Clorox’s second quarter results surpassed Wall Street’s revenue and profit expectations, but the market responded negatively, reflecting investor concerns about the underlying demand environment and near-term volatility. Management cited the implementation of a new ERP system, which led to temporary inventory builds at retailers, as a primary driver of top-line growth during the quarter. CEO Linda Rendle acknowledged execution challenges in certain businesses and stressed, “It was a pretty dynamic quarter, and we didn’t get it all right, but we see clear opportunities to improve moving forward.”
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Clorox (CLX) Q2 CY2025 Highlights:
- Revenue: $1.99 billion vs analyst estimates of $1.93 billion (4.5% year-on-year growth, 3.3% beat)
- Adjusted EPS: $2.87 vs analyst estimates of $2.21 (29.7% beat)
- Adjusted EBITDA: $512.8 million vs analyst estimates of $433.2 million (25.8% margin, 18.4% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $6.13 at the midpoint, missing analyst estimates by 5.1%
- Operating Margin: 21.7%, up from 13.9% in the same quarter last year
- Organic Revenue rose 8% year on year vs analyst estimates of 4.2% growth (379.9 basis point beat)
- Market Capitalization: $15.02 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Clorox’s Q2 Earnings Call
- Peter Grom (UBS) asked about the gap between reported organic performance and category consumption data. CFO Luc Bellet explained the difference stemmed from inventory builds and lower-than-expected share performance in several segments.
- Filippo Falorni (Citigroup) questioned assumptions behind organic growth guidance and the outlook for promotional intensity. Bellet responded that the guidance reflects ongoing volatility, with promotions expected to remain elevated in trash and cat litter, but rational in most categories.
- Anna Lizzul (Bank of America) sought clarity on drivers of expected improvement in the back half of the year. CEO Linda Rendle stated that the improvement would mainly come from innovation and execution, not an anticipated change in consumer demand.
- Javier Escalante (Evercore ISI) asked about the negative price/mix and potential for price realignment in competitive categories. Bellet attributed the result to one-time trade spending adjustments, while Rendle emphasized innovation and improved product mix, rather than price cuts, as the path to share recovery.
- Lauren Lieberman (Barclays) inquired about the sharp drop in advertising spend and the impact of the Glad JV buyout on margins. Rendle explained the advertising decline reflected lapping prior-year spending, and Bellet noted the Glad buyout would add 20–25 basis points to gross margin in the upcoming year.
Catalysts in Upcoming Quarters
In the coming quarters, our team will focus on (1) progress with the ERP transition and its normalization effects on reported sales and margins, (2) the ramp-up and early performance of new product innovations, and (3) the company’s ability to maintain margin improvements amid higher tariffs and promotional pressures. Continued monitoring of competitive dynamics in key categories and the impact of cost-saving initiatives will also be essential for evaluating execution.
Clorox currently trades at $123, down from $125.32 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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