Clorox Company Conference Call Summary Company Overview - **Company**: Clorox - **Industry**: Health and Hygiene, Household Essentials - **Key Executives**: Linda Rendle (Chair and CEO), Luc Bellet (EVP and CFO) Core Points and Arguments Digital Transformation and Operational Efficiency - Clorox has undergone a significant digital transformation, enhancing its operating model to improve efficiency and decision-making [1][3] - The company has fully rebuilt gross margins through its Holistic Margin Management program, which supports EBIT margin expansion of 25-50 basis points annually [1][24] - Clorox's portfolio consists of leading brands, with 80% holding the number one or two market share positions in their categories [5][6] Consumer Insights and Market Trends - Consumers are currently under stress, with nearly 90% engaging in value-seeking behaviors [11] - Historical spending on household essentials remains stable at 12%-14% of consumer budgets over the last 20 years, indicating a consistent demand for these products [6] - The rise of mental health awareness and the desire for comfort and joy in home environments are influencing consumer behavior [12][13] Innovation and Product Development - Clorox has strengthened its innovation pipeline, with a focus on faster idea generation and higher consumer appeal [30][32] - The company is launching Clorox Pure, a new allergen neutralizer, addressing a significant unmet need in the allergy remedies market, projected to grow by 20% in the next two years [33][34] - The Scentiva platform has been relaunched, doubling household penetration and expanding into new segments [41] Acquisition of GOJO Industries - Clorox is in the process of acquiring GOJO Industries, the maker of PURELL, which is expected to enhance Clorox's health and hygiene segment [52][53] - The acquisition will increase Clorox's health and hygiene sales to over 50% of total company sales, with GOJO expected to grow mid-single digits to high single digits [65] Financial Performance and Outlook Recent Performance - Clorox's organic sales growth has been mixed, with expectations for growth between -1.5% to +2.5% for the fiscal year [60] - The company has successfully rebuilt gross margins after a decline of 800 basis points during the inflationary cycle [63] Long-term Financial Goals - Clorox targets long-term sales growth of 3%-5% and EBIT margin expansion of 25-50 basis points [61] - The company has a disciplined approach to capital allocation, focusing on reinvestment, dividends, and share repurchase programs [66] Additional Important Insights - Clorox is leveraging AI and data analytics to enhance personalization in marketing, with 70% of marketing now personalized based on digital signals [21] - The company is adapting to e-commerce trends, achieving a 19% growth in e-commerce sales with leading retailers [49] - Clorox is focusing on sustainability and operational excellence as part of its strategic playbook [5][6] This summary encapsulates the key points discussed during the Clorox conference call, highlighting the company's strategic initiatives, market insights, and financial outlook.

CAGNY 2026 Linda Rendle Chair & Chief Executive Officer Luc Bellet EVP & Chief Financial Officer Safe Harbor Except for historical information, matters discussed in this presentation, including statements about the success of the Company's future volume, sales, costs, cost savings, earnings, earnings per share, including as a result of the GOJO acquisition, foreign currency exchange rates, cash flows, plans, objectives, expectations, growth or profitability, are forward-looking statements based on managemen ...

Financial Data and Key Metrics Changes - The company reported continued improvement in organic sales and effective execution of its transformation initiatives, particularly in North America Retail [3][4] - Pricing actions have been successful, with over 90% of the pricing strategies implemented performing as well or better than expected [4][17] - The company anticipates profit growth in the fourth quarter, aided by favorable trade timing and the addition of a 53rd week [8] Business Line Data and Key Metrics Changes - North America Retail has shown growth in volume share across eight of the top ten categories, with a focus on strategic pricing adjustments [3][5] - The North America Pet segment has gained share in its core business, with mid-single-digit growth in the cat category and positive momentum in the treats business [5][6] - The Love Made Fresh initiative has reached approximately 5% market share among early customers, with plans to expand distribution [6][7] Market Data and Key Metrics Changes - The pet category overall grew about 1% in Q2, with dog feeding lagging behind due to shifts in consumer behavior and preferences [25][27] - The cereal category remains under pressure, with a decline of about 3%, as consumers shift towards high-protein alternatives [61][62] Company Strategy and Development Direction - The company aims to maintain momentum in organic sales while focusing on profitability improvements in the second half of the fiscal year [8] - The Remarkability Framework is central to the company's strategy, emphasizing pricing, product innovation, and marketing effectiveness [4][16] - The company is confident in its competitive positioning and plans to continue leveraging its pricing strategies without resorting to deep discounting [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustainability of volume growth in North America Retail, despite some shipment timing benefits [13] - The competitive environment remains rational, with no significant increase in discounting levels observed [15][16] - The company is cautious about the volatile environment, including potential impacts from government actions and consumer sentiment [21][58] Other Important Information - The company has maintained its annual guidance despite ongoing volatility in the sector, indicating confidence in its ability to navigate challenges [58] - The transformation initiatives are expected to deliver savings above 4% in the coming year, contributing to overall profitability [68] Q&A Session Summary Question: Sustainability of volume growth in North America Retail - Management acknowledged some shipment timing benefits but remains optimistic about continued category improvement and competitiveness in the second half [13] Question: Competitive environment and pricing strategies - Management noted that discounting levels have not increased significantly and emphasized the importance of executing pricing strategies effectively [15][16] Question: Expectations for fiscal 3Q and 4Q - Management indicated that while there may be a trade-off between Q3 and Q4 performance, they expect overall improvement in organic sales [22] Question: Consumer behavior in the pet category - Management highlighted a shift towards e-commerce for pet purchases and noted that the dog feeding segment continues to lag behind [80] Question: Impact of pricing investments on volume - Management reported that nearly 90% of pricing investments have met or exceeded expectations, with ongoing monitoring of performance [31][66] Question: Inflation and cost of goods sold outlook - Management reaffirmed guidance of approximately 3% base inflation, with additional tariff headwinds expected [41][42] Question: Performance of the Wilderness brand - Management acknowledged underperformance in the Wilderness brand and outlined plans for new product launches and improved marketing strategies [70]

Financial Data and Key Metrics Changes - Reported net sales for Q2 were $4.9 billion, down 7%, with a 6-point headwind from divestitures and acquisitions; organic net sales were down 1% [24] - Adjusted operating profit was $848 million, down 20% in constant currency, primarily due to lower volume and higher input costs [25] - Adjusted diluted earnings per share totaled $1.10, down 21% in constant currency [25] Business Line Data and Key Metrics Changes - North America Retail organic net sales were down 3%, driven by unfavorable price mix, but organic volume growth modestly outpaced Nielsen measured retail volume growth [26] - North America Pet segment net sales were up 11%, with organic net sales up 1%, driven by favorable price mix [27] - North America Foodservice organic net sales were flat, with growth in frozen baked goods and cereal offset by a decline in bakery flour [28] - International segment organic net sales were up 4%, driven by growth in Brazil, China, India, and North Asia [29] Market Data and Key Metrics Changes - In North America Retail, the company held or grew pound share in eight of its top 10 U.S. categories, with Nielsen measured pounds up 1% in Q2 [8][26] - The North America Pet segment saw mid-single-digit growth in cat feeding, while dog feeding results were mixed [16][27] - The international business held or grew dollar share in 54% of priority businesses, led by Häagen-Dazs and Nature Valley [29] Company Strategy and Development Direction - The company is focused on investing to strengthen brand remarkability to restore organic sales growth [3] - Key priorities include returning North America Retail to volume growth, accelerating North America Pet growth, and driving efficiencies to fund investments [5][6] - The Remarkable Experience Framework guides brand investment decisions, focusing on product, packaging, brand communications, omnichannel execution, and value [6][10] Management's Comments on Operating Environment and Future Outlook - Management noted a change in consumer behavior, with lower and middle-income consumers making more purchases on promotion due to economic pressures [9] - The company expects to drive further improvement in organic sales growth in the second half of fiscal 2026, reaffirming its fiscal guidance [4][33] - Management anticipates Q3 operating profit to be down more than previously expected, but expects strong profit growth in Q4 [33] Other Important Information - The adjusted gross margin was 34.8% of net sales, down 150 basis points due to higher input costs [30] - The adjusted effective tax rate was 23.3%, up from 20.1% a year ago, due to unfavorable earnings mix [31] - Capital investments in the first half totaled $253 million, with $659 million paid in dividends [32] Q&A Session Summary Question: What are the expectations for organic net sales in the second half? - The company expects improved organic net sales in the second half, driven by the expanded impact of remarkability investments [33] Question: How is the company addressing the challenges in the North America Retail segment? - The company is focused on returning North America Retail to volume growth by investing in remarkable experiences [5] Question: What are the plans for the North America Pet segment? - The company plans to strengthen the core Blue Buffalo business while driving growth through new product launches and expanded distribution [16][18]

Financial Data and Key Metrics Changes - Reported net sales for Q2 were $4.9 billion, down 7%, with a 6-point headwind from divestitures and acquisitions [23] - Organic net sales decreased by 1%, while organic volume was flat, showing sequential improvement from Q1 [25] - Adjusted operating profit was $848 million, down 20% in constant currency, primarily due to lower volume and higher input costs [24][30] - Adjusted diluted earnings per share totaled $1.10, down 21% in constant currency [24] Business Line Data and Key Metrics Changes - North America Retail organic net sales were down 3%, driven by unfavorable price mix, but organic volume growth modestly outpaced Nielsen measured retail volume growth [25] - North America Pet segment saw a net sales increase of 11%, with organic net sales up 1%, driven by favorable price mix [26] - North America Foodservice organic net sales were flat, with growth in frozen baked goods and cereal offset by a decline in bakery flour [27] - International segment organic net sales increased by 4%, led by growth in Brazil, China, India, and North Asia [28] Market Data and Key Metrics Changes - In North America Retail, the company held or grew pound share in eight of its top 10 U.S. categories [8][25] - The North America Pet segment experienced mid-single-digit growth in cat feeding, while dog feeding results were mixed [16] - The international segment held or grew dollar share in 54% of priority businesses, with strong performance from Häagen-Dazs and Nature Valley [28] Company Strategy and Development Direction - The company is focused on enhancing the "Remarkability" of its brands to restore organic sales growth [3] - Key priorities include returning North America retail to volume growth, accelerating North America pet growth, and driving efficiencies to fund investments [5][6] - The Remarkable Experience Framework guides brand investment decisions, focusing on product, packaging, brand communications, omnichannel execution, and value [6][10] Management's Comments on Operating Environment and Future Outlook - Management noted a change in consumer behavior, with lower and middle-income consumers increasingly making food purchases on promotion [9] - The company remains confident in its strategy to deliver more value to consumers amid economic pressures [10] - Fiscal 2026 guidance was reaffirmed, with expectations for improved organic net sales in the second half [32][33] Other Important Information - The adjusted gross margin was 34.8% of net sales, down 150 basis points due to higher input costs [29] - Capital investments in the first half totaled $253 million, with $659 million paid in dividends [31] Q&A Session Summary Question: What are the expectations for organic net sales in the second half of fiscal 2026? - The company expects improved organic net sales driven by the expanded impact of remarkability investments and favorable trade timing benefits in Q4 [32] Question: How is the company addressing the challenges in the North America Pet segment? - The company is focusing on strengthening the core Blue Buffalo business and driving growth through new product launches like Love Made Fresh [18] Question: What are the anticipated impacts of divestitures on future performance? - The divestitures are expected to continue to pose headwinds, but the company is managing these impacts through strategic investments and operational efficiencies [24][30]

Strategy and Growth - General Mills aims to accelerate growth by driving remarkability in its offerings [7] - The company's strategy focuses on core markets, global platforms, and local gems, with a goal of organic net sales growth of +2% to 3% and adjusted operating profit growth in the mid-single digits [9] - Portfolio reshaping through acquisitions and divestitures has added approximately 1 percentage point to long-term growth exposure [23] - Nearly 30% of the net sales base has been turned over since fiscal year 2018 [25] Financial Performance and Outlook - General Mills reaffirms its fiscal year 2026 financial outlook, including organic net sales growth of -1% to +1%, adjusted operating profit growth of -15% to -10%, and adjusted diluted EPS growth of -15% to -10% [317] - The company anticipates approximately 5% headwinds from the net impact of divestitures and acquisitions and 3% from normalization of corporate incentive expense in fiscal year 2026 [317] - Holistic Margin Management (HMM) cost savings are projected to be 5% of COGS in fiscal year 2026, continuing a long-term trend [22] - General Mills returned nearly $14 billion to shareholders between fiscal years 2019 and 2025, including $9 billion in dividends and $5 billion in net share repurchases [340, 341, 343] Segment Performance - North America Retail segment is focused on building remarkable brands in food [46] - North America Foodservice segment reported $2.3 billion in net sales in fiscal year 2025 [158] - North America Pet segment is identified as the largest growth opportunity for the company, operating in a $56 billion U S category and a $142 billion global category [190, 189] - International segment reported $2.8 billion in net sales in fiscal year 2025, with global platforms expected to drive 75% of its growth over the next three years [268, 280]

Financial Data and Key Metrics Changes - Fiscal 2025 results did not meet expectations, with organic net sales and adjusted operating profit falling short, despite exceeding cost savings and free cash flow conversion goals [4][5][6] - Delivered Holistic Margin Management (HMM) savings totaling 5% of cost of goods, which is at the top of the industry [5][6] - Strong free cash conversion in fiscal 2025 allowed the company to return $2.5 billion to shareholders through dividends and share repurchases [6] Business Line Data and Key Metrics Changes - The North America yogurt business was divested, and Whitebridge Pet Brands was added to the North America Pet segment, focusing on categories with stronger long-term growth opportunities [6] - The company has turned over 30% of its net sales base since fiscal 2018, contributing more than a point of growth to projected long-term category growth exposure [6] Market Data and Key Metrics Changes - In Q1 fiscal 2026, there was a low single-digit decline in organic net sales and a double-digit decline in adjusted operating profit and adjusted diluted earnings per share [9][10] - End market results were broadly in line with expectations, with strength in pound share on eight of the top ten categories in North America Retail [9] Company Strategy and Development Direction - The Accelerate strategy remains the framework for long-term growth and returns, focusing on restoring volume-driven organic sales growth in fiscal 2026 [4][10] - Three priorities for fiscal 2026 include returning the North America Retail segment to volume growth, accelerating growth in North America Pet, and driving efficiencies to reinvest in growth [7][8] Management's Comments on Operating Environment and Future Outlook - The company is navigating an evolving operating environment characterized by economic uncertainty, geopolitical conflict, and regulatory changes [6][10] - Management is confident in the ability to restore sustainable, volume-driven organic sales growth, which is seen as the foundation for long-term value creation [10] Other Important Information - The company reported preliminary voting results indicating that all management proposals were approved, while both shareholder proposals failed to gain majority support [24][25] Q&A Session Summary Question: Approach to supporting healthy diets and providing nutrient information - The company has a history of providing access to important nutrition and has consistently evolved its portfolio to improve nutritional characteristics [29] Question: Thoughts on M&A activity in the food industry and divestiture criteria - The company maintains an ongoing M&A capability and has turned over about 30% of its net sales base since fiscal 2018 to focus on brands with stronger growth prospects [30] Question: Global transformation initiative and savings reinvestment - The global transformation initiative is expected to generate $100 million in savings for fiscal 2026, which will be reinvested to fuel growth investments [31]

Financial Data and Key Metrics Changes - Fiscal 2025 results did not meet expectations, with organic net sales and adjusted operating profit falling short, despite exceeding cost savings and free cash flow conversion goals [4][5] - Delivered savings totaling 5% of cost of goods, which is at the top of the industry, helping to offset input cost inflation [5][6] - Strong free cash conversion in fiscal 2025 allowed the company to return $2.5 billion to shareholders through dividends and share repurchases [6] Business Line Data and Key Metrics Changes - The North America yogurt business was divested, and White Bridge Pet Brands was added to the North America Pet segment, focusing on categories with stronger long-term growth opportunities [6] - The company has turned over 30% of its net sales base since fiscal 2018, contributing more than a point of growth to projected long-term category growth exposure [6] Market Data and Key Metrics Changes - In the first quarter of fiscal 2026, there was a low single-digit decline in organic net sales and a double-digit decline in adjusted operating profit and adjusted diluted earnings per share [9] - End market results were broadly in line with expectations, with strength in pound share on eight of the top ten categories in North America retail [9] Company Strategy and Development Direction - The Accelerate strategy remains the framework for driving long-term growth and returns for shareholders, focusing on restoring volume-driven organic sales growth in fiscal 2026 [4][10] - Three priorities for fiscal 2026 include returning the North America Retail segment to volume growth, accelerating growth in North America Pet, and driving efficiencies to reinvest in growth [7][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macro-economic backdrop and value-seeking consumer behavior that pressured top-line results [5][10] - The company is focused on restoring sustainable, volume-driven organic sales growth, which is seen as the foundation for long-term value creation [10] Other Important Information - The company reported preliminary voting results indicating that all management proposals were approved, while both shareholder proposals failed to gain majority support [24][25] Q&A Session Summary Question: Approach to supporting healthy diets and providing nutrient information - The company has a long history of providing access to important nutrition and has consistently evolved its portfolio to improve nutritional characteristics [29] Question: Thoughts on transformational M&A activity in the food industry - The company maintains an always-on M&A capability and will continue to look for opportunities to upgrade its growth profile through acquisitions and divestitures [30] Question: Global transformation initiative and expected savings - The global transformation initiative is designed to enhance and streamline processes, with savings expected to be reinvested into growth investments [31]