The Clorox Company (CLX) Earnings Call Transcript & Summary

Let us get started. So I'm really happy to be welcoming the Clorox Company. We've got Linda Rendle, the company's Chair and CEO; and Kevin Jacobsen, CFO, with us. So thank you guys for being here. And I think Linda you had some prepared -- some things and comments you want to make before we get into Q&A.

That's perfect, Lauren. Thank you. Great. Thanks for having us. Good to see everyone today. I thought we would just get started with some context before we get into Lauren's question to set the stage. And I think it would be best to do that just reflecting back on our performance in fiscal year '24, which ended for us on June 30. It was certainly an intense year for us as we dealt with the cyber-attack, but one in which we made really great progress against our strategy despite that and rebuilt the operational strength of the company. I think that's what we feel most proud about coming out of that year and heading into a year, we're seeing more consumer pressure. We were able to fully restore supply, fully restore customer service level back to retailers. We lost about 40% of our distribution temporarily due to the cyber-attack, and we regained all of that and in fact, had more distribution at the end of the year than we started with. We were able to restore merchandising and rebuild the vast majority of the share that we lost. What that led to was flat organic sales for '24. And in the context, we started with a quarter in Q1 where we declined 18% from an organic sales perspective. So made good progress in Q2 through Q4. We were able to exceed our expectations that we originally had for the year on gross margin and delivered our seventh consecutive quarter of gross margin expansion in Q4 as well as deliver another year of double-digit earnings growth. Here I think if we step back and put all of that in context, we believe that we have done all the things necessary to set ourselves up for '25. But in addition, if you look at what we were able to do strategically, we were able to continue to evolve our portfolio with two divestitures of businesses that were both top line and margin dilutive to the company. We were able to advance our transformation and complete our operating model as well as advance our digital transformation on top of rebuilding the operational strength of the company. So I think we head into '25, eyes wide open to the environment, we expect categories to be growing a bit slower given the consumer pressure and the competitive intensity we have seen coming into that, but we feel we're in a really good position. Our brands continue to deliver superior value to consumers. We're investing strongly in those brands. And again, we've rebuilt the operational strength of the company to deliver that. So with that, Lauren, I'm sure you have a lot of questions along those lines, but hopefully, that's a good context for us to get started with.

Absolutely, that's great. So let's maybe start on the very big picture. And if we go back to 2019, the categories in which Clorox compete, at least according to Nielsen, we're growing at around a 2% rate. So I was curious what you see as kind of that long-term category growth rate, if that's a good benchmark. And then to go from there to the bridge on IGNITE's goals of 3% to 5% kind of what's the bridge from category growth to the 3% to 5% IGNITE strategy.

Perfect place for us to start. Great. So if you think about what we set out in our IGNITE strategy, we actually increased our goal from 2% to 4% sales growth to 3% to 5%. And the reason that we did that was we saw tailwinds coming out of COVID that we thought we could take advantage of from a category perspective. We saw that consumers were cleaning more. That still holds true today. We saw cat adoption up in the U.S. So a larger base of cats to ensure that we were taking care of from a Cat Litter perspective. And the list goes on and on and on. And certainly, a lot has changed since what happened in COVID, but we still feel very strongly and convicted in our ability to deliver 3% to 5% and here's how we think about it, Lauren. Obviously, this year, categories are going to be a little bit softer, but we view that as temporary, and we would see our category growth rebounding to the 2% to 2.5% that we typically see. In addition to that, we intend to grow share. And that's U.S. retail category growth, I want to be clear about, and we would intend to grow share in those categories. In addition, the remainder of our business that is untracked as well as our professional business and international business, we would expect to grow above company average. So for our Pro business in international, we would expect to grow in low single digits, about 20% of the business. And if you add all of that up, you're within the 3% to 5% range. What's that's supported by strong investment in our brands, continuing to communicate to consumers the value that we offer and enhance that value innovation, which I think we've done a good job in advancing our innovation plans, but we have plans to even accelerate that. We want stronger performance in fiscal year '26 and '27 beyond to support the 3% to 5%, but we see very clearly in upside to that 3% to 5%, based off of the category exposure we have and our plans to grow share.

Okay. Great. So portfolio printing decisions, you referenced them, so divesting both Argentina and VMS, which I think together were about 5% of sales. So maybe if you could just talk to the rationale on both of those and how we can think about the more medium-term top line implications of removing sort of geography that was solid top line growth because of inflationary pricing. But then also the segment, VMS was kind of challenged on the top line and also maybe on margins, too.

So we did make two portfolio decisions this year, as Lauren highlighted, selling our Argentina business as well as we'll complete the sale of our Vitamins, Minerals and Supplements business coming up here shortly. And as we look at what our goal was in IGNITE, it was to deliver more profitable, consistent accelerated growth. And both of those businesses, if you look at the combination, were dilutive from a top line perspective, and a margin perspective. So you pick up about 0.5 point of growth as well as about 50 to 75 basis points of gross margin expansion in the combined as you look at that on an annual basis. So it won't all be in this year because we haven't closed the deal on VMS yet. And if you look at Argentina, it is true that we did have strong organic growth and pricing growth, but that was all offset basically by FX. And that was the vast majority of the FX exposure that we had in our portfolio. So we were not getting the benefit out of having that top line and pricing ability in Argentina. We feel these were very -- two very good moves for the company. It sets us up to have structurally higher growth and structurally higher margins as a result of that. And in addition, there were two businesses that required a disproportionate amount of our focus and attention given what was going on in the VMS category as well as the intensity of the environment in Argentina, so we can focus more of our attention on the growth opportunities in the company.

Okay. So let me take the flip side because you haven't been particularly acquisitive recently, VMS was put together 2016, 2018. There's a series of institutional disinfecting businesses in 2012 and Burt, I think was 2007. And it's interesting because -- let me just -- start high level, just curious about learnings because each of those, I think, were an approach to a new platform, right? It wasn't just out of random plug it in. It was a new area that can be built upon. So maybe let's just start with kind of learnings from those three, one of which has gone very well with Burts and the other two, more mix perhaps.

Yes, we've got a lot of learnings. I think you're exactly right. There was definitely mixed performance, and we're very happy to be owners of Burt's Bees. That brand has been a great growth driver, has a meaningful differentiated benefit with consumers, and we've been able to innovate for a number of years to create new superior value propositions for consumers. And we feel like we have a lot of headwind -- or headway to do that as well. And what we learned from that was when we take businesses that are close to our capabilities where we can create big share brands in midsized categories, and we're very clear on how we create value, we can be very successful. And that's the case on Burt's. We knew that, that was a brand that had good natural tailwinds that we could deliver innovation on. It wasn't fashion innovation, but things that we could do over the long term on product performance on the type of natural ingredients that consumer is looking for and that we could use our marketing capabilities to make sure that we were targeting consumers that either had tried us before, and we wanted to expand our portfolio with them or we wanted to bring new consumers under the Burt's franchise. That went very well and continues to go well on Burt's. As I look at VMS, the lessons we learn there, we have the same intent, which was to grow a big share brand in a midsized category. What we acquired over two acquisitions were over 10 very small nascent brands. And the competitive environment turned out to be much more intense than we had anticipated. And so the investment required to grow those nascent brands into mid share -- or big share brands in midsized categories, just became too much. And all of that activity that we have done have been was very successful on Burt's that we built over time was not as successful because this is more of a fashion category. You had Ashwagandha 1 week and a different additive the next week and consumers were moving relatively quickly. And our innovation machine, although we can move with speed was not designed to launch the types of innovations 2 days after a consumer has decided there's a new ingredient that they are really passionate about. So we learned -- we tend to take trends over the mid- to long term and deliver really great value through innovation. We're really not about fashion categories that's best left to somebody else. And we're really good where we can get the right scale to balance the investment level that we have and our capabilities in an order to grow. So that's great because as we look to be acquisitive in the future, we're very clear on how we create value. We're very clear on the type of assets that would be attractive to us.

Okay. And I guess, how does M&A play in, in terms of long-term growth aspirations? And would you say it would again also be ideally more of a platform rather than a brand that plugs in?

I think we're open to both. So we like the categories that we compete in, and I'll have Kevin talk a bit more about just how we think about the criteria moving forward and how we're thinking about capital allocation on this way. But we would be open to more tuck-in bolt-ons in categories we compete, household essentials and health and wellness brands to get some more scaling categories we have or bring to segments that we don't directly compete in today, but in categories that we do. But we'd also be very much open to a platform that, again, is growth accretive to our company, and we are able to use the capabilities that differentiate us to create value in and to create brands that are more big share brands in midsized categories. And if that meant just like we did with Natural Personal Care, another extension, we would be very open to that.

Yes. And then, Lauren, I'd say in terms of the criteria. And as Linda said, our desire is to create a new growth run rate for the company, and we can do that organically or inorganically. And so it's certainly something we're looking at. If you think about what we -- how we approach this, first, we're looking for long-term consumer tailwinds. When we buy brands, we expect to be the long-term owner. So we want to make sure we line these opportunities up where we see consumers going over the long term. And then we're looking for strong structural economics. We wanted to be growth accretive and margin accretive to the business. And as Linda mentioned earlier, it's got to leverage our capabilities. We build brands, we innovate, we expand distribution. That's really the criteria we're looking for. And so we're going to continue to look for those opportunities. I would say we have now rebuilt the balance sheet. We've got quite a bit of financial flexibility to pursue good opportunities and we're going to continue to be disciplined. If we can find the right opportunity that meets our criteria at the right price, it's certainly something we're interested in.

Okay. Great. Let's switch gears to some of the big investments and projects that you've had going on internally. So digital enhancement. Let's maybe start there. So recently raised the cost to $560 million to $580 million given the delays around cyber. Could you just remind us, I guess, the updated timeline on when you expect to complete implementation? And what sorts of capabilities will that investment ultimately enable?

Yes, I'll talk a bit about the capabilities and then we get into the timeline. So we've said before that this digital transformation combined with our operating model change that we completed this last year will mean that fundamentally, no one at Clorox does work the way that they did in the past. If you are managing orders and processing orders, if you are in logistics and figuring out how we get products from point A to point B, if you're in financial reporting and controls if you're in innovation and marketing, we are giving you a set of technology and tools to do your work in a more efficient and effective manner. And this program, it does -- it cost $560 million to $580 million, has a very strong return. And we're very clear on the sources of value creation against each one of the levers in the project, and we are tracking those to ensure that we get that return. And what it really unlocks our ability to do is to continue margin expansion. So we've made great progress on margin over the last few years. And some of these technologies are starting to bear fruit. But really, this is about as we fully implement the ERP happening here in next year, we'll begin in the U.S. We did the implementation for Canada, which we can talk about a bit, which gave us a good proof points in our ability to do that, but we'll implement the U.S. next calendar year. And that will unlock our ability to see more end to end, to have more insight and data, move with speed, remove costs as well as move faster to innovate and meet consumer needs. One example of some of the work that we put in place, we launched an innovation in just a matter of a few months, which we had never done before. And that was insight into the time that we shipped it. And that is because of the digital tools that we've created and the ability for our team to move with speed based off of insight. But no one at Clorox will do work the same, and we're really excited about that and transforming our culture to be more consumer obsessed, faster and leaner. And again, as I said, we just implemented the Canada implementation of our ERP and Global Finance in July. That went very well. We are taking the learnings from that implementation to build our implementation plan for the U.S. that happens next calendar year. And then the suite of technologies that surround that we've been putting in place over the last couple of years, and we'll continue to execute that through the remainder of our implementation period that last another 18 months.

18 months. Okay. Okay. On the operating model. So you said you've completed implementing, right, but the reimagining work is like very much underway, right? And it keeps being reimagined once the tools are there. So I was going to ask to give me sort of concrete examples. You started to do that already. But maybe, I guess, we were reimagining work, but are people are going to -- are we reimagining it again in a year or 2 when all the digital transformation tools are available, is there more change coming in the organization as we look out over the next 2 years?

I think the way to think about it Lauren is, work is constantly changing, and we should be thinking about how we're doing work more effectively and efficiently all the time. That being said, the operating model was put in place knowing what the digital transformation will unlock. So some of the things that the operating model already unlocks more business unit centricity, getting closer to the consumer. End-to-end decision-making for our general managers. So whereas before, they were much more focused on the demand creation side, they have more visibility and the digital transformation will give them even more data and insight. And it's one of the ways that we've been able to deliver the margin improvement that we have because our general managers have a set of tools and accountability to look end-to-end and make sure they're removing costs while adding consumer value. So we see the operating model putting in place the structure for the digital transformation to meet its full potential is how we think about it. That does mean though that we're doing some work today because we do not have those digital tools in place in ways we wish we wouldn't do it in the new operating model, but we have a line of sight to once we implement that ERP how we will transition work. And some of that has already happened. And again, we're learning from our implementation in Canada on the ways that we need to do that according to our plan, and we might need to adjust that plan.

Okay. And you mentioned accountability. So we have incentives structures changed for people.

They have not, although how we handle our performance and the goals that we've asked people to said we have changed. So we still continue to compensate people in the short term on both top line margin and bottom-line performance. And then our long-term incentive is based on economic profit, and we think those are still the right things to incent and measure people on. What's changed, though, is how we measure individual performance. So what a general manager is accountable for is a more full set of metrics related to the performance of their business unit and how they deliver against the enterprise, and we weight more heavily a general manager's performance within their business unit versus just the total company. And so we are holding them much more accountable to their outcomes that they can deliver. So within that framework is how we pay our people.

Okay. Great. Let's shift to consumer kind of top line kinds of conversations. So first, and you hinted that previewed it, let's say, in your opening remarks. But just kind of current views on the consumer. And just to refresh what your expectation is for category growth in the current fiscal year. Yes. So we'll just start there.

Perfect. We continue to see the consumer under more stress. And we've been talking about this for a while, and we certainly experienced that consumer under more stress in the back half of our fiscal year '24, and we continue to see those signs of stress as we are in now our first quarter and fiscal year '24, and we'd expect, like any time where a consumer comes under stress, this is a temporary period of time. There's a lot going on, whether that be interest rates, do you think about savings rates depleted et cetera, there's also a lot of positive signs in the economy. But overall, the consumer is in a more stressed position. What that means for our categories, they tend to grow low single digits, but we're staying the low end of low single digits. So 0% to 1%. We're seeing that play out. If you look at the latest 13 weeks, our categories, including probiotics, were up 0.1%. The trend over the last 4 weeks has been a little bit stronger than that, but we're well within the range of what we expected. We're seeing an increased promotional environment and retailers really ensuring that they have the right value proposition for shoppers. So we thought promotion would return to pre-COVID levels, and we have seen that. We saw that in Q4 of last year, we're continuing to see that in Q1, and we expect that for the remainder of the year. It's been fairly rational, though. I wouldn't say there's any behavior that we say is out of the realm of what we expected. But we do see it being more competitive. We do see categories slowing down slightly. But what I would just also emphasize is, our brands are very resilient. After being out of stock for all of that period of time coming back, we've seen our shares continue to trend in the right direction. In Q4, we were down a half a share point. We lost 5 share points in total last year at the height of being out of stock. We were down in Q4 to a decline of 0.5%. If you look at the last 13 weeks, we were down 0.3%. Last 4 or 5 weeks, we were flat. Latest week, we're up 6/10 of a share point. So definitely moving in the right direction. Again, I would never count a week, as something that we should fully celebrate, but it does show that certainly, we're making progress against that. And we're spending on our brands to ensure that they have that value and doing everything we can to support category growth. But what we see is what we expected, consumers under more pressure, they will be for a little bit of time. We're going to watch it closely, but we feel we're well positioned to deal with that environment.

Okay. Great. You just gave me a bit of the sort of status report, report card on recovery and in terms of market share. Where -- because that's the holistic view. So are there still areas where you're still underperforming a bit in terms of share. I mean I know what I think, you can sort of talk a little bit about [indiscernible]. But what kind of progress being made on those on those businesses? Yes, we start there.

That sounds good. We did call out at the end of fiscal year '24 and on our call that we had two businesses that we were especially focused on given the environment. And that was our trash business for Glad and then our Cat litter business. And they are both a bit of a different circumstance and I'll walk through each one of them and both have shown improvement. On Glad trash, that was one where it took us a bit longer to get into supply on the key portion of the portfolio, and that is our large size packs. People like buying a lot of trash bags at once from us. And what happens is when we were out of stock, they bought competitive large sizes. So they were out of the market for quite a bit of time. And we also saw quite a bit of competitive activity, price reduction, et cetera, in that category. And so our share position was below the company average. We have since reversed that. So we fully restore distribution. We have restored merchandising. We're seeing enhanced promotion but nothing out of the realm of what we expected and we've made significant share improvement, and we're back to growing share in Glad trash, growing share with our largest customer and our large-sized Glad Trash bags were one of the leading items in Amazon Prime Day for example. So good progress on Glad. It's one again that we expect will continue to be competitive. So we're laser-focused on ensuring that, that progress continues, but feel good about where we are there. Litter was the other one we called out. And Litter was part of the reason that we saw our Q4 sales miss in part due to Litter's performance. And what we were seeing was a category that is a bit different in dynamics. I have found out that many of our investors don't have cats, even though a lot of people in the U.S. have cats. So pardon me if I overexplain cat behavior, but what happens with cats and their pet parents is when you are deciding to have an indoor cat, which most people in the U.S. do, you have a cat litter box, and you want to make sure that, that cat uses the litter box and does not use your closet as a bathroom. And when we were out of stock, consumers who loved Fresh Step had to make a different decision. When they had their cat, very comfortable with the litter that they were using and so they switched to a competitive brand. And now for some of those consumers that that's a stressful point for them, now we're asking them to switch back. And that's a little bit different than asking them to use a different bleach or a different cleaner. And the good news is we've made lots of good progress on that, and I can speak about what we're doing. And then the other factor for litter is it's a business that has heavy e-comm presence and as a result of that, has high subscription. And what that means for the consumers, they don't have to think about it, obviously. You go into your favor e-commerce retailer, you set a subscription up for Fresh Step. And what happened was when we were in stock, they automatically substituted another branch. Now we need them to go log back into their account, how many of you have subscriptions and you know what this is like. You know what this is like, right? So you have to log back in and you have to make a choice to change that subscription back to Fresh Step. And so we've been laser focused with all of those consumers and retailers doing just that. We've made very good progress. What that's netting to is we actually grew share in this last 4 or 5-week period, which is terrific. The job is not done. And I would say this is one we expect to take a bit longer to fully feel like we've recovered that business and we're back where we need to be with consumers. But we have good innovation plans. We're spending strongly in the brands, merchandising plans are working, but it's just one Lauren, that's going to take a bit longer than our others have.

Okay. I'm not sure you convince anyone to get a cat.

Cats for lovely. I'm a dog person personally, but cats are wonderful if you're a cat person.

Right. Okay. Let's -- let's see what I want to do next. Let's parse out maybe the Clorox consumption trends through the year? Because I know like what you're expecting in terms of forecast, right, because you're still going to have choppiness on the lapse. So maybe, Kevin, you can walk through kind of effectively what's going to be a mismatch between shipments and end market consumption and how we should be thinking through that as the year progresses.

Yes. And so as Lauren mentioned, our expectation for the year is we're going to grow 3% to 5%, but choppy noisy. We have different words to describe this. It is going to be noisy as we go through some of these cyber lapse. If you think about the full year first and the fundamental drivers, as Linda said, we're expecting a fairly modest category growth rate, this flat to 1%. And then we're offsetting that with, I'd say, the benefit of lapping cyber and then the strength of our demand plan, which includes share growth. That's really how we get to that 3% to 5%. If you think about how that plays out front half versus back half, right now, our expectation is a little bit stronger growth in the back half versus the front half of the year. The fundamental difference between the front half and back half beyond the noise of cyber is I'd say there's two drivers. The first is trade spending. We expect this year, we're going to be back to a normalized level of promotional environment or promotional activity. And we saw that in the back half last year. But if you think about the cyber event, when we had very limited promotional activity in the front half of this year, you are going to see a step-up in trade spending. So negative price mix in the front half that you won't see in the back half of the year is one reason we'll see a little bit stronger growth in the back half. And then we can get the structural benefit Linda talked about from the divestitures. We'll compete the VMS divestiture later this month, but it will have some impact on the quarter. By the back half of the year, that's going to be completely out of our portfolio, and that structurally accelerates the growth rate of the company. So both from the divestitures and the shift in trade spending, we'll see a little bit stronger growth in the back half of the year is our expectation.

Okay. And in terms of volumes, is that also the case on -- because I think volume expectations for the second half kind of backing into it, given commentary in the first half, is there something in the kind of mid-single-digit range, which feels strong, given market shares were already pretty well rebuilt by then. So how should I -- and I guess you just told us some of it's going to be the VMS helps gives you [indiscernible]?

VMS was the business that was climbing double digits. So when you take VMS out of the portfolio, both volume and sales, you get accelerated growth to the company. So you'll see that benefit as well in the back half.

Okay. So is that kind of a key part of that bridge to mid-single-digit volume growth in the second half?

It certainly helps. So you've got the VMS exiting. That certainly helps. And as I said, you've got the less of a drag on trade spending. And then typically, our innovation program tends to be more back half loaded. So we've got a very strong innovation program. You'll see more of the benefit in the back half of the year than the front half the year from innovation.

Okay. Okay. Great. Let's talk a bit about Burt's Bees or Burt's. Do you just call it Burt's now?

You can call it Burt's Bees.

Okay. So -- but looking back to last quarter, you noted some weakness in the business. In Nielsen, it's about 5% of the U.S. business. I don't know if that's a good representation. I think it's going to be a little bit bigger if you include untracked.

It's 3% if you -- and you can see that in the tables in our disclosures. It's 3% of total company.

Of total company. Okay. So increased competitive activity, maybe some distribution losses, I think you mentioned in non-core, but just maybe look for like an update on kind of what's driving a little bit of that weakness in Burt's.

Yes. And so Burt's, we continue to feel great about the category, continue to feel great about the [ branch ]. This has been, in addition to what we dealt with on cyber for Burt's. Unfortunately, we talked about it about a year ago, we had a supply disruption as one of our suppliers had a fire, and we didn't have tubes for our lip balm. So we had kind of back-to-back issues, unfortunately, that Burt's was dealing with. And so some of that is us just fully recovering from that and ensuring we get distribution back. Some we've made decisions to prune. For example, we have cosmetics on Burt's. Not all of those SKUs are productive, and we've made a decision to simplify that portfolio, which we think is the right thing to do for retailers, for consumers and for our business. But some of that is coming out right now, for example. So on the stuff that we can -- that is more things we think we need to do is, one, making sure that we get the distribution back in a couple of the core categories that were a result of those two things back-to-back hedge is one where distribution is slightly lower than the average return. And then competitive environment, there's been lots of brands that have launched into the lip segment. And although we continue to do well in lip and are by far the share leader there. We're looking at additional innovation and investing like we are from a company perspective and strong advertising plans to ensure that we get that business back. So I feel very good about the long term just a little bit more choppy given the two sets of circumstances and a little bit more of a difficult climb for Burt's but the brand continues to perform really well, and we feel very strongly that it will be a key contributor to growth moving forward.

Okay. It's interesting because it's a business that I will admit that back in 2007 when Clorox bought the business, and it was Natural Personal Care. I -- a little ahead of my time. I guess I'm like, it's just Personal Care. It's Personal Care is better ingredients, and I thought that the category would kind of come together, right, that it wouldn't be a midsized category, it would be the category. Clearly, I was wrong, they remained very separate. But what's been interesting is there's been so much competition, right, with any kind of indie start-up brand, whatever if it's prestige or mass price point, there's so much more attention to ingredient profile very broadly. So how have you been able to maintain Burt's so competitively? I mean, it's pretty remarkable how strong that brand has been and how relevant it has remained even being one of the first ones, right, to compete in this space.

I think your insight back then was right and that consumers care more about the ingredients that are going on them in them and around them. And so isn't that just the category, it's not just any category. But consumers do hold us to a different standard. When they think about natural personal care or those ingredients at the highest standard. And so for a lip balm, where we have a leading market share, we deliver a great product experience. But they also know that all of the values that's around that brand are at the peak of what they stand for in terms of the ingredients that they're putting on them. And so I think that's why we've been able to differentiate ourselves as we stand for kind of that highest bar in the category. And as consumers care more about those ingredients, then all boats rise and our boats rise as well because it's not like, I would say, Burt's brands that don't stand for that are the ones that are at risk because consumers are looking for that. But for us, I think it's also focused. And in some places, like in makeup, I think we expanded too much in Burt's, and we learned that. And so that's the other thing that our team is really focused on is where can we offer a differentiated proposition where our brands meet that type of standard, lip balm a great example, some of the skin care launches that we've done if you think about baby, how many of you have told me stories about the way that you've entered Burt's is because you had a baby and you use Burt's Baby wash. It's one of the reasons why I absolutely love the brand as remembering my two boys and the smell of Burt's baby wash. But that's, I think, the differentiator as we stand for something in the category and have been a leader, and we want to continue to be that leader and set a standard for what good safe products mean for consumers.

Yes. Okay. One more question I should ask, I'm sorry, going backwards, but on the promotional environment because you commented that back to 2019 levels, nothing that seems out of the ordinary. But if we're all agreeing the consumer is under pressure, we're all agreeing that category growth is slower. We are hearing from retailers, right? You're seeing some market share shifts across retailers and sort of generating more attention to pricing. So what is the risk? Or why wouldn't promotional levels go considerably in excess of 2019? Like why shouldn't we be worried about that over the next 6 to 12 months?

Yes. It's certainly something, Lauren, we're watching pretty closely. As we've said in our outlook, our expectation is return to what we describe as a more normalized promotional environment. If you look at Clorox historically, about 25% of our sales are in some form of promotion. Now we've been well below that for a number of years, either because of the pandemic when we couldn't supply or when we were taking pricing broadly as an industry, we weren't doing a lot of price promotion at that time. So it's been depressed for a while. Our expectation for now several years is we had over time, move back to that normalized level of promotion. We saw that occur last -- the back half of fiscal year '24. So we got back in that sort of mid-20s percent range of promotion. We think that's about the right amount of promotion that supports our plans to grow share, and it seems to be consistent with what we're seeing in the industry we're seeing a fairly constructive environment. We're not seeing anyone with outsized promotional activity. Our expectation is that we will continue. And so we will see some increase year-over-year in the front half of this year as we lapse cyber. But it's something we're watching very closely. And I'd say the good news is we have strong financial wherewithal if we do see something we have the ability to react to it. But the reality is that's not how we want to manage our business, promotion in and of itself, there's value and types of promotion. But just to put more money in the system, if you think about our portfolio, folks, like every day at central products, consumers don't use more trash bags because they're cheaper, just takes money out of the category. And so we want to make sure we have the right promotion to bring people into the category, remind them to use the product. But we don't see a lot of activity in our categories, just trying to take dollars out. And so our expectation is we'll see that normalized level. That is an increase year-over-year. But we're also ready to react if we think we have to do something different. We have the financial capability to do that.

Okay. Great. I'm out of time. So thank you so much for joining us. It's great to have you back. And also nice that it's after -- last year was very different up here. So congratulations on getting though what you did over the past year.