Clorox(CLX) - 2025 Q4 - Annual Results

Executive Summary Clorox delivered strong FY25 margin expansion and adjusted EPS growth, despite missing topline expectations, while advancing its ERP system implementation and anticipating FY26 declines due to ERP shipment reversals Q4 and FY25 Performance Overview Clorox reported strong margin expansion and adjusted EPS growth for fiscal year 2025, despite not meeting topline expectations in the second half due to shifting consumer behaviors and market volatility. The company advanced its long-term strategy, including the implementation of a new ERP system in the U.S. to accelerate growth and improve efficiencies - Delivered strong margin expansion and adjusted EPS growth for FY25, but did not meet topline expectations in the second half due to rapidly shifting consumer behaviors and broader market volatility[1][3] - Advanced long-term strategy and began implementing a new ERP system in the U.S. to modernize capabilities, accelerate growth, and deliver stronger efficiencies[3] FY26 Outlook Highlights For fiscal year 2026, Clorox anticipates a significant negative impact from the reversal of incremental ERP shipments from FY25, leading to expected declines in net sales and EPS. The company remains focused on operational excellence and market share improvements - Fiscal year 2026 outlook is significantly impacted by the transitory reversal of incremental ERP shipments from FY25[10][14] - Company remains focused on operational excellence and driving category and market share improvements in FY26[3] Fourth-Quarter Fiscal Year 2025 Summary Clorox reported increased Q4 FY25 net sales and EPS, driven by ERP shipments, alongside strategic advancements and varied segment performance Key Financial Results (Q4 FY25) In Q4 FY25, Clorox reported a 4% increase in net sales and an 8% increase in organic sales, largely due to incremental ERP shipments. Gross margin remained flat, while diluted EPS and adjusted EPS saw significant increases of 55% and 58% respectively, also benefiting from ERP shipments Key Financial Results (Q4 FY25) | Metric | Q4 FY25 | Q4 FY24 | Change | ERP Benefit (points/cents) | | :----------------------- | :------ | :------ | :----- | :------------------------- | | Net sales | $2.0 billion | - | +4% | 13-14 points | | Organic sales | - | - | +8% | - | | Gross margin | 46.5% | - | Flat | 150 basis points | | Diluted EPS | $2.68 | $1.73 | +55% | - | | Adjusted EPS | $2.87 | $1.82 | +58% | $0.85 - $0.95 | - Net sales increase was primarily driven by incremental ERP shipments, partially offset by the divestiture of the VMS business and unfavorable price mix[4] - Gross margin flatness was due to higher volume and cost savings, offset by higher manufacturing/logistics costs and trade promotion spending[4] Strategic and Operational Highlights Clorox achieved strong cost savings, prepared for its U.S. ERP launch by building retailer inventory, and continued to invest in value-superiority innovations across major brands. The company also received recognition as a top workplace and Net-Zero Leader - Delivered strong cost savings, contributing to margin expansion and growth in market shares and organic sales for the fiscal year[7] - Executed strong preparation, including building retailer inventory, ahead of its ERP launch in the U.S. at the beginning of fiscal year 2026[7] - Continued investment in innovations across major brands, including relaunches and expansions in various product categories[7] Key Segment Results (Q4 FY25) All segments experienced net sales growth in Q4 FY25, primarily driven by higher volume from incremental ERP shipments, though partially offset by unfavorable price mix. Health and Wellness, Household, and Lifestyle segments showed significant increases in adjusted EBIT Health and Wellness Net sales increased 14% due to higher volume from ERP shipments, leading to a 20% rise in adjusted EBIT - Net sales increased 14%, driven by 18 points of higher volume (mainly incremental ERP shipments), partially offset by 4 points of unfavorable price mix[8] - Segment adjusted EBIT increased 20%, primarily due to higher net sales and lower advertising[8] Household Net sales grew 7% from increased volume due to ERP shipments, resulting in a 59% increase in adjusted EBIT - Net sales increased 7%, driven by 13 points of higher volume (mainly incremental ERP shipments), partially offset by 6 points of unfavorable price mix[8] - Segment adjusted EBIT increased 59%, primarily driven by higher volume[8] Lifestyle Net sales rose 3% driven by higher volume from ERP shipments, contributing to a 54% increase in adjusted EBIT - Net sales increased 3%, driven by 8 points of higher volume (mainly incremental ERP shipments), partially offset by 5 points of unfavorable price mix[8] - Segment adjusted EBIT increased 54%, primarily driven by lower advertising[8] International Net sales decreased 1% due to unfavorable price mix and FX, but organic sales increased 1%, with adjusted EBIT up 28% - Net sales decreased 1%, mainly due to unfavorable price mix and foreign exchange rates, partially offset by higher volume (incremental ERP shipments). Organic sales increased 1%[11] - Segment adjusted EBIT increased 28%, primarily due to higher volume and lower selling/administrative and advertising expenses[11] Fiscal Year 2025 Summary Clorox's FY25 performance saw flat net sales but strong organic growth and margin expansion, significantly influenced by ERP transition benefits expected to reverse in FY26 ERP Transition Impact Retailers placed advance orders in Q4 FY25 due to Clorox's ERP system transition, providing a temporary benefit to FY25 net sales and EPS. This benefit is expected to reverse in FY26, leading to lower shipments and a significant reduction in sales and EPS for the upcoming fiscal year - Incremental ERP shipments in Q4 FY25 provided a benefit of about 3.5 to 4 points to FY25 sales and $0.85 to $0.95 to FY25 EPS[10] - This benefit is expected to reverse in FY26, resulting in about 7 to 8 points of sales decline and a reduction of $0.85 to $0.95 in FY26 EPS[10] - The inventory draw down is projected to reduce FY26 diluted EPS by 29% to 32% and adjusted EPS by 22% to 25% compared to FY25[10] Key Financial Results (FY25) For the full fiscal year 2025, net sales were essentially flat, but organic sales increased by 5%. Gross margin improved significantly by 220 basis points. Diluted EPS surged by 190% and adjusted EPS increased by 25%, both benefiting from ERP shipments and cost savings Key Financial Results (FY25) | Metric | FY25 | FY24 | Change | ERP Benefit (points/cents) | | :----------------------- | :----- | :----- | :----- | :------------------------- | | Net sales | Flat | - | 0% | 3.5-4 points | | Organic sales | - | - | +5% | - | | Gross margin | 45.2% | 43.0% | +220 bps | 50 basis points | | Diluted EPS | $6.52 | $2.25 | +190% | $0.85 - $0.95 | | Adjusted EPS | $7.72 | $6.17 | +25% | $0.85 - $0.95 | | Net cash from operations | $981 million | $695 million | +41% | - | - Gross margin increase was primarily driven by cost savings, higher volume, and benefits from divestitures, partially offset by higher trade promotion spending and manufacturing/logistics costs[11] - Diluted EPS increase includes lapping the divestiture of the Argentina business, pension settlement charge, and cyberattack insurance recoveries[11] Financial Performance Tables (FY25) The tables provide a detailed reconciliation of GAAP to non-GAAP measures for fiscal year 2025, highlighting the impact of foreign exchange, divestitures, and ERP transition on net sales and diluted earnings per share Net Sales Growth (Percentage Change vs. Year Ago Period) | Metric | Three months ended Jun. 30, 2025 | Twelve months ended Jun. 30, 2025 | | :------------------------------------------ | :------------------------------- | :-------------------------------- | | Net sales growth / (decrease) (GAAP) | 4 % | 0 % | | Add: Foreign Exchange | — | — | | Add/(Subtract): Divestitures/acquisitions | 4 | 5 | | Organic sales growth / (decrease) (non-GAAP) | 8 % | 5 % | | Note: Approximate benefit from incremental shipments related to ERP transition | +13% to +14% | 3.5% to 4% | Diluted Earnings Per Share (GAAP vs. Adjusted) | Metric | Three months ended Jun. 30, 2025 | Twelve months ended Jun. 30, 2025 | | :------------------------------------------ | :------------------------------- | :-------------------------------- | | As reported (GAAP) $ | 2.68 | 6.52 | | Loss on divestiture | — | 0.94 | | Cyberattack costs, net of insurance recoveries | — | (0.42) | | Digital capabilities and productivity enhancements investment | 0.19 | 0.68 | | As adjusted (non-GAAP) $ | 2.87 | 7.72 | | Note: Approximate benefit from incremental shipments related to ERP transition | $0.85 to $0.95 | $0.85 to $0.95 | Fiscal Year 2026 Outlook Clorox forecasts significant declines in FY26 net sales and EPS, primarily due to the reversal of ERP-related incremental shipments from FY25 Key Financial Projections (FY26) Clorox projects a significant decline in net sales and organic sales for FY26, primarily due to the reversal of ERP-related incremental shipments from FY25. Gross margin is also expected to decrease, while selling and administrative expenses and advertising spending are projected as a percentage of net sales - Net sales are expected to be down 6% to 10% compared to the prior year, with organic sales decreasing 5% to 9%[16] - The reversal of ERP incremental shipments is expected to negatively impact organic sales by about 7 to 8 points and gross margin by about 100 basis points[16] - Diluted EPS is expected to be between $5.60 and $5.95 (14% to 9% decrease), and Adjusted EPS between $5.95 and $6.30 (23% to 18% decrease), both including a negative impact of $0.85 to $0.95 from the ERP reversal[16] Financial Outlook Tables (FY26) These tables provide the full-year fiscal year 2026 outlook for net sales growth and diluted earnings per share, detailing the expected impact of the ERP transition and other adjustments Net Sales Growth Outlook (Percentage Change vs. Year Ago Period) | Metric | Fiscal year 2025 full year | Fiscal year 2026 full year outlook (Low) | Fiscal year 2026 full year outlook (High) | | :------------------------------------------ | :------------------------- | :--------------------------------------- | :---------------------------------------- | | Net sales growth / (decrease) (GAAP) | 0 % | (10)% | (6)% | | Add: Foreign Exchange | — | — | — | | Add/(Subtract): Divestitures/acquisitions | 5 | <1 | <1 | | Organic sales growth / (decrease) (non-GAAP) | 5 % | (9)% | (5)% | | Note: Expected impact from incremental shipments related to ERP transition | 3.5% to 4% | (8)% | (7)% | Diluted Earnings Per Share Outlook (GAAP vs. Adjusted) | Metric | Fiscal year 2025 full year | Fiscal year 2026 full year outlook (Low) | Fiscal year 2026 full year outlook (High) | | :------------------------------------------ | :------------------------- | :--------------------------------------- | :---------------------------------------- | | As estimated (GAAP) $ | 6.52 | 5.60 | 5.90 | | Loss on divestiture | 0.94 | — | — | | Cyberattack costs, net of insurance recoveries | (0.42) | — | — | | Digital capabilities and productivity enhancements investment | 0.68 | 0.35 | 0.30 | | As adjusted (non-GAAP) $ | 7.72 | 5.95 | 6.30 | | Note: Expected impact from incremental shipments related to ERP transition | $0.85 to $0.95 | ($0.95) | ($0.80) | Non-GAAP Financial Information This section defines and reconciles non-GAAP financial measures, detailing adjustments for divestitures, cyberattack costs, and digital capability investments Non-GAAP Measures Definitions This section defines the non-GAAP financial measures used by Clorox, including organic sales growth/(decrease), adjusted EPS, adjusted ETR, and adjusted EBIT, explaining why management believes these measures are useful to investors for evaluating performance on a consistent basis - Organic sales growth/(decrease) is defined as GAAP net sales growth/(decrease) excluding the effect of foreign exchange rate changes and any acquisitions or divestitures[25] - Adjusted EPS is diluted earnings per share that excludes or has been adjusted for significant nonrecurring or unusual items[26] - Adjusted EBIT represents earnings (losses) before income taxes, excluding interest income, interest expense, and other significant nonrecurring or unusual items, used to assess segment operating results[26] Adjustments to GAAP Measures Clorox details specific adjustments made to GAAP results for non-GAAP reporting, including the divestiture of the Better Health VMS business, cyberattack costs (net of insurance recoveries), and investments in digital capabilities and productivity enhancements, explaining the rationale for each adjustment Divestiture of Better Health VMS Business Clorox completed the divestiture of its Better Health VMS business in Q1 FY25 to support its IGNITE strategy for portfolio evolution and margin improvement - Completed the divestiture of the Better Health VMS business (Natural Vitality, NeoCell, Rainbow Light, RenewLife brands) in Q1 FY25[28] - This transaction supports the IGNITE strategy to evolve the portfolio, reduce volatility, accelerate sales growth, and structurally improve margins[28] Cyberattack Costs Clorox incurred incremental costs from the August 2023 cyberattack, partially offset by $100 million in insurance recoveries - Incurred incremental costs from the August 2023 cyberattack, primarily for third-party consulting, IT recovery, forensic experts, and professional services[30] - Received $100 million in insurance recoveries related to the cyberattack, with no additional recoveries anticipated[30] Digital Capabilities and Productivity Enhancements Investment Clorox plans to invest $570 to $580 million over five years in transformative technologies, with approximately 75% as incremental operating costs adjusted from reported EPS - Plans to invest $570 to $580 million over five years (starting FY22) in transformative technologies, including ERP system replacement and cloud-based platform transition[32] - Approximately 75% of the total investment is expected to be incremental operating costs, primarily recorded within selling and administrative expenses, adjusted from reported EPS through FY26[33] Non-GAAP Reconciliations This section provides detailed reconciliation tables for various non-GAAP financial measures, including organic sales growth, adjusted diluted EPS, adjusted effective tax rate, and adjusted EBIT, to their most comparable GAAP measures for both quarterly and annual periods Organic Sales Growth Reconciliation (Q4 FY25 and FY25) | Segment | Q4 FY25 Net Sales Growth (GAAP) | Q4 FY25 Organic Sales Growth (Non-GAAP) | FY25 Net Sales Growth (GAAP) | FY25 Organic Sales Growth (Non-GAAP) | | :------------------ | :------------------------------ | :-------------------------------------- | :--------------------------- | :----------------------------------- | | Health and Wellness | 14 % | 14 % | 9 % | 9 % | | Household | 7 % | 7 % | 3 % | 3 % | | Lifestyle | 3 % | 3 % | 2 % | 2 % | | International | (1)% | 1 % | (8)% | 5 % | | Total Company | 4 % | 8 % | 0 % | 5 % | Adjusted Diluted EPS and ETR Reconciliation (Q4 FY25 and FY25) | Metric | Q4 FY25 GAAP | Q4 FY25 Adjusted | FY25 GAAP | FY25 Adjusted | | :------------------------------------------ | :----------- | :--------------- | :-------- | :------------ | | Diluted EPS | $2.68 | $2.87 | $6.52 | $7.72 | | Effective Tax Rate | 18.2 % | 18.6 % | 23.6 % | 21.4 % | | % Change (Diluted EPS) | 55 % | 58 % | 190 % | 25 % | | Adjustments (FY25 EPS): | | | | | | Loss on divestiture | | | 0.94 | | | Cyberattack costs, net of insurance recoveries | | | (0.42) | | | Digital capabilities and productivity enhancements investment | | | 0.68 | | Adjusted Diluted EPS Outlook Reconciliation (FY26) | Metric | FY26 Outlook (Low) | FY26 Outlook (High) | | :------------------------------------------ | :----------------- | :------------------ | | As estimated (GAAP) | $5.60 | $5.95 | | Digital capabilities and productivity enhancements investment | 0.35 | 0.35 | | As adjusted (Non-GAAP) | $5.95 | $6.30 | Adjusted EBIT Reconciliation (Q4 FY25 and FY25) | Metric | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :------------------------------------------ | :------ | :------ | :--- | :--- | | Earnings (losses) before income taxes | $410 | $275 | $1,078 | $398 | | Interest income | (2) | (2) | (9) | (23) | | Interest expense | 22 | 21 | 88 | 90 | | Loss on divestiture | — | — | 118 | 240 | | Pension settlement charge | — | — | — | 171 | | Cyberattack costs, net of insurance recoveries | — | (28) | (70) | 29 | | Streamlined operating model | — | 19 | — | 32 | | Digital capabilities and productivity enhancements investment | 30 | 23 | 111 | 108 | | Adjusted EBIT | $460 | $308 | $1,316 | $1,045 | Condensed Consolidated Financial Statements This section presents Clorox's condensed consolidated financial statements, including statements of earnings, reportable segment information, and balance sheets Statements of Earnings The condensed consolidated statements of earnings show Clorox's financial performance for the three and twelve months ended June 30, 2025, detailing net sales, gross profit, operating expenses, and net earnings Condensed Consolidated Statements of Earnings (Dollars in millions) | Metric | Three months ended 06/30/2025 | Three months ended 06/30/2024 | Twelve months ended 06/30/2025 | Twelve months ended 06/30/2024 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,988 | $1,903 | $7,104 | $7,093 | | Gross profit | $924 | $884 | $3,213 | $3,048 | | Selling and administrative expenses | $296 | $268 | $1,124 | $1,167 | | Advertising costs | $171 | $266 | $770 | $832 | | Earnings before income taxes | $410 | $275 | $1,078 | $398 | | Net earnings attributable to Clorox | $332 | $216 | $810 | $280 | | Diluted net earnings per share | $2.68 | $1.73 | $6.52 | $2.25 | Reportable Segment Information This section provides a breakdown of net sales and segment adjusted EBIT by reportable segment (Health and Wellness, Household, Lifestyle, International) for the three and twelve months ended June 30, 2025, highlighting performance across different business units Net Sales by Segment (Dollars in millions) | Segment | Q4 FY25 Net Sales | Q4 FY24 Net Sales | Q4 % Change | FY25 Net Sales | FY24 Net Sales | FY % Change | | :------------------ | :---------------- | :---------------- | :---------- | :------------- | :------------- | :---------- | | Health and Wellness | $741 | $652 | 14 % | $2,697 | $2,485 | 9 % | | Household | $639 | $597 | 7 % | $2,001 | $1,950 | 3 % | | Lifestyle | $339 | $328 | 3 % | $1,303 | $1,275 | 2 % | | International | $269 | $271 | (1)% | $1,065 | $1,162 | (8)% | | Total | $1,988 | $1,903 | 4 % | $7,104 | $7,093 | 0 % | Segment Adjusted EBIT (Dollars in millions) | Segment | Q4 FY25 Adjusted EBIT | Q4 FY24 Adjusted EBIT | Q4 % Change | FY25 Adjusted EBIT | FY24 Adjusted EBIT | FY % Change | | :------------------ | :-------------------- | :-------------------- | :---------- | :----------------- | :----------------- | :---------- | | Health and Wellness | $243 | $202 | 20 % | $840 | $719 | 17 % | | Household | $156 | $98 | 59 % | $325 | $260 | 25 % | | Lifestyle | $94 | $61 | 54 % | $290 | $253 | 15 % | | International | $23 | $18 | 28 % | $110 | $122 | (10)% | Balance Sheets The condensed consolidated balance sheets present Clorox's financial position as of June 30, 2025, and June 30, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Dollars in millions) | Metric | 06/30/2025 | 06/30/2024 | | :------------------------------------------ | :--------- | :--------- | | Total current assets | $1,608 | $1,622 | | Total assets | $5,561 | $5,751 | | Total current liabilities | $1,919 | $1,574 | | Long-term debt | $2,484 | $2,481 | | Total liabilities | $5,079 | $5,259 | | Total stockholders' equity | $482 | $492 | About The Clorox Company This section provides an overview of The Clorox Company, its brand portfolio, and its recognition for sustainability efforts Company Profile and Brands The Clorox Company, headquartered in Oakland, California, is a consumer products company known for its trusted brands such as Brita®, Burt's Bees®, Clorox®, and Glad®. It has been recognized for its sustainability efforts, ranking No. 1 on Barron's 100 Most Sustainable Companies list for three consecutive years - The Clorox Company (NYSE: CLX) champions people to be well and thrive every single day[20] - Its trusted brands include Brita®, Burt's Bees®, Clorox®, Fresh Step®, Glad®, Hidden Valley®, Kingsford®, Liquid-Plumr® and Pine-Sol® as well as international brands such as Chux®, Clorinda®, and Poett®[20] - Ranked No. 1 on Barron's 100 Most Sustainable Companies list for the third consecutive year in 2025[20] Forward-Looking Statements This section outlines the inherent risks and uncertainties that could cause actual results to differ from forward-looking statements Risks and Uncertainties This section outlines various risks, assumptions, and uncertainties that could cause actual results to differ materially from forward-looking statements. These include unfavorable economic conditions, supply chain disruptions, intense competition, volatility in costs, cyberattacks, and the ability to implement strategic initiatives like the ERP transition - Forward-looking statements are subject to risks and uncertainties, and actual results could differ materially from those discussed[22] - Important factors include unfavorable general economic and geopolitical conditions, supply chain disruptions, labor shortages, rising inflation, and foreign currency exchange rate fluctuations[22] - Other risks include the impact of the August 2023 cyberattack, intense competition, volatility in raw material costs, and the ability to successfully implement transformational initiatives like the ERP transition[22]