how the competitive environment evolves from here.

We’ve talked about the consumer being stretched, category growth being sluggish. So it feels like a pretty open question in terms of how do companies respond, and does the promotional activity worsen?

Linda Rendle, CEO, Clorox: Generally, we’re seeing a fairly rational environment right now from competitors, and that’s on average. We’re seeing promotional levels exactly what we would have expected them to be. There are pockets, though, where I would say not just promotion, but just generally competitive activity is higher. That is absolutely true in litter, and that is absolutely true in our trash business. We are seeing higher levels of competitive activity across a number of forms, promotion being some of that.

And I think everybody is looking to see what they can do to support the consumer, and everyone does that in a different way. What we would say is as we approach this problem, whether it be continuing to win in categories we’re winning in today or in places like trash and litter where we are making improvements, we are really focused on a few things. One, we believe there’s a way to grow over time that is consistent with our model and we think the right way to grow household penetration. That’s investing in innovation. It’s investing in advertising and sales promotion.

It’s using insights to get to know the consumer better and delivering them a superior proposition that they’re willing to pay for. We believe that’s the right model over the long term that delivers value. And we religiously believe in that. We’re also not afraid, though, in the short term to increase merchandising if we need to and be competitive, but we do not want to destroy category profitability. We’re very clear that the way to win is not just by giving people a lower price on a trash bag.

And those are the things that we’re balancing right now, based on what we see for competitive activity. We’re really ensuring we have our price gaps right now. We’re sharpening that. There are places where I think we can sharpen that. But overall, we want to make sure that we’re doing this in a way that is constructive, in a way that we feel we can add good value over time.

But you have seen us, for example, in Litter. Part of the reason it was more promotional was because of us, because we were out of stock during the cyberattack we needed to get back in. And we used promotion to do that because it’s an effective tool. So promotion can be quite strategic. Also, it can just be tactical when you need to get your distribution and share back.

But certainly, there are places where we’ve leaned into that as well. As we look forward, the consumer is going to continue to be under stress, which means we believe the environment will continue to be competitive. But again, we don’t, at this point, foresee anything completely irrational happening. I think what people are trying to do, you’re seeing innovation ramp up. You’re seeing people talk a lot more about consumer insights.

And certainly, in our categories, where we tend to lead those, that’s what we’re focused on with retailers, helping them thinking about Market Basket, how can they grow the categories in their store, how can they remind consumers it’s a great time to grill, how can they remind consumers as their kids are going back to school, they need cleaning supplies or maybe you need to teach them to clean based on an earlier conversation Lauren and I had. So those are the things that we think are we’re going to continue to see in the category, and we’ll see places where it continues to be more competitive. Okay.

Lauren Lieberman: Let’s just talk for a moment about guidance. So low end of the range for this quarter. Can you just talk a bit about any kind of key category growth assumptions built into the forecast for the balance of the year?

Unidentified speaker: Sure. As we think about the guidance, maybe let me talk briefly about the impact of the ERP and then talk about the impact excluding the ERP because there are a lot of moving pieces. The ERP is clearly the most significant assumption in our outlook and guidance. It’s a transitory one, but it creates a lot of noise. And it creates a year over year decline of seven to eight points.

As Linda mentioned, we went live in July. In preparation for that go live, we ended up shipping two weeks of volume in June 2025 instead of July 2026. And so those two weeks were worth about 3.5 to four points of sales, which mean that fiscal year twenty twenty five was absolute sales were higher by 3.5 to four points and fiscal year twenty twenty six absolute sales were lower by 3.5 to four points. So looking year over year that created a seven to eight point decline. Now while we acknowledge it creates a lot of noise, it’s important to remember that this is transitory and there’s nothing structural about this.

And importantly, as Linda just mentioned, it’s a necessity for us to meet our future aspirations. We are essentially fundamentally modernizing the backbone of our company, and that’s going to help us drive a lot of productivity not only in supply chain and in admin, but also unlock some top line accelerations as we now have access to data and insight that we never had before. So that’s for the ERP. So create a lot of noise. But of course, this noise should start going down as we move through the quarters.

Excluding the ERP, our outlook guidance essentially imply organic sales growth to be minus 1% to plus 2%. Now we’re assuming the external environment continue to be volatile, uncertain and challenging. We expect the consumer to continue their value seeking behaviors. And we also expect competitive activity to remain heightened and the tariff environment to remain uncertain. Specifically to category growth, I think Linda just mentioned it, we expect it to be lower than historical average with category continue to be sluggish.

That means for Us U. S. Retail growth averaging 0% to 1% for the year, but there’ll be variations by businesses and month to month. Now as we look at the sequencing throughout the years, we would expect the front half to decline low single digits and then the back half to have organic sales growth to grow low single digits. Now Q1, we just talked about it briefly.

But again, we’re assuming the consumption trends that we saw in the prior quarters, including the margin the share pressure to continue. Our outlook is for sales to decline 17% to 21%, but includes two points of decline from the VMS divestiture and 14 to 15 points from the RP reversal. So excluding this, we essentially assume that Q1 organic sales growth excluding the RP would decline low single digits. And again as Linda just mentioned, given the slower than expected ramp up in our order fulfillment capability with the new ERP and the out of stock that we saw in August, we expect that we’ll be on the lower end of that range. And beyond Q1, we expect sequential improvements in both consumption and market share with most of it coming in the back half.

I think Linda alluded to it. We feel like we have strong plans in place to either reinforce or actually improve in some businesses superiority. Some of that includes strong initiatives on net revenue management, but also strong innovation plans. We’re launching new platforms in the back half, expanding on existing platform. And in general, we’re excited about the innovation in the back half, and we feel like we have strong plans and the right level of spending behind it.

Lauren Lieberman: Okay. Great. The company has been through so much. And if we look longer term, of fiscal ’twenty eight theoretically, right, no more ERP comparisons to contend with. I’m curious to talk a little bit about the structure of the P and L because gross margin is already back to pre COVID levels.

So thinking about to what extent does long term EBIT margin expansion depend more on SG and A leverage versus further expansion in gross margin?

Unidentified speaker: Sure. I would say, well, our long term goal is to continue expanding EBIT margin by 25 to 50 basis points. And in general, we feel good about our ability to continue doing this over the next few years, while reinvesting in the business. A few things to consider. First, we continue to feel good about our ability to drive cost savings.

Historically, we always had very robust cost savings programs. And in recent years, we moved this program to a more holistic margin management, including and adding new capabilities like net revenue management, design to value and leveraging a lot more data and technology. And that’s really working for us. We saw record level of cost savings in the past few years and we actually feel really good about the pipeline going forward. So that’s the first thing.

Second, the new ERP implementations. We’re going to start seeing the noise, the cost and the volatility associated with that project coming down and the benefits to ramp up, most likely starting next year. With that, we expect a lot of productivity on the supply chain, which should help continue expanding gross margin. And we’re also expecting benefit on working capital. And in addition, with the increased level of automations, we should see some good benefit on SG and A as well.

And then maybe one third things to consider that we generally don’t talk much about, but it’s like we’re starting really accelerating our Global Business Services capability. Historically, because of our antiquated, I would say, data and technology infrastructure, we were not able to take as much advantage of that capability. But now that we move to the new ERP, we’re able to really accelerate it, and that creates a lot of productivity in admin through automation and through offshoring. And so when you take those all those three things together, we feel like we have really a strong pipeline and road map for years to come to continue expanding gross margin and lowering SG and A, and that gives us confidence in our ability to expand EBIT margin while reinvesting in the business.

Lauren Lieberman: Okay. We have to wrap up. That was a good

Linda Rendle, CEO, Clorox: place to end talking about

Lauren Lieberman: the future. So thank you so much for being here. Please join me in thanking Clorox for joining us.

Unidentified speaker: Thank you, Lorraine.

Lauren Lieberman: Thank you.

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