Clorox (CLX) Q4 2026 earnings call transcript

Thank you, Jen. Good afternoon, and thank you for joining us. On the call with me today are Linda Randall, our Chair and CEO, and Luke Bellet, our CFO. Please note also that our earnings release and prepared remarks are available on our website at thechloroxcompany. com. Linda will share a few opening comments, and then we'll take you questions.

During this call, we may make forward-looking statements, including about our fiscal year 2027 outlook. These statements are based on management's current expectations, but may differ from actual results or outcome.

In addition, we may refer to certain non-gap financial measures. Please refer to the forward-looking statement section, which identifies various factors that could affect such forward-looking statements, which have been filed with the SEC. In addition, please refer to the non-gap financial information section of our earnings release and the supplemental financial schedule and the investor relations section of our website for reconciliation on non-gap financial measures to the most comparable gap measures.

I will turn it over to Linda. Thank you for joining us today. Throughout fiscal year 2026, we operated in a dynamic environment marked by heightened value-seeking behavior, increased competitive activity, inflationary pressures, and ongoing macroeconomic uncertainty. We moved with urgency on incremental short and medium-term actions to better surfumers and compete more effectively in this environment. That work is focused on advancing superiority and key categories by sharpening our product experiences, strengthening our price-pack architecture, improving our promotion effectiveness, increasing the impact of our brand-building investment, and ensuring we are present where consumers choose to shop.

At the same time, we took strong actions to advance our long-term strategy while continuing the always-on transformation work that is strengthening our capabilities, improving productivity, and positioning the business for more consistent, profitable growth. While the majority of our businesses are performing at or above expectations, we have taken decisive actions to improve in the areas that are not yet delivering what we expect.

We are encouraged by the sequential improvement and the progress we are making. As we look at fiscal year 2027, we are confident in our strategy and the stronger foundation we built. Our focus remains on the priorities that will create long-term value, delivering superiority across our portfolio, accelerating consumer-led innovation, investing behind our brands, shaping a portfolio structurally positioned for faster growth, advancing operational excellence, and generating fuel to reinvest in the business.

With that, Jen will now open the line for questions.

Hi, Peter. I'll start. So, what we referenced as weaker category growth is very consistent with actually what we saw in fiscal year 2026. We expect the categories to continue to be muted given what's going on from a macroeconomic perspective and consumers continuing to engage in value-seeking behaviors, largely consistent with what we saw in 2026. Of course, we're watching that very carefully because this outlook assumes more of a continuity and category growth and no significant displacement depending on what happens with inflation and what happens in the Middle East, et cetera. But I would say very much in line with the category growth that we saw in 2026.

And then from a market share perspective, we expect to continue to make progress on market share. We had a number of categories that had turnarounds, particularly the exit rates much stronger, food, glad, home care continued to be strong, but we expect to continue to make progress throughout the course of the fiscal year on market share. And that gets us to the combination of what we expect from a organic growth perspective.

Thanks, Peter.

Sure, Filippo. So, starting in aggregate, again, we saw sequential improvement if you looked at fiscal year 26 from Q1 to Q4 with getting too close to flat, we're down a tenth of a share point in aggregate. And that was due to a number of businesses continuing to perform from a share perspective. We saw our home care business continue to deliver share growth for eight consecutive quarters of share growth in home care. We continue to see strong share growth in our pro and international businesses.

And then, really importantly, we saw market share turnarounds in GLAD behind our reinvestment and superiority across a number of levers, and we saw a trash grow in Q4. And then, importantly, despite the category still being a bit soft, we saw the turnaround of share for Hidden Valley Ranch behind all the actions we took on innovation, price pack architecture, marketing spend, and our activation against the World Cup.

And we want to continue to make that progress in 27, and all of those businesses have strong innovation plans, have strong brand investments, and so we continue to expect those businesses to perform from a market share perspective heading into 27. We want to continue to make progress in other areas, so of note would be litter, where if you look at the most recent weeks, some of the incremental actions we've taken to improve superiority are leading to a better trend on market share, but we're far from where we want to be on that business, and we knew that this transformation would take time, but we'd expect to make progress on that, and then as well as Kingsford, maybe I'll just go ahead and talk about the season for Kingsford right now, I think that would be helpful.

So if you look at the category from a grilling perspective across all fuel types, including pellets for the first time, the category declined, and this was largely and mostly due to weather related issues on major holidays, so Memorial Day was unseasonably chilly and wet across most of the US, and then for July 4th, 185 million Americans were under heat advisory, and almost 150 daily city temperature highs were broken during July 4th weekend, so we saw less grilling behavior from consumers, and that significantly impacted the category.

In addition, retailers made some choices on merchandising to go after value shopping consumers and put smaller sizes on deal, we'll correct that next year, because it's actually better to load consumers earlier in the season, and so that was a learning, and we won't repeat that next year. So that is what you're seeing in the category and share results for Kingsford, but we would expect that to also improve as we head into season year 27, that will start in March of next year.

Sure, Philippo. So we expect a fiscal 27 inflation to be above $200 million, so from perspective, it's about more than double or historical range, which has been in the 75-200 million. Now clearly, the current geopolitical backdrop continues to create volatility across energy, community, and supply chain markets. So our clue, as human average, for a brand could oil at about $90 per barrel, but importantly, it's not just energy or commodity stories.

While commodities remain a significant driver, we are also seeing inflation across broader areas of supply chain, including supply of costs, ocean freight, tracking costs, and other logistic related expenses. So as a result, it's fair to say that inflationary pressures are proving more persistent and should extend well beyond what is just reflected in the headlines for the oil price.

The last thing I would mention is there's a dynamic from a timing standpoint. We expect the impact of the inflation to be more pronounced in the first half of fiscal 27.

We're really pleased with the start that Cloroxo Purell has had. We are seeing the strategic rationale for this acquisition playing through, of course, I'll note it's early, but we continue to feel great about the synergies, about the opportunities to enhance growth and the integration is going as planned and in some places, slightly ahead, given the opportunities that we found. If you look at the business performance outside of what we just thought you would add from a company perspective, like for like, that business continues to perform very strong. So they were actually ahead of their targets for Q4 and they have strong plans embedded into this outlook for fiscal year 27, so feeling very good about the base health and feeling very good about our pro-business in tandem, which delivered a strong Q4 and we have a lot of confidence that business will continue to be a creative and additive to the company's performance.

Yeah, so I think from a financial standpoint, most of it will be in the adjustment except the fourth quarter where we start, you know, the growth in GOGU, we start impacting the organic status growth and it will be an outside growth contributor, and it's just a quarter, so it's fairly small for a career. Going forward though, we fully expect, you know, this business to continue growing and meeting the digits, and we expect to start seeing some of the revenue synergies showing up as early as next year, and so once we start putting those in place, you know, we probably, our expectation for the business would be mid-twice in the digits, you know, for a few years as we realized those synergies.

And since we're talking about financials, we will just, you know, two more comments. Linda mentioned the business is actually performing well and a little ahead of their plans, so they were actually accretive, not diluted as we anticipated in the fourth quarter, and expect them to be accretive to adjust the DPS as well as next fiscal year, so that's, as you remember, we expected them to be initially neutral, so that's a strong performance. And then last thing, we talked about it, you know, a prepared remark, and we talked about it last time, but it's just, you know, and full to remember that GOGU is a B2B business and has a different P&L profile than the GOGU's company.

So, legacy, so you, when you look at a performance of the business with GOGU, on the gross margin standpoint, there's about, you know, alpha points of dilutions, and then there's SG&A would be about, you know, making the post acquisition about less than a point higher than what it was, and then advertising is about a point lower than what it was, so just keep that in mind as you look at the different lines on the P&L for our book.

Good, Andrea, and then I'll turn to your question on promotion. So, I'll, maybe just make a comment on Q4 and then what we expect for 27. So, for Q4, to your point, there was some noise in the promotional numbers, which meant that promotion was higher than year ago, given the prime day shift into Q4 from a category perspective.

But we view that as a timing issue versus a significant change in the increase, you know, in a promotional environment as a percent of sales. What we expect for fiscal year 27 is a continued elevated promotional environment, given the focus on value, and that's more in line with what we saw pre-COVID levels, and that varies again by category, but for the most part just returning to those more historic promotional levels.

And then, of course, you'll see a little bit of noise and timing in Q1 given the shift in prime day, but nothing structurally different from a promotion perspective.

Hi, Anna. Great. I'll start with portfolio. I'll probably move to your third question second and then I'll tackle the cyber attack question to bring it home. So from a portfolio perspective, you know, we are very pleased with the results of the discipline action we've taken on our portfolio over the last number of years. The divestitures we've made aimed at getting a more predictable and steady and higher growth company, and that certainly has played out in the divestiture of Argentina, and vitamins, minerals, and supplements.

And as well as the large acquisition we made in Gojo, we see very clear line of sight to that improving company performance. And what I'll say is we'll continue to be disciplined, just as we've shown up over the last number of years. We regularly review our portfolio as a management team and a board, and we're always looking to see is there a way to strengthen our core, whether that be through acquisitions or divestitures.

And, you know, again, just stay disciplined. It's always focused on shareholder value. It's always focused on ensuring that we have the capabilities that can execute with excellence against each of the businesses that we own, and that's the way that we'll approach it. So hopefully, based on our track, you can see the exact way that we'll approach just moving forward, although nothing to comment on at the moment.

And then, you know, as you look at just the challenging categories, you know, I think there's two things to know. And both of them are challenges in some ways, but both of them are very big opportunities. And what this is predicated on is we believe we are the drivers of category growth. And of course, there's things that impact category growth, macroeconomics, where the consumer is.

But as the leaders of categories, when you have number one and number two share brands, we take the job very seriously, that our job is to grow the category. And, of course, we'd like to grow share in those categories as well. And we're focused on two major areas to do that. The first is addressing value-seeking across consumers.

And we see that across all consumers, you know, most potent in low-income consumers right now. But we are laser-focused against every aspect of value superiority. And for us, we have a superiority model. We shared this before. It takes no account, the product, the package, the proposition. The place so where consumers can find it. And of course, the price. And we're looking through all five of those levers by business, by retailer to ensure that we have value superiority.

And we're laser-focused on that. And so what you will see in the plan that we just finished in 26 is we made some of those investments, glad trash and hidden value are two great examples, and those are playing out in share growth. As we head into fiscal year 27, we're also going to be making additional investments in superiority to do the same thing. We're going to be investing in some product superiority on a number of our big businesses, including packaging, upgrades.

We're investing in some places in a targeted way like we did with GLAD on pricing. Because based off the amount of pricing we took since COVID, there's a few places where we need to make adjustments.

And that's going to be a key focus for us as we move forward to continue to support consumers and category growth. And then very, very importantly, consumers continue to look for better experiences overall. And, of course, value is part of that. But they are looking for us to address trends that are important to them in their lives. And we highlighted some of them in their prepared remarks, but consumers continue to focus heavily on their wellness.

And there's opportunities to provide them solutions like we're doing with chloroscopure on their allergies, or continuing to address pet health in litter. There's just a number of opportunities that we can address to ensure that we continue to support category growth and support getting back to more normalized category growth over time. And we do that through innovation. In 26, our innovation as a percent of sales doubled.

And we expect continued progress in 27. We have a very strong slate of innovation targeted at those trends and ensuring that we deliver value to consumers. So that's how we're thinking about it. And then finally on the cyber attack, I think it's a good point, Anna. You know, between COVID and supply chain disruptions in the cyber attack, we've been very operationally focused as a company, getting back the basics.

You know, when you lose distribution after cyber, you have to get that distribution back. Your competition has in many cases had a six-month head start on you on innovation because they haven't been focusing on that. And so job one was restoring distribution, which we did, restoring the fundamentals, which we did. And now, you know, most of the businesses have also been able to welcome consumers back fully. So I give a good example, home care did that in full. And you can see the share results.

And I feel great about trash and food and some other of our businesses at the same time. Litter is the one that I would say continues to have a hangover.

Given the operational challenges on that business, given the amount that was on e-commerce, et cetera, I feel good that we've gotten distribution points back, but we're still working through our literary invention to ensure that consumers know that we are a better value than competition and making sure that that is clear on packaging and the way that we talk to them in our marketing, improving the product, et cetera. And we're making some additional investments and superiority to deal with that.

So I would say largely we're through a lot of the cyber attack effects, but you have seen over the last couple of years just that operational intensity at higher levels. And we're getting back to innovation, getting back to full brand building and leaving most of that behind, which is energizing to us as a management team and as a company.

Thanks, Anna.

I guess I'm wondering why your range is, I guess, you know, relatively wide versus the tight guys range on sales and the specific 42% growth margin guide. You know, maybe you could help frame for us what's implied at the bottom end, you know, versus the top end of your EPS growth guidance range this year.

Yes, Bonnie. I can check that. The, I mean, at the end of the day, there's a lot of moving paths, especially with the transitory element on ERP. But if you look and the fact that we are comping a lower than usual incentive comp in the base here. But if you remove all those, essentially the main impact on EPS is the lower growth margin.

And what it is about, 42, it actually, you know, there's a little bit of movement and the EPS is quite sensitive. And as I just mentioned, this is probably where we have the environment around the cost and commodity. And especially the timing, more than the total is what, you know, it's what's leading to a slightly wider than usual EPS range.

Sure, Bonnie. I would consider Ex Gojo where we're spending over 11% of sales as we have in the past, you know, the past number of years where we increased it from 10 to continue. And so the 10 reflects Gojo's lower percent of advertising and sales promotion.

And I would just consider phasing to be very much like we've thought about in prior years. We tend to heavy up our spending during key pulse periods, whether that be back to school, cold and flu. And particularly when we're launching new innovation, which tends to happen in Q3 and Q4. And again, you know, we're not super detailed on when we have that spending. We want it to mirror the business plan. But it should look largely like other years have in the past.

Thanks, Bonnie.

Thanks, Bonnie.

Thanks. Yeah. Thanks, Robert. Yeah. Nice. Starting the cost noise and volatility associated with large complex implementation in the rear view mirror. And we expect to see the benefit ramping up. Across the supply chain and across our admin functions. I would say probably later this fiscal year and then into next fiscal year. This is when we see the benefit on efficiencies.

There is, as you can imagine, there is obviously some productivity gain to be had on the supply chain through just better planning, lower inventory levels, just more automation opportunities. But there's actually a lot of effectiveness. And where we start seeing it is now people are able to see end to end data. So you can, you know, you can have just your supply chain being much more reactive and in some case proactive to some change in demand signal. So we're starting this, you know, integrated business planning thought and we also see a lot of efficiency or like we have some initial inefficiencies that we'll be lapping, but some efficiencies in our demand fulfillment and in order to cash functions.

And then later we, you know, we also expect to see much more automation and efficiencies in the back office. You know, we went from an environment that was quite manual working on spreadsheets with now, you know, fairly automated. And I think I mentioned this one of the benefits also of upgrading digital infrastructure is we're able to take advantage at a broader scale of global business services. And so this is something that we'll accelerate in next few years, and that's a great source of productivity for us initially.

Yeah, if you remember, Robert, we experienced most of those in the second quarter and the third quarter. There's a little bit of a range with it, but I would say it's under alpha and then we, you know, definitely included, you know, that lapping in a gross margin guidance.

Kevin, thanks for the question. Actually, let me use your framing. I like that. And I'm going to start with talking about free cash flow. So we have a business model that generates and continues to generate strong free cash flows. And fiscal year 27, we expect another year or strong cash flow generations that should be in line with our targeted range of 11 to 13%. That does include the temporary lower margin in the front half of the year, driven by the elevated cost it wins, but it also includes some continued focus on working capital and balance sheet discipline to drive cash flow improvements. So net, we feel good about cash flow. As a reminder, good role also bring some, not only some strong cash flows in line with 11 to 13%, but very stable cash flow because of their install base.

And beyond that, the way we structure the acquisition of Gojo, we also expect to see some tax benefit in the years to come. So all of that is actually just helping to strengthen the cash flow. So net, feel good about cash flow generations. Within that context, I think I'm answering your question on dividend. I think at this point, our commitment to support the dividend has not changed.

As you know, we have a long track record here. You know, dividend has increased a new year for decade, and for now, you should expect this to continue. We do do regular reviews with our boards, and we have a really robust process, and at this time, we're comfortable with our current dividends. As you mentioned, the current payout is a bit elevated, but we see this as something more transitory as we rebuild our gross margin and not something structural. So, but of course, we continue to evaluate this of the time.

Yeah, thanks for the question, Kevin. So, I don't view a structural issue on pricing over the long term in our categories. We see consumers to continue to accept pricing and better innovation that we price for with better experiences. That's playing out in many of our categories today. I think, you know, I'll speak for co-oxonely. What we view is a unique period of time where we have near back-to-back inflation cycles.

Off of a record setting inflation cycle back in 22 and 23, where we experienced costs at a level, you know, ten times higher than what we had normally experienced, and we took four rounds of pretty substantial pricing across our categories. And it turned out that the elasticities in that pricing were a bit better than we had expected, but now with consumers' kind of pressure, you can kind of see little places where we've had to adjust pricing, et cetera. So, I think, you know, from our perspective, we just look at our toolbox because pricing is only one tool in the toolbox and say that it is best for our categories right now to take targeted pricing, which we are doing.

There are places where we are taking a regular price increase, GLAD is a good example, given its commodity exposure to resin. We are taking a regular price increase in that category and have already announced and implemented that pricing, but in other places we're being much more targeted. And we're using the other tools we have in the toolbox, which we feel confident about, whether that be revenue growth management, price pack architecture, cost savings, and we'll have another strong year of all of that this year.

And we have our confidence ability to do it over the mid to long term. So, I think, Kevin, the point is, you know, it's a unique period where we typically have a bit longer between inflation cycles. I think given the uncertainty and volatility consumers are experiencing, you know, we are just being more targeted in the toolbox, but feel fully confident that these categories can take pricing over time. We'll continue to do that through innovation. Again, we'll take targeted pricing this year where we think it's warranted and we'll take a strike price increase on GLAD trash, as you might expect. And I think as we move forward, when we get back to hopefully a more normal set of cycles around inflation, you'll continue to see pricing be a strong lever for our types of business.

Thank you, Bob.

Hidden Valley Ranch, you know, may have had a bit of a boost from the World Cup. You don't know if that's sustainable or not. You know, why not maybe a higher figure for investment as you, you know, just to assure that you don't end up back in the situation you were in earlier with more broader share losses because it feels like we're sort of just at the edge. And I'm curious what the math is behind what that right level of spending is.

Hi, Col Millam. I'll take, I'll tackle that. So first, you know, I wouldn't attribute some of the bumpiness we had in fiscal year 26 to a lack of investment. You know, we were had a operationally challenging environment. We were transitioning our ERP in the U. S. and sector, which caused more of the issues than the spending issue. And what I would say is we've looked across every line of investment across the P&L and balance sheet to say do we have the right level of spending to support superiority in the category. And we are being very targeted and disciplined about adding incremental spending. And we have done that. You see that in margin this year as we're investing in some product performance.

You see that in advertising where we're spending over 11% retail again. You see it in our trade spending where our trade has been higher. And so we want to do that in a way. Now that we have better data, we can do that in a much more targeted and effective way to get to the place we want to. And it's working.

You know, you've seen we have been able to increase consumption, increase share over time. We expect that to continue. But that's the way that we approach it. You know, and even in advertising, we expect a very high level of efficiency improvements every year from our team. But we have reinvest those efficiencies back into the business where we have the highest return.

And we'll do that again this year. So we feel good about the spending level. If it turns out that the consumer environment weakens or strengthens in any way, those are things that we will reopen up and ensure that we continue to have the right level spending. And our team is prioritizing ensuring we have superiority, ensuring we support the innovations that are growing the categories in the market that we're launching. And as I mentioned earlier, we have a very strong innovation plan for 27.

And if there's opportunities to put good ROI spending in the system, we will.

Yeah, I think for the vast majority of our portfolio, I feel very good. We either continue to see performance. So again, I'd call out our health and hygiene business and aggregate, which is over 50% of our business, continue to feel very good that we're staying ahead of the consumer on value superiority. There'll be places even in that business we're investing in product improvements this year to continue to advance that superiority and continue to win market share.

I feel very good about the changes we've made in GLAD. And you know, GLAD was not just pricing work that we did in large-scale trash. We also improved our innovation plans. We improved the proposition through better marketing campaign behind Don't Get Mad, Get GLAD. And so feel very good about the comprehensive nature of what we tackled. And then to your point, you know, we did see a category list from World Cup, but we grew share significantly. And so our team's ability to activate price pack architecture at that time, strengthen our innovation plans, and of course take advantage of the fact that there was a lot of eyes on ranch during that time, let us to market share improvements.

And though we'll watch the category carefully, I feel very good about the plans that the food team has in store for 27. So I would say largely we're on a place where we are going to continue to improve security, et cetera. The one I would call out that is early work in progress is litter. We have made improvements across the full range of superiority, so all the things I spoke about, product, packaging, the proposition, place, and really focused on winning and e-commerce.

But we've taken some additional actions on pricing recently in a targeted way, and we're seeing improvements off of that. But we'll continue to take additional actions, including launching a set of innovations in the back half, and to your point, Camille, those take a while. Innovations don't happen overnight, but you'll start to see those things flow through in the back half of the year, and that will lead to further improvement.

Sure, Chris, of course. As we announced back in May, as you note, I informed the Board of my intent to step down from my role, given my personal health challenges. The good news is I continue to do well, I'm cancer free, and feeling well and continue to execute my job, just like I did before. The Board has made good progress in the search.

When we first announced that we let you know that they were in the process of hiring a leading external search from, they have done that. And I can say that the search is progressing as expected against the timeline the Board has laid out. And then from a skill set perspective, that independent group of the Board, you know, is properly evaluating our strategy and where we are in our execution and looking for the next leader to take that next leap. We've made a very large transformation as a company, rebuilding the foundation of our data and technology, our innovation plans, our portfolio.

And of course, it will be up to a new leader to take a fresh look at that, continue the progress, but also, you know, depending on where they land, maybe take it in a different direction too. And the Board is hard at work in determining the right person to do that for the company. In the meantime, we are laser focused on continuing to execute. I personally am laser focused on continuing to execute.

And then, of course, ensuring a smooth transition that we will do once that new leader is named.

For Q1, Chris, you have it right in assuming that the timing impacts due to Kingsford and some other promotional impacts are really the story in Q1. And if not, that would look much like the trajectory for the remainder of the year. So that is the primary impact to Q1 as you note. And then from a pricing perspective, you know, back to Kevin's question, we are taking what we would call targeted or strategic pricing. And we've done that across the portfolio, looking at the places where the security warrants it, where we feel we have more exposure, but being very disciplined about that. And the one category I called out that is more like it has been in the past is glad given its exposure to commodities.

That price increases being implemented right now and largely going as expected. But you would see versus historical inflation cycles. If you look back, certainly 2023, a more muted price impact from that perspective, given the degree of pricing we're taking. And then of course, we priced through innovation, which you see as innovations roll out and that gets built in.

But that's the that's the extent you won't see a very, very large aspect from straight price increases, given the amount that we're using it for this year to offset inflation.

That's correct, Chris. You have a few things going on the net. This is how I will play out.

Thanks, Chris.

Yeah, sure. Javier, I can take it. So yes, as you just mentioned, inflation of $200 million would be, you know, it's going to be more concentrated in the fontiles as you look at all levels to offset those. Productivity would still be the primary level, right? And we mentioned, we actually feel very good about the strength of our cost savings pipeline.

And pricing would be another level, strategic pricing, so not as much as productivity. There are other levels that we're taking, you know, just mentioned, in some cases we're making investment to actually improve our superiority in brand position. And it can be adjustment in pricing or trade promotion going the other way. But when you net all of that, we expect to start, you know, recovering gross margin in the back house.

Now, of course, across the full year, we won't be able to fully recover the gross margin, but we expect to exceed the year with a much stronger gross margin.

And Linda, if you can comment on the market share? Sure.

So, let's just take GladTrash. I think it's a great example. GladTrash is actually growing share. And we feel good about the progress that it has made.

And we are taking pricing consistent with what we see in the category. We see that the pricing is moving in other parts as well. And typically, when we've taken price in the past, that's a place where share is either neutral or positive. We're going to see how this plays out. We don't know the level of pricing other people will take. You know, we've determined our own level of pricing that we think is right to recover the right degree of commodities combined with all those other factors. But we'll watch it very closely. And the good news is we have better tools today to evaluate those changes in pricing. And if we need to make adjustments after we take that price increase, we'll do exactly like we did in GladTrash before.

And all of our other businesses will follow a similar model. I'd also call out for Hidden Valley. It's the same thing. We've been very targeted in how we think about pricing. We've recovered share through good fundamentals, through good distribution, strong innovation, good price pack architecture.

And so as we layer pricing on top of those things, we will look very carefully to see that that whole package of superiority is coming together and if not, we'll make adjustments. But right now, feeling good about the share position we head into, sequential improvement quarter after quarter, next to it right in June, the strongest we saw all fiscal year 26.

And we'd expect that we continue to make progress in 27 and we know with pricing, it might be a little bumpy, but we're heading in the right direction.

Sure. Um, if you don't mind, I'm going to go a little bit out of order. I'll just start with the simple one up front, which is inventory levels. So largely we see inventory levels in line with what we would expect and have not seen in our categories, any material inventory changes or pressures from retailers. We would expect that to be fluid throughout the year as retailers make choices, but we have no visibility to that. And again, it's short term noise.

Um, you know, it doesn't tend to change the way that consumers consume or how retailers approach our brands and store. Uh, but for now we don't have any aspects outside of the ones that you mentioned with promotional timing in Kingsford. Shelf space from cyber, we fully recovered all the distribution we lost from cyber, um, and we did detail planning at a by retailer level by business level. Uh, distribution is actually higher today than it was post cyber and we gained share of, uh, distribution this year as well. Um, and based off of our innovation plans, we expect to continue to have another strong year in gaining, uh, you know, physical virtual shelf space, uh, as well as TDPs.

And I think that, that moves nicely into your question on retailer relationships, Olivia, because the reality is that the sales environment, uh, the retail environment is changing really rapidly. And in exciting ways for consumers, um, given the technology, given the data that we all have in the ecosystem, we have an opportunity to give consumer better shopping experiences. Whether that be through e-commerce, through the way that we talk to them about our brands, all the way to visions of having a gent- uh, gentified commerce where consumers are really out of a lot of the decision making patterns. Um, and we can ensure that they are spending time doing things they really love doing rather than shopping.

And with that, you know, we've invested with our retail partners, um, to ensure that we're ready and leading in many of those aspects. I call it in particular, uh, with some of our larger retailers, our focus on e-commerce. We're getting much more sophisticated with those retailer partners on how we talk to consumers in e-commerce, how we translate that into sales, how we tie that into, uh, brick-and-mortar stores and our plans there, and we're seeing the impact. We've had a number of categories significantly improve their growth rates in e-commerce, and that will continue to be a focus for the company in 27. We have relatively strong share of positions e-commerce, but there are places where we're under shared and we will make progress this year in ensuring that each category by retailer, uh, we have specific plans for, um, and our laser focused on e-commerce.

And then I think from a future perspective, because we've invested so much in those retailer relationships, you know, we're ready for whatever comes and want to be building in our categories, the plans of the future for retailers. And we've seen that with them, you know, we are category advisors, given our leading share position, and most of the categories we compete, um, and we continue to invest in that capability through category growth ideas that we work with retailers on, and then, of course, the future of capabilities.

So it feels very, very good that our retailer relationships are stronger than they've been, uh, but that's an area where, you know, you have to continue to improve year after year, and that's what we're focused on for 27, particularly on the e-commerce side.

Yeah, thanks, Steve. You know, maybe just taking a step back on fresh stuff. I think this ties really well to how we talk about growing categories and making sure that we win share in our categories. And that all ties to do we have an overall superior proposition that we're giving the consumer through all aspects is the product better is the packaging better. Are we communicating that difference to consumers in a way that's compelling? Can they find us wherever they're shopping in? Is it easy to procure? And then, of course, is at the right price. And when we evaluated our plan on fresh stuff, we could see that we were not in a place where we had superiority.

Um, and so we overhauled, uh, the entire fresh step brand to address every single one of those elements of superiority. And we knew that that would just be a first phase. So we improved the product. We had some product that was, uh, had too much dust. So we reduced the dusting in our product. Uh, we changed our focus on some of the categories where we hadn't been competing a lot. Lightweight is a very important part of the segment and we had a very small business there. So we've invested in innovation in lightweight. Uh, we've invested in packaging changes to consumer preferred packaging in that lightweight. Uh, we've changed our marketing and all of our e-commerce sites.

Um, and then in addition more recently, we've invested more in price. So that's an all in an effort to improve, improve that superiority. But because we changed all of those elements, that takes a while to ensure that consumer understands the value you're getting with that better product. Uh, translating that into sales and then translating that into repeat. And that's what we're in right now is getting through the hump of that. Uh, making executional changes where things weren't shelved exactly right.

Uh, making claim changes where we're not communicating exactly right. The product changes were an early innings. And then of course, most importantly is getting back to a strong slate of innovation that drives the category. And we knew that would take some time and that really starts in earnest in fiscal year 27, which we're excited to get out in the market in the back half.

So I would characterize it as something where given cyber, given the impacts and given the very strong competitive that we have here who continue to make strides. You know, we sell behind in security, but we're taking all the right steps to address that. Um, and you can see through examples and whether that be glad trash or Hidden Valley that when we put our mind and get that superior to right. Um, we can make the right changes to get back to a leadership position in this category. So I feel confident over time we will, but it's early ending. Um, and we'll continue to keep you updated as we make progress.

Yes, Steve. Um, you know, as we set this budget with our board, we took the exact same principal approach we've taken every year, which is looking at the external factors, making the assumptions around what we expect from the consumer category and cost. Looking at the plans that we have and doing everything we can to strengthen them and then setting an appropriate and balanced outlook based off of those factors. So nothing else was taken into consideration.

It was the same set of factors that we always consider. And from a management team and board perspective, we are laser focused on executing that because that's the best way that we can set that up for a new CEO to come in is to execute these plans we have. And, and we feel these plans are the right plans to continue to advance, you know, our categories and our share position within them.

Thank you.

Another area we talked about is, you know, being subject to help with the new ERP. Thanks. Yeah, thanks, Lauren. There's a lot going on in the SD&L line. So let me, let me unpack it a little bit.

The, you know, first and foremost, the, you know, the 16% of sales includes about 40 basis points of negative impact from Gojo transaction related costs. Right. So one time. So excluding that, you're about 15 and a half. Now, as I mentioned, you know, Gojo has a higher level of SG&A and so that adds about, you know, a point also.

And so excluding this, you get pretty close to, you know, where to finish the year. Keep in mind this year, the, actually, the incentive comp was quite significant. And so without going through the math, what I'll tell you is that the level of productivity next year, more than offset the level of inflation. So we are making progress. Now, we're not making step progress. And there's two things. One, you know, because the top line is very flat. You don't get the benefit of offering leverage. But most importantly, most of the initiatives that we talk about that are enabled by the ERP and a further expansion in global business services will start taking place. Maybe starting late this year, but most likely next year.

Okay.

Did you say that total productivity will be greater than inflation? That is correct. So we are actually on a, you know, on a comparable basis, we are actually making progress in SG&A next year.

And that productivity statement, sorry, that was a specific to SG&A, not in growth margins, except for conversation. That is correct.

And then since we're doing this on the 200 million of inflation, you mentioned, I just want to clarify what that covers. Is that just inputs? Does that include logistics and transportation inflation as well or not? Yeah. That's total inflation across supply chain, right? So commodities is going to be, you know, the majority of it. But as you mentioned, the look, you know, we're actually seeing pretty material inflation across different element of logistics. As an example, labor is actually not, you know, not as much of a driver next year.

Interest expense for 2027. I'm guessing that's north of 200 million. Is that right?

Thanks, Lauren.

Sure. Hi, Clark. You know, it was an exciting moment, I think, for everyone around the World Cup. And of course, an exciting moment for our company was the love that international visitors experienced when they tried ranch for the first time. That is an American staple and not available in many other countries. And the team was prepared that this could be a moment and took full advantage of it. So we worked with our retail partners to ensure that they were putting ranch out in front, given visitors were wanting to try it and give it incented consumers in the United States to remind them to use it. We did the largest sampling program that we've ever done once we started to see the impact.

We got to many of the quarterfinals, semis and finals games and did the largest sampling program with our dry product, which allowed those consumers to take it back home with them if they wanted to. And then, of course, we captured a lot of attention on social media as we talked about the love that ranch was getting and turning that again into sales. I think the important part here is, you know, one, we have a superior product that consumers love and we continue to invest in that product.

We will continue to invest in it in fiscal year 27. We have a very strong slate of innovation that is targeted at consumers who are thinking about wellness. And there's a number of innovations we have, whether that be avocado oil, et cetera, that are focused on that trend. We ensured that we got price pack architecture right for those consumers that are value stretched. And so we have focused on some smaller sizes and larger sizes and getting that distribution right. And we will see that play into 27.

And then given the love and attention, we continue our social campaigns to remind consumers of all the great ways to use ranch to make their at meals even better. And we're seeing strong consumer reactions about as well. So feel good about the progress. Feel good about the, you know, moment that we took advantage of, but this was much broader than a moment. It was taking our full capabilities to bear and building a stronger plan for 27.

Priya. Yeah. I just wanted to get notes that you have outstanding. Should we expect those to get for you to dance?

I just wanted to see if we should expect you to reasonance the short term and CT balance that you have outstanding.

Hi, Priya. We don't have any plan for the moment. Actually, just, you know, the way we structured the debt is to ensure that we would actually repay those with the free cash flows that will generate over the next 20 to 18 months. Now, we do have some maturity coming up. And so that'll be, you know, that'll give you an opportunity to just reassess the debt structure going forward in next calendar year.

Ms. Rental, I'd like to turn the program back to you. Thanks, Jen. I will close by saying we're entering fiscal year 2027 from a stronger position than we started fiscal year 2026. And we expect that momentum to continue building as we move through the year. With our ERP implementation complete, we're focused on optimizing the platform, unlocking productivity, and realizing the benefits of that investment.

At the same time, we're continuing to advance our long-term strategy, sustain our always-on transformation agenda, and take the necessary targeted short and medium-term actions to strengthen superiority.

The acquisition of GoJoe further strengthens our foundation by expanding our health and hygiene platform, bringing the Purell brand into our portfolio, and creating new opportunities to serve consumers and professional customers with more complete set of trusted hygiene solutions. Combined with the investments we've made in our business over the last several years, these actions give us confidence in our ability to accelerate category and market share growth, expand profitability, and create long-term shareholder value.

Thank you for your time and questions today. We look forward to updating you on our progress next course.