In this paragraph, the Operator introduces the Clorox Company's quarterly and fiscal year earnings release conference call, informing participants that the session will be in a listen-only mode until the Q&A session later. Lisah Burhan, Vice President of Investor Relations, welcomes participants and introduces key speakers: Linda Rendle, Chair and CEO, and Kevin Jacobsen, CFO. Lisah mentions that the earnings release and prepared remarks are available on the company's website. She notes that forward-looking statements, including fiscal 2025 outlooks, may be discussed, and directs listeners to specific sections for related information. Finally, Linda Rendle begins her remarks, indicating that the first quarter results were strong.

The company entered fiscal 2025 with operational strength, having recovered from an August 2023 cyberattack by restoring supply, distribution, and market share. This quarter, the company exceeded expectations by regaining market share, improving margins for the eighth consecutive quarter, and expanding its VMS business, following the sale of its Argentina business. Despite a challenging macro environment, the company remains focused on delivering value to consumers, investing in brands and innovation, and advancing its transformation to be more consumer-centric and resilient. They aim for consistent, profitable growth and are ready to take questions.

In the paragraph, Dara Mohsenian asks about the company's market share and future expectations. Linda Rendle responds by saying the company has restored its market share to pre-cyber disruption levels and experienced growth across most categories in Q1. This growth occurred even before lapping the cyber disruption. Private label brands haven't significantly changed in share compared to previous quarters, and the company's share has grown in categories where private labels did as well. They have invested in advertising and promotions to maintain brand health, aligning with their expectations for share growth this quarter.

The paragraph is a discussion between Dara Mohsenian and Linda Rendle about market share growth and promotional strategies within their industry. Linda Rendle indicates they expect continued market share growth, albeit at a smaller level due to current conditions. Promotional activities have returned to pre-COVID levels, with variations across different business segments. The Litter category, in particular, has higher promotional levels to regain customer interest, but this is seen as temporary. Rendle also mentions that aside from Litter, promotional levels are generally in line with expectations. The discussion concludes with Peter Grom from UBS asking about the phasing of sales guidance.

In the paragraph, Kevin Jacobsen addresses concerns about the company's growth expectations in light of some industry peers experiencing weaker growth. Despite a strong Q1 with 31% organic growth, the company adjusted its Q2 expectations due to some Q1 sales being pulled forward from Q2. They now anticipate a Q2 decline in the low-teens. For the full year, they project 4% growth, translating to 3%-5% growth in the second half, aligning with their long-term goals. Key growth drivers include solid performance from their International and Clorox Professional businesses and the structural benefits from recent divestitures, particularly the sale of their VMS business.

The paragraph discusses a business's positive outlook and plans for ongoing growth. Linda mentions the strength of their demand plans, innovation programs, and marketing support, aiming for a 3% to 5% growth rate, not only for this year but also looking ahead to fiscal year 2026. Peter Grom inquires about the better-than-expected gross margin in the first quarter, and Kevin Jacobsen attributes it to increased topline delivery and improved cost absorption. Filippo Falorni from Citi asks about the recovery of shelf space for the Glad and Litter businesses. The company has seen progress with large pack sizes for Glad and aims to regain shelf space and convert consumers back to their Litter brand.

Linda Rendle discusses the progress made with the Glad and Litter businesses. Glad has shown strong recovery, achieving share growth and being a top-selling item during Amazon Prime Day, with improved merchandising and restored distribution. The Litter business has also made advances, recovering most of its lost subscription business and regaining the number one share position with Fresh Step at a leading retailer. Both businesses experienced a growth of seven-tenths of a share point in Q1, with strong merchandising and promotional activities supporting this growth. While more work remains, especially in restoring consumer subscriptions, they are optimistic about continuing in a positive direction.

The paragraph features a discussion about the company's expectations and performance related to their products and financial metrics. They mention that progress with the 'Litter' business will take longer, though they are pleased and plan to invest in advertising and sales promotion throughout the year. Filippo Falorni inquires about gross margin expectations, noting the strong performance in Q1. Kevin Jacobsen states that Q2 gross margin is expected to decline due to volume deleveraging but anticipates a recovery in the latter half of the year to around 44-44.5%. Andrea Teixeira from JP Morgan then asks about category consumption and market share recovery.

The paragraph discusses the current consumer environment and company strategies to address it. The speaker, Linda Rendle, mentions that consumer stress levels were anticipated, leading to expectations of low single-digit growth in their categories, which materialized as projected. The consumer behavior shows a focus on value, with people buying different sizes to manage costs and seeking promotions, which have been effective. Retailers are actively competing for customers, resulting in normal competitive tactics across various channels. The speaker acknowledges this environment when considering margins and revenue balance for future quarters.

The paragraph discusses a shift towards value-oriented channels for consumers, which aligns with company expectations and is expected to continue for 12 to 18 months, despite an uncertain U.S. market. In Q1, the consumer environment met expectations, with no significant shift towards private label products in most categories, except wipes and salad dressing, where their brand still gained market share. The company's brands remain strong due to superior value and increased promotions. Kevin Jacobsen addresses gross margin, recalling an expectation of normalized cost inflation in the supply chain, originally estimated at $75 million, divided between commodities and the rest of the supply chain, with a modest update to this outlook.

The paragraph discusses the company's expectations for commodity prices, gross margins, and pricing strategy. It indicates that while inflation remains a factor, commodity prices are slightly better than anticipated, impacting full-year expectations minimally. The gross margin was 46% in Q1 and is expected to decline in Q2 due to deleveraging, with a projected decrease of less than 100 basis points, taking it to around 43%. The back half of the year is expected to stabilize around 44% to 44.5%. Andrea Teixeira and Anna Lizzul ask questions about full-year guidance, promotional spending, and strategies for driving volume growth. Linda Rendle responds that there is minimal pricing change expected in the U.S. outside of net revenue management, focusing instead on volume growth and trade promotions.

In this discussion, the speaker addresses the impact of earlier promotions on quarterly performance and notes expectations for ongoing volume-based growth driven by innovation and effective demand spending. They indicate that trade promotion levels have returned to pre-COVID norms, with advertising and sales promotions around 11-11.5% at the aggregate level, with more spending in the U.S. than internationally. There's an emphasis on tailoring strategies according to business unit needs and specific periods. Bonnie Herzog from Goldman Sachs then asks about the effectiveness of promotional strategies in the Litter category. Linda Rendle acknowledges current consumer behavior as a factor in this context.

The paragraph discusses strategies for promoting the Fresh Step cat litter brand after a period of being out of stock, emphasizing the use of strategic promotions without deep discounting to reinforce brand value. The speaker is confident in their approach and sees the cat litter market as having natural growth due to the rising number of cats and ongoing innovation. They do not feel the competitive environment resembles a Prisoner's Dilemma, as innovation will drive category growth. The speaker anticipates continued innovation from both their company and competitors in the future.

In the paragraph, Linda Rendle discusses how consumer behavior has shifted towards more value-oriented shopping channels, driven by economic pressures. She notes that consumers are focusing on deals and promotions, particularly in grocery stores, and are buying in bulk from club stores to get better value. This behavior is typical during times of financial stress, with consumers making more stock-up and fill-in trips. However, Rendle mentions that these trends are aligning with their expectations and are not influenced by their cyber recovery efforts. Bonnie Herzog acknowledges this with thanks, and the discussion moves on to Robert Moskow, who has a question about the company's gross margin.

The paragraph discusses the seasonal impacts on a company's gross margin, specifically the drop from 45.8% in Q1 to 43% in Q2. This decline is attributed to the end of the profitable Kingsford charcoal season and increased holiday merchandising for their Burt's business, both of which traditionally result in lower margins for Q2. Additionally, deleveraging due to declining topline numbers affects the margin. In terms of earnings per share (EPS), although the company exceeded consensus expectations in Q1, they are cautiously raising their forecast by only $0.10 for the year, expressing caution due to uncertainties around the U.S. consumer's health and the promotional environment.

The paragraph discusses the financial outlook and inventory positioning of a company. Linda, a speaker in the dialogue, mentions that the first quarter (Q1) results were as expected, but they are being cautious about future predictions due to the volatile macroeconomic environment. They highlight that some Q1 success was due to moving shipments from the second quarter (Q2), which won't impact the whole year. The company is focused on maintaining financial flexibility. In a Q&A, Olivia Tong from Raymond James inquires about inventory levels, particularly in Trash and Litter, and how consumption trends might change post-promotion. Linda responds that inventory levels are normalized in the retail environment, with no significant issues to report.

The paragraph discusses the stability of inventories and consumer shipments, noting no significant changes except a shift in cold and flu shipments from Q2 to Q1, attributed to retailers' seasonal preparations. On financial performance, Kevin Jacobsen highlights strong Q1 gross margin improvements due to cost savings, achieving a 240 basis point enhancement. The company aims for 175 basis points of EBIT margin expansion annually, often exceeding this target; it plans to continue this trend. Furthermore, recent divestitures have improved structural margins by 50 to 70 basis points, contributing to positive results in Q1.

In the paragraph, a discussion takes place regarding the growth and potential of certain business segments within the company, particularly focusing on PPD and the International business. Growth at a mid-single-digit rate is driven by increased stability, especially after reducing currency volatility and divesting from the Argentina business. The PPD segment is benefiting from industry trends, such as healthcare consolidation, which has led to more opportunities for innovation and expansion within the portfolio. The company is confident that these segments will continue to contribute positively to growth, as evidenced by performance in Q1.

In the paragraph, a discussion takes place during a conference call where Linda Rendle addresses a question from Kaumil Gajrawala about the ERP (Enterprise Resource Planning) implementation experience in Canada and its timeline for the U.S. Rendle explains that the Canadian ERP transition was successful, with minimal disruption to customers, which serves as a positive model for the more complex U.S. implementation. The U.S. ERP implementation is expected to begin at the end of the current fiscal year, with more details to be provided in the Q2 earnings release. The success in Canada boosts confidence for the U.S. rollout.

The paragraph discusses strategies to encourage consumers to return to or try the Fresh Step and Scoop Away litter brands. Besides trade promotions, the company is focusing on advertising, emphasizing product benefits, and introducing new promotional messages to attract consumers. They launched new advertising for Fresh Step in July, which has positively impacted their market share in Q1. The company is also optimizing pricing strategies, leveraging digital advertising for real-time claims, and engaging consumers through subscription services. They are considering future innovations to further attract and delight customers.

The paragraph captures a conversation during an earnings call, where the speakers discuss their plans for enhancing their product and brand communication strategies. Kaumil Gajrawala inquires about sources of surprise in their recent quarterly performance, particularly in the International segment. Linda Rendle responds that while the International segment performed slightly better than expected, the improvement was mainly due to effective execution and the removal of financial challenges related to Argentina. Overall, it was a result of consistent efforts rather than any significant unexpected developments.

In this paragraph, Chris Carey is questioning the pricing dynamics of the company's segments, noting discrepancies between different segments' price performances and overall remarks about price increases. He's trying to understand if the pricing in the U.S. business is expected to decline slightly into the second half of the year and how this impacts volume growth projections. Kevin Jacobsen acknowledges the complexity due to the impact of a "cyber lap" and explains that significant favorable price mixes from the previous year are reversing, which is primarily just noise. He gives an example from the Lifestyle segment where the previous year's favorable price mix was due to a faster rate of decline in the Burt's Bees business compared to others within the segment.

The paragraph discusses the impact of a cyber event on a business segment called LTL (Less Than Full Truckload). The cyber event negatively impacted this segment, resulting in less revenue per case and a skewed price mix last year that is now normalizing. The business is regaining momentum, particularly in the Burt's business, which grew significantly compared to the Food and Beverage sector. There's ongoing structural price mix change, including a 1-point negative impact from increased trade spending. However, this was offset by favorable mix gains, particularly within the U.S. cleaning business, leading to better-than-expected performance in Q1. The conversation hints at continued normalization as they move past the disruption, but some confusion remains around an apparent pricing mix discrepancy, which the speaker suggests could be discussed further offline.

The paragraph is a discussion from a conference call involving Kevin Jacobsen and Chris Carey, where they talk about the structural benefits of divesting the Argentina business which affected revenue mix positively in its first year. They also mention expecting unfavorable trade in the first half due to low promotional activity during a previous "cyber" period, which normalized in the back half of the last year. Chris Carey appreciates the explanation, and Kevin encourages further follow-up if needed. Then, Javier Escalante from Evercore ISI asks about the underlying category growth assumption for a 3% to 5% organic sales growth target for 2025, which Linda Rendle notes as zero percent to 1%. Javier also references a data spike related to hurricanes in October.

In the paragraph, Javier Escalante questions whether the stronger-than-expected quarter was influenced by strong merchandising and impulse purchases due to a storm. Linda Rendle responds that their analytics do not indicate such factors had a significant impact. While hurricanes can affect sales temporarily, their overall effect was minimal, and no substantial consumer pantry loading was observed. The company remains confident in their 0% to 1% growth forecast for the year, though they will continue to monitor consumer behavior and pricing dynamics. Rendle notes that growth was mainly driven by strong performance in their Health and Wellness portfolio, particularly in Home Care, Laundry, and Bleach businesses.

The paragraph discusses the strong performance and future outlook of a business, attributed to effective advertising and trade promotion, leading to increased consumer interest due to perceived superior value. PPD's performance has been a positive surprise, with some results shifted between quarters. Javier Escalante thanks the operator, and Steve Powers from Deutsche Bank asks Linda Rendle and Kevin about household penetration and growth expectations. Linda explains they closely monitor household penetration as a long-term business health metric, noting the impact of pricing strategies on consumer retention, which affected not only their business but also their categories overall.

The paragraph discusses a reversal in consumer behavior changes due to pricing, leading to volume-based growth. Despite previous disruptions like a cyber-incident affecting stock availability, the company is focusing on regaining household penetration through innovation, advertising, and sales promotions. They aim to grow both categories and market share by offering superior value experiences. The current strategy involves heightened trade promotion to appeal to value-seeking consumers while maintaining long-term consumer retention efforts. Kevin Jacobsen mentions expectations for growth in alignment with their algorithm and does not foresee shipping exceeding consumption, with adjustments for SAP impacts to be revisited in February.

The paragraph discusses Clorox's proactive steps to mitigate the risk of supply chain disruptions, particularly in light of potential tariffs and past disruptions. Kevin Jacobsen explains to Kevin Grundy that Clorox has been working on nearshoring and onshoring production to reduce their vulnerability, as well as expanding production capacities and establishing contract manufacturers in key regions like the U.S., Europe, and Asia. These efforts are part of Clorox's strategy to improve their supply chain resilience and reduce dependence on long supply chains by leveraging a broad network of suppliers.

The paragraph involves a discussion about the company's preparedness for potential disruptions, with a focus on ensuring product access and effective management. Kevin Grundy questions Kevin Jacobsen about the company's sourcing of goods from outside the U.S., to which Jacobsen responds that they do not publicly disclose this information. Linda Rendle concludes the call by emphasizing the company's progress on commitments, the strength and continued investment in its brands, and the strategic actions being taken to accelerate growth and transformation.

The paragraph highlights the company's focus on achieving consistent profitable growth and enhancing long-term shareholder value. The speaker expresses gratitude to the audience and mentions future updates in February, as the conference call concludes.

This summary was generated with AI and may contain some inaccuracies.