The Clorox Company
Analysis
The rebuild is done; now Clorox has to prove it pays off. The new ERP is live and service is back to normal, but the cost wave arrives before the innovation and savings meant to pay for it, so fiscal 2027 is the test. How much of the new cost inflation can cost savings offset in fiscal 2027?
- The ERP switch is finished, and the outage it caused is over.
Clorox went live on the new system in Q1, lost more market share than expected to empty shelves, and finished the plant rollout in Q3. Service is back to normal and the costs are gone, so the operations excuse is finally off the table. How far has market share recovered since the ERP went live?
- The cost wave lands before the fixes that pay for it.
Input inflation for fiscal 2027 is expected above $200 million, double Clorox's usual range, and management says it lands hardest in the first half. Cost savings are the main offset, so the margin only turns up in the back half of the year.
- The turnaround now rests on the categories that have struggled most.
Litter got a full rebuild of items, packaging and pack sizes, but the shelf switch caused out-of-stocks and slow sales, and management calls it a multiyear fix. Glad and Hidden Valley are growing share; the total now waits on litter. How much of Fresh Step's lost share has come back since the relaunch?
- Essential household categoriesClorox sells cleaning, trash and food products that households buy in any economy, so volumes depend more on execution than on whether shoppers feel wealthy.
- Innovation reaching shelvesThe bull case is that new products plus restored shelf space win back shoppers lost during the systems change, and that share gains build from there.
- Purell professional hygieneBuying Purell's maker adds a professional hygiene business that grows faster than the core and reaches hospitals, offices and restaurants Clorox already supplies.
- Value-seeking shopper behaviorThe bear case is that shoppers under price pressure keep trading to smaller packs and cheaper channels, so Clorox must spend more on promotion to hold volume.
- Inflation above historical rangeCost inflation across resin, freight and energy has moved far above what Clorox normally absorbs, and raising prices risks accelerating the share losses it is trying to stop.
- Debt from recent acquisitionsClorox borrowed for the Purell and Glad deals, so cash that once funded buybacks now goes to debt repayment and leaves less room if margins disappoint.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$15K | Jul 27 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$15K | Jun 24 | Aug 22 |
Donald Trump Republican · Executive | Purchase | ≥$100K | Jun 18 | Aug 22 |
Donald Trump Republican · Executive | Purchase | ≥$15K | May 22 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$1K | May 18 | Jul 1 |
Congressional trading data provided by QuiverQuant
How The Clorox Company turned $6.7B of revenue into $1.7B of operating income.
| Revenue | ||
|---|---|---|
| Health and Wellness | $2.7B | ▲ 0.00% YoY |
| Household | $1.8B | ▼ 10.69% YoY |
| Lifestyle | $1.1B | ▼ 13.81% YoY |
| International | $1.1B | ▲ 4.51% YoY |
| Total revenue | $6.7B | |
| Gross profit | $2.8B | 42.3% |
| Operating income | $1.7B | 24.7% |