Core Insights - The Clorox Company (CLX) reported mixed second-quarter fiscal 2026 results, with adjusted earnings per share (EPS) of $1.39, missing the Zacks Consensus Estimate of $1.43, and net sales of $1.67 billion, which beat the consensus mark of $1.63 billion but decreased 1% year over year [1][4][11]. Financial Performance - Adjusted EPS decreased by 10% from $1.55 in the same quarter last year [3]. - Net sales fell 1% year over year, primarily due to lower consumption, although shipments ahead of consumption partially offset this decline [4]. - Gross profit declined 2.2% year over year to $722 million, with gross margin contracting by 60 basis points to 43.2% due to elevated manufacturing and logistics costs [5]. Segment Analysis - Health and Wellness segment sales grew 2% year over year to $643 million, driven by increased volumes from ERP transition shipments [6]. - Household segment sales decreased by 6% year over year to $419 million, impacted by lower volume and negative price mix [7]. - Lifestyle segment sales tumbled 5% year over year to $321 million, reflecting reduced consumption [8]. - International segment saw a 7% rise in net sales to $294 million, with organic sales growing 5% [9]. Financial Position - Clorox ended the quarter with cash and cash equivalents of $227 million and long-term debt of $2.49 billion [10]. Guidance for FY26 - Management maintained the outlook for net sales, gross margin, and adjusted EPS for fiscal 2026, expecting a decline in net sales of 6-10% compared to the prior year [12][13]. - The anticipated decline in EPS is between $5.60 and $5.95, reflecting a year-over-year decrease of 14-9% [16]. - Adjusted EPS is projected to be between $5.95 and $6.30, indicating a decline of 23-18% from the previous year [17].

Core Viewpoint - Consumer stocks are recognized for their ability to generate substantial dividend income, supported by a loyal customer base that ensures consistent profits and cash flow for shareholders [1]. Group 1: Realty Income - Realty Income is a REIT focused on single-tenant commercial properties, with over 15,500 properties and a client base including Home Depot and Dollar General [3][4]. - The company has maintained a monthly dividend since 1994, currently paying $3.24 per share annually, resulting in a dividend yield of 5.3%, significantly higher than the S&P 500 average of 1.1% [4][6]. - Realty Income's stock trades at 15 times its FFO income, indicating potential for stock price appreciation alongside its generous dividend [7]. Group 2: Target - Target operates nearly 2,000 locations across the U.S., with over 75% of Americans living within 10 miles of a store [8]. - Despite recent struggles, including inventory issues and political controversies, Target has a P/E ratio of 13, which is lower than competitors like Walmart and Costco [9][12]. - As a Dividend King with 54 years of dividend increases, Target's annual payout is $4.56 per share, yielding 4.3%, and plans for a $5 billion investment in store remodels and technology could revitalize the business [12][13]. Group 3: Clorox - Clorox is known for its cleaning products and other brands like Kingsford and Burt's Bees, but faced challenges post-pandemic, including inflation and a cyberattack [14]. - The stock price decline has resulted in a P/E ratio of 18, near a multiyear low, while the annual dividend payout of $4.96 per share yields 4.4% [15][16]. - Improvements from an ERP implementation could enhance efficiencies, and brand loyalty may support Clorox's recovery despite inflation concerns [17].

Core Thesis - The Clorox Company is viewed positively due to its strong market position and potential for recovery, despite recent operational challenges [1][6] Valuation and Financial Metrics - Clorox shares were trading at $109.70 with trailing and forward P/E ratios of 17.08 and 18.05 respectively [1] - The stock is currently valued at decade-low levels of 16 times depressed forward earnings, presenting a potential upside of 30-40% alongside a 4.78% dividend yield [3] - The intrinsic value is estimated to be between $134 and $145 per share based on discounted cash flow and peer comparisons, with downside risk limited to the mid-$90s [5] Operational Challenges - The company faced a significant setback due to a $580 million ERP implementation that led to supply chain disruptions and a 17% decline in organic sales, causing the stock price to drop from $150 to around $104 [3][4] - Despite these challenges, the underlying business remains robust, with no permanent market share losses and a recovery in fill rates to 92% expected by March 2026 [4] Market Position and Competitive Advantages - Clorox holds a dominant position in essential product categories, including a 61% market share in bleach and significant shares in trash bags and charcoal [4] - The company benefits from strong retailer relationships, co-owned clay mines, and advantageous manufacturing locations, which support high gross margins and operating margins in the high teens [4] Recovery Outlook - Management anticipates full normalization of operations by March 2026, with expected annual cost savings of $75-100 million from the ERP implementation [4] - The balance sheet remains solid with a net debt/EBITDA ratio of 2.0, ensuring dividend continuity [5]

Core Insights - Clorox reported $1.67 billion in revenue for the quarter ended December 2025, reflecting a year-over-year decline of 0.8% and an EPS of $1.39 compared to $1.55 a year ago, with a revenue surprise of +2.6% over the Zacks Consensus Estimate of $1.63 billion and an EPS surprise of -2.61% compared to the consensus estimate of $1.43 [1] Financial Performance - Organic Revenue Growth in Health and Wellness was 2%, outperforming the four-analyst average estimate of -3.3% [4] - Organic Revenue Growth in International was 5%, exceeding the average estimate of -0.8% [4] - Organic Revenue Growth in Lifestyle was -5%, compared to the average estimate of -3.9% [4] - Organic Revenue Growth in Household was -6%, against the average estimate of -3.3% [4] - Organic Sales Growth (non-GAAP) was -1%, better than the average estimate of -2.9% [4] Revenue Breakdown - Net Revenue for Health and Wellness was $643 million, surpassing the average estimate of $607.01 million, with a year-over-year change of +2.4% [4] - Net Revenue for International was $294 million, exceeding the average estimate of $274.15 million, with a year-over-year change of +7.3% [4] - Net Revenue for Lifestyle was $321 million, slightly below the average estimate of $324.97 million, reflecting a year-over-year change of -5% [4] - Net Revenue for Household was $419 million, below the average estimate of $431.47 million, representing a year-over-year decline of -6.1% [4] Income Metrics - Income before income taxes for Health and Wellness was $190 million, exceeding the average estimate of $171.23 million [4] - Income before income taxes for Household was $22 million, below the average estimate of $53.24 million [4] - Income before income taxes for Corporate and Other was -$59 million, better than the average estimate of -$77.63 million [4] Stock Performance - Clorox shares returned +11.9% over the past month, outperforming the Zacks S&P 500 composite's +1.8% change, with a current Zacks Rank of 3 (Hold) indicating potential performance in line with the broader market [3]

分组1 - Clorox reported quarterly earnings of $1.39 per share, missing the Zacks Consensus Estimate of $1.43 per share, and down from $1.55 per share a year ago, representing an earnings surprise of -2.61% [1] - The company posted revenues of $1.67 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 2.60%, but down from $1.69 billion year-over-year [2] - Clorox has surpassed consensus EPS estimates two times over the last four quarters and topped consensus revenue estimates three times in the same period [2] 分组2 - Clorox shares have increased approximately 12.4% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for investors [4] - The current consensus EPS estimate for the coming quarter is $1.52 on revenues of $1.65 billion, and for the current fiscal year, it is $5.87 on revenues of $6.5 billion [7] 分组3 - The Zacks Industry Rank indicates that the Consumer Products - Staples sector is currently in the bottom 36% of over 250 Zacks industries, which may impact stock performance [8] - The estimate revisions trend for Clorox was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it will perform in line with the market [6]

Financial Data and Key Metrics Changes - The company reaffirmed its guidance for the fiscal year, indicating a sequential improvement in Q2 compared to Q1, with category growth expected to be in the 0%-1% range for the back half of the year [9][10][15] - The gross margin is expected to expand in the back half of the year after contracting in the front half, with projected cost savings run rate higher in the back half [32][33] Business Line Data and Key Metrics Changes - The household segment experienced negative pricing, particularly in the trash bag category, while the overall pricing for the company remained flat [31][39] - The company is focusing on innovation in its trash and litter categories, with plans for a full relaunch of its litter business and new product introductions in the back half of the year [56][102] Market Data and Key Metrics Changes - The competitive environment is described as consistent with pre-COVID levels, with some categories experiencing heightened promotional activity [10][39] - Consumers are increasingly focused on value, leading to a shift towards larger and smaller pack sizes, impacting pricing and volume dynamics [11][31] Company Strategy and Development Direction - The company is advancing its digital transformation and enhancing execution through a newly modernized ERP system, which is expected to unlock long-term growth opportunities [4] - The planned acquisition of GOJO Industries is seen as a decisive step to expand leadership in health and hygiene [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong innovation plans and a focus on consumer value [4][10] - The company anticipates that category growth will remain flat to up 1% in the back half of the year, with expectations for improved share performance [10][68] Other Important Information - The company is investing in digital capabilities beyond the ERP implementation to enhance productivity and efficiency [44] - There is a focus on balancing promotional activities with profitability, particularly in competitive categories [58][79] Q&A Session Summary Question: Can you discuss the competitive environment and promotional activity? - Management noted that competitive activity is back to pre-COVID levels, with some categories experiencing more intense competition, but they have plans to address this [10][39] Question: What is the expected impact of the ERP transition on shipments? - The company experienced higher than expected shipments due to the final phase of ERP implementation, which is expected to reverse in the third quarter [21][22] Question: How is the company addressing pricing and promotional strategies? - Management indicated that they are making selective price investments in response to consumer pressure, particularly in the trash bag segment [78][79] Question: What are the expectations for category growth and the Ignite strategy? - Management expects category growth to return to historical levels, which is necessary to achieve the Ignite strategy's target of 3%-5% net sales growth [69][70]

Financial Data and Key Metrics Changes - The company reaffirmed its guidance for the fiscal year, expecting category growth to remain in the 0%-1% range for the back half of the year [10][15] - The company experienced a sequential improvement in performance during Q2, consistent with expectations, although market share was down [9][10] - Gross margins are expected to expand in the back half of the year after contracting in the front half, with a projected solid expansion in Q4 [32][36] Business Line Data and Key Metrics Changes - The household segment faced negative pricing, particularly in the trash bag category, while the overall pricing for the company remained flat [31][39] - The company is focusing on innovation in its trash and litter categories, with plans for a full relaunch of its litter business and new product introductions in the back half of the year [57][102] Market Data and Key Metrics Changes - The competitive environment has returned to pre-COVID levels, with some categories experiencing heightened promotional activity [10][39] - Consumers are increasingly focused on value, leading to a shift towards larger and smaller pack sizes, impacting pricing strategies [11][31] Company Strategy and Development Direction - The company is advancing its digital transformation and enhancing execution through a newly modernized ERP system, which is expected to unlock long-term growth opportunities [4][22] - The planned acquisition of GOJO Industries is seen as a decisive step to expand leadership in health and hygiene [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance, citing strong innovation plans and demand strategies for the back half of the year [4][29] - The company anticipates that consumer behavior will remain under pressure, but believes it has the right plans to support category and share growth [68][70] Other Important Information - The company is investing in digital capabilities beyond the ERP implementation to enhance overall efficiency and effectiveness [44] - There is a focus on balancing promotional activities with profitability, particularly in competitive categories [58][79] Q&A Session Summary Question: Can you discuss the competitive environment and promotional activity? - Management noted that competitive activity is largely as expected, with some categories experiencing increased promotional intensity, particularly in litter and home care [10][39] Question: What is the expected impact of the ERP transition on shipments? - The company experienced higher than expected shipments due to the final phase of ERP implementation, which is expected to reverse in the third quarter [21][22] Question: How is the company addressing pricing and promotional strategies? - Management indicated that they are making selective price investments in response to consumer pressure, particularly in the trash bag segment [78][79] Question: What are the expectations for category growth and the Ignite strategy? - Management expects category growth to return to historical levels, which is necessary to achieve the Ignite strategy's target of 3%-5% net sales growth [69][70]

Financial Data and Key Metrics Changes - The company reaffirmed its guidance for the fiscal year, indicating expectations for sequential improvement in performance in the second half of the year [7][13] - The gross margin is expected to expand in the back half of the year after contracting in the front half, with projected cost savings running higher in the back half [33][34] Business Line Data and Key Metrics Changes - The household segment experienced negative pricing, while overall pricing for the company remained flat [31][32] - The company noted a sequential improvement in share performance, particularly in the trash bag and litter categories, driven by innovation and promotional activities [9][56] Market Data and Key Metrics Changes - The competitive environment has returned to pre-COVID levels, with some categories experiencing heightened promotional activity [8][37] - The company expects category growth to remain in the 0%-1% range for the back half of the year, with plans to improve share performance through innovation [9][14] Company Strategy and Development Direction - The company is focused on digital transformation and enhancing execution through a newly modernized ERP system, which is expected to unlock long-term growth opportunities [3][20] - The planned acquisition of GOJO Industries is seen as a decisive step to expand leadership in health and hygiene [3] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance despite external pressures, emphasizing the importance of innovation and consumer value [3][10] - The company anticipates that consumer behavior will remain focused on value, with a trend towards larger and smaller pack sizes [10][11] Other Important Information - The company is investing in marketing and demand creation for new product launches, with a significant increase in marketing investment planned for the back half of the year [24][29] - The company is addressing changes in consumer trends through price pack architecture adjustments in its litter business [102] Q&A Session Summary Question: Can you discuss the competitive environment and promotional activity? - Management noted that competitive activity is largely as expected, with some categories experiencing more intense competition, particularly in litter and home care [8][9] Question: What are the expectations for pricing in the second half of the year? - Management indicated that pricing is expected to remain flat, with some potential for price interventions depending on market conditions [31][32] Question: How will the ERP implementation impact future operations? - The final phase of the ERP implementation is complete, and management expects to see benefits in supply chain efficiencies and cost savings moving forward [20][92] Question: What is the strategy for balancing growth and profitability? - Management emphasized the importance of innovation and disciplined promotional spending to balance market share and profitability [58][59] Question: How is the company addressing consumer trends in packaging and pricing? - The company is making adjustments to its price pack architecture to better align with consumer preferences and trends [102]

Core Viewpoint - Consumer demand was pressured early in the second quarter due to factors such as the government shutdown and increased value-seeking behavior [1] Group 1 - The government shutdown negatively impacted consumer demand [1] - Heightened value-seeking behavior among consumers contributed to the pressure on demand [1]

Financial Performance - For the fiscal quarter ended December 31, 2025, net sales decreased by 1% to $1,673 million compared to $1,686 million in the same period last year[83]. - For the six months ended December 31, 2025, net sales decreased by 10% to $3,102 million compared to $3,448 million in the prior year[83]. - Gross profit for the three months ended December 31, 2025, was $722 million, a decrease of 2% from $738 million in the prior year[88]. - Gross margin decreased by 60 basis points to 43.2% for the three months ended December 31, 2025, primarily due to higher manufacturing and logistics costs[88]. - Selling and administrative expenses for the three months ended December 31, 2025, decreased by 6% to $262 million, representing 15.7% of net sales[90]. - Diluted net earnings per share decreased by $0.25, or 16%, in the current three-month period, primarily due to lapping insurance recoveries and lower gross profit[96]. - Adjusted EBIT for the three months ended December 31, 2025, was $256 million, compared to $258 million for the same period in 2024[129]. Segment Performance - Net sales for the Health and Wellness segment increased by 2% to $643 million in the current three-month period, while segment adjusted EBIT decreased by 2% to $190 million[99]. - Net sales for the Household segment decreased by 6% to $419 million in the current three-month period, with segment adjusted EBIT declining by 54% to $22 million[101]. - Net sales for the Lifestyle segment decreased by 5% to $321 million in the current three-month period, while segment adjusted EBIT increased by 3% to $72 million[103]. - International segment net sales increased by 7% to $294 million in the current three-month period, with segment adjusted EBIT rising by 48% to $31 million[105]. - Organic sales growth for the total company was reported at (1)% for the three months ended December 31, 2025[85]. - Organic sales growth for the total Company was a decrease of 1% for the three months ended December 31, 2025, with Health and Wellness segment showing a growth of 2%[134]. Investments and Acquisitions - The total incremental investment for the ongoing ERP transformation is expected to be approximately $580 million, aimed at enhancing operational efficiency[78]. - The Company plans to acquire GOJO Industries and purchase Procter & Gamble's interest in the Glad business, reflecting a strategy to evolve its portfolio[79]. - The pending acquisition of GOJO Industries announced on January 22, 2026, is planned to be funded primarily through debt financing[116]. - The Company will purchase P&G's 20% interest in the Glad bags and wraps business for $476 million, expected to be paid in cash during Q3 of fiscal year 2026[119]. - The planned acquisition of GOJO is expected to impact the company's net sales, earnings performance, and profitability, although specific financial metrics were not disclosed[135]. Cash Flow and Liquidity - Net cash provided by operations was $404 million in the current six-month period, compared to $401 million in the prior period[112]. - Net cash used for investing activities was $77 million in the current six-month period, compared to net cash proceeds of $35 million in the prior period[114]. - The Company expects to have sufficient funds to support its short- and long-term liquidity and operating needs, anticipating positive cash flows from operations in the future[117]. - As of December 31, 2025, the Company maintained a $1.2 billion revolving credit agreement with no borrowings under it, ensuring availability for general corporate purposes[120]. - The Company repurchased 1,109 thousand shares of common stock for $125 million and 2,157 thousand shares for $254 million during the three and six months ended December 31, 2025, respectively[122]. - Dividends per share declared were $1.24 for the three months ended December 31, 2025, compared to $1.22 for the same period in 2024, with total dividends paid of $151 million[123]. Taxation - The effective tax rate on earnings for the six months ended December 31, 2025, was 24.5%, compared to 28.2% in the prior year[93]. - The effective tax rate on earnings was 25.1% for the current three-month period, compared to 18.1% in the prior three-month period[95]. Operational Challenges and Risks - The Company anticipates continued volatility in the operating environment, impacting consumer spending and overall business performance[80]. - The company faces risks related to the integration of the GOJO business and the realization of anticipated benefits and synergies from the acquisition[135]. - The company is navigating unfavorable economic conditions, including inflation and supply chain disruptions, which could affect sales growth targets[136]. - The company is managing risks associated with reliance on third-party service providers, which could impact cost savings and operational efficiency[136]. - The company is addressing challenges in the labor market, including increasing labor costs and sustained labor shortages, which may impact operations[136]. - The company acknowledges the potential impact of climate change and sustainability issues on sales and operating costs[136]. - The company is focused on maintaining its business reputation and the reputation of its brands amid regulatory and compliance challenges[136]. - The company has not reported any material changes to its market risk since June 30, 2025, indicating stability in this area[140]. - The company's ability to pay dividends or repurchase stock in the future may be influenced by its indebtedness and credit rating[139].