Clorox(US:CLX)2025-11-03 21:45Financial Performance - For the fiscal quarter ended September 30, 2025, net sales decreased by 19% to $1,429 million compared to $1,762 million in the prior period[82]. - Gross profit for the same period was $596 million, reflecting a 26% decrease from $807 million, with gross margin dropping from 45.8% to 41.7%[85]. - Diluted net earnings per share decreased by 19% to $0.65, down from $0.80 in the prior period, primarily due to lower net sales[92]. - Total net sales decreased by 19% to $1,429 million for the three months ended September 30, 2025, compared to $1,762 million for the same period in 2024[1]. - Segment adjusted EBIT for the reportable segments totaled $208 million, down 47% from $396 million in the prior year[1]. - Earnings before income taxes decreased to $107 million in Q3 2025 from $177 million in Q3 2024, representing a decline of 39.3%[122]. - Adjusted EBIT for Q3 2025 was $160 million, down from $332 million in Q3 2024, a decrease of 51.8%[122]. Segment Performance - Health and Wellness segment net sales fell by 19% to $565 million, with segment adjusted EBIT decreasing by 47% to $124 million[95]. - Household segment net sales also decreased by 19% to $362 million, with segment adjusted EBIT down 55% to $27 million[96]. - Lifestyle segment net sales dropped 23% to $245 million, with segment adjusted EBIT declining 42% to $38 million[97]. - International segment net sales decreased by 2% to $253 million, with segment adjusted EBIT down 46% to $19 million[98]. - Corporate and Other segment net sales plummeted by 89% to $4 million due to the divestiture of the Better Health VMS business[100]. Expenses and Investments - Selling and administrative expenses were $277 million, a 1% decrease from $281 million, but as a percentage of net sales, it increased by 350 basis points to 19.4%[86]. - Advertising costs decreased by 17% to $166 million, but as a percentage of net sales, it increased from 11.4% to 11.6%[87]. - Research and development costs were $28 million, a 10% decrease from $31 million, with the percentage of net sales increasing from 1.8% to 2.0%[88]. - The company incurred $32 million in operating expenses related to digital capabilities and productivity enhancements in Q3 2025, compared to $29 million in Q3 2024, an increase of 10.3%[125]. - Approximately 75% of the total investment in digital capabilities is expected to represent incremental operating costs, primarily related to ERP implementation[124]. - The company anticipates that 70% of the incremental operating costs will be associated with the ERP implementation, with the remaining costs for complementary technologies[124]. Cash Flow and Dividends - Net cash provided by operations was $93 million, a decrease from $221 million in the prior year, primarily due to lower cash earnings[104]. - The company maintained a $1,200 million revolving credit agreement with no borrowings as of September 30, 2025[113]. - Dividends per share declared increased to $2.48 from $2.44 in the prior year, with total dividends paid remaining at $151 million[116]. Future Outlook and Risks - The Company is in the stabilization phase of its ERP transition, with total incremental transformational investment expected to be approximately $580 million[79]. - The Company anticipates a volatile operating environment for the remainder of fiscal year 2026, with continued macroeconomic uncertainty impacting consumer spending[80]. - The company continues to monitor macroeconomic conditions, including inflationary pressures and evolving trade policies, which may impact operations[75][76]. - Forward-looking statements indicate potential risks including inflation, supply chain disruptions, and geopolitical tensions that could impact future performance[128]. - The company emphasizes that the costs associated with the digital transformation are not reflective of ongoing operational costs and will not be incurred post-implementation[127]. - The divestiture of the Better Health VMS business positively impacted net sales growth by 2% in Q3 2025[126]. - The company expects the strategic investments in digital capabilities to cease at the end of the investment period, which is not expected to recur in the foreseeable future[123]. Taxation - The effective tax rate on earnings was 23.4%, down from 41.8% in the prior period, primarily due to the nondeductibility of the loss on the divestiture of the Better Health VMS business[91].