Q1 2025 Earnings Summary
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Sales Growth | Q1 2025 | 3% to 5% growth for FY 2025 | 27% YoY increase (from US$1,386 million in Q1 2024To US$1,762 million in Q1 2025) | Beat |
Gross Margin Expansion | Q1 2025 | +100 basis points YoY for FY 2025 | +750 basis points YoY (from ~38.3% in Q1 2024To ~45.8% in Q1 2025, using COGS) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Margin recovery and expansion | Q4 2024: 360 bps gross margin improvement from cost savings, pricing actions, benign commodities ; Q3 2024: Recovered 650 bps of 800 lost to inflation ; Q2 2024: Aiming for 42% exit rate. | Achieved an eighth consecutive quarter of gross margin expansion, on track to reach pre-pandemic levels by the end of FY25; Q1 gross margin came in above expectations. | Consistent progress each quarter with growing confidence in hitting pre-pandemic margins. |
Distribution recovery and supply | Q4 2024: Distribution and share largely recovered, except Litter took longer ; Q3 2024: ~90% share lost recovered ; Q2 2024: Distribution points mostly restored, some categories still lagging. | Supply and distribution fully restored post-cyberattack; channel performance and market share back to normal, with no lingering operational disruptions mentioned. | Issue resolved, with only select categories (e.g., Litter) needing longer to regain consumers. |
Advertising and trade promotion | Q4 2024: Ads at 14% of sales in Q4, expected to normalize to 11%-11.5% of sales in FY25 ; Q3 2024: Shifted spending to second half, near 11% of sales ; Q2 2024: Plan to increase ads to ~12% by year-end. | Spent over 12% of sales on advertising in U.S. retail; trade promos back to pre-COVID levels, supporting volume and share gains. | Elevated spending continues, aimed at driving household penetration and volume recovery. |
Market share changes (Glad, Litter, bleach, health/wellness) | Q4 2024: Glad recovering from -0.9 to -0.2 share loss; Litter slower to regain ; Q3 2024: Supply constraints impacted Glad/Litter, ~90% share recovered ; Q2 2024: Distribution below pre-incident for both. | Glad up 0.7 share points, distribution fully restored; Litter also up 0.7 share points, though longer loyalty recovery needed; bleach and health/wellness showing strong share growth. | Positive share momentum in Q1 2025, especially for Glad; Litter still catching up but improving. |
Volume growth challenges and expectations | Q4 2024: Expect volume to grow slightly above 3%-5% range, with negative price mix ; Q3 2024: Supply chain constraints hurt volume, but service levels restored by end of Q3 ; Q2 2024: High single-digit volume declines, improving. | Focus on volume-based strategy, lapping prior price hikes; promotions supporting volume; aiming for 3%-5% organic growth in H2 FY25. | Shifting to volume-led growth, aided by better supply, promotions, and household penetration efforts. |
Portfolio optimization and divestitures (Argentina, VMS) | Q4 2024: Argentine and VMS exits to add 50-70 bps to gross margin ; Q3 2024: Argentina divested (2% of sales), margin dilutive ; Q2 2024: No mention [—]. | Argentina and VMS both divested; structurally improved margins by removing volatile markets. Full VMS benefit starts in Q2 2025. | Fully executed divestitures, reducing FX and margin volatility. |
Consumer pressure and value focus | Q4 2024: Value consciousness with softer category growth ; Q3 2024: All income tiers under pressure, but Clorox performing well with lower-income consumers ; Q2 2024: Value-seeking behaviors widely observed. | Consumers remain stressed, seeking value via promos and larger/smaller sizes; private label shares mostly down from peak. | Ongoing consumer pressure, but brand resilience seen in stable share gains. |
3%-5% top-line growth targets | Q4 2024: Confident in 3%-5% for FY25, with volume as main driver ; Q3 2024: Long-term 3%-5% reaffirmed, focusing on stable international mix ; Q2 2024: Emphasized same growth goal. | Still aiming for 3%-5% organic sales growth in FY25, assuming 0%-1% category growth; expecting 3%-5% in H2 driven by innovation and strong demand plans. | Consistent guidance, supported by volume recovery, portfolio changes, and innovation. |
Professional Products Division (PPD) | Q4 2024: Returning to stronger growth within the portfolio ; Q3 2024: No specific mention [—]; Q2 2024: Expected to normalize over time but no detail. | Above-average growth in Q1, mid-single-digit gains; driven by favorable industry trends and new opportunities in healthcare. | Resurgence in PPD, with a focus on healthcare and innovation. |
Impact of cost inflation and manufacturing/logistics | Q4 2024: Projected $75M supply chain inflation in FY25, modest commodity pressure ; Q3 2024: Some commodities easing, but wage-driven inflation remains ; Q2 2024: ~$200M inflation mainly from wages/logistics. | No major new commentary in Q1; better fixed cost absorption helped margins. | Less emphasis in Q1, indicating improved cost environment, with only moderate inflation headwinds forecast. |
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Gross Margin Outlook
Q: What's the outlook for gross margin in the back half?
A: We expect gross margin to be around 44%-44.5% in the back half, consistent with our full-year projection. Q2 margins will be down due to volume deleveraging, but overall margins should remain fairly consistent throughout the year. -
Sales Guidance and Growth
Q: Have back half growth expectations changed?
A: Back half growth is expected to be 3%-5%, aligning with our long-term algorithm. Despite category growth slowing to 0%-1%, we're confident due to strong demand plans, contributions from international and professional businesses, and benefits from divestitures. -
Commodities and Input Costs
Q: Has the commodities outlook changed?
A: Commodity inflation is slightly better than anticipated but still inflationary; this won't significantly impact our full-year expectations. We forecast $75 million in supply chain inflation, split between commodities and other costs. -
Divestitures and Margins
Q: How are divestitures impacting margins?
A: Recent divestitures of margin-dilutive businesses will structurally improve margins by 50-70 basis points on average. We're already seeing benefits in Q1, which will continue into Q2 and beyond. -
Market Share Recovery
Q: Can you expand market share from here?
A: We've returned overall market share to pre-cyber levels and grew in almost every category in Q1. We expect to continue growing share, though at a smaller rate, and anticipate solid market share gains by fiscal year-end. -
Promotions and Consumer Behavior
Q: How is increased promotional spending affecting pricing?
A: We're seeing volume-based growth as we lap price increases, with trade promotions returning to pre-COVID levels. Advertising and sales promotion are around 11%-11.5% of sales, higher in the U.S.. -
Litter and Glad Recovery
Q: Update on Litter and Glad business recovery?
A: Glad returned to share growth, increasing 0.7 share points in Q1. Litter also grew 0.7 share points, but recovery will take longer. We're investing in advertising and promotions to regain consumer loyalty. -
ERP Implementation Timing
Q: What's the timeline for U.S. ERP implementation?
A: After a successful launch in Canada, we plan to begin U.S. ERP implementation at the end of this fiscal year. We'll provide more details in our Q2 earnings release. -
International and PPD Performance
Q: What's driving growth in international and PPD?
A: Both are growing at mid-single-digit rates. International benefits from reduced volatility and the Argentina divestiture. PPD growth is driven by innovation and favorable industry trends, not just return-to-office dynamics. -
Impact of Potential Tariffs
Q: Could tariffs affect the business?
A: We've reduced supply chain risks by nearshoring production. While we're monitoring the situation, we don't foresee major disruptions and haven't built any impacts into our outlook.