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CLOROX CO /DE/ (CLX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 results missed on the top line and non-GAAP EPS: net sales fell 8% to $1.668B and adjusted EPS declined 15% to $1.45, as category slowdowns, price/mix headwinds, and Household destocking offset robust cost savings; gross margin expanded for the 10th straight quarter to 44.6% .
  • Versus S&P Global consensus, revenue missed ($1.718B* est. vs $1.668B actual) and adjusted/Primary EPS missed ($1.56* est. vs $1.45 actual), while Q1–Q2 had both revenue and EPS beats; EBITDA also trailed consensus in Q3* .
  • FY25 guidance: GAAP net sales narrowed to down 1% to flat (from down 1% to up 2%), gross margin raised to about +150 bps, GAAP EPS raised to $5.73–$6.13, adjusted EPS maintained at $6.95–$7.35; outlook now includes tariff headwinds and higher ERP pre‑shipment benefits that will reverse in 1H FY26 .
  • Call tone: management sees temporary category pressure, limited trade-down so far, and plans tariff mitigation (sourcing, reformulation, targeted pricing); Q4 gross margin implied ~44% with some timing/tariff/Household inventory reductions, keeping the margin expansion narrative intact near term .

What Went Well and What Went Wrong

  • What Went Well

    • 10th consecutive quarter of gross margin expansion (44.6%, +240 bps YoY) on cost savings and mix (post-divestitures) .
    • Health & Wellness grew net sales 3% on +7 pts volume; segment adjusted EBIT up 10% on lower manufacturing/logistics costs and savings .
    • Management reiterated confidence in brand strength and resilience despite macro volatility: “we held overall market shares and delivered our 10th consecutive quarter of gross margin expansion” — Linda Rendle, CEO .

  • What Went Wrong

    • Consolidated net sales declined 8% to $1.668B as unfavorable price/mix and category slowdowns weighed; organic sales fell 2% with flat organic volume .
    • Household was weakest: sales -11% (volume -9%; higher trade spend) and segment adjusted EBIT -18%, with late-quarter retailer inventory adjustments and timing issues in Kingsford and Litter .
    • Adjusted EPS fell 15% to $1.45 (vs $1.71 LY) on lower sales; competitive promotions (notably in Glad) and retailer inventory actions pressured price/mix and shipments .

Financial Results

Headline quarterly trend (oldest → newest):

MetricQ1 FY25Q2 FY25Q3 FY25
Net Sales ($B)$1.762 $1.686 $1.668
Gross Margin %45.8% 43.8% 44.6%
GAAP Diluted EPS$0.80 $1.54 $1.50
Adjusted EPS$1.86 $1.55 $1.45

Q3 FY25 vs S&P Global consensus:

MetricQ3 FY25 Estimate*Q3 FY25 Actual
Revenue ($B)$1.718*$1.668
Primary/Adjusted EPS ($)$1.56*$1.45
EBITDA ($M)$327*$296*

Note: Asterisks indicate values retrieved from S&P Global.

Segment performance – Q3 FY25:

SegmentNet Sales ($M)YoY %Segment Adjusted EBIT ($M)YoY %
Health & Wellness$630+3% $169+10%
Household$469-11% $61-18%
Lifestyle$306-3% $60-6%
International$263-15% $31-18%

KPIs and other items:

KPIQ3 FY25
Organic Sales Growth-2% (Total Co.)
Organic Volume~0% (Total Co.)
Adjusted EBIT ($M)$266; margin 15.9%
Net Cash from Operations$286M (17.1% of net sales)
Capital Expenditure$53M
Free Cash Flow (YTD)$542M; 10.6% of net sales

Non-GAAP adjustments Q3 FY25 (per share): cyberattack insurance recoveries (-$0.21), digital capabilities investment (+$0.16); adjusted EPS $1.45 vs GAAP $1.50 .

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY25, 2/3/25)Current Guidance (Q3 FY25, 5/5/25)Change
GAAP Net SalesFY25Down 1% to +2% Down 1% to 0% Lowered
Organic Sales (incl. ERP)FY25+4% to +7% (1–2 pts ERP) +4% to +5% (2–3 pts ERP) Narrowed; ERP benefit raised
Organic Sales ex‑ERPFY25+3% to +5% ~+2% Lowered
Gross Margin YoYFY25+125 to +150 bps ~+150 bps Slightly raised midpoint
GAAP EPSFY25$5.52–$5.92 $5.73–$6.13 Raised
Adjusted EPSFY25$6.95–$7.35 $6.95–$7.35 Maintained
ERP pre‑shipment EPS benefitFY25$0.25–$0.45 $0.50–$0.70 Raised
S&A as % of SalesFY2515%–16% 15%–16% Maintained
A&P as % of SalesFY2511%–11.5% 11%–11.5% Maintained
Effective Tax RateFY25~26% (Adj ~23%) ~26% (Adj ~23%) Maintained
Tariffs in OutlookFY25Excluded Included; higher costs from recent tariffs Now included (new headwind)

Management quantified tariffs as a ~$100M 12‑month run-rate headwind with ~$10–$20M in Q4 as inventory rolls through .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY25)Current Period (Q3 FY25)Trend
Consumer/category growth & trade-downQ1: Strong share gains and volume-led rebound; margin rebuild underway . Q2: Grew share in 7 of 8 categories; volumes lapping cyberattack; margin expansion continued .Categories softened mid‑Feb; low‑single‑digit declines; no meaningful trade‑down observed; shifts to pack sizes/channels .Deteriorated near term; resilience claims intact, but visibility low.
TariffsNot discussed in Q1; Q2 guidance excluded tariff impacts .Now included; ~$100M annualized headwind; mitigation via sourcing, reformulation, productivity, targeted pricing .New headwind emerging.
ERP transition pre‑shipmentsQ1: digital/ERP investments ongoing . Q2: ERP adds +1–2 pts to organic; +$0.25–$0.45 EPS; reversal 1H FY26 .ERP benefit raised to +2–3 pts; retailers building ~1.5 weeks inventory; reversal mainly Q1 FY26 .Larger near‑term lift; larger reversal risk.
Promotions/price mixQ1: higher trade promo in several segments . Q2: normalization of promotions; price/mix headwinds persisted .Promotions normalized overall; Glad facing deep competitive discounting; CLX responding selectively .Mixed; pockets of elevated competitive intensity.
Channel shiftLimited earlier commentary.Shift to mass/club; CLX well‑positioned in those channels; online also growing .Ongoing shift supports share.
Margin trajectoryQ1/Q2: 8th/9th consecutive GM expansion; on track to rebuild GM in FY25 .10th consecutive expansion; Q4 GM implied ~44% with timing/tariffs .Continuing expansion, though Q4 has puts/takes.
InternationalEx‑Argentina organic +11% (Q1) and +6% (Q2) .Ex‑Argentina organic +2% (Q3) .Decelerating ex‑Argentina growth.

Management Commentary

  • “In the third quarter, heightened macroeconomic uncertainties drove changes in shopping behaviors… We still expect to deliver organic sales growth and another year of strong earnings growth.” — Linda Rendle, CEO .
  • “Our exposure to tariffs is relatively limited… the unmitigated impact we expect is a 12‑month run rate of about $100 million… ~$10–$20 million in Q4 as inventory rolls through. We’ll offset over time via sourcing, supply chain changes, reformulations, productivity and targeted pricing.” — Luc Bellet, CFO .
  • “We expect gross margin in Q4 to be about 44%… aligned with the full‑year average (~44.5%), with Q3 favorable timing reversing in Q4 and a ~$10–$20 million tariff impact.” — Luc Bellet, CFO .
  • “Retailer inventory reductions were limited to Household late in the quarter… not a strategic issue; we’re not seeing consumer out‑of‑stocks.” — Linda Rendle, CEO .

Q&A Highlights

  • Consumer/category outlook: Categories weakened mid‑February; Q4 categories expected down low-single digits; consumers shifting channels and pack sizes but not trading down meaningfully yet .
  • Tariffs: ~$100M annualized cost headwind; limited exposure helps; targeted pricing plus sourcing/productivity levers planned; Q4 P&L impact ~$10–$20M .
  • Gross margin cadence: Q4 implied ~44% with Q3 timing reversal, slightly stronger cost savings, and tariff headwind; consistent with ~44.5% FY average .
  • Retail inventory/destocking: Modest at total company (<1 pt Q3), concentrated in Household; more expected in Q4, embedded in guidance .
  • ERP transition build/reversal: Retailers building ~1.5 weeks of inventory pre‑go‑live; benefit variability ~1–2 pts per 1–2 days; reversal mainly Q1 FY26 .

Estimates Context

Consensus vs actuals (S&P Global) — last three quarters:

PeriodRevenue Consensus Mean* ($B)Revenue Actual ($B)EPS Consensus Mean* ($)EPS Actual ($)
Q1 FY251.637*1.762 1.393*1.86
Q2 FY251.626*1.686 1.400*1.55
Q3 FY251.718*1.668 1.557*1.45
  • Q3: revenue and EPS missed consensus; Q1–Q2 both revenue and EPS beat. Current FY25 adjusted EPS guidance of $6.95–$7.35 brackets the S&P Global FY25 EPS consensus of ~$7.06*, but with a larger ERP pre‑shipment contribution that reverses in 1H FY26 .

Note: Asterisks indicate values retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s miss was largely top‑line: Household destocking, competitive promotions (Glad), and price/mix pressure outweighed continued cost savings, even as GM rose to 44.6% .
  • Guidance quality mixed: sales outlook trimmed (down 1% to flat) but GAAP EPS raised and gross margin nudged higher; adjusted EPS unchanged as tariff costs and category softness offset stronger ERP pre‑shipments .
  • Tariffs are the new swing factor (~$100M annualized); watch mitigation execution (sourcing, reformulation, productivity, targeted pricing) and Q4–FY26 flow‑through .
  • ERP transition will pull demand into Q4 (retailers building ~1.5 weeks), bolstering FY25 but creating a reversal headwind mainly in Q1 FY26 — a setup to monitor for early FY26 .
  • Segment mix matters: Health & Wellness remains a relative bright spot (volume‑led growth, EBIT up 10%), while Household requires tighter promo/pricing discipline amid elevated competitive discounting .
  • Margin expansion remains the core bull point near term (Q4 GM ~44% implied), but sustaining it through tariff headwinds and category volatility is the key medium‑term test .
  • Optionality into FY26+: portfolio moves (Glad JV end and purchase of P&G’s 20% stake in Jan 2026) and ongoing digital/ERP productivity could support the 25–50 bps annual EBIT margin expansion ambition when macro normalizes .