The Clorox Company’s management said fiscal second-quarter results were largely in line with its internal expectations as the company worked through a volatile macro backdrop and the temporary impacts of its ERP implementation. On the earnings call, Clorox (NYSE:CLX) Chair and CEO Linda Rendle said the company entered the year anticipating a challenging first half and described sequential improvement through the quarter, while CFO Luc Bellet detailed how ERP-related items affected shipments and costs and how those pressures are expected to ease as the year progresses.
Sequential improvement, but categories remain subdued
Rendle said the company saw “sequential improvement” in the second quarter and that performance exiting the quarter was stronger than entering it, with that trend continuing into January. She cautioned, however, that recent consumption data can be noisy due to weather and timing impacts, and management did not indicate a change to its category outlook based on early January results.
On share, Rendle said the company was down in share but saw sequential improvement through the quarter, adding that management expects stronger share performance in the back half as innovation launches and demand plans scale.
Competitive and promotional environment back near historical levels
Management characterized the competitive environment as largely in line with what it anticipated, with competitive activity “back to” pre-COVID levels, though with pockets of heightened intensity. Rendle and other executives pointed to cat litter and Glad as areas with higher promotional levels, and noted some pressure in home care.
Executives also discussed consumer behavior as broadly consistent with recent trends, including value-seeking, channel shifting, and mix movement toward both larger sizes (for stock-up and better unit economics) and smaller sizes (to lower cash outlay). Rendle said private label share gains have not been significant, citing a 0.1 share-point increase in the latest quarter, and said consumers “still want brands,” reinforcing the importance of matching price and pack to consumer needs.
In response to questions about willingness to make price investments, Rendle said the company has made selective investments—often through promotion—in areas where consumers appear under more pressure, including trash bags and some home care. She said Clorox is not taking additional price actions “off the table,” but would approach changes strategically and with discipline, supported by expanded revenue growth management (RGM) capabilities and a margin management program intended to provide flexibility to reinvest as needed.
ERP implementation: shipment timing and cost impacts
Bellet said the company experienced roughly “about a point” of shipment favorability in the second quarter—higher shipments ahead of consumption in a few businesses—that it expects to reverse in the third quarter. He attributed the primary driver to higher-than-expected retailer inventory prebuild related to the final phase of the ERP rollout, noting the company had planned for some prebuild, but it came in higher than expected. He emphasized this is “quarterly noise” with no implication for the full year.
The ERP implementation itself was described as phased for manufacturing facilities, with go-lives in July, October, and January. Bellet said the final phase in January went “very smoothly,” and management indicated the company is now moving from stabilization toward optimization.
Bellet also addressed the company’s digital transformation investment adjustments, stating there would be about $0.08 of adjustment in the third quarter and that the company expects to be done with the adjustment associated with the five-year digital investment roadmap after that. He added that ongoing technology investment in the P&L has been increasing and should continue, but is expected to be offset by productivity savings from automation and effectiveness gains.
Back-half focus: innovation pipeline and category-specific plans
Rendle said the back half of fiscal 2026 is “heavily weighted” toward innovation launches across major brands, and that while many items are already shipping, most shelf resets are expected in the back half of the third quarter or early in the fourth quarter—when management expects a more meaningful ramp and share impact.
Among the innovation and business actions discussed on the call:
- Cleaning innovation focused on allergies: Rendle described a new proprietary technology positioned to “destroy the allergen,” with early consumer reviews and strong retailer plans. She said marketing support is planned at roughly double the company’s typical launch investment and that additional waves are already being sold in with retailers.
- Glad innovation: The company is expanding its ForceFlex platform with a LeakGuard feature, adding an absorbent layer to help prevent liquid leaks after tears. Rendle said this is aimed at delivering better consumer experiences and could help “temper” promotional activity in the category.
- Cat litter relaunch: Rendle said Clorox is relaunching its litter business in the back half with updated packaging, graphics and claims, and other changes. She also confirmed a price-pack architecture component to reflect shifting consumer trends and clarify tiering across brands such as Fresh Step and Scoop Away. Management said early results in certain customers are encouraging, though the category remains competitive.
- Hidden Valley: Rendle cited price-pack architecture actions and a new Avocado Ranch offering aimed at consumers looking for non-seed oil options.
Asked about balancing growth and profitability—particularly in trash bags and litter, where promotional activity has increased—Rendle said Clorox is trying to avoid “destroy[ing] value” in categories and views innovation as the most sustainable route to long-term growth. She acknowledged the company has increased some promotion in the short term to manage headwinds but emphasized discipline and a focus on consumer-relevant benefits.
Margins, cost outlook, and fiscal 2027 ERP unwind
Bellet said that excluding temporary ERP impacts, he expects gross margin to expand in the back half after contracting in the first half. Key differences he cited included a higher cost savings run rate in the back half, ERP-related logistics and other costs easing as service levels stabilize (expected to start coming down in the back half and “fully go away” by the fourth quarter), and a step-up benefit tied to the Glad JV termination that he said would contribute about 50 basis points in the back half. He added that gross margin is expected to be about flat in the third quarter and expand more meaningfully in the fourth quarter due to timing of manufacturing expenses, cost savings, and the fade of remaining ERP stabilization costs.
On price/mix, Bellet said the full-year assumption remains that price mix will be a headwind of about 1%, driven largely by consumer value-seeking and channel shifting, partially offset by net revenue management initiatives.
Looking beyond fiscal 2026, Bellet said the company expects a normalization benefit in fiscal 2027 related to ERP shipment timing, describing an expected pickup of about 3.5 points on sales and about $0.90 in EPS when shipment and sales patterns normalize. Rendle added that investment decisions will continue to be driven by strategy and return on investment, and that the company believes it has the tools and “firepower” to increase brand investment if conditions warrant.
Management also reiterated enthusiasm for the planned acquisition of GOJO Industries (Purell), with Rendle saying it fits with Clorox’s strength in health and hygiene, brings a strong management team and operations, and offers upside across B2B and retail. She said the company’s operating model—with dedicated teams by business—should help maintain focus on core category execution while integrating the new asset.
About Clorox (NYSE:CLX)
The Clorox Company is a leading manufacturer and marketer of consumer and professional products designed to help people care for their homes and live healthy, sustainable lives. Its portfolio spans cleaning and household products, food and beverages, water filtration systems and cat litter, serving both retail and institutional customers. The company’s flagship bleach and disinfecting products are well known in the United States and many international markets, where they help prevent the spread of germs in homes, hospitals, schools and businesses.
Clorox’s diverse brand lineup includes liquid bleach and surface cleaners, eco-friendly cleaning tools, food preservation and preparation items, charcoal grills and briquettes, specialty foods and beverages, pet care products and personal care lines.
