Clorox(CLX) - 2025 Q2 - Quarterly Report

Financial Performance - For the three months ended December 31, 2024, net sales decreased by 15% to $1,686 million compared to$1,990 million in the prior year[91]. - Gross profit for the same period was $738 million, a decrease of 15$280 million for the three months ended December 31, 2024, representing 16.6% of net sales[97]. - The diluted net earnings per share (EPS) increased by $0.79, or 105$1.42, or 154%, in the current six-month period, primarily due to the pension settlement charge in the prior period and higher net sales[105][106]. - Total net sales for the reportable segments decreased to $1.686 billion in the current three-month period, down 13$1.936 billion in the prior period[108]. - Segment adjusted EBIT for the total reportable segments was $258 million in the current three-month period, down from$386 million in the prior period[108]. - Adjusted EBIT for the three months ended December 31, 2024, was $258 million, compared to$386 million in the same period of 2023, reflecting a decrease of 33%[138]. Segment Performance - The Health and Wellness segment reported an organic sales growth of 8% for the three months ended December 31, 2024[93]. - The Health and Wellness segment reported net sales of $628 million, a decrease of 13$446 million in the current three-month period[109][111]. - The International segment's net sales decreased by 12% to $274 million, primarily due to the divestiture in Argentina[115][116]. - Organic sales growth for the total Company decreased by 9$191 million, with a rise in advertising spend as a percentage of net sales from 9.3% to 11.3%[98]. - The Company continues to invest in brand capabilities and product innovation to drive consistent, profitable growth over time[86]. - The Company incurred approximately $26 million and$55 million in operating expenses related to digital capabilities and productivity enhancements during the three and six months ended December 31, 2024, respectively[141]. - The Company expects approximately 70% of its incremental operating costs related to its digital capabilities investment to be recorded within selling and administrative expenses over the next five years[139]. - The Company aims to implement cost savings and efficiencies through a streamlined operating model and digital capabilities[33]. Cash Flow and Financing - Net cash provided by operations was $401 million in the current six-month period, compared to$173 million in the prior six-month period, driven by higher cash earnings and lower tax payments[121][122]. - Net cash provided by investing activities was $35 million in the current six-month period, compared to a net cash used of$56 million in the prior period, mainly due to proceeds from the sale of the Better Health VMS business[125]. - Net cash used by financing activities was $346 million in the current six-month period, an increase from$104 million in the prior period, primarily due to higher treasury stock purchases[126]. - As of December 31, 2024, the Company maintained a $1,200 million revolving credit agreement with no borrowings under the agreement[129]. - The Company repurchased 906 thousand shares of common stock at a cost of$150 million during the three months ended December 31, 2024, and 1,695 thousand shares at a cost of $257 million during the six months ended December 31, 2024[131]. - Dividends per share declared increased from$1.20 in Q4 2023 to $1.22 in Q4 2024, with total dividends paid rising from$149 million to $151 million[132]. Tax and Regulatory Environment - The effective tax rate on earnings for the three months ended December 31, 2024, was 18.1%, down from 29.3% in the prior year[101]. - The effective tax rate on earnings was 18.1% for the current three-month period, down from 29.3% in the prior period, primarily due to an international legal entity reorganization[104]. Strategic Initiatives and Challenges - The divestiture of the Argentina and Better Health VMS businesses is part of the Company's strategy to reduce volatility and improve margins[86]. - The Company anticipates continued volatility in the operating environment for the remainder of fiscal year 2025 due to macroeconomic conditions[85]. - The Company faces unfavorable economic and geopolitical conditions, including supply chain disruptions and rising inflation, impacting its operations[33]. - The Company is recovering from a cyberattack in August 2023, which poses risks related to information technology systems and potential security breaches[33]. - The Company is experiencing intense competition in its markets, which may affect its ability to drive sales growth and increase market share[33]. - The Company is dependent on key customers, and risks related to customer consolidation and ordering patterns could impact revenue[33]. - The Company is exposed to international trade risks, including foreign currency fluctuations and changes in governmental policies, which could affect its operations[33]. - The Company is facing challenges in attracting and retaining key personnel due to labor market conditions, including rising labor costs[33]. - The Company is subject to risks related to acquisitions and divestitures, including potential asset impairment charges and integration costs[33]. - The Company must manage environmental, social, and governance (ESG) issues, which could impact its reputation and operating costs[33].