Clorox (CLX) Q1 2026 Earnings Call Transcript

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DATE

Monday, Nov. 3, 2025, at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Linda Rendle
• Chief Financial Officer — Luc Bellet
• Vice President, Investor Relations — Lisah Burhan

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RISKS

• Linda Rendle said the company "did cause us to lose more market share than we had anticipated" due to ERP implementation, with recovery ongoing but not yet fully resolved.
• Luc Bellet stated, "it is a little more towards the lower end of the range," regarding gross margin for FY2026, reflecting added expenses from ERP-related operational disruptions and increased trade spending.
• The company noted "continued pressure from a market share standpoint," according to Filippo Falorni, in trash bags and cat litter, with ongoing heightened promotional activity and competitive intensity in these categories.

TAKEAWAYS

• ERP System Implementation -- The U.S. ERP launch is complete and delivering operational benefits, but initial disruptions impacted sales, expenses, and market share, particularly in August.
• Organic Sales Growth Outlook -- Organic sales are projected to be negative low single digits in the first half and positive low single digits in the second half of FY2026, excluding ERP impacts.
• Category Growth Assumption -- The company expects U.S. retail categories to grow between 0% and 1% for the full year, which management described as "muted" and below historical averages, according to Luc Bellet.
• Gross Margin Drivers -- Input cost inflation for FY2026 is now forecast at $70 million, which is $20 million below the prior estimate, while $40 million of additional tariff headwinds are anticipated.
• Market Share Trends -- The company experienced market share losses, especially in August, with partial recovery observed in September and October.
• Innovation Pipeline -- New products were launched in Glad (fall scents), Brita (smaller pitcher and filter sizes), and Burt's Bees (body care), and innovation is planned for all major brands in the second half.
• Promotional Environment -- Promotions increased in trash and cat litter, with overall promotional activity up in certain categories but not material in aggregate. Competitive intensity remains "rational," according to management commentary for Q1 FY2026.
• Channel and Value Dynamics -- Value-seeking consumer behaviors, channel shifting, and increased private label activity in categories like Brita filters and bleach continue to create headwinds.
• Run Rate Earnings Perspective -- Luc Bellet said, "We would see the $0.90 being added to wherever we finish this year as a starting point to next year," referencing the lapping effect of the ERP transition on EPS for FY2026 and FY2027.

SUMMARY

Clorox (CLX +1.15%) management confirmed effective U.S. ERP system deployment, expecting the remainder of the year to benefit from improved operations and demand creation efforts. The company updated its input cost inflation projection to $70 million and maintained a $40 million tariff headwind for FY2026, reshaping its gross margin outlook. Promotions and category-specific competition intensified in areas like trash and cat litter, resulting in market share declines and required operational adjustments. New products and innovation across major brands are positioned as primary drivers of organic sales growth and future share recovery. Management reiterated a disciplined long-term portfolio approach and flexibility in investment decisions should category growth volatility persist.

• Linda Rendle addressed the ERP transition: "... the entire company is focused on using that new ERP to drive value."
• Gross margin expansion is anticipated in the second half, with Luc Bellet stating, "you should see pretty robust gross margin expansion in both Q3 and Q4 of FY2026."
• Retailers' inventory positions are stable post-ERP disruption, with no material destocking trends reported for the quarter.
• The company is closely monitoring private label share, especially for Brita and bleach, and has targeted back-half initiatives to address this competition.

INDUSTRY GLOSSARY

• ERP: Enterprise Resource Planning; large-scale business management software facilitating integrated operations and real-time data visibility across functions.
• Price Pack Architecture: Strategy of designing product offerings and price points to match diverse consumer needs and maximize value perception.
• Net Revenue Management: Tools and processes enabling the optimization of revenue through pricing, mix, and promotional effectiveness analytics.
• Household Penetration: Measurement of the percentage of consumer households purchasing a specific brand or product in a defined period.

Full Conference Call Transcript

Linda Rendle: Thank you for joining us today. In Q1, we reached a major milestone in our transformation journey with the successful launch of our new ERP system in the U.S. This foundational step has strengthened our digital backbone and unlocks new value streams for our company. Launching the ERP was a significant undertaking. And while the transition presented some challenges, our team's resilience and adaptability allowed us to navigate them effectively. We are already seeing the benefits ramp up across our operations. As we move forward, we have incorporated the realities of the implementation into our latest outlook and made the necessary adjustments to strengthen our plan for the remainder of the year.

Importantly, as we move past these temporary challenges, we are fully focused on our demand creation plan to deliver superior value to our consumers and reinvigorate category growth. With that, Luc and I are happy to take your questions.

Lisah Burhan: Thank you, Ms. Rendle. And our first question today will come from Peter Grom with UBS.

Peter Grom: Great. Thank you. Good afternoon, everyone. So I just wanted to touch on the organic sales cadence. And I get there are a lot of moving pieces. But just was hoping to get some perspective on the second quarter as well as the balance of the year. So just first, can you just help us understand what you are including or embedding from a category growth perspective? And then second, you touched on returning to kind of sales growth or consumption growth in the back half as a result of the strong demand creation plan.

So can you maybe just unpack that a bit more and just what drives the confidence that trends will inflect versus what we are seeing today?

Luc Bellet: This is Luc, and I can take that. I think when we look at the phasing for the full year outlook, it might be easier to just exclude the impact of the ERP in both Q1 and Q4. And if you do so, organic sales growth in the front half would be negative low single digits, and organic sales growth in the back half would be positive low single digits. The assumptions on the category remain the same. We assume that, you know, our U.S. Retail category remains muted, kind of on average growing 0% to 1%, still below historical average.

And so the improvement in the back half is really driven by improvement in consumptions, driven by improvement in market share. And there are two main levers here. The first one is that we have a few major innovations in some key businesses. In some cases, we are actually launching new platforms, in others expanding existing platforms. I think we talked about it last quarter, we are excited about innovation plans in the back half and we have strong demand plans in place. And then the second thing is we are lapping some pretty negative trends that started in the back half of last fiscal. And as for U.S. Retail and outside U.S.

Retail, we feel really good about the momentum of both the international and the professional business in the back half. Now Q2 low single, you asked the question about Q2. So Frontal would be low single digits, and we expect Q2 to be in the low single digits. Mostly, slightly expect a continuation of the U.S. Retail consumption trends that we have seen in the first quarter. That as well as about one point of headwinds from the timing of early shipments in the first quarter.

Peter Grom: Okay. That is super helpful. And just maybe more specifically on 2Q. Just on that consumption point, the decline you are expecting, maybe just be more specific on what you have seen through October and how you see kind of consumption trending from here? Is it more or less what we have seen through the majority of 1Q? Or do you see any you embedding any sort of improvement from here?

Linda Rendle: Yeah. Peter, there are some dynamics in October that would be helpful to cover. Because there is definitely a difference if you are looking at the data between the first half and the second half. The first half is marked by a lap of what we saw last year with some storms, hurricanes as well as port issues. And although they were not very material to the quarter last year, they do create a year-over-year comparison issue. So you could see we were down fairly significantly in consumption in the first two weeks, which we expected.

Now you have seen in the October that has rebounded significantly back to what we expected and you can see consumption down low single digits in MULLO. So that would be the dynamic I would expect is that current rate that we have seen over the last two weeks to continue for the remainder of the quarter. But outside of that, we do not have any material things that you should focus on outside of what we provided in the outlook.

Peter Grom: Great. Thank you so much. I will pass it on. Tender Nick question will come from Andrea Teixeira with JPMorgan.

Andrea Teixeira: Thank you. Good afternoon. I was hoping if you can touch a little bit on the environment for promotions. I mean, understand you in the prepared remarks that you continue to see consumers being cautious and value-seeking but hoping to see how the competitive environment unfolds and unfolded through this back half of October to Peter's question. And then if you can also comment on the price pack architecture that you are looking to do for this innovation that is coming in the back end back half of the year? Should we see you becoming more I would say, meeting where the consumer is at in terms of like price points? Anything to add there?

Or in general, what is embedded in your price in the price algorithm for the organic sales growth in the second half?

Linda Rendle: Hi, Andrea. I will start with your first one on the environment. So we are seeing the environment largely in line with what we had expected when we started the year and a continuation of what we saw in the back half of last year. As you noted, the consumer continues to be under stress, definitely reacting to the level of volatility and uncertainty that is out there and we are seeing that in their shopping behaviors. So while in aggregate the entire consumer wallet has been fairly stable, the changes within that wallet have been quite significant and varying week to week and quarter to quarter.

That has meant for our categories is we have seen a generally more competitive environment although I would say it varies business to business, category by category what we are seeing in the specific competitive responses. We have seen increased promotions, for example, in the trash business and cat litter business. Not different than we would have expected given the dynamics of those two categories. We have seen some price changes, both things that looked like promotional price changes turning permanent, as well as some minor price increases. And so again, it varies by category, but I would say on average, the competitive environment seems pretty rational right now.

If you look at the overall promotional spending again in some categories it was up, but in aggregate across our categories not that material. And so what we are just responding to and continuing to watch very closely is will there be a change in the consumer environment that makes people become more competitive, put more money in the system, etcetera. We have seen retailers do some additional support on private label, although it has not yielded any private label share results. As of last quarter, those are the things we are watching carefully.

But again, it still remains a fairly rational environment, but I think people getting very sharp on value depending on what matters to them and their portfolio and the category that we compete in. There are a couple of places maybe that I would just call out that I think are we are watching really carefully, and one of them is food. On average, the food category at large has been challenged. And specifically when we look at the food category that we are in with salad dressing, that category has been declining low single digits and very variable. We have made adjustments to our plan.

I think you saw in prepared remarks that large and small sizes in that business are working really well. But that is a good example of a place Andrea will be using price architecture fully to ensure that we are capturing the consumer wherever they are. Offering them a Hidden Valley offering that is right for they want to get the very best value per ounce or if they cannot afford to get that large size and they just need something in their pantry that is going to get them through the next few meals.

I would also note on the price pack architecture for the new innovation, similar to what you saw in the prepared remarks, that is how we have approached all of these programs. So we have talked about we have some innovation coming in Litter. That will definitely have components of price pack architecture built into it thinking about what are the right price points we need to be at etcetera. As well all the innovations that we launch in the back half.

Our teams have those tools now embedded in our innovation process and they are using them to ensure that we capture the full spectrum at launch and we can talk more about those when those innovations launch in the back half.

Andrea Teixeira: That is helpful. And if I can squeeze in one for Luc, on the gross margin side. I understand that obviously there was a lot of operational deleverage, but you also mentioned commodities coming in, I think slightly better, if I am not mistaken. Anything to add to that in terms of like your flexibility to perhaps getting to better range than guided. I understand some of these ranges will go into the low end, but I was curious to see what has changed from a cost perspective that would inform you to be at the low end?

Luc Bellet: Sure, Andrea. Maybe let me just speak first about what we are seeing from an inflation in general, both commodity and supply chain and then talk about the different puts and takes as we look at gross margin drivers for the full year outlook. So on we if I look at overall inflation, we expect it to continue to remain moderate would say, the year, but it we did mention it is slightly more favorable than our prior estimate in July.

If you remember, at the beginning of the year, we assumed that input cost and inflation would increase a little under $90 million for the full year, with about half coming from commodities and half coming from Supply Chain, both manufacturing and logistics. Our latest projection assumes that input costs and inflations would increase about $70 million so about $20 million more favorable. And again, about half of that is will come in commodities and half of that is coming from the rest of the supply chain. Now we also have to contend with tariffs. And right now, our estimates on tariff remain the same. It is about a headwind of $40 million for the year.

So looking at all of it together, this is about $110 million or about $20 million more favorable than what we thought at the beginning of the year. Now there are a few other puts and takes as we look at the gross margins for the full year. One, we did have to incur additional expenses during the first quarter. To deal with the disruptions on the demand fulfillment related to the ERP ramp up being a little slower than expected. So that is incremental expenses. That offset some of the benefits.

And then second, we are as the teams are finalizing and optimizing their demand creation plans for the innovation in the back half, we increased a little bit both trade spending and advertising. The trade spending is also putting little more pressure. So at this point, it is a little more towards the lower end. Of the range. But keep in mind, it is we expect to have like more movement going through the year. What is important is we generally feel good about our ability to meet our gross margin outlook. And if I may say, if I look at the back half of the year, you should see pretty robust gross margin expansion in both Q3 and Q4.

Andrea Teixeira: Thank you, Linda. Thank you, Luc. I will pass it on.

Lisah Burhan: We will move next to Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala: Hey, guys. Went digging in just a little bit on, you know, maybe your report card because there are so many moving parts with ERP and shipments and all of that when you are making adjustments for it, how do you feel about your market shares? Are they trending in a direction that you prefer the opposite? It is a little hard to read given everything that is going on. I am curious where you are. And layered, I guess, on top of that, you sort of hinted at a few things on more demand creating activities. Do you have the all clear from an infrastructure perspective to go and pursue them?

And if so, maybe just some more details on what it is and how much you expect it to contribute.

Luc Bellet: Maybe what I can do, Kaumil, is just unpack a little bit what was the underlying performance of the first quarter because there was so much noise. So let me start there. And then maybe Linda can provide a little more perspective on the performance in the market. So if we look at Q1 organic sales, excluding the impact of the ERP, we declined about three points. Even within this three point, there was a few things happening. One, there was a one favorable point of timing which is really just the timing shift between Q2 and Q3. Q1 related to some early shipments. For merchandising in the second quarter.

But we also had the impact of the out of stock, which impacted both our market share and maybe to a certain extent some categories and some businesses. And that was about three points of headwinds. So again, if you unpack the negative the decline of three points in the first quarter and exclude those two levers, like the underlying performance was about negative one. Right? So that gives you some context and also kind of just fairly consistent with what we signaled around the frontals being in the negative low single digits.

Kaumil Gajrawala: Hey. Okay. I know a little bit on the share. Yep. Go ahead.

Linda Rendle: Perfect. So on share and just how that translates to the market, unfortunately with the ramp up that we had on our ERP, it did cause us to lose more market share than we had anticipated. And you saw that primarily impact August in a material way. We saw September a bit better and again October continues that trend. But we cannot say we are satisfied with that. We intend to grow market share over the long term. And so we are laser focused on that as we head into Q2 and the back half of the year.

And that is why you are seeing us continue to refine and tune our plans which we feel good about in the back half feel great about the innovation that we have. Feel good about the spending levels we have. And I think what that also connects to is the other parts of the scorecard that will make up share and give us confidence in our ability to grow share again in the back half. And that is household penetration, which remains stable. In fact, if you look at our biggest mega brands that is up in household penetration the Clorox brand and up fairly significantly. Our consumer value metric remains higher, significantly higher than it was pre-COVID.

And again, we have all of the right spending and tools and innovation in that plan to drive market share performance. So while not satisfied right now, I feel like we have the right plans to get that turned around and the fundamentals of our business remain very strong.

Kaumil Gajrawala: Got it. Thank you.

Lisah Burhan: And we will move next to Filippo Falorni with Citi.

Filippo Falorni: Hi, good afternoon everyone. So maybe following up on Kaumil's question, just on the second half, Linda, you mentioned a lot of the improvement is based on the innovation plans that you have for the second half of the year. Can you give us a little bit more color on what categories the innovation is going? What is differentiated? Of what gives you that confidence that innovation will work. And then maybe you can give us specific drill down a little bit more on trash bag and calendar those continue to remain two of the most challenged. Categories. And you mentioned increased promotional activity. So maybe just a review on the plans on those two particular categories as well.

Thank you.

Linda Rendle: Sure, Filippo. You know, in innovation, maybe I will talk about some of the ones that we just launched that are in market now and that we have the ability to speak a bit more about. In Glad, we are continuing to build on the very successful Scent platform that we have. You have heard us talk about Bahama Bliss, which was the last big scent that we had released, and we are following that with a fall scent. Which we think will do very well for Glad and continue to attract that consumer that is looking for that extra piece of treat at home given what they are going through.

In Brita, we are actively modernizing our pitchers with new colors. We are also ensuring that we are doing price pack architecture there to ensure we are capturing consumers who cannot afford to buy a larger pitcher at the moment. So we have launched some smaller sizes for both pitchers and filters and that gives consumers a reason to not turn away from a Brita pitcher. On Burt's, we have expanded a very successful platform. We launched a boosted BOM a while back and we are increasing the footprint of that and launching that into body. And we just launched innovations including a lotion, whipped butter and moisturizing melt. They are quite delightful.

And I think consumers are really going to like them. So those just came out, and we are feeling good about those. We will have additional innovations and the way I would think about it Filippo is that we will have innovations across all of our major brands this year. And so you will see those coming in the back half. Some of these innovations are brand new spaces for us in terms of what we are going after from a consumer perspective and what problems we are trying to solve for them. And then some of them build again on existing capabilities that we already have.

And I know you can understand that I cannot get into exactly where those are right now. But the key takeaway is innovation across all major brands, feel really good about the innovation that we launched in Q1. Very good about the back half. We have the right spending and I think they are the right mix between continuing to improve the base and bringing new to world innovations that are superior value to consumers. And that we think we can create years and years of value from.

Filippo Falorni: Great. And maybe just, just on trash bags and litter, we have seen continued pressure from a market share standpoint. So maybe can you give us a sense of your assessment of those categories and how sustained this promotional environment can remain in those categories? Thank you.

Linda Rendle: Yes. On both of those categories, they are largely what we expected to see, which is very competitive, more promotional activity, you know, continued innovation, and we are seeing about in line with what we expected to see in both of those. Of course, Q1 was impacted by our implementation of the ERP. So we saw a bit more share decline than we had expected. But obviously once we are back in stock and we for the most part are now, we have begun to see those shares rebound. But both of those continue to be marked by higher than normal competitive activity and we see that in pricing, we see that additional promotional spending.

And what we are trying to balance in both categories and particularly in trash would be the long-term value creation aspects of this. We do not want to get into a place where destroying value in the category. Because we just do not see people create a lot more trash when a trash bag is more discounted. What we are trying to do is ensure that we preserve the right to grow this category through innovation and better consumer ideas and experiences. And so we are being very choiceful. There are places where we have increased our investment in Glad we are being very surgical about that.

And there are places where we are willing to lose a bit of share in the short term in service of that long-term objective. So that is what we think we are getting the balance right on now. We are going to watch it really carefully in Q2 and the back half. We want to execute our innovation with excellence. I would say that category is very much what we expected to see. Litter, of course, in a place where the category is growing and we are not getting our fair share of that, that is highly disappointing to all of us. We feel good about the plans we have on litter in the back half.

We will talk more about those in our next call. But we will go after all of the things that we think are not working quite right for us in Litter right now. And we are hopeful that will show a marked turnaround in the back half once we get that implementation in market.

Filippo Falorni: Got it. Thank you very much.

Lisah Burhan: Thanks, Filippo. Your next question will come from Chris Carey with Wells Fargo.

Chris Carey: Hey, everyone. My first question is just around the, like, spending plans for the back half. I am mostly curious how these have evolved, you know, since you started the year. And what I am specifically interested in is are we talking about you have these great innovations, you will be leaning in more. You are basically funding that with the incremental cost savings that you are getting from, you know, more favorable commodities. Or are you looking at the broader suite of activities and thinking that you can drive, you know, greater outcomes, you know, beyond even those innovations and just is there a way to think about it between promotional activity and advertising? And I have a follow-up.

Linda Rendle: I will start, Chris. So, yeah, on the spending plans for the back half, we started the year we felt very good about them to begin with. We have pretty sophisticated tools that allow us to put money where we know we are going to get a good return. You have heard us a lot talk about the personalization engine that we built that allows us to target consumers in a way that gets some messaging that is driving very good ROIs and we have one of the leading ROI in the industry from an advertising perspective. So we already felt strongly about our plans heading into the back half.

We took an opportunity to do is as consumers are adjusting their behaviors, we have adjusted our plans to sharpen that spending in the back half. Now I will give you some examples. Some of it is innovation as we have gotten clearer on what distribution looks like and what retailers plan to do, we have made adjustments in spending on retail media. We have made adjustments in spending in advertising. Or how we might do a promotional kickoff in a retailer. Those are the things the teams have done. In addition, I will give you an example in Kingsford, we saw that many consumers are doing exactly what they are in categories from a value perspective.

They are either trading up to larger sizes or they are looking for an opening price point. So for really the first time in July 4 and Labor Day, we had much more merchandising on smaller sizes and larger sizes. It actually grew household penetration as a result of that plan. And that we adjusted that spending based on the learnings we had from Memorial Day where we talked about the merchandising plan did not go as we had anticipated and we did not execute to the degree we wanted to. We made those adjustments in July 4 Labor Day and are taking those forward as we look at the back half of the year.

So it is across a number of things Chris. We are using the tools that we have. The consumer understanding that we are getting and making real-time adjustments with retailers. To try to capture as much of the change as we possibly can. And because we feel very confident about our ability to deliver strong returns on advertising, we feel confident about the choices that we have made. And frankly, we will probably continue to make adjustments as we learn more. And our business units are fully empowered to do that. And they are watching the consumer carefully and will make adjustments if they need to support innovations or the base.

Chris Carey: Okay. Thank you. One follow-up. We have seen an increase in portfolio actions I guess, that we can call them at a number of companies across consumer staples to respond or maybe adjust to different demand backdrops. I am conscious you have a fairly diverse portfolio, a very clean balance sheet. You called out certain categories that have been more volatile than what you wanted. Perhaps there are others where you would want to play more in.

So just, you know, in this environment, with the balance sheet you have and volatility we are seeing can you give us maybe a sense of how you are thinking about the concept of portfolio and what you are really trying to accomplish with your own and how you think about maybe, you know, any future evolution? Thanks so much.

Linda Rendle: Sure, Chris. You know, first, think the most important principle we have is we always take a long-term focus when it comes to our portfolio. And so are certainly a lot of things going on right now, of which is just noise. And temporary, and some of which we will see. Does it turn more permanent? Is there a change in the consumer environment that we need to account for or any company needs to account for? But we are staying very disciplined in taking a long portfolio focus. And that plays itself out in two very important ways. The first and the most important is that we strengthen our core.

And that we take the brands that we have that are in the vast majority of U.S. households and in households all around the world and we offer better value to consumers, invest in those brands and we get to the place where we are pretty consistently growing market share, growing household penetration, etcetera. And we have seen moments of that over the last several years and it has certainly been choppy given the external environment and some of the challenges we have had on our own.

But that is our number one focus and I feel, you know, better than I have in a long time around the innovation plans that we have, and the ability for those to continue to grow our market share and household penetration over the long term. We have plenty of opportunities on our core business to get better and sharper and deliver profitable growth. The second component of that is actively with our board all the time, looking at our portfolio to ensure that we have the right portfolio moving forward and you have seen us make a few moves albeit on the smaller side but very important.

We divested our business in Argentina, which had driven the vast majority of the currency volatility we had experienced. As well as divesting the business for vitamins, minerals and supplements, which unfortunately did not contribute what we had anticipated it would in a series of the two acquisitions that we made. And that is delivering real results. Every day in the portfolio. And we are always looking with our Board at all options for our portfolio whether that be tuck-ins continuing to expand on categories that we play in today or looking of course at more transformational things, just as you would expect us to with our board. But we will remain disciplined.

The good news is we do have a strong balance sheet. So if there is something that we think is attractive from a shareholder perspective, we have the ability to act on it. We want to make sure that we are taking a long-term view always and not chasing some short-term temporary disruption and setting ourselves up for good long-term shareholder returns.

Chris Carey: Okay. Thank you.

Lisah Burhan: Our next question will come from Anna Lizzul with Bank of America.

Anna Lizzul: Hi, good afternoon. Thanks so much for the question. Just wanted to ask, we are hearing from peers in this space that there is some destocking here from certain retailers. And I suppose with the ERP transition, not as exposed to that right now, but was wondering if you can comment on this inventory trend. And as we see a retailer shift to club and online from consumers, I was wondering how you are looking to increase your exposure here. You mentioned in the past that Glad was a brand that has significant competition from the club channel.

Any innovation you can mention with this in mind in terms of your offerings to have these retailers pick up new products and new pack sizes? Thank you.

Linda Rendle: Sure. And on destocking, you are right to assume that our ERP would, of course, have the opposite effect because we were rebuilding inventories with retailers as we got through that period. So largely, we are not seeing any material destocking behavior impacting results. And largely what we continue to see from retailers is they are doing the good structural work you would want to reduce inventories across the value chain. And that is good for everybody over the long term, but we do not see anything in the short term. And again, that could change as retailers' plans change that are impacting our business and we have largely recovered our inventories from the period during the ERP implementation disruption.

But again at this point, we are not seeing anything material that we would call up for this quarter or for the remainder of the year. On the club business, we have a very strong club business across many of our businesses and we do focus on specific innovation for the club member and shopper just like we do for the grocery channel and for the dollar channel and for e-commerce. We are looking to combine, you know, the moment of truth with what the product offering needs to be and so we work very closely with our club customers and others to ensure that we are getting the right member value for them.

And we have been doing that for many, many years, which means we have very strong positions in club now. You are right that we have called out Glad as being a place where we have less of a position in club. We continue to work on opportunities there to ensure that we are providing the right value potentially unlock different distribution opportunities. For now, what we are focused on is ensuring consumers who want a large count of trash bags can get them in other places. So obviously we have very strong distribution across other channels that also sell large sizes. And so we are focused on that and focused the club customers where we have good distribution.

But I think I feel very good largely about where we are in club and our ability to specifically target innovation that provides great member value.

Anna Lizzul: Okay. And just one follow-up on private label. While the overall share is more muted in terms of growth, we are still seeing some increases in categories like wipes. So I am curious for your thoughts here relative to private label share and the increase that we are seeing versus on the branded side?

Linda Rendle: Yeah. So in aggregate, we have not seen private label make any material inroads in aggregate, but there are a couple of categories we call it. I actually would not call it wipes as being one of the categories that we have concern about. Or are watching carefully. But actually, Brita is one that we are watching carefully right now. We have seen some consumers trade down to private label filters as smaller sizes. And so we have reacted with ensuring that we have the right lineup of pitchers, and filters and making sure that we are having the right value there. But that is one place we are watching very carefully.

We have seen this behavior in the past when consumers are under stress. They may make a substitution here and there for a lower price private label filter, but that is a place that we have been watching pretty carefully. And then I would say Bleach would be the other place that we are watching very carefully. Generally, our cleaning portfolio was doing very, very well. Particularly against private label and we are seeing consumers across the whole value spectrum all the way from dilutables up to wipes looking for that premium experience. We continue to see good overall share performance in Home Care. Obviously, was by the out of stocks that we had in Q1.

But we are seeing that bounce back. Bleach is a place we are watching carefully. We have seen a bit of private label uptick feel like we have good bleach plans in the back half and that is a place where we targeted strengthening the plan in the back half. But those are two categories that we are watching very carefully. And watching particularly lower-income consumers see what their behaviors are and adjusting our plans to make sure that we have an offering from Clorox that meets their needs.

Anna Lizzul: Great. Thank you so much.

Lisah Burhan: And our next question will come from Bonnie Herzog with Goldman Sachs.

Bonnie Herzog: Thank you. Hi, everyone. I wanted to circle back on your guidance, your organic sales growth guidance of the declines that are expected of negative five to 9%. Just hoping for a little bit more color on the puts and takes of that. You highlighted your current expectations are for to be at the lower end of the range. But just curious that the high end of this range is achievable. And if so, what would the drivers of that be? And then just a quick clarification of the inventory unwind. Was there maybe a greater unwind than you expected in any areas of your business? Thanks.

Luc Bellet: Yeah. Thanks, Bonnie. I can take that. First, on your last questions, I think we generally feel good about our inventory positioning. At the end of the first quarter. So that is a you probably noticed, we refine the estimates of the incremental shipment associated with the ERP transitions. From a range of seven points to eight points of negative sales headwind in fiscal year 2026 to a point estimate of 7.5. And just a background there, I think we talked about it last quarter, but had a pretty robust tracking process in place to try those incremental orders, but there is also an element of triangulation as you probably know, some of our customers have algorithm-based ordering systems.

And so we really needed to wait the end of the first quarter to kind of finalize those estimates. So again, good about the current retailer inventory position at the end of the Q1, and we feel also good about the now having finalized the estimate of the ERP transitions. Having said that, maybe when we look at looking at the outlook, for the organic sales growth range, think a few things that is worth mentioning one, we are still early in the year. And second, it is a pretty wide range in that given the environment. And that was the breadth of the range was a deliberate choice.

Because it allows us to really remain agile and realistic as we navigate the market dynamic and external environment during the year. So it is a wide range. So when you look at the higher end of the range, having said that, it is fair to say that we would need everything to eat on the all assumptions to eat on the high end for us to meet the higher end. And it would be a, you know, a pretty robust sales in the back half. So that means category growth will be on the higher end of our estimates. Either one point on average for U.S. Retail or higher.

Second, we would have great execution on innovation and demand creation plan. And then third, of course, that assumes no supply or extra issues coming up as we continue through the year. So, yeah, that is what we need to be true.

Bonnie Herzog: Okay. Thank you. I will pass it on.

Lisah Burhan: We will move next to Olivia Tong with Raymond James.

Olivia Tong: Great. Thanks. Good evening. First, you mentioned in your prepared remarks that category growth rates have stabilized even if they are lower than historical. What are you seeing that underlies your confidence in that stabilization? Because many of your peers seem concerned that things could get worse through basically '26. And I think you mentioned flat to plus one category growth at the moment. You expecting that to get better as time progresses? Or is it more about your innovation, other actions that are driving that share driving some share opportunity to continue the stabilization? Thanks.

Linda Rendle: Olivia, Hi. So on the category growth piece, we have been talking for a while about the stress of the consumers on. Under and have been calling muted category growth rates for quite a while. And basically, what we have seen, which we have estimated zero to one, it has been in that range for a number of quarters. Now it has been on the higher end of that range. Then it has been on the lower end. And if you look at this quarter, it was on the lower end if you exclude Beauty, which we do not have a very big business in. We obviously compete in Burt's, but that is relatively small. Category growth was about flat.

Now to be fair, we were out of stock in some places, and so how much of that is attributed getting to that lower end of the range to us? Regardless, it was not the situation that we would have hoped for. And we could have expected category to be a little bit better than that and maybe more in line with what we had seen in the previous two quarters. So our confidence that will continue as we are in essential categories. We fuel people's everyday lives. They need to clean their house. They need to take care of their pets. They need to take out the trash.

And so that is why we feel there has been a floor on the categories that we compete in. Keeping them in that range. And in addition to that, just as you call out Olivia, we feel very good about our back half plan. And of course, our number one focus is reinvigorating category growth. And then two, our focus is on growing share. In those categories through better ideas and better execution. So that being said, we are watching the consumer carefully because there are a lot of things going on right now, many of which are still playing out and are uncertain. And that can mean the consumer would react differently.

But again, given the dynamics that we know today, what we see is the most likely scenario and how consumers have been responding over the last number of quarters, we feel pretty good about that category estimate of zero to one.

Olivia Tong: Got it. Thanks. And then just on the ERP, could you just talk about how the organization is adjusting to all these changes? Do you expect any disruption to extend beyond Q2 other than obviously the comp issues in Q4 that you have got to deal with? But just thinking about the organization and what is the step after this and you are expecting any big pull forward pushbacks etcetera for the remainder of the year? Thanks.

Linda Rendle: Perfect. Yes. On the ERP, we are through the hard part is the way that I would put it. We did the heavy lifting in Q1 and we had one implementation that happened later in the quarter that went without a note. We have another smaller implementation happening coming up here. And again, we would expect based on what we have seen that would be of no consequence either. And so now the entire company is focused on using that new ERP to drive value and then getting laser focused on reinvigorating category growth and executing the plans that we have for Q2 and beyond. I think generally we are all really excited.

We have been waiting for this moment for a long time. This unlocks so many things for us to be able to do when it comes to creating superior value for consumers. Faster insights, faster ability to react when consumers have changing behaviors, the ability to see end to end in our supply chain. Which will just make us better at reacting to what is going on from retailers and consumers. And of course on the savings side, there is a lot to be had here from an efficiency perspective. That ability to see end to end allows us to remain take costs out.

It fuels our ability to do net revenue management and all the tools that we have talked about over the last couple of years. So generally, the organization is very optimistic and laser focused on now that we have gotten through this period, it is time to put that to work. And time to ensure that we are reinvigorating categories and giving consumers the very best value we can at a moment they need it more than ever.

Olivia Tong: Got it. Thank you.

Lisah Burhan: Our next question will come from Robert Moskow with TD Cowen.

Robert Moskow: I just wanted to just confirm given the issues related to ERP in the first quarter, are your customer fill rates now back to normal or are you still a little bit below normal in your second quarter? And then secondly, I had a question on price mix. It is three straight quarters now with price mix negative. And a lot of commentary on the call about competitive pressures, value-seeking behavior, across many categories at once. So is there a path for price mix to inflect positively or is this going to be kind of like a negative environment, although albeit modest while working through this value-seeking environment?

Linda Rendle: Thanks, Robert. I will take the first, and then I will pass it over to Luc for price. So on Q2 order fulfillment, we are back with retailers able to fill the orders that they need and we have largely rebuilt inventories nearly everywhere. On the margins, there are some small things that we are continuing to work out. Professional is a good example of that where just given the distribution network taking a little bit longer than the average to fully rebuild inventories. But yes, from a customer perspective, they are experiencing more of a normal Clorox. And we are able to get back to the type of fill rates that they expect from us.

Luc Bellet: And on price mix, Robert, you are right. We have, you know, last year, we actually saw about two points of price mix negative price mix. And this was really a lot of it was really driven by the value-seeking behaviors from consumers and channel shifting. As well altogether. Along with some incremental promotions as we both normalize promotion and saw increased competitive activity. This year, our outlook contemplates still a headwind but lesser, about one point. And really, essentially, it is the continuation of value-seeking behavior and channel shifting. Promotions are fairly stable year over year. And then we are seeing some benefits from some of the net revenue management activities that were taking place.

But not fully offsetting the headwinds of the value-seeking behavior on channel shifting. Now it would be about one point for the year, it was about a point for the first quarter. It might move quarter by quarters, but I think we are seeing good momentum. Then we will have to see where we are after next year.

Robert Moskow: Thank you.

Lisah Burhan: And our next question will come from Kevin Grundy with BNP Paribas.

Kevin Grundy: Great. Thanks. Good evening, everyone. Question probably for Luc, but Linda, I would like to get your thoughts as well. So it is kind of twofold. Number one, run rate, EPS, how we should still be thinking about that? But then sort of relative to adequacy of investment levels. So Luc, I think you said before we should be thinking about adding back the entirety of the ERP transition and EPS now seems like it is going to be the low end of the so like a $5.95 number. And then we just sort of gross that up for ERP transition as we are thinking about sort of run rate going forward.

And want to kind of take your temperature on whether you both still feel comfortable with that thinking. And I ask in the context that market share is not where you would like it to be. Promo is ramping. It seems like the cost of business is moving higher, a lot of categories are slower. So do you still feel comfortable with that sort of thinking? And I guess the question really gets to as you are thinking about the investment factors, that may potentially hold back that kind of thinking.

For investors and that is that the entirety of the $0.90 should be thought about sort of base earnings or is there a potential here that investment levels need to move higher in the current environment? So love to get your thoughts there on that. Thank you very much.

Linda Rendle: Sure, Kevin. I will start. You know, the way that we look at this is the year outside of the fact that we had a blip in the implementation order fulfillment is largely playing out as we expected. We are seeing the consumer largely in line with what we expected, categories largely in line, competitive activity largely in line, our execution largely in line. We are seeing some nuances by category, which is typical in a portfolio like ours where we play in so many different categories. But I would say the environment, the competitiveness, the consumer generally what we thought it would be.

And so nothing has changed in our confidence and our ability to navigate that environment to deliver performance that we expect of ourselves. And then of course as we come out of this to accelerate all of the things that we know will add value like innovation, continuing to invest sharply and deeply in our brands, which we are this year, and we feel like we have the right investment level given everything, all the factors that we spoke about. So generally, see the world very much like we saw the world the last time we talked about this.

And the changes that we from a quarter perspective, we trued up our outlook to account for the fact that we had a blip in our implementation. Largely all the other stuff remains true. You know, what we are watching really carefully, Kevin, is when will when can we and others reinvigorate category growth? And that is what we aim to do in the back half and can we get our categories growing back to the 2%, 2.5% range we are used to seeing.

Even if they do not and this is a prolonged period, we still see the opportunity for our brands to play a leading role in the categories and deliver good value creation and earnings for our shareholders. Albeit even if it is at a lower top line growth number. But it is too early to call that yet. We are focused on 26% and making progress in Q2 and the back half. But I would say nothing has changed in our thinking or confidence in our ability to come out of this year and continue to deliver good earnings performance for our shareholders.

Luc Bellet: Yeah. And Kevin, on the earnings run rate, your understanding is correct. We would see the $0.90 being added to wherever we finish this year as a starting point to next year. And again, as a reminder, we essentially ended up shifting two weeks of sales out of fiscal year 2026 into fiscal year 2025. So the absolute sales dollars and EPS dollars in fiscal 2026 are understated. And as you lap that, you will see a step up in fiscal year 2027.

Kevin Grundy: Very good. Thank you both. Good luck.

Lisah Burhan: Thank you. Thank you. And this concludes the question and answer session. Ms. Rendle, I would now like to turn the program back to you.

Linda Rendle: Thanks, Jen. As we wrap up today's call, I want to emphasize that our team is actively navigating a rapidly changing consumer environment. We recognize that consumers are facing ongoing challenges. With spending habits shifting quickly across all income levels. While we anticipated many of these changes, new patterns continue to emerge and we are closely monitoring these developments. By leveraging more real-time insights, we are adapting our strategies with agility and focus to meet evolving consumer needs. Our portfolio of trusted brands with strong consumer value loyalty and stable household penetration enable us to recover market share. We will help to reinvigorate category growth.

Looking ahead to the second half of the year, we have a robust pipeline of innovation supported by significant demand creation investments. We are laser-focused on continuing to deliver and enhance superior value experiences with our brands for consumers in a time they need it more than ever. Our strong holistic margin management program enables us to reinvest in our brands, balancing immediate actions with a long-term perspective to ensure their ongoing health and success. To support our focus on delivering superior value with speed, our new ERP system gives us real-time visibility, enhances demand planning, and enables faster execution. With the majority of the implementation complete, our focus is on rebuilding growth momentum.

The choices we are making today are shaping a stronger, more resilient Clorox setting the stage for sustained growth and stakeholder value in the years ahead. Thank you for your time and questions. We look forward to sharing our continued progress in the quarters to come.

Operator: And this concludes today's conference call. Thank you for attending.

Lisah Burhan: Goodbye.