The Clorox Company (CLX) Earnings Call Transcript & Summary

Good afternoon. It is my pleasure to welcome Clorox back to the CAGNY stage. And before I start, please join me in thanking the company for their generous sponsorship of this morning's break. In what remains a dynamic and challenging environment, Clorox has been steadfast in its commitment to build a faster, stronger and more resilient company that stays ahead of evolving consumer needs. The company has undergone a significant digital transformation and evolved its operating model, enabling it to scale capabilities, enhance efficiency and accelerate decision-making. The early signs of the progress have been encouraging. Clorox has fully rebuilt gross margins through its holistic margin management program and advance its revenue growth management and insights-driven execution. Looking ahead, we're excited to see that the company can deliver through bigger, stickier innovation platforms that further enhance the consumer experience. There's been some germs in here. But good thing, I have my trusty bottle of Purell with me at all times. Never leave home without it. Joining us today, we have Clorox's Chair and CEO, Linda Rendle; and EVP and CFO, Luc Bellet. Linda, over to you.

Thank you, Andrew. I love that little prop up there. Good afternoon, everyone. Thank you for your interest in Clorox and for joining us today. A good reminder that this presentation contains forward-looking statements. I know you take that as seriously as we do. And with that, let's get started. So today, we want to talk about how we continue to position Clorox well, as Andrew highlighted, to continue to deliver long-term shareholder value. I want to acknowledge that our organic sale trends have been mixed over the last few years, and that's due to a number of factors. We experienced a cybersecurity attack in 2023. We had an ERP transition. But we can and we will do better. And we're confident in our ability to do that because we have a portfolio of leading brands in essential categories that we continue to invest in. And we're going to spend a lot of time today talking about the trends that will allow those brands to continue to great superior value and experiences for people. . In addition to that, we have modernized our capabilities and talent to win in this ecosystem, including building a completely new data and technology foundation. And then finally, our ERP is now behind us, but the value creation is just beginning. I plan to spend the majority of my time today connecting our growth plans to the consumer and what we're seeing but also grounded in the reality of what we're experiencing today as consumers are under stress. So before we get into all that, let's spend a brief moment on who we are and how we view our competitive advantage. We have a portfolio of leading brands, trusted and loved by consumers in the health and hygiene and household essential spaces. We can compete in over 100 countries around the world, but the vast majority of our sales are in the U.S. Our North Star is maximizing economic profit, and we do that with a choiceful and disciplined playbook, focused on building leading brands with superior value in categories where we can apply megatrends and our capabilities, we embed sustainability into everything we do at Clorox to maximize value and minimize risk, and we drive operational excellence in all that we do. And really important in this playbook are our leading brands. So 80% of our portfolio has the #1 or #2 share position in the categories they compete. Let me speak a moment about those categories because they're essential to consumers' everyday lives, but consumers are certainly under stress. But when you take a long-term view of these categories, it's clear. Over the last 20 years, consumers consistently spend 12% to 14% of their budget on household essentials, and we have zero evidence that that's changing. It just means we need to get to know them better, we need to understand them in ways that can give them great experiences and we can continue to prop up and grow our categories. Back in 2019, we knew this playbook could be successful it had for many years, but we saw a more challenging future then when we set out to rewrite our strategy. And what we saw was some of our portfolio not delivering against expectations, and we knew we needed to invest more and spend more focus on that portion of the portfolio. We also saw an amazing future in capabilities that require data and technology and our foundation and talent just weren't ready. And then finally, we saw opportunities to continue to strengthen our core, as I mentioned, on the businesses that we're performing, but also be more discerning about portfolio evolution over time. And that was what our strategy was created to do was to address those foundational issues and ensure that we had a bright future of stronger growth and consistent growth. So our choices were 4, the first is to fuel growth, and that is about expanding EBIT margins 25 to 50 basis points annually and at the same time, investing in our brands. And our brands are all about creating great experiences for consumers, they grow household penetration, grow categories and of course, grow our share when we do it well. We knew we needed to reimagine work. The world was moving so much faster, and we saw it exponentially increasing and consumers were moving faster and changing, and we need to change the way we work and the talent that we have in order to be as fast. And then finally, I mentioned on the portfolio, we needed to strengthen our core and be more discerning about how we evolved our portfolio. And as I noted at the beginning, we have not yet got to consistency in accelerating our sales growth, but we feel optimistic in the future given the capabilities we've created and hopefully, I can convey that optimism today in what we see. But we have built a very strong foundation to grow from. We have completely rebuilt the capabilities of the company centered on data and technology. We also have portions of our portfolio that are doing exactly what we expect them to do. And we know that proof points that these capabilities work. And then finally, our recent portfolio moves, including the planned acquisition of GOJO give us confidence in our future growth opportunities. Okay. So now we're getting to the section where I'm going to spend the majority of our time, giving you examples of these capabilities, and we're going to spend a lot of time talking about our brands and innovation. So as I mentioned before, we need category and consumer insights to make sure that regardless of the environment that we're in, the environment is tough now, but there are opportunities to grow. And when we get those insights right, we drive new occasions. We bring new users and new households into our categories, and that allows us to reunite category growth. And of course, when we do it well, increase our market share. And as I said, consumers are stressed Almost 90% of consumers are engaging in value-seeking behaviors. And you can see a number of those on the screen. But I want to call a couple of things out. The first is this is not unusual. We've seen this many, many times before where our categories get impacted about 1 point or 2 of growth in our household essentials. And we see consumers engage in these behaviors. But there are 2 things I'd like to highlight on this. The first is, this creates great opportunity for us to get our fundamentals right with consumers, getting our pricing right, our claims. It's a call to action to ensure that we're delivering the very best value in everything that we do. But it also creates opportunities for growth, and they're not apparent right away if you spend your time thinking about all this and only doing this. Consumers are under stress and they don't want to feel that stress anymore. Our brands can create great opportunities and create opportunities to grow. And that's what I'm going to show you as we move forward. But I think before we do that, it's important to note, Consumers are engaging with private label even in these times, just as they have been for a number of years. So the level and the way that consumers are engaging is the same as it's been for many years. What does that tell you? It tells you that value means so much more to consumers than just a lower price. So let's get into this. I'm going to spend a bunch of time on this one slide. And I hope you'll bear with me because this is incredibly important to how we think about getting our categories growing again. I'm going to talk about the trends that we see in forming our business. The first, we used to call Health and Wellness. Health and Wellness has been a global trend for years and years and years, so many people focused on taking better care of themselves. And what we're seeing now is the rise and continued rise of mental health. People are under so much stress that they want to ensure that they're bringing moments of comfort and joy into their life, to counter all of the things they experience in the external environment. And this happens in a number of ways. In our categories, we see things really working that are sensorial, Consumers want a better experience. We've heard from about 90% of consumers when their home smells clean, their anxiety goes down. It gives them a real comfort and a joy to have those small things, a pop of color on a trash bag, a little more joyful when you take your trash how. New textures and skin care. This is what is getting consumers excited and they are focused on this because they know it's connected to their overall wellbeing. Also in that, their home has become the center of their world like it never has before. Consumers are spending more time at home and they're doing more activities at home, for example, in our world, cleaning is up 29% versus 2016. And people are creating more messes, but they're also just like cleaning more. And this is maybe one of my favorite stats in the presentation. Gen Z, when you ask them, are they looking forward to cleaning, 49% of people say, yes, they get excited to clean Gen Z, do you know what we all think? Only 18% of us get excited to clean. And there's a real point and insight on that. It's about people being able to control their own environment, being able to create a safe haven. And there's a really interesting trend in home at the center, and I'm really familiar with this because I have one of these. Gen Z is doing this thing called bathroom camping. And I want to see if any of you are brave enough to make you bathroom camp after explain what it is. Bathroom camping is when someone retreats the bathroom. This is my 14-year-old. And unfortunately, it's my bathroom, not his. Retreats to the bathroom with a digital device, some headphones, maybe blanket, in my case, full meal or snack and they're in there for hours, hours. And what they tell you and what my son would tell me is that's an area of solitude. No one comes in the bathroom when you're in there and they get to reset their nervous system and they get to come out feeling much better. Now of course, this is only enhanced by a clean bathroom, right, because who wants the bathroom camp in a dirty bathroom. We spent a lot of time cleaning the bathroom in my house. Okay. People are using screens more than ever. I don't like any of these stats that I'm about to tell you about, but they're important, and we've got to deal with them. The amount of leisure screen time for consumers is up 18% since 2016, but that doesn't include gaming, which is up 42%, and it also doesn't include all the time we spend using screens to get work done. Screen time is on the rise. The fact is that consumers are living in a multi-device universe, and they're doing things like watching a show, shopping on Amazon, all at the same time. And we have to be there with them, but it creates tremendous opportunities for our brands to engage with them in a deeper way, and we'll talk about some of that in our capabilities section later. And then finally, responsibility used to being to people big are, the planet. And now they still care about those things, many consumers. But what it comes down to is how does it impact me and my family. If you're in a zone that experiences floods or fires, you're concerned about that. A lot of people are concerned about water quality today. These are the way that consumers are internalizing these trends around responsibility. Okay. I'm going to give you a minute if you're interested. We have just released a report with retailers that goes deeper into the trends that I just spoke about. You can scan the QR code to download that report. I'll give a minute. And if not, we'll make sure you have the QR code after. All right. So we take those consumer insights and we combine them with the capabilities we built as a company. And as I told you, we modernized all of our capabilities. And that's how we build leading grounds. I'm going to take you through the list of capabilities on the right, we have more, but these are the ones that we see creating a lot of value in the future. They're all in different stages of development. Some of them are capabilities we've worked on for many, many years, and some of them were just getting started on. And they're all based on the investments that we've made in data and technology. Data is the most important thing that we have and our ability to use manipulate that data is incredibly important. So we invested in a clean, modern data fabric during our digital transformation and we're now able to seamlessly access and use that data given the technology layer that we put on top. Really importantly, in a lot of these capabilities, it requires new talent, and we've invested in significantly new talent. I'll call it a couple of areas where we've done that as I take you through the capabilities because some of these have already been built at scale in other companies. So we've been able to hire people in and build them very quickly versus learning ourselves. So let's start with the first capability personalization. You've heard us talk about this 1 for a long time. This has been something we've been hard at work at. And at this point, we have built a database of 100 million known users in the U.S. that we house on a state-of-the-art data platform. We built a high-efficiency content hub, and this allows us to personalize now 70% of our marketing on a digital signal. That's up 10 points versus last year and continues to support our industry-leading ROI. And of course, personalization delivers better ROI because it's a better consumer experience. When you deliver the right content at the right time to the right person. I'd also highlight the right cost, and this takes me to this next example on Kingsford. AI is completely changing the game on cost. This is an example where in Kingsford, people are grilling in all types of locations and weather seasons and they want to see a grilling experience that reflects if they're in a Chicago winter or a Florida summer. We were able to build against 13 different locations, 4 seasons in a studio and reduce the cost and time by 90%, and we're just getting started on this capability. But AI is changing the game in ways as personalization continues to proliferate given the media proliferation, and we're now building agents across the content journey to coordinate, they're learning our brand standards, they're learning about safety with us, our past performance and we'll be able to personalize it a whole scale. Which gets us to our big future goal, where 50% of our media is personalized on a one-to-one basis, where a consumer feels we're speaking to just them because we are. All right. The next set of capabilities, these are all in a more early stage. We built a holistic margin management toolbox that Andrew referenced at the beginning as well as we're in early days of revenue growth management. And you can see the number of buckets and capabilities that sit underneath this. We really built this capability because we saw the inflationary impacts a few years ago, and we needed a more comprehensive way to do what we did well already which was cost savings. That was something in the company's DNA for decades, but we needed new ways to drive value. So we built this toolbox, we were able to fully recover our gross margins, and now this supports our EBIT margin expansion of 25 to 50 basis points annually. Let me take you through some quick examples here. The first 2 are in the logistics space, and this one is in transportation. Now with the data that we have, 1 of our business units was able to optimize transportation lanes and this reduced cost and drive efficiency. Last year, I shared an example of Kingsford. We were looking to significantly improve margins, and we have finalized this project now. What we did was take an end-to-end look at package design and our supply chain because Kingsford is a very seasonal business for us. And what it meant is we had a lot of external warehousing and that costs a lot of money. So through this end-to-end look at formula, we were able to simplify that formula, increased stackability for those beautiful pallets that look like that in our warehouses, but we were also able to eliminate a number of SKUs. And that means we were able to get rid of a lot of the external warehouse and we had significantly reducing cost. And we're applying these types of tools to all of our business units now. An area where we are just in early days is in the manufacturing network and value levers there that we saw when we implemented our ERP we're just stabilizing that ERP now, but we're starting work on these, and we expect them to deliver value for years to come. Same in the procurement area, there's a number of levers for us to go after with the goal of having global fully automated data-driven decision-making. An example of what we're doing right now in procurement is on AI commodities forecasting. We're using an AI-based tool that gives us near real-time insights on individual commodities and allows us to make better decisions, sourcing decisions that lead to better financial outcomes. And it's also reducing our cycle time by 90% and getting much more efficient on the resources we have. As you heard me say before, RGM is a relatively new capability for the company. Certainly not a new capability for the industry but new for us. And you're going to see some examples of RGM in the future. When I talk about innovation, more in the price pack architecture, the big RGM levers. But this is actually an additional lever that we're using right now as we have real-time issues in the market. This is on Glad. Our new data models allow us to evaluate price gaps and price impacts in more real time. And we realized we had an issue on one of our most important segments at a leading retailer with Glad 80 count. We were able to adjust the pricing. We've seen a significant change in share. So we're back to our 2022 share levels, which is about 7 to 10 points higher in that segment than we were before the October. All right. design to value. We've given you examples of this last year, but they were on the cost side. So what design to value allows you to do is look across all the things that consumers care about as we design a package, and a product, we also can look across the supply chain for levers. And what the team wanted to do here was we were wanting to accelerate our performance on all-purpose cleaners, which is a relatively new segment for the Clorox brand. We tend to play in things that disinfect with bleach. And what we needed to do was amp up the communication on versatility. So by doing this evaluation, we found out that consumers, the bottle tells them a lot about safety and versatility and the clear bottle was something that they preferred and we're already looking at expanding this as a platform, given the insights that we've had for our all-purpose sprays business. And then the final one I'll touch on before we get to the innovation, the most exciting part of this presentation is trade optimization. For many, many years, we have had a capability to drive efficiency and effectiveness in marketing. And we count on that every single year from our business units, getting more and more efficient. But we haven't had the data and infrastructure to do this at scale on trade. And so this is a value lever we see in the coming years, the ability to increase ROI on our trade, which is a large investment for us as well as increased sales. With that, I want to turn to innovation and how those insights create great experiences for people. I can't take you through all of the innovation we have across the company because of the number of businesses, but we do have a video in a play that shows you the breadth of innovation we have in fiscal year '26. Go ahead and roll it. [Presentation]

All right. So now I get to take you through the capability that we built that got us to a stronger innovation platform that we had in the back half of this year that we expect will continue to accelerate in fiscal year '27 and '28. We built a digital core that allows us to get to ideas faster, evaluate them in a more stringent way as well as deliver higher consumer appeal. So I'll tell you a little bit about this core, and then I'm going to take you through an example of how we built our newest platform on this core. So the first capability this has is AI signal sensing. It takes millions of data points from everywhere, ratings and reviews, how consumers buy, what they're commenting on in social media, and it starts to outline trends that it sees that we then can decide if those trends make sense for us to prototype, which we use with AI as well and really rapidly test in the marketplace and understand how well they're doing as we test them with consumers. The third part, which I will take you through is tipping points. We look at a trend. And what we don't want to do is be on the back end of it. We want to ensure that there's still value to be had there, that it's not too late in a trend or too early where we can't monetize it. And these sets of tools we implemented on our businesses right after we recovered from the operational impacts of the cyberattack. We put every one of our teams hard at work and said, you have to improve your innovation pipeline. We knew the consumer was under stress and our teams have done just that. So our pipeline is 3x stronger. We are now getting ideas to market in half the time. And as I said earlier, these ideas have significantly higher consumer appeal. Let me take you how through how the digital core built our newest innovation with Clorox PURE. So the allergy space, which we did not compete in until December is a very large space. It's about $4 billion in the U.S. of allergy remedies for people. But what we were hearing in that signal sensing out in the marketplace was that there was actually a very high unmet need. And basically, what we heard back from consumers is no matter how much I clean, no matter how many meds I take, my allergies keep coming back. And then when we ran the modeling to say, where is this, geez allergies have been around for a long time. It's actually still in an early phase. And what you can see is the dark orange is where we are today and the dotted line is where it predicts this trend will be in 2 years. So 20% growth versus the need today. So we thought there's really something here where we can create a different consumer experience. The challenge was there wasn't a technology that did what we needed it to do. So we set out to create a product that would really fundamentally change consumers' lives. If any of you experience allergies, at almost 90% of U.S. households do, you know how just miserable it can be. So we set out with 3 very high goals in this product development. The first is we couldn't do what a lot of products on the market do today. We couldn't just knock allergies out there and stick them to fabric. Because when they sit on that fabric, the allergies just come back and you still feel sick. So we had to denature or change that allergen protein to ensure that people would not feel bad when it was around them. We had to have the highest safety standards. This had to be able to be used around kids and pets. You have to be able to breathe around it. And then finally, we had to formulate with our 82 known fragrance allergies that are used in air care today. It was quite a challenge, but we got there. And we have a product that does what other products don't do out there. This is a patent-pending technology it actually destroys the allergen, it changes the protein in it so that it cannot make you sick. And we knew we needed to build a great proposition. We had to have the right marketing. We had to ensure that we had the right retailer support in order to make this as big as we know it can be. So we got retailers involved very early. In fact, this is the exact TikTok video we shared one of our largest retailers. I'll play it for you. [Presentation]

And retailers said, yes, we heard this too, in our data. Consumers don't feel well. And they saw in their categories the opportunity that we saw, and they recognized there was no solution. So we have retailers engaged very early from the start. That helped us ensure that we have the right customer requirements, and they gave us access to their tools and data to ensure that we could reach them in a new way. And that has led to tremendous early wins with retailers. We've seen most retailers take all of the items that we launched. They're some of the best promotional plans that I have seen in a new launch in Clorox in my over 2 decades. As well as we've got placement in the pharmacy section and they're allowing us to use our marketing tools to ensure that we reach these new consumers. We're making strong investments in this launch. We're spending about 2x the average of this size of launch from a marketing perspective. We also launched first in e-com, and of course, that's where consumers are. But really importantly, before this product even hit Walmart shelves, we have 1,000 5-star reviews. And that allows consumers to see that this is a product that can work for them and it makes that decision making really easy. We're also using a different level of influencers. You can imagine if you don't feel well, you tend to rely on your doctor to give you advice. We developed this product with allergists, but we also launched it with allergists first at 2 allergy conferences in the fall, and they're helping in the influence around help people have solutions. And I'll share some of that with you later when we talk our e-comm and social capability. Why don't we look at the long-form advertising though to start. [Presentation]

And we are just getting started. As I mentioned, this is a new platform for the company. So we have a multiyear plan. We just announced a partnership with Claritin, one of the leading allergy medicine brands, which we're very excited about, and we think creates a great holistic solution for consumers. We also have the next wave of products, and they're shipping in just less than 4 months here. We've already sold them into retailers offering new benefits in this space. All right. Turning to a more established platform that we've had for many, many years in our cleaning business is our Scentiva platform. And this is an interesting one, and this is the power of being able to invest in something for many years and continuing to drive sales. And this platform has helped us drive some of the strongest sales and growth that we have in any of our businesses at Clorox. I told you earlier that consumers are seeking joy in those everyday experiences. They want their home to smell clean, but they don't necessarily want it to smell like chemicals because they can interrupt the mood in their household. And Scentiva does just this, and we've been able to expand Scentiva into new segments and new fragrances to continue to delight consumers. We relaunched this platform in 2024, and we were able to double the household penetration. So we still have lots of room to grow, and we'll just play the next video that shows our next items. [Presentation]

And we are expanding this platform internationally. This is an example where we're using our market-leading Pallet brand in LATAM combining with the power of Clorox and we know consumers already have this layering behavior and think this is going to be an exciting way for them to tackle both cleaning and scenting their home at the same time. Moving to Trash. There's nothing more that can make your home field terrible than a leaking trash bag. In fact, it's one of the things that consumers hate most in this tour is when a bag leaks. And so our answer to that is a new innovation, Clorox Max strength with LeakGuard and I'm going to play this video for you now. And what you're seeing is this bag actually absorbs liquids in the bottom. So if there were to ever be a rip in the bag, you're not going to have a leak. Pretty cool technology, and we think a very big upgrade for consumers. And then this person, I don't think is bathroom camping. I think she's just taking a bath. I don't see any food or digital devices. But she certainly is enjoying the fact that self-care is becoming more important and people are also looking at a category level for benefits that they put on their skin. So vitamins, nicinamide, peptides, they want those on their body. And with that, we've launched a platform of lip and eyecare under our Birks brand that offers these boosted benefits. They're boosted with vitamins, they have ceramide peptides. They're beautifully formulated. I love them. And we really have had some strong early wins with retailers and consumers based on this launch. And then Cat Litter, it would never be a presentation if we didn't have cats on it at Clorox, we love this. So humanization they make pet family. And in addition, consumers continue to adopt more cats and a lot of them are becoming multi-cat households. And this has led to strong category growth category has been growing mid-single digits for a long time. But as we talked about, we have not taken full advantage of that and gotten our fair share. And this is our First Step in doing that with the reinvention that we've launched this back half fiscal for Fresh Step. And you can see on the screen, all of the components of this reinvention. We've improved all of our products and freshed up with new and improved odor control technology and less dusting. We've also used price pack architecture on this to create 2 tiers because what we knew we needed to do is compete in both the popular segment and the premium segments, which we hadn't fully done. We completely redesigned our e-commerce experience. You can see this is one of our landing pages with one of our larger customers. This allows you to quickly pick the product you want and then drives you to subscription. And we redid all of our sites to ensure that they were mobile first and mobile-friendly because that's how consumers are shopping today, giving them a really great experience when they go to buy Fresh Step. And I'll note is we're just getting started on Fresh Step. We had to reset the foundation, I feel good about this. We've got incremental distribution with retailers. They're excited about the steps we're taking, and we have excellent innovation plans in fiscal year '27 and 28 to complement this reinvention. All right. I have 2 more capabilities to talk about. I've got to go fast because Luc is realizing I'm about to take his time over. And that's not good. So I'm going to go fast. I'm going to skip a few slides that I think you'll get quickly as we talk about the capability. So evolving with shoppers, we need to make sure we are where they are in e-commerce, and that continues to get more sophisticated. And so we are focused on continuing to win in e-commerce. This is an example of our leading brick-and-click retailer, where we have been working with them on our digital penetration now for a number of years. This year, we experienced 19% growth in our e-commerce with them. And we have higher digital penetration on most of our brands than the category. And Clorox PURE was also the #1 item in ship to home in our category as a result of all of the work that we've done here. And this is the one I'm going to go pretty fast through, which is disappointing because you may or may not like these videos. They're a little -- this is social first. So what does social first mean, in old world, we used to take whatever we did on TV or other marketing vehicles, and we would retrofit it for social. It was very one way the cycle times were long but we've developed a new capability called social first, where we're developing content real time for social media. It is highly interactive and the cycle times are incredibly fast and in a lot of cases, leading to a purchase directly in an app. So I'm going to take you through one of these examples and I'm going to skip the next two. The example I'll take you through is Pine-Sol. And this is not the marketing going to warn you that we grew up with, but let's look at the first video. [Presentation]

You can see how it connects back to consumer insights, but not necessarily for everyone in this audience, maybe for your kids. But what's really interesting is this picked up. And the video I'm about to play for you now shows the result of this going viral. And there was a wife who asked what it would take for her husband to get her name tattooed on him. And he said, if you get 50,000 likes on this and Pine-Sol replies, I'll get a tattoo, which, of course, we did. And he end up getting two tattoos. [Presentation]

That doesn't normally happen after TV advertising. I'll tell you that. But what's really important other than some fun videos is now social is our most efficient vehicle in Pine-Sol and has become our most efficient vehicle in other brands. All right. I'm going to skip, unfortunately, Brita. These are some fun videos, but we don't have time. And I'm going to skip Clorox Pure, but that's an allergist, letting everyone know how great our product is, and it's one of the solutions you should have. I'm going to talk about our portfolio. As Andrew highlighted, we are in the middle of a planned acquisition of GOJO Industries, which are the maker of Purell, and I wanted to spend a little bit of time talking about our excitement in adding this to our portfolio. And why are we so excited? This is building on an area of strength for Clorox. Our Health and Wellness segment has been performing well for a very long time. It's our largest, most profitable and fastest-growing segment and in fact, it's had a 4% growth CAGR over the last 10 years. And GOJO and Purell had a similar profile. Purell is the #1 hand sanitizing brand. It has a high installed base in B2B, where we have dispensers, and I hope you've had a chance to use the dispensers we have throughout the hotel. As decades of strong growth, strong tailwinds and they have world-class capabilities in innovation and many other capabilities that will be additive to Clorox. Really importantly, this brand is like our Clorox brand. If you read the quote on the screen, this brand drives trust and loyalty. It means something deeply to consumers and how they keep their family well and thriving. And what we see is these 2 companies come together with complementary scale. So 80% of Purell sales are in professional hand hygiene, 80% of Clorox sales are in retail surface cleaning. So combined, we offer a health and hygiene solution across B2B and retail that we know we can get better scale, better activation on having to scale across these 2 very important ecosystems. We see 3 main sources of value creation. The first is continuing to grow the B2B business for both PRL and our brands. GOJO adds incremental capabilities that will continue to support our already strong professional business. And really importantly, we are strong in different verticals. And so will help our penetration based off of the varying strengths we have in that ecosystem. We also see the ability to continue to accelerate PRL in retail where they haven't been as focused and we have very strong capabilities, many of which I just outlined. And in fact, they only have 14% Household penetration, so that gives you an idea of the potential opportunity. And then finally, we see a significant opportunity to drive cost savings as we combine both businesses. I'm just going to spend a very quick time on why does this matter in the complex B2B ecosystem this idea of scale. So today, GOJO sells hand sanitizers and hand cleaners and they sell them to distributors and they sell them directly. And we do too. We sell Clorox products into distributors and end users. And we do that in very distinct and small segments. But by providing this overall health and hygiene program, not only do we give better programs to distributors to sell to their end users with more scale, which they're very excited about. They're all excited about they have to wait where we don't -- haven't closed the deal yet, but they're all very excited to talk to us. And then importantly, when we sell directly to end users, we can give them a different solution. So for example, at a nurses station, we can really help them through all the steps they need to make sure that their employees and their patients are keeping their hands clean and they're keeping the surfaces around them sanitized and that really will help us drive scale in sales. With that, we think that GOJO will be additive to our company from a future growth perspective. We're very excited about it, and we're excited to keep you informed as we make progress on the integration. And with that, I've given Luc less time than he needs to cover the financial update.

Thank you, Linda. Good afternoon, everyone. What I'm going to walk us through the financial update is a short amount of time as I can. Andrew, just might have to give me a few extra minutes. But I'll work through it in 3 parts. First touch base quickly on the outlook, then talk about the financial goals and historical performance and then touch base on how we think about our capital allocation. Key message is this. While our recent organic sales performance has been mixed, we're taking the right actions and rebuilding momentum. And as you heard today, our strategic; progress positions us well for the future. With strong foundation, capabilities and innovation, we feel like we are well positioned to deliver more consistent profitable growth and long-term shareholder value, okay? So with that, let's turn to the outlook. Now our fiscal year outlook reflects a transitory year where the ERP implementation is creating material but temporary year-over-year change. And so if you exclude the transitory impacts, really, what we expect is organic sales growth to be negative 1.5% to positive 2.5%, gross margin to be flat to up 50 basis points and adjusted EPS to be flat to up 6%. And as we previously communicated, at this point, we currently think that our result will be on the lower end of that range. Now in the first-half our growth has been challenging, but that was as expected. And we now expect sequential improvement in the back half, right? And there's a few things that support that. First, stable supply, now that we move from the ERP transitions, robust demand creation plans, and as you just saw, a really strong innovation select across all our businesses, but including new to the world platform, Clorox PURE. So now stepping back. and looking at our long-term financial goals, they remain unchanged, right? We're really trying to accelerate the financial performance of the company. And specifically, we target sales growth of 3% to 5%. And EBIT margin expansion of 25 to 50 basis points, and we expect to continue delivering strong free cash flows. So with that, let's jump into our organic sales growth performance. And as I've just mentioned upfront, and as you heard from Linda, organic sales growth performance in recent years has been mixed, right? And we -- the good news as Linda said, part of it was driven by some of our -- the challenges following the cyber incident as well as the ERP transition. But at the end of the day, we can and we will do better. Now the good news is the ARP is behind us like with the cost, complexity, ramping down and the benefit just about to begin to ramp up. In this fiscal year, as I just mentioned, we're taking the right actions and rebuilding momentum. And so looking ahead, we're confident that we will build momentum and accelerate organic sales growth going forward. We have a very strong innovation pipelines for the upcoming years, and we're just starting seeing the benefit of new scaling new capabilities like revenue growth management. So now let's turn to margin. Now gross margin in contrast is a different story, and this is a place where the team has executed very well in recent years. During the inflationary cycle, about a few years ago, our gross margin declined by 800 basis points, and we were able to fully rebuild our gross margin. Now this is a clear indication of the actions and investments we're taking in strengthening our capabilities delivering meaningful results. For perspective, we had a long established cost savings program for decades. And more recently, as you heard Linda, we shifted to a more holistic margin management adding new tools and new capability like design to value, hiring new talent and experts and leveraging our new data and technology foundation. And this is working we've been leveraging, we've been delivering record level of cost savings over the past few years. And importantly, we continue to see opportunity ahead of us. We have a very strong cost-saving pipelines, and we have a clear runway for years to come. So now when we step back and evaluate our performance versus goals, we always look for ways to deliver improvement that are more structural. And that brings me to GOJO. Our GOJO acquisition is really going to expand our Health and Hygiene platform as well as accelerate our financial performance. Let me set a little bit of context here. We have 4 operating segments, Health and Wellness, Household, Lifestyle and International. And the Health and hygiene part of the business includes all of Health and Wellness and half of International. So that represented about 40% of our portfolio at the beginning of the strategy period. Now Linda you heard Linda talk about Health and Wellness. It's been an area of strength for us and so is International. And so both of those business have consistently delivered outsized growth for the company. And so the proportion of health and hygiene has been growing steadily for us. And now that we're adding the GOJO acquisitions, we expect health and hygiene to be north of 50% of total company sales. And of course, by having GOJO, we're also adding a business that's expected to grow mid-single digits to high single digits going forward. So the expansion of the health and hygiene business is reshaping our portfolio and also creating a more stable and faster-growing core. And with this added stability and growth, we also feel that this is strengthening our ability to grow earnings and free cash flow, which I'm going to talk about next. So we have a long history of delivering strong free cash flows. You can see over the strategy period, we delivered about 12% on average, which is in line with our targeted range of 11% to 13%. at a time where we have to deal with elevated inflation and investments. And then looking at our use of cash, we have and will continue to be very disciplined and consistent. First and foremost, we want to reinvest in our base business. This is where we can strengthen our competitive advantage and generate the strongest return for shareholders. We continue to support dividends. We have a long track record of doing so. And then we'll manage our debt leverage. Our targeted debt-to-EBITDA ratio is 2 to 2.5 and we've been on the low end of that range, and we expect after the GOJO acquisition to temporarily go to 3.5. And then we will bring this down to about 2.5 at the end of calendar year '27. And finally, for our priority, we will distribute all excess cash to shareholders through share repurchase program. And with a business that generates strong cash flow and a disciplined approach to our capital allocation, we can deliver strong ROIC. You can see over the last 5 years, we were on the high end of the industry. Okay. Let me bring this home and start where Linda actually started. We believe we have an attractive investment case. As you heard today, our strategic progress positions us well for the future. We have a strong portfolio of leading brand in everyday essentials and we're investing behind that. We modernize our capabilities. We built a strong digital foundation that will strengthen our brands and help us reinforce our competitive advantage for years to come. And then finally, with the ERP implementation behind us, we're going to see the noise, the cost and complexity ramping down and then the benefits ramping up. So when we consider all this, looking ahead, we feel like we are confident in our ability to deliver more consistent profitable growth and share long-term shareholder value. With that, I thank you for your time. And for those of you meeting us in the breakout room, we look forward to seeing you there. Thank you.

Join me in thanking Clorox again for their generous sponsorship of the conference. And as Luc said, we'll take it over to the breakout.