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    Clorox Co (CLX)

    Business Description

    The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products, operating in approximately 25 countries and selling in over 100 markets. The company offers a variety of well-known brands, including Clorox® bleach and cleaning products, Pine-Sol® cleaners, Liquid-Plumr® clog removers, Glad® bags and wraps, Fresh Step® cat litter, Kingsford® grilling products, Hidden Valley® dressings, Brita® water-filtration products, and Burt's Bees® natural personal care products, among others . Clorox's business is organized into four reportable segments: Health and Wellness, Household, Lifestyle, and International .

    1. Health and Wellness - Focuses on cleaning and disinfecting products, including Clorox® bleach and Pine-Sol® cleaners.
    2. Household - Encompasses bags, wraps, cat litter, and grilling products, featuring brands like Glad® and Fresh Step®.
    3. Lifestyle - Includes food, water-filtration, and natural personal care products, with offerings such as Hidden Valley® dressings and Brita® water-filtration products.
    4. International - Comprises products sold outside the United States, extending the reach of Clorox's diverse product portfolio.

    Q4 2024 Summary

    Initial Price$152.68March 30, 2024
    Final Price$136.47June 30, 2024
    Price Change$-16.21
    % Change-10.62%

    What went well

    • Clorox expects to return to pre-pandemic gross margins in fiscal year '25, driven by strong progress in margin transformation programs, cost savings initiatives, and digital transformation efforts, which are leading to sustained margin expansion and providing flexibility to invest in growth opportunities.
    • The company is focused on innovation and delivering superior value to consumers, with successful product launches like Clorox Scentiva achieving its largest quarter in Q4, and strong innovation plans in key categories like Litter for fiscal year '25, which are expected to drive market share growth and share gains in fiscal year '25.
    • Strategic portfolio optimization through the divestiture of Argentina and the sale of the VMS business reduces volatility, allows focus on growth opportunities in core businesses, supports margin expansion, and confirms their long-term 3% to 5% organic sales growth outlook.

    What went wrong

    • Clorox has experienced significant market share losses due to supply disruptions, including a cyber attack that caused distribution to be down by one-third and resulted in a loss of five full share points. The company ended June down 0.3 percentage points in share and acknowledges that market share is "not exactly where we want it to be right now."
    • The company's Burt's Bees brand has been weak for a long period of time, facing supply issues due to a supplier fire and compounded by the cyber attack. Additionally, Burt's Bees competes with companies that spend significantly more on marketing (over 30%) compared to Clorox's 14% spend, raising concerns about competitiveness in that segment.
    • Clorox is not increasing advertising and marketing spending as aggressively as some competitors, despite acknowledging increased promotional intensity and market share losses. Competitors are increasing advertising and trade promotions across the board, but Clorox plans to maintain its advertising spend at 11% to 11.5%, which may hinder its ability to regain lost market share.

    Q&A Summary

    1. Top Line Growth Outlook
      Q: How do you expect top line growth, volume, and pricing to evolve?
      A: Linda Rendle stated that they expect consumers to remain under pressure, leading to low single-digit category growth. They anticipate volume growth driven by superior value and innovation, aiming for 3% to 5% organic sales growth. While pricing is holding in the marketplace, they expect modestly negative pricing due to increased trade spending.

    2. Gross Margin Improvement
      Q: What are your expectations for gross margin improvement next year?
      A: Kevin Jacobsen explained that they expect gross margins to fully recover, adding another 100 basis points to reach pre-pandemic levels. This will be supported by over 200 basis points of cost savings and benefits from portfolio reshaping, including the divestiture of Argentina and the anticipated sale of the VMS business.

    3. Household Segment Challenges
      Q: What are the issues in the Household segment, especially with Glad and Litter?
      A: Linda Rendle described that the Household segment underperformed due to weather impacting the grilling business and delayed distribution recovery in Glad and Litter. While Glad's distribution was fully recovered by the end of the quarter, Litter recovery will take longer due to consumer behavior and increased competitive activity.

    4. Advertising and Marketing Spend
      Q: Are you increasing advertising and marketing spend to regain market share?
      A: Linda Rendle stated they plan to maintain advertising and sales promotion spending at 11% to 11.5% of sales, similar to last year. They believe this strikes the right balance to support growth but are prepared to invest more if needed to win back consumers.

    5. EBIT Margin Recovery
      Q: When do you expect EBIT margins to return to historical levels?
      A: Kevin Jacobsen mentioned that they have been rebuilding EBIT margins from 12% in fiscal year '22 to about 15% last year, and are targeting 17% to 17.5% this year. They expect to fully rebuild EBIT margins to historical levels of around 18% by the end of the year.

    6. Impact of Divestitures on Growth
      Q: Does the 3%–5% organic sales growth outlook still hold after divestitures?
      A: Linda Rendle confirmed that despite divesting Argentina and the VMS business, the 3% to 5% long-term organic sales growth target remains intact. These moves reduce volatility and support more consistent and profitable growth.

    7. Cash Flow and Shareholder Returns
      Q: How did cash flow perform, and will you increase shareholder returns?
      A: Kevin Jacobsen reported they are targeting about 12% free cash flow as a percent of sales in fiscal year '25. With strong cash flow and a low debt-to-EBITDA ratio, they have restarted their share repurchase program, aiming to return $250 million to $300 million to shareholders.

    8. Promotional Activity Impact
      Q: How is increased trade spending affecting margins?
      A: Kevin Jacobsen noted that trade spending will modestly offset growth, especially in the front half of the year as they return to normalized levels of promotion. They expect a bit of increased trade spending, which will be a modest drag on gross margins.

    9. Digital Transformation Progress
      Q: How is the digital transformation progressing, and when do you expect benefits?
      A: Linda Rendle shared that they successfully completed the first wave of their ERP and global finance rollout in Canada. The bulk of the value and benefits from the digital transformation are expected in fiscal year '26 and beyond, once the ERP implementation is complete.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    Health and Wellness4782,5325047206096522,485698
    Household6632,0983255025265971,950447
    Lifestyle3331,3382294033153281,275320
    International3051,1812703113102711,162259
    Corporate and Other-2405854545522138
    - Cleaning--------
    - Professional Products--------
    - Vitamins, Minerals and Supplements--------
    - Bags and Wraps--------
    - Cat Litter--------
    - Grilling--------
    - Food Products--------
    - Natural Personal Care--------
    - Water Filtration--------
    Total Revenue2,0197,3891,3861,9901,8141,9037,0931,762
    Revenue by Geography - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    International--2703113102461,137-
    United States-6,237----5,956-
    Foreign-1,152------
    Total Revenue2,0197,3891,3861,9901,8141,9037,0931,762

    Executive Team

    NamePositionStart DateShort Bio
    Linda RendleChair and Chief Executive OfficerSeptember 2020Linda Rendle is the Chair and Chief Executive Officer of The Clorox Company. She has been with the company since 2003 and became an executive officer in 2016. She was appointed as Chair effective January 1, 2024 .
    Nina BartonExecutive Vice President - Group President - Care and ConnectionJuly 2024Nina Barton is the Executive Vice President and Group President - Care and Connection at Clorox. Before joining Clorox, she was the CEO of Vytalogy Wellness LLC from July 2021 to November 2023 .
    Stacey GrierExecutive Vice President - Executive Chief of StaffJanuary 2024Stacey Grier is the Executive Vice President – Executive Chief of Staff at Clorox. She joined Clorox in 2016 and has held various leadership roles, including Senior Vice President – Chief Marketing Officer .
    Angela HiltExecutive Vice President - Chief Legal OfficerOctober 2022Angela Hilt is the Executive Vice President and Chief Legal Officer of Clorox. She joined the company in 2005 as Senior Corporate Counsel and has held various legal roles since then .
    Chris HyderExecutive Vice President - Group President - Health and HygieneOctober 2022Chris Hyder is the Executive Vice President and Group President - Health and Hygiene at Clorox. He has been with Clorox since 2003, holding various positions of increasing responsibility .
    Kevin B. JacobsenExecutive Vice President - Chief Financial OfficerJanuary 2019Kevin B. Jacobsen is the Executive Vice President - Chief Financial Officer of Clorox. He has been with the company since 1995, holding various senior leadership roles in the finance department .
    Kirsten MarrinerExecutive Vice President - Chief People and Corporate Affairs OfficerDecember 2020Kirsten Marriner is the Executive Vice President - Chief People and Corporate Affairs Officer at Clorox. She joined Clorox in 2016 and has held various leadership roles in human resources .
    Eric ReynoldsExecutive Vice President - Chief Operating and Strategy OfficerSeptember 2020Eric Reynolds is the Executive Vice President - Chief Operating and Strategy Officer at Clorox. He joined Clorox in 1998 and has held various leadership roles, including Senior Vice President – Chief Marketing Officer .
    Chau BanksSenior Vice President - Chief Information and Data OfficerJune 2020Chau Banks is the Senior Vice President – Chief Information and Data Officer at Clorox. She took on additional responsibility for enterprise analytics in September 2020 .
    Shanique Bonelli-MooreVice President - Chief Diversity and Social Impact OfficerJuly 2022Shanique Bonelli-Moore is the Vice President and Chief Diversity and Social Impact Officer at Clorox. Prior to joining Clorox, she served as the Executive Director of Inclusion at United Talent Agency .
    Gina KellySenior Vice President - Chief Customer OfficerJune 2024Gina Kelly is the Senior Vice President - Chief Customer Officer at Clorox. She joined Clorox in 1988 and has held various positions of increasing responsibility over the years .
    Michael OttSenior Vice President - Chief Research and Development OfficerJune 2022Michael Ott is the Senior Vice President – Chief Research and Development Officer at Clorox. He joined Clorox in 1996 as a scientist and has held positions of increasing responsibility in research and development .
    Eric SchwartzSenior Vice President - Chief Marketing OfficerMarch 2022Eric Schwartz is the Senior Vice President and Chief Marketing Officer of Clorox. He initially served as a Brand Manager at Clorox from 2000 to 2004 and rejoined the company in 2019 .

    Questions to Ask Management

    1. Despite your efforts to restore supply and distribution post-cyber attack, certain brands like Litter and Kingsford are still underperforming; what specific strategies are you implementing to regain lost market share and fully capitalize on growth opportunities in these categories?
    2. Given the significant improvement in gross margins, why aren't you investing more aggressively in advertising and promotion to drive market share gains, especially when competitors are increasing their spend and your market share isn't where you'd like it to be?
    3. With the recent divestitures of Argentina and the VMS business, how confident are you in maintaining your 3% to 5% long-term organic sales growth target, and what key growth drivers will compensate for the loss of these businesses?
    4. Considering the increased promotional intensity in some of your categories and the ongoing pressure on consumer spending, how do you plan to balance pricing, promotions, and innovation to drive volume growth without compromising margins?
    5. The Burt's Bees brand has faced significant supply issues and heightened competition, leading to variability in distribution; what measures are you taking to address these challenges, and how do you plan to ensure Burt's Bees remains a growth-accretive asset in your portfolio?

    Share Repurchase Program

    Program DetailsProgram 1 (2018 Open-Market)Program 2 (Evergreen)
    Approval DateMay 2018 August 1999
    End Date/DurationNo expiration date No expiration date
    Total additional amount$2,000 million No specified limit
    Remaining authorization$993 million Not applicable
    DetailsN/AReduce/eliminate dilution from stock compensation plans

    Past Guidance

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      • Organic Sales Growth: Expected to be 3% to 5%, driven primarily by volume with a modestly negative price mix due to increased trade spending .
      • Gross Margin: Aiming to fully rebuild to pre-pandemic levels, with an addition of 100 basis points .
      • Free Cash Flow: Targeting about 12% as a percent of sales .
      • EBIT Margin: Planning to rebuild to about 17% to 17.5% .
      • Trade Spending: Increased spending expected .
      • Commodity Inflation: Anticipating about $75 million in total supply chain inflation .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      • Fiscal Q1 Organic Sales Growth: Expected 20% to 25% growth .
      • Fiscal Year 2025 Organic Sales Growth: Expected 3% to 5% .
      • Gross Margin: Aiming for an additional 100 basis points of expansion .
      • EBIT Margin: Expected to reach 17% to 17.5% .
      • Cost Savings: Targeting 175 basis points of EBIT margin expansion annually .
      • Commodity Inflation: About $75 million anticipated .
      • Advertising and Promotion (A&P) Spending: 11% to 11.5% of sales .
      • Cash Return to Shareholders: $250 million to $300 million planned .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Adjusted EPS: Expected to meet or exceed initial guidance .
      • Gross Margin: Positioned to exceed original target .
      • Advertising and Sales Promotion: Over 11% of sales .
      • Organic Sales Growth: Flat to slightly down for Q4, up about 1% for the year .
      • Gross Margin Exit Rate: Closer to 43% .
      • Market Share Recovery: Nearly 90% regained .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      • Top Line Growth: 3% to 5% long-term target .
      • EBIT Margin Expansion: 25 to 50 basis points annually .
      • Gross Margin: Expected to exit with about 42% .
      • Advertising and Sales Promotion: About 11% of sales, closer to 12% in the back half .
      • FX Headwinds: About 5 points on the top line .
      • Inflation: About $200 million in cost inflation .
      • Volume Trends: Expected improvement .
      • Pricing: Double-digit increases in Argentina .