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CLOROX CO /DE/ (CLX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 net sales fell 15% to $1.69B as the company lapped cyberattack-driven retail restocking and divestitures; gross margin expanded to 43.8% (+30 bps YoY) and diluted EPS rose 105% to $1.54; adjusted EPS was $1.55, down 28% YoY .
  • Guidance raised: FY25 diluted EPS to $5.52–$5.92 (from $5.17–$5.42) and adjusted EPS to $6.95–$7.35 (from $6.65–$6.90); gross margin now +125–150 bps (from +100–150 bps); tax rate ~26% (adjusted ~23%) .
  • Strategic catalyst: Clorox will end the Glad JV on Jan. 31, 2026 and intends to acquire P&G’s 20% interest; removal of the 20% cash flow payment (recorded in COGS) is expected to lift gross margin post-close .
  • Management flagged temporary Q4 ERP-related shipment pull-forward (adds 1–2 pts to FY25 net sales, 25–45¢ EPS) to ensure on-shelf availability during the U.S. ERP go-live; reversal expected in 1H FY26 .

What Went Well and What Went Wrong

What Went Well

  • Share gains and demand creation: “grew share in seven of its eight categories,” supported by innovation (Hidden Valley Easy Squeeze, Brita Plus, Fresh Step Heavy Duty) and marketing .
  • Margin resilience and cost savings: ninth consecutive quarter of gross margin expansion; on track to fully rebuild gross margin in FY25 .
  • ERP and transformation progress: detailed ERP plan with retailer coordination to minimize disruption; Canada rollout went smoothly; U.S. go-live planned with inventory build to avoid out-of-stocks .

What Went Wrong

  • Top-line pressure from lapping recovery: net sales -15% (organic -9%) due to prior-year retail inventory restoration and VMS/Argentina divestitures; all segments posted YoY declines in Q2 .
  • Household competitiveness: deeper-than-expected competitive promotions in Glad; segment adjusted EBIT -48% YoY, reflecting lower sales and higher M&L costs despite savings .
  • Litter promotions elevated: temporarily higher promotional intensity to win back consumers and subscriptions post-cyberattack; planned innovation support, but near-term pressure persists .

Financial Results

Quarter-over-Quarter and Year-over-Year Summary

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.903 $1.762 $1.686
Diluted EPS (GAAP) ($)$1.73 $0.80 $1.54
Adjusted EPS ($)$1.82 $1.86 $1.55
Gross Margin (%)46.5% 45.8% 43.8%
EBIT Margin (%)15.4% 11.1% 15.2%

Notes: Adjusted EPS excludes cyberattack costs/recoveries, ERP/digital transformation expenses, and divestiture impacts as detailed in non-GAAP reconciliations .

Segment Breakdown – Q2 FY25

SegmentNet Sales ($MM)YoY ChangeSegment Adjusted EBIT ($MM)YoY Change
Health & Wellness$628 -13% $193 -25%
Household$446 -11% $48 -48%
Lifestyle$338 -16% $70 -36%
International$274 -12% $21 -34%
Corporate & Other$0 -100% ($74) +30%
Total$1,686 -15% $258 -33%

International organic sales grew +6% excluding Argentina and FX, driven by organic volume growth (+6 pts) .

KPIs and Cash Flow

KPIQ2 FY25YTD FY25
Net Cash from Operations ($MM)$180 (10.7% of sales) $401
Free Cash Flow ($MM)—$309; 9.0% of net sales
Capex ($MM)$53 $92
Advertising Costs ($MM)$191 $392

Non-GAAP free cash flow reconciliation provided in supplemental schedule .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (reported)FY25Flat to -2% -1% to +2% (incl. 1–2 pts ERP shipments) Raised
Organic SalesFY25+3% to +5% +4% to +7%; excluding ERP shipments +3% to +5% Raised headline; base maintained
Gross MarginFY25+100 to +150 bps +125 to +150 bps Raised low end
Diluted EPS (GAAP)FY25$5.17–$5.42 $5.52–$5.92 (incl. $0.25–$0.45 ERP benefit; reverses 1H FY26) Raised
Adjusted EPSFY25$6.65–$6.90 $6.95–$7.35 (incl. $0.25–$0.45 ERP benefit) Raised
Effective Tax RateFY25~28% (Adj. ~24%) ~26% (Adj. ~23%) Lowered
SG&A (% of sales)FY2515–16% 15–16% Maintained
A&SP (% of sales)FY2511–11.5% 11–11.5% Maintained
Dividend——Declared $1.22 per share (2/26/25) Announced

Earnings Call Themes & Trends

TopicQ4 2024 MentionsQ1 2025 MentionsQ2 2025 Current PeriodTrend
ERP transitionCanada rollout smooth; U.S. planning; margin rebuild ongoing U.S. go-live timing to be detailed in Q2; exit-rate planning Q4 inventory build planned; 1–2 pts sales and $0.25–$0.45 EPS benefit; reversal 1H FY26 Execution progressing; temporary shipment noise ahead
Tariffs/macroConsumer value-seeking; promo normalization Categories resilient; macro uncertain Tariffs not in outlook; short supply chains mitigate risk Monitoring; minimal assumed impact FY25
Product & promotionsHousehold weakness (weather/Glad/Litter); promo return pre-COVID Higher A&SP in U.S.; value messaging; share recovery Glad deeper promo by competitor; Clorox responding; Litter elevated promo near term Competitive intensity elevated but rational overall
InternationalEx-Argentina organic +5% Q4 Ex-Argentina organic +11% Q1 Ex-Argentina org +6% Q2; FX headwind Consistent growth ex-divestiture
Cost savings & marginsGM +380 bps in Q4; EBIT margin rebuild plans GM guidance raised; deleverage in Q2 then 44–44.5% exit GM +30 bps YoY in Q2; FY25 GM +125–150 bps target Steady rebuild; FY25 confidence
AI/techStreamlined model; digital investment Data and NRM capabilities building AI recognized in product development award Capability expansion and recognition

Management Commentary

  • “We achieved better-than-expected results across sales, margin and EPS in the second quarter due to our strong demand creation plans… on track to fully rebuild gross margin in fiscal year 2025.” — CEO Linda Rendle .
  • “We feel very confident in our ability to… then building EBIT margins in that 25 to 50 basis points per year going forward” — CFO Kevin Jacobsen .
  • On Glad JV: “We are excited to assume full control of the Glad business… confident that we will continue to drive profitable growth” — CEO Linda Rendle .
  • On ERP shipments: “We’re planning on shipping ahead of consumption in Q4… build retail and company inventory… reverses in the front half of the fiscal year” — CFO-incoming Luc Bellet .

Q&A Highlights

  • Gross margin trajectory: Q2 GM down QoQ on volume deleverage and BU mix; FY25 exit rate ~44–44.5% GM, cost savings remain strong .
  • Organic sales outlook: Q3 reported sales down mid-single digits (divestitures -5–6 pts; FX -1 pt); organic low single digits; Q4 organic mid–high single digits with ERP benefit .
  • Competitive promotions: Glad seeing deeper competitor discounting; Clorox responding within outlook; Litter promotions temporarily elevated to win back consumers .
  • Tariffs: Not included in outlook; short supply chains and prior near-shoring reduce exposure; monitoring dynamic environment .
  • Free cash flow and capital allocation: Target 11–13% of sales; likely at low end (~11%) after ERP cash timing; resuming buybacks ($250–$300MM) while maintaining dividend .

Estimates Context

  • S&P Global Wall Street consensus data was unavailable at time of analysis due to access limits; management characterized Q2 results as “better-than-expected” internally across sales, margin and EPS .
  • Given guidance raises (EPS, gross margin, net sales), Street models likely need to reflect: (1) ERP-related shipment timing (Q4 benefit; 1H FY26 reversal), (2) slightly higher gross margin uplift, and (3) lower tax rate assumptions .

Key Takeaways for Investors

  • FY25 guidance upgrade and ERP timing effects suggest near-term optical strength in Q4 and a mechanical reversal in 1H FY26; position around shipment timing and expected normalization .
  • Glad JV wind-down and planned acquisition should structurally enhance margins post-close by eliminating P&G’s 20% cash flow charge in COGS; monitor purchase financing and fair value outcome .
  • Household headwinds (Glad/Litter promotions, higher M&L) are transient; innovation and demand plans aim to sustain share gains while cost savings underpin margin resilience .
  • International ex-divestitures is a consistent growth contributor; FX headwinds added in back half, but organic performance remains solid .
  • Tax rate outlook cut (GAAP ~26%, adjusted ~23%) and lower supply chain inflation should support FY25 EPS despite competitive spend and FX .
  • Dividend stability ($1.22 per share announced) and resumed buybacks highlight improving cash generation; watch ERP-related working capital in Q4 and reversal in FY26 .
  • Execution risk around U.S. ERP go-live appears well-managed (retailer coordination, safety stock), but trading tactics should account for potential intermittent noise in shipments .

Additional Relevant Press Releases

  • Dividend: “Clorox Declares Regular Quarterly Dividend of $1.22 Per Share” (Feb. 26, 2025) .
  • CFO Transition: “Clorox CFO Kevin Jacobsen to Retire; Luc Bellet Named CFO” (Jan. 28, 2025) .
  • CAGNY Appearance: “Clorox to Present at 2025 CAGNY Conference” (Feb. 4, 2025) .