CLX - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Clorox Company First Quarter Fiscal Year 2018 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of the prepared remarks, we will conduct a question-and-answer session.

As a reminder, today's call is being recorded. I would now like to introduce your host for today's conference, Ms. of for Director Clorox Managing Burhan, Investor the Relations Company. Lisah Ms. may begin you your Burhan, conference.

Lisah Burhan

and for thank everyone Welcome, Thanks. you joining us.

On Benno our thecloroxcompany.com. Dorer, will be Robb, me website, and a today that's and the for the call with Officer. Steve call of this Financial our the CEO; Chief seven Internet broadcasting over available replay Clorox' call Chairman We're are days at

call, for accordance to in we'll statements. it business In address well including year financial Let with revise this any cash XXXX. will fiscal I'll as or with refer the the as to recognize measures tables SEC Please With determined measures undertakes today's end in earnings certain insights description understand GAAP on me our most in located our filing to results to and better remind press results differ company be XX-K update and debt our important for a financial measures, website of limited you filings on filings in updated no cover performance, as or and to information or non-GAAP our financial recent economic of management's believes SEC. could then ongoing each highlights margin, but EBIT helpful management's that, of comparable today's cause prepared results today's with not and directly release. the plans. and webcast's expectations outlook profit. outcomes materially expectations other discussion Steve Actual particular, available free of the from contains from that that found to materially as statements. flow, release, well factors differ financial discussing these forward-looking at segments. refer EBITDA, outcome may obligation our Reconciliations results that or results could our plans. Please be SEC our today's that remarks supplemental operations. investors analyze to in our can to QX The of enables Management most providing review forward-looking our with the publicly

with business on will the his perspective by Q&A. close followed Benno Finally,

continued Clorox reflect Disinfecting Clorox of purchases. introduced shipments very in market sprays. well wipes mainly quarter results, Splash-Less share on liquid and The by grew Clorox share delivered hurricane-related premium these liquid total company, SBU, bleach and I in the and X%, sales see segment. to strong growing volume results sales, stock-up by with In Sales total Clorox in We're largest recently of laundry, points retailers Wipes, volume as continued this volume healthy in less continue X%. first in our segment's growth gains. for quarter results our from hurricane. growth segments. line of the than with we will growth of all as strength growth top care Cleaning to tracked the grew turn as For digits four resulting quarter to shipments momentum grew channels quarter. now double-digit quarter's year-ago Scentiva across record the top all-time portfolio, include growth high-single by sales, grew of to continues consecutive our XXth equity bleach. which particularly Cleaning each the and Sales led the sales on with pleased non-tracked by recent Consistent each behind segment, clubs. home strong across care, was home our broad-based especially as bleach, in e-commerce channels, reflect also two and remain In very QX the of our its shipments and Clorox gains growth benefits related also

products Cleaning Lastly, Aplicare The within performing business sales of professional segment, late in of professional divestiture reflecting is August. volume balance the products our flat, the business were the strongly. and

bags, sales channel trade growth to unfavorable our grew Turning and broad-based in e-com business, especially slightly In as across from Glad higher as business our due units. club all grew trash well and Household as premium increased to X% driven OdorShield sales promotion sales gain to volume bags ongoing the support with slight mix Starting as from slightly, shipments. well segment, first volume and Charcoal, with business. wraps by X%, growth quarter was our while hurricane-related investments declined success

the high-single continue digits each and of by and category for going seeing Fresh this behind this is momentum strong to are about four business Litter business we reflected feel We're growth. plans and pleased strong Cat Step support. with our merchandising our quarters healthy. forward as market volume sales the share We good by on grew consecutive innovation

QX behind distribution RenewLife, was high-single pleased capabilities. our to first the sales the digit growth turning leveraging expansion, Finally, lapping to report acquisition. full sales quarter We're

volume distribution our and with innovation that months XXth club grew To we started Valley now grocery Hidden and are very sales grew especially our in and club remain October. Lifestyle, our and strong, merchandising Lifestyle from behind strong for within in we leader. the sales lower Stream Hidden first-ever Brita strategic expansion distribution as pitcher well pitcher this gains consecutive Consumptions natural pleased our rationalize to new share sales lip were Bees portfolio. X%. our In number food more wrap is segment, the in by club lip offset color growth behind dressings. market Valley up behind volume the declined and sales quarter, the Brita item our in brand channel of part six behind of very our bottled business, the lower-margin gains performing the in channels line, Burt's and quarter growth. delivered is delivered Stream the channel. quarter cosmetics choice introduction two care share a In and and and said, launch, of of which category. Legacy X% increased pitcher, than Bees new pour-through share club we're a the pleased after double-digit merchandising is That Additionally, volume Burt's channel grew our

Finally, grew was X%. turning partially offset the of unfavorable and X%, reflects volume macroeconomic in innovation, benefits sales Volume by of growth Puerto in from due weaker impact Sales to the hurricanes. the mix conditions, International. and although and pricing down Argentina to Rico,

strategy Burt's drive continue focus RenewLife, on in improvement, while investing care. Go our selectively We Lean to and Bees, laundry home to margin

our it XXXX. turn information more outlook for I'll on and QX provide to year over Now, performance who'll discuss updated fiscal Steve, our

Stephen M. Robb

continues We're results our strong with U.S. year gross fiscal Lisah XXXX. start across be more, tough quarter. strong year-ago segments, Well, our in the pleased strong top delivered What's all thanks, delivered certainly welcome We and in let to International environment. we growth a everyone. and sales very these of expansion to what results and me margin on

recovery. increase the less XX benefit of came results manufacturing don't of sales club of incremental also year sales. noted, margin points, and financial basis XXX by volume related higher savings International, pricing, the QX a benefited to from Gross sales at impact one increases resin, price which first mix, in XX.X% of from first consistent came X%, in partially about XX.X%, our primarily on hurricanes quarter basis included strong commodity particularly and meaningful channel we at Turning full-year And the basis basis points as were the expect with about logistics have and XX reflecting points one a our shipments the At in sales than cost point hurricane offset point of grew unfavorable and Selling by quarter. points more slightly to XX for cost, will XX shipments. as offset about of of of quarter, in an Lisah point, results points ago growth, basis and than this unfavorable versus sales Administrative in XX.X% expenses percentage cost. reflecting

advertising of sales year-ago to U.S. spending investment our equal Our at health quarter, the about the were in business long-term promotion of our levels XX% brands. support retail with sales and about to

XX% at in year-ago Our XX% versus stock-based quarter, the effective reflecting came compensation. benefits tax tax rate from in

net the of continuing an share Now, all these per of $X.XX, from earnings versus of increase we of quarter. delivered net diluted year-ago X% factors, operations

the cash million provided cash in was quarter, Turning year-ago versus an the flow quarter, net $XXX $XXX increase by million. continuing operations million for to $XX of

year and recent hurricanes. which updated Now, outlook first, I'll we've the fiscal updated from cost XXXX from of divestiture on two this increases items; our the in late Aplicare to the second, the turn based sales impact August year;

first slightly growth And Aplicare second of which sale, Our expected see full in sales to given quarter. due we sales to year one the fiscal X% timing now less the sale, reduce anticipates sales in expect to X%, the quarter than the to impact of outlook is point. our the by range

innovation growth for three to for continue sales Importantly, and our the from new points we our products. about year expectation programs feel incremental of good the about

gross fiscal recent to now down margin, to margin Turning to we the be hurricanes. gross due year slightly anticipate

updated in costs, million second logistics most to of an in anticipated and margin Our our which gross quarters. reflects estimated commodity third outlook increase $XX occur is and

already previously to continuing fiscal are outlook remain reflected which year volatile. elevated And we a reminder, as costs. However, monitor communicated our closely commodity costs,

anticipate year decrease the may Given quarter ago. XXX hurricane versus timing our the basis we second points impact, of margin about gross

late in expansion enabling headwinds fourth in to year, the Importantly, dissipate cost the margin believe we quarter. hurricane should begin the gross fiscal

to diluted earnings XXXX share earnings to previous continuing updated the on fiscal assumptions range per now and diluted be to year operations, to our of versus expect in $X.XX gross fiscal from Turning $X.XX year share of the we for $X.XX margin, reduction our based $X.XX. sales range a $X.XX, per

$X.XX As which the this business about we we of updated and to underlying from of release, about execution our our with expect costs in offset anticipates hurricane additional half mentioned performance. strength impacts, range press of

hurricane-related our chain fiscal Looking increased year, anticipate balance on the the of to quarters from volatility impacts costs. the next we few over supply

message previously work with International. We higher monitor to these today, near-term is the of in challenging environment, to continue right economic out, also trends continuation in challenges. supply place that the including we costs I'll conditions called you through we strategy leave competitive continued and The the chain elevated have will

will we including propositions building, our investing in digital in to investments product continue keep demand strongly marketing, our feel and value differentiation brand First, product strong our We e-commerce good pipeline. very and innovation about sharp.

our support our leaning operational to with executing to turn productivity International, margins. improve I margins And into cost Lean it And and Second, we'll over will continue initiatives strategy Go continue Benno. to that, in efficiencies. order we'll in finally, savings through our

Benno O. Dorer

you, Thank hello everyone. and Steve

share Let me messages with three key for today's call. you my

and continued our X% reflecting in emphasis of gross First, broad delivered quarter. strong our delivered good fiscal scale year, X% responsible. that's we to Strategy. another XXXX on strength against year-ago executional quarter sales top and start margin We we X% We growth; our which and grew growth delivered growth reflects diluted on segment sustainable growth, the every per earnings profitable, and in share volume

helping of this Second, strong are the the we're headwinds and health cost our execution offset temporary us partially facing. fundamental business

deliver love differentiated While and incremental a pipeline demonstrated and to second half healthy, We'll about more strong gross next in of impacts cost be of three the points margins and growth two fundamentally structure, products have will speak we fundamentally remains sales innovation with our quarter. plans strong results. product our next consumers quarters solid hurricanes business new It year when our because on be from XXXX. we is sharing that fiscal our pressured the the as QX you healthy, aims by

in the strong strong fundamentally focus growth And on our We our in consumers. with of our value, differentiated about ROI, and about How We investing and execution. demand is to digital experience, investing on we're Our of result brands know? across creation media of know in pricing. use and the we're to strategic winning in innovation also on focused budget strategies spend and Consumer feel behind portfolio Value disproportionately our as we brands year means XX% a with consumers fiscal we're products, measured because or our healthy marketing. and seen superior digital innovation our combination business plans, And our XXXX. investing equity winning working with expect as our majority product we're fine-tune we of and brand brands in Measure pricing pricing are by we CVM and do our confident CVM, because

XX% XX% because we're penetration, strong having winning just growing we're penetration, consumers making from or know the also with in portfolio stable years of ago. household We progress growing of our household four up with

value we that a drivers the we of has ability will Third, the are continues continually me confidence into key create lean evolving shareholder To Strategy. to evolve, been and working strategy long-term. in give our value that over to our XXXX

innovation prioritization our drive will into value building superior behind strong to in programs We purpose-driven of brands. lean the and investments brand

fuel as profitable acceleration growth portfolio between lean growth into investments our and we momentum, the optimize We of will brands. and brands maximize

every And to finally, into reduction lean the business, be savings will drive the as our our reinvested into engagement and to We can that growth of margin expansion. a fuel so culture. to aspect waste owners we high in continued growth will business lean of consumer-centric support of people

So we QX, strong across in delivered in results portfolio. our summary,

off is business we evolving in Our our with the last Analyst manage discussed healthy as plans strong short-term month. a XXXX and cost foundation, Day at of to we're we Strategy face. have pressures place And our we you

value over continue that's to this long deliver sustainable All responsible growth shareholder and term. and of gives we create the confidence profitable, that me will

California your a the teams been Glad want up to other doing Rica. humanitarian provide the bags, victims Mexico do to the hurricane flooding company recognize for the and questions, victims Clorox before to and mainland Rico, products, help Costa Northern recent of for I bleach and donating moment wildfires, the work open trash here products, in well Now, our earthquakes the the take as support relief, in as by in across and I Puerto cleaning in to U.S. call have

and are for engaged to programs company's people identity the many you part line open operator, help our questions. heritage up people. and relief to of that, can it's may so be disaster gratifying an tremendously Our with have now that of And important products highly and

Operator

Mr. Thank We'll first Grundy take Dorer. question from Kevin with today our Jefferies. you,

Kevin Grundy

growth to that setting X% and includes for the now, benefit, to what's there And within drag for But start range? it's guys in guess context has Good like And, so is growth change your the the within aside of bags, one what the I wanted within And is that so, XX any I trash I which great, in then setting syndicated was the still industry been X% sales from flattish, aside for year, than but previously, know, that guidance expectation points I the kind outside on guess, hurricane that X%, ask guess, seemingly, X% the to with the I growth Thanks. from guess, afternoon. at of but sales know category the that basis has addressing, guidance Aplicare. growth to all year performance point are from to or probably, market XX, Benno, exception the then X% not X% organic and I of I of great, non-track, that, with down part least been data have. Nielsen based channels. understand your I guidance? share higher you I the that that we

Thank at one, growth you. two, that's any So, and X% the industry question; two And parts change then on to X%? all? whether your comment changed the outlook overall you guidance within to could within if

Benno O. Dorer

Steve is Rob. this Kevin,

Let me start off.

everybody, for outlook the that The point. making growth X% only adjustment one will the the less the business an to by in to we're growth communicated of was X% okay? sales that we First, everyone with latest just late The is to of previous sharing to in outlook in X%. reflect outlook early sales than our is had August we're X%, August, to range Aplicare today divestiture reduce reground slightly which reason

assumptions, assumptions other there's remain we generally, takes, the of about and our first other feel growth puts X%. sales but All And Okay? good same. quarter certainly all

divestiture Aplicare than point. quarter sales was point That we X%, I one hurricanes. related delivered point of I had first the less slightly want a the one also But do additional half make to quarter. growth. in remind slightly was a about everybody, would less Now, to first We than

as So you of to to we're today understand kind sharing really GAAP reminder, of that two it. have a bring are just And together the finally, the all basis. then numbers a on

Benno O. Dorer

to current is change. honest. category are no will I the Historically, that's outlook. line be think than in say, would things; that about the change categories, behave X% the and they've your our account now We that part, all, that actually mind overall XX% grown but Kevin, three They expect to say are with growing X%. low-end; X%, our Keeping so quite channels less only not tracked category, bad, by solid. characterized about at at don't between varying channels and population, Yeah, in first SBU. in quite XX% I the like we situation more second to total of would solid, tracked by anywhere past, to future And of

pretty solid. is overall tracked channel So,

volume dollars elevated that particularly, versus is characterized in merchandising, any also tracked to of And second competition, by in It's in we're in quarters, channels. categories, That's elevated the a particularly our is that? third, we've non-tracked seeing the been particularly change no The noted for and still while, ahead has strong Steve as is continuing thing channels. communicated earlier. what heavy tracking in change Why then the growth last see we're don't future. continued expect

Our in of e-commerce came dimensionalize, with in a double-digits. the for company our performance sales to non-tracked channels QX. customers while. more are about of there In from the channels. customer been total Many largest strong QX, our leading up way just is E-com has growth half non-tracked XX% than growing

So, particularly feeling growth profitable in about the good non-tracked channels.

about expect we and future the to steady, same. overall, be the So,

Kevin Grundy

Good very Thank you luck, guys. much.

Stephen M. Robb

Kevin. Thanks,

Operator

Goldman Sachs. We'll next go English to Jason with

Jason English

Thank the you question. guys. questions. for Two Hey,

the most either this that other that cleanliness we related results Are would results, I that the Steve there quarter? that. one. you formaed – us costs divestments, any First, mentioned companies that are a you call GAAP unique hurricane, think have which would to think out, of appreciate you Robb, pro always small you your reminded

Stephen M. Robb

and didn't. up no, thing would the hurricane volume to to us only was that incremental relates one, that call respect out we The for it picked I but to International was the other think quarter As with divestiture, related some hurricane, shipments; we That the Rico. up a would divestiture first associated of on and the with to I first I International the and a that, is take running, that share. we obviously the is results earnings charge this in $X.XX, part as note, two, the quarter this business, only we we're results. were in you included a did, business not the per be. our And with of quarter back to certainly late This needs Puerto in third, remind approximately is country then of negatively did where thing Aplicare our that's impacted, everybody associated it know, unusual weighed

Jason English

That's Benno, you. then, And quick helpful. for Thank question a you.

You appetite we mentioned the been opportunity helm an shrinking obviously, you've could context? about terms out be a I drive you your us the since today Or One into is think you've Aplicare you're And sits something update forward, was on aggressive taken it. it, adding of right needle-moving into to on of bolt-ons interest the for the if slightly RenewLife growth. as into leaning more where there on that of your surface, end? in leaned to hoping everything were that pursued, that M&A, would M&A. you has more posture thing both, kind with that

Benno O. Dorer

Thanks for that, Jason.

that. that order doing think and QX we priority, that core to to always want I demonstrate in and the first So, well, we're to do will of continue keep results healthy priority be

continue enables and serving successful or for to QX, priority had want first QX. that we are grow put that's customers, look start long-term. then to number expanding grew to RenewLife. dividends about three, certain in where with for whether will by digits committed be we're so we grow a obviously make buybacks, the continue us for cash to business. shareholders, drive we'll we feel cash strong We've that club the course, priority good and flow continuing also a to a two. year position to a in And to of category business And And in as ways want to in to to by use That's but because is high-single the acquisition, RenewLife. our second we The after very

more do disciplined. have always we've we don't M&A So, that because more be a allows said have can to we M&A, in us but to which healthy we core, in do that

So are we looking.

shareholders. health our spaces continued have We we and the companies businesses. that small areas value space that communicated, big, particular wellness We around and and anything can look our look to in the in core add in at in to

As not our add Steve good and case that to continues those stay But be of we importantly, a we'll that afraid value shareholders. has of think often, things example like looking that. acquisitions if RenewLife bigger bolt-on can it at to But we're is the noted disciplined. they we

we call know years I three that one acquisition discipline. characterize more that So, made would don't tenure. I'd aggressive. as over it my in I

Importantly, certainly feel value. integrate well more and the shown business acquisition we that we and add do the can right we'll if like only we're at we value. can strike getting have an And but looking, we we're right

Jason English

Thank much. you very

Stephen M. Robb

Jason. Thanks,

Operator

Joe Altobello to Raymond James. go next We'll with

Joseph Nicholas Altobello

Thanks. guys. morning. Good Hey,

to First back you just Benno. wanted to mentioned, go question, something

you thought in think this on your about tracked flat at in in the year said and growth your tracked based those channels. for just I U.S., was you're channels categories, guide the least I growing X% the

the part of hurricane-related commodity called you morning offset this that out guys inflation? the that So, regards is $X.XX to in

Stephen M. Robb

Couple Joe, this is things. of Steve.

contemplates early the what be will for the full outlook outlook. quarters course year; through. it's the sales see over we in But flat unfold how we that's sales that days, keeping Our to the essentially let's up categories still move as of slightly mind, had

Joseph Nicholas Altobello

Okay.

So the consistent is that. X% with

Stephen M. Robb

yes. up Correct. Flat to slightly,

Joseph Nicholas Altobello

it. Got

of part you of club. sell-in And lip initial with, Burt's had secondly, last the on the double-digits, Bees, I from And the acceleration an guess, I for cosmetics it quarter. mentioned do was to and that I Okay. into up guess guess expansion

be ex could you items, that that business us quantify what up two would if So, was for those great.

Benno O. Dorer

specificity. that don't details I that know give we, we with Joe, that

But that as As launch our driver core to quarter say Lipsticks lipsticks, a clearly, growth last the have you be and grown. helped. continues pleased categories to the share has well grown lip also have balm. core as cosmetics noted, we're the

factors combination double-digit to So, of those that last it's led quarter. a all sales growth

Joseph Nicholas Altobello

Thank Great. you, guys. Okay.

Operator

to Ali Dibadj We'll with Bernstein. go next

Ali Dibadj

of Hey, take and guys. that retailer hearing commodity look, us year? the seeing pricing that Can you Is that pricing pricing spikes, consistent what you offset answering totally and is, with increases much of questions. commodity little on I a commodities, in We've the guidance a cost you've an take bit slightly is but your that what of to percentage A it's updated couple changing see give hard – understand pressures. sense been you're pricing? about seeing of talk done certainly about that? what competitive and although you're been lower your to And, One could wanted not offsetting to if now? given philosophy we're what from more short-term pricing your for to observation difficult it's

Stephen M. Robb

Steve. Ali, this is

in innovation, to years, which Let last why couple where up try of we the we say International we try successful is higher pricing. of over been marry pricing be me easy, We've smart rates of with try very we're where in seeing this. pricing taking though it environment never the I primarily is inflation. terms and in to would take

of disinfecting an and We're out. we our we some Analyst looking rolling know and adjustments. taking other in our and wipes businesses. last are That's the just we're quarter, second that communicated as to process at increase on in you As make Day, pricing

of say, and the the making, take the brands the we're would confident very we're investments in strength and I long-term, pricing. our ability over So, to

tell, think now will but are we playing as out time right So, things expected. I about

Benno O. Dorer

more successful Analyst we innovation this in it's implemented and and speak we'll Ali, that been we continue did has platform of we Yeah, But program February. QX our we're speak. continuing as done business. and Scentiva to to wipes about being an the innovation you our on and expect increase that's wipes on importantly, back update execution particularly we on also specific increase to us pricing part and with talk sprays, why support of well, expand price price And then, which to just quarter, Day, our be a overall as give in on new on that disinfecting know, lately call that is as detailed allows

So, recent that to an our approach and consistent increase is and of consumers. that's example better disciplined strategic with deliver value price for

Ali Dibadj

us mid-size quarter is that why it year? is? little Or told for the that the at it bit a why your versus trash Is lower this little Analyst and actually perspective your pricing Day guidance guidance last So, – a bags? on Is price what a quarter you'd been lower? what said pricing in the reduction you bit the has from

Stephen M. Robb

for the Yeah. Thanks clarification, Ali.

we I would think what the X%. our about pricing guidance that had be said in previous is quarter

think slightly over-think I point. we're now wouldn't it. than bit a one saying less I

also currency also International price a just as but as are effects. currencies Foreign moving bit to recover and not to well, you try inflation, we know, in markets particular, in

things say the we and there. and foreign together, couple change about of you next no quarters play at it's combination we would expect. of to what currency look substantive need get through again, would when but the I out, how So, pricing And see

Ali Dibadj

Okay.

kind leverage line, other top X% of good. bottom that pretty from bottom of EPS Okay. around less it X% going But just was forward, line, and to get line. top looks like the this there's line some I the And the looks top then question line leverage commodity quarter or top when line. might am guidance there just less even and between the get of because for the gross was But the be. trying I your gave and two, understand bottom quarter XXXX, the leverage margin line why next you that to is pressures that. I that between

Stephen M. Robb

Yeah.

things, you've already called of out. is, one really So, which it's the short two answer

in pressures have If in inflationary we forecast at quite second bit it's you higher, XXXX, particularly look and the quarters. third that and commodity versus XXXX fiscal our a

by costs, the are update with margin commodity driver hurricanes. taxes compensation. exacerbated further out, also that I call are would pressures I treated the would So higher XXXX, recent new around that's think we remind just I accounting which driven how share-based by adopted biggest fiscal is people being in

than lower in result, our As XXXX that bit XXXX. a as tax fiscal a normalize get XXXX. into seeing We're rate fiscal was we in

tax leverage is there little on as bit well. So, line the a of

commodities, So, less margin tied to bit there. pressures tax a leverage little rate,

Ali Dibadj

Okay. Thanks very much.

Operator

with next go to Citi. We'll Wendy Nicholson

Wendy C. Nicholson

Hi.

they're question First up on I to reduction, with that well. commodity of pressure following price prices you're that question respond simply follow environment? the your if light regarding the to on their seeing commodity other wonder pricing, in have the you as particularly is trash people because aren't seen lowering bags, competitors dealing

first that's question. So the

Benno O. Dorer

Yeah, Wendy. too on early that, to say

QX. customers a That's better a update being as the call the intended certainly have will take volume, early seen happen that, too little first you pricing we're side. in positive will what from impact on down our and to for on We the but seeing We've speak. as implemented competitive we

Wendy C. Nicholson

all give sort are there, you're just order we business. wonder it magnitude, just And expansion? how the a about quick to and Okay. two sold actually like, you the September, the think of know long second or the measurement, XX% headway ACV And good, can risk just add impact does – some you part still distribution I'm have all? how that I outlook it's but story, on shipments and you just are of that confident a shelf? RenewLife, whatever, packs for the Because then Thanks. hear those are expansion second I the it extra that at us are thing, you of sitting but through? to volume shipment an Number one, August, is sounds an making quarter saw related on big far the growth wondering So how like XX%. has that going hurricane, ACV, distribution follow-ups. extra Or on other that great then much is at for type just of you you there beginning late to just of can

Stephen M. Robb

first take have the Wendy, me I'll address second let the question question. and Benno

and of that Regarding may and up your anticipation true, is short is quantify, so is is the gone incremental offset likely exactly, first then consumption also with some hurricane, were know to there's second question, quarter. may hurricane in have to it's of But sold efforts. into through the the of answer partially used we some the the customers no inventories that likely in question in but trade that cleanup what's which that associated and stocking as don't hurricane, the shipments hard

particular, we that volume with growth, numbers. and the we where out quarter hurricane does second and That happens look as in and sales the the the be things we're have quarter? watching of some second quarter is, course, Of in we've So, sales in to the what divestiture first full reverse Aplicare. our carefully got the will

looked outlook the But get so, of as second the the full X% And look at possible to for of end a XX if kind I of on need to there hurricane. I we quarter, offsets some sales divestiture think think that, large be at how it's unfold. we I days lower the be year reason, see X%, the we'll to into for a because will through may just because and we're of Aplicare the also just and into that quarter, growth

Wendy C. Nicholson

you. Thank

Benno O. Dorer

Yeah, then Wendy. And on...

Wendy C. Nicholson

Yeah. Oh!

Benno O. Dorer

the that; through least to done We're there's distributing on natural a And channel. year expansion, interrupting. for not at RenewLife for the in room then obviously yet the while. end for fiscal of we're going keep on Sorry

then food, what's the to quantity expand things customer fiscal strategic at distribution grow some at approach, us distribution into I calendar which see customers. of us as keep management merchandising, have shelf long-term already give these tremendous if innovation, do building to on categories, is, well, an of so in real that of but mass, in that bit of category room a being I and build. strategies is room and XXXX also and as customers on with stores help we our will And the work distribution and guiding for within required will and placements in, that the you so then we're even club look established quantity as quality mean grow to the within expansion year go club their them is of there's would by you well beyond that, update What clarity further is year. to at what which on little to go placements, do from say machine you we categories. opportunity look room typically we groups turn will is course, well, that you our expanded merchandising, here drug, we all and We obviously distribution But in to the there's still is a look

can as a It's the out business. far, we value quite so was So, and why we reason RenewLife planned distribution a expansion playing big thought add to have been still we to ways go.

Wendy C. Nicholson

you Got it. much. very Thank

Operator

Andrea our with JPMorgan. next take We'll from Teixeira question

Andrea F. Teixeira

question Thank is for gross everybody. Hello, question. regarding Hi. my My margin. you taking

is alluded comment to impact your the embedding I'm in I think into go? we pricing we the – what through some pricing quarter. hoping of you sorry, that Wendy's Or year? market pass-through? I Thank this made. coming impacts in on hoping the But share are not of point, makes – of the on as Steve, pricing Is your you points some then terms you basis on and quarter margin believe potentially you're going gains that saw question baking the So, just at appreciate, improve I just recovery XXX something that about movements to you've margin the gains, balance or you. was

Stephen M. Robb

Well, Thanks, we're hoping. Andrea. Yeah. not

costs. little indicated have place gross in in number But in the quarter basis logistics second quarter quarter. will of commodity to be margins further in the as plans had Why? the both hurricanes, points it news. the very bad even challenged, bps; it's in impact I always commodities that. we gross challenging our Well, as the we and manufacturing of be had, down think one, good Obviously, comments, a likely than drive challenged the or less bit could it the rising with you quarter. I pleased my first add that going expansion margins. as XX because That's well be more was We to when most although opening do And little costs a that margin we're XXX

history quarters. of is, believe, to and couple what the for over a seen news tend we've is least costs on Now, what at go time we these elevated in good

the belief that challenges the They'll our to margins a should think most the we maybe perhaps not but but pressure third bit get is will – third So, quarter, quarter. most these okay? fourth less. time continue in dissipated. all, that the quarter, will bit the quarter, have peak a So, in be into second better, under the but costs, of we hurricane-related them By

got As result, innovation, Go margin that track pricing margin-accretive of the to combined enable Lean back expansion. to all we've get with our cost the our planned, savings, should that efforts gross us on that get in International,

we that's today. it know So, as outlook our

Certainly few variability indicate, go across markets did plans we'll good through quarters. fairly are see as the next and quarters. I to going think volatile, be commodity place there's what the we today As we've got but in we happens

Andrea F. Teixeira

price – just to be not beyond any guidance the wipes, the the clear, putting including on you're But right? increase guidance,

Stephen M. Robb

always planned International. for in have pricing We

pricing. previously we got communicated, we've As wipes

Beyond that, cost good we've the of good robust I I we plans place. in margin be the driver biggest to won't think will feel expansion which programs, comment, savings say, got other And than to single about. very continue

Andrea F. Teixeira

right. you, Steve. Thank All

Operator

next Consumer with go Edge Feeney Jonathan We'll to Research.

Jonathan Feeney

Thanks very Two much. questions.

sales impact and bit Cleaning you dime, could of you there. hurricanes, advertising about in went seemed stuff this, determining the if promotion. quarter? question but of does some a how the whatever on about the the other current forgive August I the in it that out talk if increased two because missed you impact increased process – and there September at were impact might net be was And advertising, us about And give what's the the on include specifically from hurricane you a called about when four not, lifts maybe segments profit second substantial, of First, me like the and and the what's pretty going

advertising you comment digital. is on You've returns? shifted getting been – Just better, Are digital? towards anticipated level returns lift Any you. you're spend moving getting about more that that getting worse? that, and is towards leaders Thank in

Stephen M. Robb

me part question. let address take of the Jonathan, have I'll first second. the the Benno

understand the these but drivers. best our to hard, We we much a to relates know are spend of how impacted hurricane As advanced exactly the hurricane, lot impact analytics. obviously, to have estimates. time volume of the do trying very us, It's

and the reflect was the impact And for much in out in numbers sales providing as we're that how the Again, watch what the see our so to think of estimates quarter. second may reverse that quarter we we're first best growth. to going

benefited be would that don't for and In it from terms hurricane, communicated impact businesses the a the margin would that expect earnings and lift. you think at we've from typical it, of like but specifically I bleach Glad that businesses

take out, did with charge divestiture quickly quarter, $X.XX in of Aplicare we the I'll at again, Although, least a first business. point the the associated

again, we coming modest or at, divested a top look which quarter, we're also business, very and line, a to you how a impact carefully. you the watch quarters the at over talk need hurricane small first this obviously growth, and the going look to impacted need on something to you out all of think I the So, you had need on contemplate but impact that bottom plays And impact in hurricane earnings. is to when the

Benno O. Dorer

strong if aggressive consumer, promotion, put on I not question a profitable then about of that a advertising with reinvest the and with our so in into discipline business we've very does eye growth, choice And on Jonathan, that growth fall in made that to our increases benefit profitable do brands and to is sales pursuing cost and And, with the squarely ROI. on take it your be the spend digital costs it to camp and create strategic context, matter into strategic discipline out, on strategy. that

are We Coast. of that we getting we focus our capabilities improvements, we here and in channels, better whether that's year, the the better to or with the West are the pleased every the other tribute continuous have with companies generally Area on the are a on course, is partnerships that media than returns The and building, TV which in see also year-on-year that returns returns others. digital; in are other Bay

again like what to going doing. digital, in working which of year from media than this higher the group our also year, quite what last fiscal half we is we So, and is spending is our substantially peer do up be why about budget, which yet total is

Jonathan Feeney

Thank you.

Operator

America. Bank to next Carey of go Chris We'll with

Christopher M. Carey

Hi, everyone.

impacted retail, mass of in at for of of those on not picture quarter. and these the U.S. somewhat destocking at over year, some year. have perspective you've how course channels but the much in the have bigger seen start Because a evolved growth remained clearly into the just dynamics sort you, as U.S. So, the sluggish but this

comment relative of and they've shelf you like to mix kind are space, your of can to dynamics consolidating? the around So retailers on those shelf evolved as two. a somewhat total maybe how of amount given or maybe amount related, approach year but brands bit outperformance And so label? SKUs premium have this support then, expanding, the more more talk to here not So, maybe space private

Benno O. Dorer

been isn't So, first destocking. in the is mass different dramatically seen the haven't any retail the state On certainly from big over of it's U.S. Chris, what general, your picture last point, decade. we

a any wouldn't and the and basis, regular products expect that with We if our tightly electronically customers also routinely. manage you think are our about routinely. our We on they destocking. are stocks bought nature And products, of

as portfolio private gaining share, gaining leaders. are and of also are more on is consumers would a retailers our picture focused from up you market the I of in more retailers limited well. is result So, isn't a there and winning, and are is broad support lot doing marketplace, winning, retailers leaders seeing a offering point big label assortment in XX% are that And but The market down. bifurcation as that value we're know, towards is you that than

are pursuing practically retailers not we with is we're our that but well, doing brands, do are doing why label seen That's so for they and recipe leaders know private are we've too, recipe is, retailers U.S. space tailwind is, creates for they major but market margin. shelf because a in as well growth that what we need for accelerate, some, So all while. retailers that just need for that of perhaps a they a That's consolidate which our with seeing they the

that Beyond, I on to down. to would growth outperformance in the fact just versus hunker invest back point our we brands our sales

and in We invest in to digital innovation-starved relevant We engaging keeping in have and environment. innovation, brands consumers.

proud frankly, that are do we've a the create the we're are we is way, quite something growth environment, for done is profitable and a and in is today's that, meaning, somewhat right why at, fashion that we in all something of. seeing which well, and that perhaps quite sustainable things we So, differentiated while, that good results something is is

Christopher M. Carey

Yeah. helpful. you. Thank That's

Operator

to Lauren next with go Lieberman Barclays. We'll

Shirley Serrao

Good just This into wanted It like Lauren Hi. around of line. is foray morning. on Lieberman. care sounds your with follow-up to on an first I it's behalf Shirley question Burt's. Serrao earlier club lip

new in a another First Lifestyle, distribution any year. you degradation club when mix of see really or gained Cleaning is with category didn't displace focus here competitor this then off, did for you in the last way channel? secondly, sort the we And we in wipes saw

quarter that offset was So, or something category? this significant by just else not Thanks. as a as the in dynamic

Benno O. Dorer

based this to that a recognition profitable actually on the the we margins negative is but that know, SKU We in you expect is we're it's going growth. is do not a position have, We've club as in I hope significant why This drag sure to foremost. and of And general. but wouldn't certainly the certainly but I one expansion success profitability. profitable club, this not need a shown be the because, said, a a few see we as up over behind started. when in to excessive the are Yes. profitable pleased this on which and we of very hasn't strength but first grow, a is displacement, was focused plan opportunities, why discounting, certainly early incremental, the in club our just reason also that mix as it this make very quarters, also Thanks, this in just it strength, so to a segment, SKU. want brand expansion, continue it consider to next that this doesn't Shirley. like of We, very on we And

Shirley Serrao

you. Great. Thank

Lisah Burhan

take one question. We'll more

Operator

Markets. to KeyBanc with Capital We'll Jason go next Gere

Jason M. Gere

rationalizing mix Brita, Maybe bit, sticking businesses. Thanks, Thanks. for Okay. on in me topic squeezing little you're the talking in. about, a guys of margin some lower

but the innovation, like it's are some and more of of lot guys out very this, be sales be a look which would driving talk to looking margin unprofitable in wondering opportunity seems to you and retailers you nimble, at industry it would the as or impact, of portfolio, also where an just So, have can SKUs more over-skewed you beneficial. process do maybe obviously about cutting a the are

So, Thanks. bit if little just talk that a you I about process. was wondering could

Benno O. Dorer

Jason. Thanks, Yeah.

savings. tail. enabled the another are tremendously SKUs. how and business, the SKUs we over years, mix, been everything process systematically, annual you mix unit you leader, built work more profitable with Every perhaps And outlook on make then, and SKUs. looks we've place profitable, on the that our this forecast. more SKU with is as towards less and that what reduction to trash, do into long-term, essentially this general always is, simple. also by The and cost SKU an do in towards have we the a Bleaches, where, retailers you cut target. manager profitable where more and What through is innovation, source shift successful our and other It's always process shift the the So, is perhaps is business always example to we pretty profitable we has is, eye of do an do then incremental a at creativity, SKU what profitable do how

on opportunity Simplification something on it's margin program. our that continue of should ongoing do and ongoing do to Brita, that. not routinely continues good So, Certainly on cost that, to business. is do It's to and you part all improvement be basis. something businesses good. us we an just there but to believe that savings And an expect

Jason M. Gere

Okay. Thank you.

Operator

Dorer, the session. I'll it turn for back and that Mr. concludes gentlemen, you Ladies to closing remarks. question-and-answer

Benno O. Dorer

to have in Yes. again when call, with day. Thank been I the our I second thank is speaking say really All you, I look Thank we on have everybody that who you has a to and to share and February results. you. want forward good quarter

Operator

thank for conclude and Ladies today's you This gentlemen, participation. your does conference.

now disconnect. You may

The Clorox Company (CLX) 1 Nov 172018 Q1 Earnings call transcript