What Management Said
Read the full Q1 2026 transcript ↗Please note that our earnings release and prepared remarks are available on our website at thecloroxcompany.com. During this call, we may make forward-looking statements, including about our fiscal year 2026 outlook. As we move forward, we've incorporated the realities of the implementation into our latest outlook and made the necessary adjustments to strengthen our plan for the remainder of the year. Importantly, as we move past these temporary challenges, we are fully focused on our demand creation plan to deliver superior value to our consumers and reinvigorate category growth.
First, can you just help us understand what you're including or embedding from a category growth perspective? Second, you touched on returning to kind of sales growth or consumption growth in the back half as a result of the strong demand creation plan. I think when we look at the phasing for the full year outlook, it might be easier to just exclude the impact of the ERP in both Q1 and Q4. If you do so, organic sales growth in the front half would be negative, low single digits, and organic sales growth in the back half would be positive, low single digits.
We're excited about innovation plans in the back half, and we have strong demand plans in place. Outside of that, we don't have any material things that you should focus on outside of what we provided in the outlook. In general, what's embedded in the price algorithm for the organic sales growth in the second half? If I can squeeze in one for Luc on the gross margin side, I understand that obviously there was a lot of operational deleverage.
- The company reached a major transformation milestone with the successful launch of its new U.S. ERP system, strengthening its digital backbone and beginning to ramp up benefits across operations.
- Results were delivered largely in line with expectations despite the temporary ERP impact and a volatile macro environment.
- Consumption rebounded in the third and fourth weeks of October back to expected levels after a soft first two weeks tied to lapping prior-year storms and port issues.
- Inflation came in more favorable than the July estimate, with input cost and inflation now expected at about $70 million for the year, roughly $20 million better than the prior under-$90 million view.
- The company refined and finalized its ERP shipment impact estimate to a point estimate of 7.5 points of FY2026 sales headwind, giving more clarity, and feels good about retailer inventory positioning at the end of Q1.
- The cleaning portfolio is performing very well against private label across the value spectrum, and management expects robust gross margin expansion in both Q3 and Q4.
- The ERP ramp-up was slower than expected and caused the company to lose more market share than anticipated, hitting August in a material way before improving in September and October.
- Q1 organic sales excluding the ERP impact declined about 3 points; even adjusting for a favorable timing point and out-of-stock headwinds, underlying performance was about -1.
- Out-of-stocks related to the ERP ramp impacted market share and some categories, and the company incurred additional expenses to deal with demand-fulfillment disruption.
- Trash and Cat litter remained highly competitive with elevated promotions, and Q1 was further pressured by ERP-driven out-of-stocks; gross margin outlook moved toward the lower end of the range.
- Brita and bleach showed some private label uptick that the company is watching carefully, particularly among lower-income consumers.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth (reported FY2026) | FY2026 | -5% to -9% (expect lower end) (reaffirmed) |
| ERP shipment timing impact on sales | FY2026 | 7.5 points headwind (point estimate) (refined) |
| Input cost / inflation | FY2026 | about $70 million (about $20 million more favorable) |
| Tariff cost headwind | FY2026 | about $40 million (unchanged) |
| Total cost (inflation plus tariffs) | FY2026 | about $110 million (about $20 million more favorable) |
| Price mix | FY2026 | about -1% (headwind) |
| Organic sales growth (ex-ERP) phasing | FY2026 | front half negative low single digits, back half positive low single digits |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Organic sales growth (ex-ERP) | about -3% | Included one favorable point of timing and about 3 points of out-of-stock headwinds; underlying performance about -1%. |
| Market share | down | ERP ramp-up caused out-of-stocks, with share loss most material in August, improving in September and October. |
| Price mix | about -1% | Continued consumer value-seeking behavior and channel shifting, partially offset by net revenue management; an improvement from about -2% in the prior year. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| ERP transition | Just launched in July; in stabilization/ramp-up phase | Through the hard part; ramp-up was slower than expected and caused more share loss, with a smaller remaining implementation expected to be inconsequential | Improving |
| Consumer environment | Under stress, value-seeking | Largely in line with expectations; consumer under stress with significant week-to-week shifts within a fairly stable overall wallet | Stable but pressured |
| Back-half innovation | New platforms planned for the back half | Launched Glad fall scent, Brita modernization with smaller sizes, and Burt's expansions in Q1; major back-half launches across all brands still planned | Ramping |
| Private label | No material aggregate inroads | No material aggregate share gain, but Brita and bleach being watched carefully | Stable with watch points |
| Portfolio actions | — | Divested Argentina (currency volatility) and the VMS business; continuing disciplined long-term portfolio review with a strong balance sheet | Active |
Q&A Summary
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