The Clorox Company (CLX) Earnings Call Transcript & Summary

I'm Dara Mohsenian, Morgan Stanley's household products and beverage analyst. I'm very pleased to welcome Clorox to Morgan Stanley's Global Consumer and Retail Conference. Before we begin, I have to note important disclosures. For research disclosures, please see our website at www.morganstanley.com/researchdisclosures, and you can reach out to your Morgan Stanley sales representative if you have any questions. It's certainly an interesting time to have Clorox with us here today. The business has benefited significantly from higher demand during COVID, and there's been some volatility post-COVID in demand -- with demand dropping off as well as outsized commodity pressure, although the company is certainly making progress coming off better-than-expected fiscal Q1 results here, and they've got some strategies in place longer term to really keep this higher household penetration up during COVID longer term. So here to tell us more about where the business stands is Kevin Jacobsen, who's Clorox's Executive Vice President and CFO. Kevin, thanks so much for being here.

Great. Dara. Thanks for having me. Thanks, everyone, for joining us today.

So why don't we just jump right into it? Kevin, since the initial stages of COVID, you've seen higher revenue in the Cleaning segment. You've talked specifically about the longer-term opportunity in the professional side and the International side post-COVID, and there are some opportunities that have opened up. So at the same time, there's been volatility, right? And the landing off of COVID has been weaker than expected even when you include the recent top line beating the most recent quarter, if you look over the last few quarters. So just where do we stand today as you sort of take a step back, look at the business longer term, the opportunity versus what you would have thought a couple of years ago? And maybe focus specifically on that opportunity in International and Professional and what's been sort of unlocked for your organization, potentially longer term there?

Sure. That's a good place to start, Dara. What I'd say about the growth opportunities, and you know recently, we took up our expectations as a result of the pandemic and the additional opportunities we see. If I step further back, when we launched our IGNITE Strategy a couple of years ago, our intent was to accelerate the performance of the company, and we set a top line goal of 2% to 4%. And then as a result of the pandemic, we further raised that goal of 3% to 5%. Dara, where we see the opportunity as a result of the pandemic is in a couple of buckets. The first is our, what I described as global cleaning and disinfecting opportunities. And that's really driven by the changes we're seeing in consumer attitudes in a number of areas that we think are going to allow us to accelerate our sales in this space. And to your question, if you start with the International. For us, what we're seeing is as consumers are becoming more aware of the cleanliness of their environments, they're looking for more convenient solutions. And for us, we see a real opportunity to expand our wipes business internationally. And so that work has begun. To date, we've doubled the number of countries we're in with wipes. And I see this as a multiyear growth runway for us. And so that's one area we've started to build out. As we've talked before, we've built a dedicated supply chain in Asia to support that growth opportunity, and we'll continue to pursue that for, I suspect, a number of years. In addition to International, as it relates to cleaning and disinfecting, we've also talked quite a bit about the out-of-home opportunities. For you folks who are not as familiar with this opportunity, this is really about businesses who understand their consumers now have a heightened expectations in terms of the cleanliness of the facilities. And so these businesses are looking for partners who can help them deliver a better experience for their shoppers. So we partner with a number of businesses. We continue to see good interest, and I suspect you'll hear us announcing additional partners as we go. And that's a new growth area for us to sell product into these customers as well as drive connections with these consumers. We normally don't get to engage consumers with the Clorox [ entity ] in some of these spaces. And so that work is underway, and we're continuing to build that out. I'd say it started out a little bit slower than we anticipated, and we're still learning in that space, but feel very good about the long-term potential there. And then the last space is just U.S. retail. Again, as I said, we see consumers, a heightened interest in cleaning and disinfecting both in and outside their home, and so we see plenty of opportunity to accelerate our underlying U.S. retail business. So that's one big bucket, I'd say, Dara, in the global cleaning and disinfecting opportunities. And then the other opportunity we've seen as a result of the pandemic is what we see on our household essentials portfolio, which is predominantly the bulk of our portfolio outside cleaning and disinfection. Whether it's increased Grill ownerships, increased pet adoption rates, if you think about people working more from home, that generally benefits our businesses broadly. All those trends, we think, also give us opportunity to sell more product to consumers. And so when we put all that together, it gives us quite a bit of confidence in our ability to accelerate the growth rate by about 1 point.

Okay. Great. And that's helpful from a longer-term perspective. Maybe we could talk a little bit about the short term. The top line guidance for this year, you have a 400 basis point range at down 2% to 6%. How much visibility do you have around that? And specifically looking to the back half of the year when you expect to return to growth again, what gives you confidence behind growth in the second half? Help us understand some of the underlying assumptions there. Maybe you can give us a little bit of granularity by segment or how do you think about the building blocks of growth in the back half of the year and that visibility around top line guidance for the full year?

Yes. And as you know, Dara, we reconfirmed our outlook in November. So the outlook we said at the beginning of the year, we've reconfirmed it. We're off to a good start. We had expected our business would be down further in Q1. But for a number of reasons, business performed better than we had anticipated. So that's always a good place to be to start the year off. And then what -- to your point about what gives me confidence, I would tell you, I don't think our brands have ever been stronger in terms of where we're sitting today. We've made really good progress on improving supply. As you know, that was one of the challenges we've had for the better part of the last 18 months is making sure we could fully supply demand. We made good progress there. And so at this point, for the most part, we now can supply demand, which ensures we can deliver against those sales. We're growing share broadly across our portfolio now. We continue to have a very strong innovation program. We had a strong program last year. We look like we're going to have a very strong program this year. And then the pricing actions we're taking, as some of you folks know, we're planning to price about 70% of our portfolio. To date, we have priced about 50% that's now in market, and that's all gone through, so that gives me more confidence. And so when I look at all those items, I feel very good about the plan we've set, down 2% to 6%. And then lastly, the growth run which I just talked about, whether it's expanding our wipes business internationally or out-of-home, those opportunities continue to play out. And as I look across all those levers that we can control, I feel very good about our ability to deliver that 2% to 6% down. Now importantly, as you know, there's a number of areas that we don't control: how the pandemic plays out, cold and flu as well, we're going to see how that plays out. We have some assumptions baked in. But for the areas we control, we feel very good about that, and that's why we reconfirmed our outlook last month.

Great. And could you talk specifically about the innovation contribution this fiscal year? Obviously, innovation took a bit of a backseat the last couple of years when you were managing through COVID and the supply challenges. Should we expect a significant ramp up this fiscal year? Or do you think you had a pretty robust program even the last couple of years? So just order of magnitude, how do we think about the innovation contribution to revenue?

Yes. And innovation is incredibly important to us as some of you folks know, as I talked about, when we rolled out our IGNITE Strategy, and we took up our financial goals, much of that was driven by our ability to get more value from innovation. We thought that was certainly possible. What I'd tell you is I think Linda made a really thoughtful call very early in the pandemic when all the disruption was going on broadly across the company, Linda required that our innovation team really get walled off and not get pulled into managing all the disruption we were dealing with. And so that team stayed very focused ever since the pandemic began to make sure we didn't take our eye off the ball in terms of innovation. We had a very strong program last year. We expect that to continue this year. And to sort of dimensionalize that, Dara, what that means is if you look at the innovation since we've launched our IGNITE Strategy, we have more than doubled the value we're getting from innovation on the top line. When we rolled out IGNITE, our intent was what we described as bigger, stickier or sort of platform innovation. We thought we could drive a lot more value. If you think about the different types of innovation, there are -- sometimes you think about little eye innovation, flavor extensions, scent extensions, they tend to have a little bit of value in the year 1, then you see some decay over time. We want to move away from that to more meaningful innovation programs, which we've been doing. If you look at what we've been launching over the last 18 months, they're much more impactful. And what we're seeing is much less drop-off in demand when you get into year 2, 3 and beyond. And so as a result of that, as I said, we more than doubled the value we're seeing from innovation, and that's certainly our expectation going forward.

Okay. And is this more of sort of a change in focus for the organization? Is it more of their operational changes, the way you've changed the R&D process? Help us understand how the process has changed.

Yes. As I said, we're really focusing our innovation resources on some of these bigger initiatives, so what we describe as more platform-driven innovation. Probably the best example for us is if you think about our Scentiva launch a number of years ago, that was a new brand based on a consumer insight, the consumers wanted a little bit more enjoyment while they're cleaning, scent-based. We launched Scentiva and we've continued to extend that portfolio into different forms and different uses. That's a great example of a platform. We're doing more of that work, and we're doing it both in -- we've done it in Glad, we've done it in Litter and a number of businesses. We're really excited about Kingsford. We've got some really big innovation in our Kingsford program as well. But it's really about focusing our resources on bigger initiatives and moving resources away from what I describe as more brand maintenance-type innovation work.

Great. That's helpful. And then I wanted to spend some time on the new $500 million spending program over the next 5 years that you introduced recently to drive productivity, to drive improvements in the digital area. It didn't sound like when the program was implemented, you expected a lot of near-term payback or ROI from those efforts. So A, is that fair? B, assuming it is, with such a significant amount of spend, help us understand why maybe there's not greater near-term payback, But also more importantly, what gives you confidence, longer term, there will be an ROI behind the program, and this is just not sort of the cost of doing business in a new environment and you'll get strong returns behind that program.

Yes, that's a great question. As some folks may know, we announced at the beginning of the year, a $500 million investment over the next 5 years to significantly increase the digital capabilities of the company. For us, Dara, this is really about an investment in our future. As you said, we expect the bulk of the value we deliver will be outside our strategy period. Our IGNITE Strategy ends in 2025. What I'd say is these was investments I expect we would have made over a longer period of time. And I think as a result of the pandemic, what we've seen is an opportunity to accelerate this investment. We've seen consumers adopt digital behaviors at a much faster rate, as I think everyone is seeing during the pandemic. And the other area for us is in our supply chain. I think we had a supply chain that was very capable of managing in a low volatility environment. And since the pandemic, with the increased level of volatility, we see the need to invest more in our supply chain to increase our digital capabilities. We hold the belief that COVID has now become endemic and there will be a level of increased volatility over the long term, not what we're experiencing now, but certainly more than we had before the pandemic. And as a result of that, we think this is a very good investment in the future of the company. Now we expect this to generate a strong return. We hold ourselves accountable on this investment like every other investment we make that it's got to generate a strong return for our investors. And so we fully expect to see increased revenue and increased cost savings opportunities as a result of this. But by and large, many of the investments we're making will go online fairly late in our strategy period, 2024, 2025. So while it will generate very nice savings for us and enhance revenue, likely that will be pushed out beyond our strategy period and really end up 2030 and beyond.

Okay. And can you give us a little bit of nitty-gritty detail on maybe some examples of where you generate cost savings, some examples of where you generate higher revenue from the program, more discrete details around it, I think, would be helpful.

Sure, happy to. So let me start with the supply chain as we talk about digitizing our supply chain. So with the types of technology that's available right now, and keep in mind, we're running an ERP that's almost 20 years old. So part of this work, we're replacing our ERP. But imagine with much greater access to data, we can do much better demand planning with real-time data and much better algorithm in terms of predicting demand. We can manage production capabilities at a much greater degree with the technology, inventory management, order fulfillment can all be enhanced through increased access to data, including our ability to do direct-to-consumer shipments, that's all part of the work we plan to do as part of this. If you think about things like trade spending, we're improving our digital capabilities as it relates to trade spending, which means getting much more real time and insight into how we're spending our trade dollars, the returns rating on those dollars. And as you can imagine, Dara, once we do that, we're going to be able to make changes to our plans, make sure we're flowing dollars to the areas that we're getting the maximum return. So I expect things like trade efficiency to go up. I expect supply chain costs to go down. When you're putting a new ERP system, there's been a tremendous amount of development since the system we put in 20 years ago, you're going to see a lot more admin productivity opportunities for us. And so across all those different areas, we see a lot of opportunity to both expand revenue and reduce costs.

Great. That's helpful insight. And then maybe switching to the gross margin side. We've seen record levels of year-over-year compression for you guys in the last couple of quarters here. And even this upcoming fiscal year, most of which is still ahead of us, 300 to 400 basis points of compression, the magnitude is pretty surprising for a company that's historically been proud of its ability to price away cost pressures. And obviously, I understand the increases in commodities are pretty unprecedented here. But just help us understand why that compression is so much more severe than we've seen in past commodity cycles for you guys. And then maybe we can talk about the other side of it in terms of pricing.

Sure. I don't love the word unprecedented, but frankly, I don't have a better way to describe it. This is something like I've never seen before, and I've been in this industry a very long time. If you think about Clorox in a typical year, we see inflation, and I'll talk commodities and logistics because that's the area we're seeing the most inflation. Commodity and logistics inflation for us on an average year is maybe $50 million, $60 million. This year, we anticipate it's going to be closer to $350 million in those 2 areas. So you can understand the level of increase we're dealing with is nothing like we've ever seen before. And it's not only the level we're seeing, but it's the pace with which it's increasing. 75% of that we're going to experience in the front half of this fiscal year. And so it's a rapid run-up in the cost environment, in the transportation environment. And as a result of that, it takes longer to recover these cost increases. And when you get that level of increase happening that quickly, you get the impact of margins you're describing, which is they're down about 1,000 basis points in our fourth quarter, down another 1,000 basis points last quarter. And as I said in November, we expect to be down about another 1,000 basis points this quarter. And so that's really just because we're incurring so much cost so quickly. Now what we care most about is our ability to recover that cost and our ability to rebuild margin, and that's certainly what we're focused on. We think we're taking all the necessary actions to do that. As we're leaning into our cost savings program, we're also pricing about 70% of our portfolio. And as a result of that, our expectations are, by the fourth quarter, we'll be in a position where we'll start rebuilding gross margins. And so that will start in the fourth quarter, and we're targeting to get back in the low 40s. And then if you assume we're going to get back to a more normalized cost environment, we'd expect that margin expansion to continue well beyond the fourth quarter. Dara, the best example I can give you, if you look back over the last 10 years, we've had 3 inflationary cycles before this one now. Certainly not to this degree, but it's something we've dealt with in the past many times. Each time we've been able to take the necessary actions to both recover the cost increases and rebuild margins. And so I expect us to be able to do that again. If you look at the last time we did this, fiscal year '18, we priced a similar portion of our portfolio. And following those pricing actions, we have about 9 straight quarters of gross margin expansion. And so that is our intent as we move through this cycle as well. It's just it's going to take a little bit of time to get there.

Right. Okay. And thinking about the other side of the equation, which is pricing, just the timing of pricing. It does seem a little bit slower here just given the magnitude of cost increases, which we talked about is obviously unprecedented. So help us understand that is -- was some of that sort of more related to COVID and not wanting to sort of price early in that situation from a PR perspective? Is some of that maybe that a lot of capacity was built up in some of these categories that benefited from demand during COVID and the competitive environment is a little more difficult to ascertain in that -- in light of that environment? How should we think about the lag of pricing here, again, relative to that unprecedented run-up in costs?

Yes. And you're right, Dara. During the height of the pandemic, we made a commitment not to take pricing. And so we honor that commitment and didn't price our brands. But that's really not the issue we're dealing with in terms of the timing of pricing for us. The biggest issue for us was supply. The challenge has been for us for the better part of the pandemic as we have not been able to keep up with demand. If you look back just 6 months ago, about half of our portfolio was on allocation. And when I say allocation, what that means is we can't fully supply the demand we're receiving from consumers through retailers. We've made really good progress, our credit to our supply team in terms of improving our ability to produce product. And as we've been ramping up our ability to produce, demand has also been moderating as we expected. Now we're in a much better position. So this most recent quarter, we're down to about 5%, 6% of our portfolio is on allocation. But by and large, we can now fulfill demand. As a result of that, we moved on to pricing because I would tell you, it's very hard to take pricing when the conversation you're having with retailers is we can't even supply the products they're ordering from us. We've addressed that issue for the most part. And after we've gotten through that, we started taking pricing. As I said, we're pricing 70% of our portfolio. To date, about 50% of our portfolio is in market, that's all gone through. We've got some more work to do for the last 20% in the back half of the year, but today to feel very good about the work that the team has done, the pricing is in market. And as I said, we've got a little bit more to do. We'll see how that plays out, but we're off to a good start as that goes.

Okay. Great. And then maybe on the 50%, where you've taken pricing so far, can you discuss the consumer reaction? Retailer receptivity? Generally what you're seeing from a competitive standpoint? Obviously, you're in a lot of different categories, but generally, are you seeing competitors follow or not? So consumer reaction, retailer receptivity and competitive environment in that 50% where you have taken pricing.

Yes. Let me start with the retail receptivity. So I'd say all the conversations have been constructive. I mean pricing is never easy when you're having a discussion with retailers. I'd say maybe what's a little different this time around is the cost inflation is so pervasive and clear to everyone, both manufacturers and retailers, I think there's a greater level of understanding what we're all dealing with in the supply chain. And so those have been constructive conversations. As I said, the pricing we've taken to date, 50% of our portfolio, that's all gone through, and that's in market now. We've got some more conversations to hold, but it's gone well to date. In terms of the -- I'll talk competitors next. In terms of competitive reaction. It's still early. Glad is the one that's been in market the longest. And what we've seen in Glad, we took a high single digit. It seems to be generally in line with what we're seeing from competitors. Our price gaps are generally where they were before we saw pricing in the category. And so that's worked out, I think, played out pretty well for us. It's still a bit early for some of the other categories. We're just starting to price a number of other brands. It will probably take a few more quarters for that to all shake out, but I would say anecdotally what I'm seeing in market, we seem to be generally in line with what I'm hearing from competitors. So at this point, I don't anticipate any significant surprises in terms of level of pricing versus others in the marketplace. And then from a consumer perspective, it's generally going well. I mean we're always being cautious about the level of pricing we take. But as you've seen, Dara, we have taken pricing. We continue to grow share. So we feel very good about our performance in market. We're not seeing consumers trade down to private label, but it's certainly something we're keeping a close eye on to see if that does occur, but to date that hasn't. And then, as I said, for us, it's critical because this is really the pathway to how we rebuild margins starting in the fourth quarter. So I would say, overall, off to a good start, but we certainly have more work ahead of us.

Great. That's helpful. And then look, 70 -- plans for 70% of your portfolio taking pricing is great, but we are in a tough commodity environment, as we discussed. So any thoughts on the other 30% potential pricing there? Is that more just a matter of time? Or is it more an if scenario as opposed to when? How do you think about pricing in the rest of the business? And then maybe you can also touch on mix beyond pricing. And how you think about mix playing out over the next few quarters here and even looking out longer term?

Yes. On the pricing front, I don't know, Dara, if it's more about 70, you go to 80, 90 or 100. I think it's more likely the brands we price. Do we go back and take a second round of pricing? For us, this is a brand-by-brand decision based on the challenges we're facing in the cost environment. In a normal year, the work we do on cost savings, the work we do with margin-accretive innovation is more than enough to offset cost inflation and allow us to take a little bit to the bottom line. And so for some of our brands, they're still able to do that between the cost savings programs they've got, the margin-accretive innovation, the other tools we have available to us, they can offset the costs they're facing. They're not as difficult in some of our businesses, you think Burt's, for an example, they're in much better shape from a cost input perspective. So we're not pricing brands that aren't warranted because of the cost environment. But for those brands where it's just -- it's something we can't cover through our normal activities, we are pricing those. That's a 70%. In the case of Glad, we've already priced that twice. And we said, if we're wrong on the resin market, we have an expectation for resin moderating in the back half of the year. But if we're wrong, we'll look at another round of pricing on our Glad business. So I think, for me, it's more likely we may take a second round of pricing in some of the business that have already priced versus that 70% going to 80% or 90% is likely how I see it playing out. And then on mix, mix is fairly unique for Clorox. During the height of the pandemic, we had a temporary benefit as it relates to mix. As I've talked about this challenge on supply, One of the ways we improved our ability to produce product was we went down to those products that we can run the fastest on our lines. And I'll give you the best example on wipes. We produced a single count 35 canister for wipes. That's a fairly small product. And that gives you a mix benefit because you're not producing the larger sizes, you're not producing value packs. And so during the pandemic, we had favorable mix fairly consistently for 4 straight quarters as we had simplified our product offering to those products so we could run the fastest on our line. As we've now addressed our ability to supply, we're reintroducing those products. So larger sizes, multipacks, getting back to a more normalized product offering. And what you'll see is you'll see that favorable mix unwind for 4 straight quarters. That started in Q4. We saw that again in Q3 -- or excuse me, Q1, and you'll see it for both the quarter we're in right now and next quarter as well until we lap that. And then by the fourth quarter, we've lapped it, and we'll get back to a more normalized mix impact.

And is there a longer-term mix impact you'd expect? It may be hard to say. But as you look out over the next few years from a product category or geographic standpoint, do you expect any significant mix impacts?

Yes. I think the benefit for us, Dara, if you think about our segments, health and wellness has one of the highest margins in our portfolio and we see outsized growth opportunities in health and wellness. And so when I look at our portfolio, when I look at the growth opportunities exist, they tend to be in the more profitable portions of our portfolio. That's certainly beneficial. And as an example, if you think about what we're doing in international, we're trading consumers up to a more convenient solution that tends to be more margin accretive to our international portfolio as well. So I like the long-term trends in terms of where I see the growth opportunities as it relates to mix.

Great. And maybe we could turn to the ad spend line as a percent of sales. You're expecting about 10% this year. That's down from 10.8% last year. How do you think about the ad spend line? Are you worried that with the pullback, it may impact share a bit? And is this sort of a normalized base to work off of going forward? Could it potentially come down as top line growth returns once you get out to the back half of the year and obviously beyond this year? Or is this something where maybe it moves back up to your peak levels over time? Just how do you think about that marketing line as a percent of sales?

Sure. Yes. Typically, we've invested, Dara, about 10% of sales being at the right level for us. And now keep in mind, it's 10% at the enterprise level. When you look at all our different brands, it can vary quite a bit by brand. But at an aggregate level, 10% has been about the right level historically that allows us to support the goals we set, to allow us to support our innovation, grow share. What I'd tell you is last year, we had a really unique opportunity. As a result of the pandemic, millions of additional consumers were coming into our franchise, trying our brands. And I think many people understand if you can increase household penetration, that generates a very nice return for us. And so we invested behind that. We invested to engage these new consumers who are coming into our franchise. We invested to build loyalty. So we invested about a little over $100 million of additional advertising investment last year because we had such a unique opportunity to engage new consumers and build that loyalty. This year, we're back to what I'd say a more normalized level, about 10%. And that continues to be about the right level for us. Dara, I'd tell you what I think is the opportunity is not just the amount we're spending, but how to continue to improve the return we're getting on that spend. So a lot of the work we're doing to more personalize that advertising. We see that as a real opportunity for us to keep generating higher returns on how we spend that money versus the amount we spend. So I think we'll keep spending about 10%. We're always open to revisiting that. We think there's a good return. We're not opposed to spending more, but right now, 10% feels about right for us.

Okay. Great. And then historically, you guys have had a great focus on productivity. You've been ahead of the peer set from that standpoint going for a long period of time looking back over the last decade or so. You're relatively lean today. How do you view the cost savings opportunity going forward, particularly in the context of the IGNITE Strategy? Do you see productivity being a big bucket for you guys going forward? And maybe give us an idea of what some of the key areas are going forward on that front.

Yes, I continue to feel very confident, probably even more confident than before in terms of our ability to keep driving cost savings, not only for our IGNITE Strategy but over the long term. And it starts with a disciplined approach we have to cost savings. And Dara, I think you and I have talked about this a number of times. Every one of our general managers maintains a 3-year cost savings road map. And the benefit of that is Linda and I, at any given time, can look across the enterprise and see over the next 3 years exactly what our plans are as it relates to cost savings. That allows us to ensure that we have a robust pipeline at any given time looking out over a number of years, and that's worked quite well for us. And then in addition to what I'd say is the typical process we pursue. I see a number of additional cost savings opportunities for us. When we launched our IGNITE Strategy, we actually raised our cost savings goal. And part of that was the -- our focus on our ESG. The way we're approaching ESG, we're really focusing on taking content out that the consumer doesn't value. We spend hundreds of millions of dollars a year on packaging content. And as part of this work to drive our ESG agenda, we think we can drive even more cost savings through that work. And so that gives us more confidence. And then there's 2 other areas more recently that I would highlight that are going to drive nice cost savings. The first is, as we work to build a more resilient supply chain trying to manage through the disruptions we're experiencing, we've incurred quite a bit of cost to do that. If you think about maintaining higher inventory levels, working with additional contract manufacturers, signing up additional material suppliers, all that has helped ensure that we can manage through all the disruption we're facing, but it also comes at a higher cost. And over time, we're going to be able to work those costs out of our supply chain as we get to a more normalized supply environment. So we built up some costs that I expect over the next 12, 18, 24 months, we're going to be able to pull out of the system, and that gives us more opportunity to drive cost savings. And then lastly, as I think beyond our IGNITE Strategy is, Dara, you and I just talked about the $500 million investment we're making, we see a significant opportunity to drive increased cost savings as a result of that. And so that gives me confidence not only through our IGNITE Strategy through 2025, but the investments we're making in technology are going allow us to drive cost savings well into 2030. And so for all those reasons, I feel very good about our ability to keep driving cost savings.

Great. And maybe we can end talking about some of the untracked channels, top line performance there. Obviously, we can see the scanner data in terms of tracked channels. But as we look at the untracked channels, can you talk a little bit about the sustainability of e-commerce growth post COVID? And some of the opportunities in club that I know you guys are pursuing at this point. So an update there would be helpful.

Yes, sure. I'd say, before the pandemic, untracked was growing faster than tracked as we're seeing consumers moving online, that only accelerated during the pandemic. And so when the pandemic hit for all the obvious reasons, consumers moved online to an even faster pace. If you think about the impact to our business, we now have about 14% of our sales through e-com. It almost doubled during the pandemic from where we were before the pandemic began, and we expect that to continue. And so I would expect untracked channels to continue to grow and accelerate a rate. If you just think about e-com, just in the last quarter, we have a 65% 2-year stack. If you think about the 2-year stack for the total company, it's about 21%. And so you can see it's growing at a significantly accelerated rate versus the broader growth rate of the company. So I do expect that to continue. As it relates to club, we continue to perform very well there. We continue to have a higher share in club. As you know, it tends to be limited assortment, and our portfolio has performed very well over a very long period of time in the club channel. So we tend to have higher shares in that channel relative to the broader market just because we tend to have outsized representation. But the business is performing very well. We continue to see it grow fairly rapidly. And Dara, as I think you know, we talked about this a bit, we've invested in these channels for many years, and I think it's really set us up to be successful. And then the investments, the technology investments we're making, we think, only ensure that we can continue to be successful. Not all in these channels, but broadly across the bulk of our channels.

Great. Well, we really appreciate you being here. We're out of time. So we'll cut things off here. But thanks again for joining us, Kevin.

Happy to do it. Thanks, Dara, and thanks, everyone, for joining today. Have a good day.