CLOROX CO /DE/ Q3 FY2025 earnings call

• Consumer environment: Tougher with increased competition, slower category growth; U.S. consumer sentiment weakened in second half of third quarter. - Gross margin: 10th consecutive quarter of expansion; Q4 gross margin expected around 44%, aligned with full-year average. - Promotional activity: Aggregate promotion normalized, but with category nuances; Glad had higher promotion due to competition. - Innovation: Consumers willing to pay premium for innovative products delivering superior value; examples like Scentiva and ToiletWand. - ERP transition: On track, working closely with retailers; impact on sales and inventory build-out, with most impact expected in Q4. - Tariff impact: Exposure limited, unmitigated impact expected at $100 million run rate, manageable with mitigations like sourcing changes and strategic pricing. - Retail destocking: Limited to household in Q3, expected to impact Q4; not seen as strategic issue. - M&A: Focus on core health, with divestitures strengthening financial profile; open to opportunities if right value and fit.

No detailed breakdown of specific product segments with revenue contributions provided in the transcript.

• Fiscal 2025 outlook: Categories could be down low-single digits in Q4; tariff impact on gross margin expected at $10 million to $20 million in Q4; ERP transition impact on sales with a wide range in outlook. - Long-term: Confident in ability to navigate uncertainties, with focus on margin expansion and earnings growth through capabilities like technology transformation and innovation.

• Macroeconomic and geopolitical uncertainties: Drive changes in shopping behaviors and temporary category impact. - Tariff impact: Unmitigated impact of about $100 million run rate, though manageable. - Retail destocking volatility: Uncertainty around timing and extent of inventory adjustments, with potential for impact in future quarters. - Competitive pressure: Increased discounting in certain categories like Glad, requiring careful management.

Q: What's driving category weakness?

A: Macro uncertainty, changing consumer shopping behaviors, wallet shifting beyond market baskets including Clorox goods.

Q: Impact of tariff on gross margin?

A: Unmitigated impact expected at $100 million run rate, with less than fair share in Q4 due to inventory.

Q: Promotional activity by category?

A: Aggregate promotion normalized, but Glad has higher promotion due to competition.

Q: ERP transition impact on sales?

A: Retailers expected to build one and half weeks of inventory, with most impact in Q4.

Q: Consumer trade down?

A: Not seeing traditional trade down, but channel and pack size shifting; confident in essentials' resilience.