Snapshot
Clorox Co /De/ reported $1.43B of revenue in Q1 2026, up -18.9% year over year, with diluted EPS of $0.65 and an operating margin of 8.7%.
- Revenue
- $1.43B
- YoY growth
- +-18.9%
- Diluted EPS
- $0.65
- Operating margin
- 8.7%
What management said
- •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.
What went well
- •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.
What went wrong
- •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 | Previous | Current | Change |
|---|---|---|---|---|
| Organic sales growth (reported FY2026) | FY2026 | -5% to -9% | -5% to -9% (expect lower end) | reaffirmed |
| ERP shipment timing impact on sales | FY2026 | 7-8 points headwind | 7.5 points headwind (point estimate) | refined |
| Input cost / inflation | FY2026 | under $90 million | about $70 million | about $20 million more favorable |
| Tariff cost headwind | FY2026 | about $40 million | 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 change | Reason |
|---|---|---|
| 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
What is embedded for category growth and what drives confidence in a back-half inflection? (UBS)
U.S. retail category assumed muted at about 0%-1%; ex-ERP front-half organic is negative low single digits and back half positive low single digits; the back-half improvement is driven by improved consumption and share from major innovation launches and lapping prior-year negative trends; Q2 is expected at low single digits.
How do you feel about market share given all the ERP noise? (Jefferies)
Ex-ERP Q1 organic declined about 3 points (about -1 underlying after a favorable timing point and 3 points of out-of-stock); the ERP ramp caused more share loss than anticipated, worst in August and better since, but household penetration is stable and the consumer value metric remains well above pre-COVID.
Why is gross margin guidance moving toward the lower end? (JPMorgan)
Total cost is about $20 million more favorable (inflation about $70 million plus $40 million tariffs, roughly $110 million), but incremental ERP demand-fulfillment expenses and higher trade spending and advertising to support back-half innovation pressured margin toward the lower end; robust expansion is still expected in Q3 and Q4.
Is the high end of the -5% to -9% organic range still achievable? (Goldman Sachs)
It would require everything to hit, including category growth at the higher end (about 1% or more for U.S. retail), strong execution on innovation and demand creation, and no supply or extraneous issues; the wide range was a deliberate choice to stay agile.
Is the path to price mix inflecting positive or staying negative? (TD Cowen)
Price mix is expected to be about a 1-point headwind for the year (versus about 2 points last year), driven by value-seeking and channel shifting, partially offset by net revenue management, with stable promotions year over year.
Should we still add back the full $0.90 ERP impact to get a run-rate EPS base? (BNP Paribas)
Yes; about two weeks of sales and EPS were shifted from FY2026 into FY2025, so FY2026 absolute sales and EPS dollars are understated, and the $0.90 would be added to wherever the year finishes as the FY2027 starting point.