CLOROX CO /DE/ Q2 FY2025 earnings call

1. CFO Transition: Kevin Jacobsen to retire after nearly 30 years, Luc Bellet to become CFO on April 1st. 2. Gross Margin: Confident in rebuilding gross margins to 44% in fiscal 2025 and aiming for EBIT margins 25-50 basis points per year growth. 3. ERP Transition: Next year's ERP conversion to drive productivity across the organization. 4. Glad JV: Assuming full control of Glad business as the agreement ends with no renewal, confident in driving value moving forward. 5. Consumer Behavior: Consumers are value-seeking, trading up to innovation and adjusting purchase quantities (larger/smaller sizes); private label shares stable. 6. Distribution: Fully restored distribution lost from the cyber-attack. 7. Innovation: Investing in innovation, advertising, and sales promotion; innovation resonating with consumers, e.g., Bahama Bliss in Glad.

1. Gross Margin: Confident in reaching 44% gross margin in fiscal 2025 and aiming for EBIT margins to grow 25-50 basis points per year starting fiscal 2026. 2. Organic Sales: Q3 organic growth expected in low single-digits; Q4 organic growth expected in mid to high single-digits due to ERP transition shipping ahead to build inventory. 3. ERP Impact: Q4 shipment ahead to build retailer and company inventories, with reversal in the first half of 2026.

1. ERP Transition: Noise between quarters due to inventory timing shifts during the ERP system transition. 2. Tariffs: Sourcing exposure from impacted regions, but short supply chains and onshoring mitigate impact; not specifically baked into guidance. 3. Competitive Promotion: Increased promotional activity in categories like Glad, requiring strategic promotional responses.

Q: Give perspective on continuing to drive gross margin expansion beyond fiscal 2025 and longer-term drivers?

A: Kevin Jacobsen said confident in continuing gross margin expansion, with drivers including productivity, ERP conversion, and margin transformation tools like design to value and net revenue management.

Q: Why the Glad JV change and M&A outlook?

A: Linda Rendle said timing related to agreement end, both parties mutually not renewing; M&A remains to find accretive opportunities filling portfolio white spaces.

Q: Organic sales outlook, especially after backing out ERP benefit?

A: Kevin Jacobsen said Q3 organic growth low single-digits, Q4 mid to high single-digits due to ERP-related inventory shifts.

Q: Litter and Glad promotional activity impact?

A: Linda Rendle said Litter promotional activity in line with expectations, Glad seeing more competitive promotions but equipped to handle with innovation and share growth.

Q: ERP transition practicals and impact?

A: Luc Bellet and Linda Rendle said it's standard, building inventory to manage system transition, noise between quarters with no consumer impact.

Q: Tariffs and sourcing exposure?

A: Kevin Jacobsen said evaluating, short supply chains and onshoring mitigate impact, not baked into guidance.

Q: Consumer sentiment impact on category growth?

A: Linda Rendle said consumer behavior indicates value-seeking, expecting category growth to rebound as consumer confidence improves.

Q: Cash flow and Glad JV transition?

A: Kevin Jacobsen said free cash flow on track, exiting Glad JV involves repurchasing P&G's stake, impacting gross margin and earnings.