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CLOROX CO /DE/ (CLX)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 results declined sharply due to the expected reversal of Q4 FY25 “incremental ERP shipments,” but CLX still posted small beats vs S&P Global consensus on revenue and adjusted EPS; GAAP EPS fell YoY as gross margin compressed 410 bps to 41.7% on lower volume and higher M&L costs . Versus consensus, revenue was ~$1.429B vs ~$1.398B and adjusted EPS was $0.85 vs ~$0.78 (non-GAAP) .*
  • Management maintained FY26 guidance (net sales down 6%–10%, GAAP EPS $5.60–$5.95; adjusted EPS $5.95–$6.30), but reiterated performance is tracking toward the lower end given earlier order-fulfillment challenges and share pressure; ERP transition impact is still pegged at about a 7.5-pt sales headwind and ~$0.90 EPS drag in FY26 .
  • CFO highlighted slightly better input-cost outlook (now +$70M for FY26 vs +$90M prior) and a ~$40M tariff headwind; gross margin expansion is expected to be “robust” in 2H (Q3–Q4) as innovation and demand-creation spending ramp, albeit with higher trade spending in the near term .
  • Near-term stock catalysts: (1) execution on back-half innovation and demand plans as category growth stays muted (~0–1% U.S. retail); (2) confirmation that fill rates remain normalized and share recovers; (3) visibility on price/mix turning less negative and gross margin inflecting in 2H .

What Went Well and What Went Wrong

  • What Went Well

    • Delivered small top- and bottom-line beats vs S&P Global consensus (adjusted EPS and revenue), despite deliberate ERP-related volume headwinds .*
    • Management kept FY26 guidance unchanged and signaled 2H gross margin expansion; input-cost inflation outlook improved to +~$70M with ~$20M favorability vs prior, though tariffs remain a ~$40M headwind .
    • ERP rollout largely complete; fill rates are “more of a normal Clorox,” with inventories rebuilt at retailers and further value from digital tools expected (NVRM, end‑to‑end visibility, efficiency) .

  • What Went Wrong

    • Net sales fell 19% YoY to $1.429B as retailers drew down Q4 FY25 pre‑ERP inventory; gross margin was 41.7% (-410 bps YoY) on lower volume and higher manufacturing & logistics costs .
    • Adjusted EPS declined 54% YoY to $0.85; GAAP EPS declined 19% YoY to $0.65; free cash flow fell to $57M (4.0% of sales) vs $182M (10.3%) a year ago .
    • Market share was weaker than expected during the ERP ramp; promotions elevated in trash and litter; price/mix remains a headwind (~-1 pt contemplated for FY26), reflecting value-seeking and channel shifting .

Financial Results

Headline results vs prior year, prior quarter, and S&P Global consensus

MetricQ1 FY25Q4 FY25Q1 FY26 ActualQ1 FY26 Consensus
Net Sales ($USD Millions)$1,762 $1,988 $1,429 $1,398.10*
Gross Margin (%)45.8% 46.5% 41.7% N/A
Diluted EPS (GAAP)$0.80 $2.68 $0.65 N/A
Adjusted EPS (Non-GAAP)$1.86 $2.87 $0.85 $0.78*
  • Consensus EPS and revenue values marked with an asterisk are from S&P Global; Values retrieved from S&P Global.

Segment performance (Net Sales and Segment Adjusted EBIT)

SegmentNet Sales Q1 FY25 ($MM)Net Sales Q1 FY26 ($MM)Segment Adj. EBIT Q1 FY25 ($MM)Segment Adj. EBIT Q1 FY26 ($MM)
Health & Wellness$698 $565 $235 $124
Household$447 $362 $60 $27
Lifestyle$320 $245 $66 $38
International$259 $253 $35 $19

KPIs and cash flow

KPIQ1 FY25Q1 FY26
Net Cash from Operations ($MM)$221 $93
Free Cash Flow ($MM)$182 $57
FCF as % of Net Sales10.3% 4.0%
Capital Expenditures ($MM)$39 $36
Advertising Costs ($MM)$201 $166

Additional profitability context

MetricQ1 FY25Q4 FY25Q1 FY26
Adjusted EBIT ($MM)$332 $460 $160
Adjusted EBIT Margin (%)18.5% 23.1% 11.2%

Context and drivers

  • YoY sales decline was primarily ERP-related shipment reversal and volume drawdown (company estimates the ERP “reversal” equates to ~7.5 pts FY26 sales headwind and ~$0.90 EPS headwind) . Gross margin down 410 bps, driven by lower volume/mix and higher M&L costs, partly offset by cost savings .
  • Price/mix was modestly negative (company cites ~-1 pt for FY26), reflecting value-seeking and channel shifts; incremental promotions in trash and litter .

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 FY25, 7/31/25)Current Guidance (Q1 FY26)Change
Net Sales YoY (GAAP)FY26(10)% to (6)% (10)% to (6)% Maintained
Organic Sales YoYFY26(9)% to (5)% (incl. ~7–8 pts ERP reversal) (9)% to (5)% (incl. ~7.5 pts ERP reversal) Maintained (refined ERP point estimate)
Gross Margin (bps YoY)FY26Down 50–100 bps Down 50–100 bps Maintained
S&A (% of Sales)FY26~16% (incl. ~90 bps digital/productivity investment) ~16% (incl. ~90 bps digital/productivity investment) Maintained
A&P (% of Sales)FY26~11% ~11% Maintained
Effective Tax RateFY26~24% ~24% Maintained
GAAP EPSFY26$5.60–$5.95 (incl. ~$(0.85)–$(0.95) ERP reversal) $5.60–$5.95 (incl. ~$(0.90) ERP reversal) Maintained
Adjusted EPSFY26$5.95–$6.30 (excl. ~$0.35 digital investment; incl. ERP reversal) $5.95–$6.30 (excl. ~$0.35 digital investment; incl. $(0.90) ERP reversal) Maintained
Dividend per ShareNext payment$1.24 (declared Jul 30, 2025) carried forward$1.24 declared; payable Feb 13, 2026 (record Jan 28, 2026) Affirmed cadence

Management reiterated performance is tracking toward the lower end of ranges given order-fulfillment disruption impacts earlier in the year and resulting share pressure; back-half improvement hinges on innovation and demand plans, with ERP reversal effects normalizing comps in Q4 .

Earnings Call Themes & Trends

TopicQ3 FY25 (Q-2)Q4 FY25 (Q-1)Q1 FY26 (Current)Trend
Category growth & consumerMacro uncertainty drove slower consumption; organic sales -2%; maintained overall shares .Built retailer inventory ahead of ERP; organic sales +5% for FY25; cautioned back-half volatility .U.S. retail category outlook ~0–1%; expect 2H inflection with innovation, share recovery .Stabilizing at muted levels; execution-led 2H recovery.
ERP transitionNot yet launched; planning and signaling FY26 reversal of shipments .Incremental shipments added ~13–14 pts to Q4 net sales; set up FY26 headwind .ERP largely launched; fill rates normalizing; FY26 ~7.5 pts sales headwind and ~$0.90 EPS drag .Transition past peak; moving to leveraging ERP for efficiency.
Gross margin drivers10th consecutive quarter of expansion; cost savings strong .Flat YoY in Q4; FY25 +220 bps; ERP shipments aided .Q1 down 410 bps YoY; 2H expected robust expansion; input costs +~$70M, tariffs ~$40M .Near-term compression; improvement expected in 2H.
Price/mix & promotionsUnfavorable price mix; value-seeking behavior .Unfavorable mix and higher trade promo; club channel mix .Price/mix headwind ~-1 pt FY26; elevated promos in trash/litter; environment “rational” .Continued pressure; NRM to offset partially.
Innovation pipelineOngoing across brands (e.g., Burt’s, Hidden Valley, Fresh Step) .Innovations continued; ERP-enabled digital capabilities .Broad-based launches across major brands in 2H; PPP/price-pack architecture emphasized .Intensifying in 2H to drive share.
Inventory/destockingRetailer adjustments (litter/Kingsford timing) .Retailers built inventory for ERP .No material destocking; retailer inventories rebuilt post-ERP .Normalizing.
Private label watchNot specifically highlighted.Not specifically highlighted.Watching Brita filters and bleach for trade-down; wipes less concerning .Mixed; targeted value actions.

Management Commentary

  • “This quarter’s ERP launch marks a significant milestone… empowering faster execution, greater productivity, and deeper insights… As with any rollout of this scale, we experienced some temporary disruptions that affected our market share.” — Linda Rendle, CEO .
  • “Exclude the impact of the ERP… organic sales growth in the front half would be negative low single digits, and… in the back half would be positive low single digits.” — Luc Bellet, CFO .
  • “Input costs and inflation would increase about $70 million [FY26]… about half from commodities and half from the rest of the supply chain… tariffs… about a headwind of $40 million.” — CFO .
  • “We are back with retailers able to fill the orders that they need, and we have largely rebuilt inventories nearly everywhere.” — CEO .
  • “We have not seen [material] destocking… [and] feel good about… finalized estimate of the ERP transitions… ~7.5 percentage points [FY26 sales headwind].” — CFO .
  • “Private label… we are watching [Brita filters]… and bleach… Cleaning portfolio is doing very, very well… we are seeing that bounce back.” — CEO .

Q&A Highlights

  • Organic sales cadence: Ex‑ERP, front-half organic sales down low‑single digits, back half up low‑single digits; Q2 expected low‑single digit decline as U.S. consumption trends continue and ~1 pt headwind from early shipments timing .
  • Gross margin and costs: FY26 input-cost inflation now +~$70M (improved ~$20M vs July); tariffs ~$40M headwind; additional Q1 expenses for ERP demand‑fulfillment; expect robust GM expansion in Q3–Q4 despite higher trade/A&P in support of innovation .
  • Promotions/price-pack: Promotional activity elevated in trash/litter but “rational”; CLX leaning into price‑pack architecture to meet value tiers across categories (e.g., Brita, litter, food) .
  • Market share/fill rates: Share losses larger than expected during ERP ramp (not satisfactory), but fill rates have normalized and management expects share to recover with 2H innovation/demand plans .
  • Run‑rate EPS concept: CFO reiterated the ~$0.90 FY26 EPS drag from ERP timing should be added back to the base as comps normalize in FY27; achieving high end of FY26 organic range requires all assumptions to hit (category, innovation, execution, no new external shocks) .

Estimates Context

  • Versus S&P Global consensus: Q1 FY26 revenue $1.429B vs ~$1.398B (+~2.2% beat); adjusted EPS $0.85 vs ~$0.78 (+~9% beat). GAAP EPS was $0.65, but Street typically tracks adjusted EPS for consumer staples .*

  • Forward look (S&P Global): Q2 FY26 consensus revenue ~$1.641B and EPS ~$1.45; company indicates front-half ex‑ERP down low‑single digits, suggesting cautious near-term setup with emphasis on 2H improvement .*

  • Implications: Given guidance reaffirmed toward the low end and price/mix headwinds (~-1 pt), Street may need to calibrate 2H GM expansion assumptions vs higher trade/A&P support; but improved input-cost outlook provides partial offset .

  • Consensus values marked with an asterisk are from S&P Global; Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 was the expected ERP hangover quarter: sales -19% YoY, GM -410 bps; however, small beats vs S&P Global consensus on revenue and adjusted EPS suggest the reset is tracking to plan .*
  • FY26 guide unchanged but tilted to the low end; 2H gross margin expansion is the crux as CLX leans into innovation and demand creation, with normalized fill rates and ERP efficiencies aiding execution .
  • Cost outlook improved (+$70M inflation vs +$90M prior) but tariffs ($40M) and price/mix (-1 pt) keep pressure on 1H; watch if price pack architecture and NRM can stabilize mix while preserving brand equity .
  • Segment risk/recovery: Trash and litter remain promo‑intense; Cleaning and Professional should benefit as in‑stocks stabilize; monitor Brita filters and bleach for private‑label trade‑down and response .
  • Cash discipline: FCF compressed this quarter on volume and ERP dynamics; trajectory should improve with 2H margin lift; dividend maintained at $1.24/share (next payable Feb 13, 2026) .
  • Setup into Q2: Management expects low‑single digit decline (ex‑ERP lens) and muted category growth (~0–1%); stock likely to trade on evidence of share recapture, pricing/mix stabilization, and signs of 2H GM inflection .
  • FY27 run‑rate: The ~$0.90 EPS drag from FY26 ERP timing should normalize, providing a mechanical uplift to base earnings if execution stays on track .

Appendix: Selected Detail

Gross margin bridge (bps) vs prior year shows -410 bps in Q1 FY26: cost savings +140, price +20, market movement -30, M&L -180, “all other” (including lower volumes) -360 .

Dividend declaration: $1.24/share, payable Feb 13, 2026, to holders of record Jan 28, 2026 .

ERP timing impact: ~7.5 pts FY26 sales headwind vs FY25 base; ~$(0.90) FY26 EPS impact; reversal of Q4 FY25 incremental shipments that delivered ~13–14 pts to that quarter and ~$0.85–$0.95 to FY25 EPS .

Footnote on Consensus: All consensus figures marked with an asterisk are from S&P Global; Values retrieved from S&P Global.