Clorox Co (CLX) June 3, 2026 Conference Transcript

All right. Welcome, everybody. Thanks for joining us. For our next session, I'm very happy to welcome back the Clorox Company to our conference. With us today, our chair and chief executive officer, Linda Rendell, as well as chief financial officer, Luke Belay. Linda and Luke, thank you for joining us again. Always a pleasure to have you here. Let me give you the platform, because there was some big news late last week and over the weekend, so let me address that, and we can pick it up from there.

That sounds great. Thank you. Do I need a microphone? I do? Okay. Hello. I'm assuming you can all hear me now. I want to take a moment to address some news that we announced last week. I have asked our board of directors to initiate a search for our company's next CEO, and this was due to health reasons, and I won't get into that in a great detail here, but I would offer that I posted a blog about this with more detail, and I'd welcome you to read that. It was an incredibly difficult decision. I love this company and love my job, but this is right for me and for my family. And with that, I just wanted to leave you with two takeaways before we get right into the business. The first is that nothing changes in the short term. This was a long-term decision for me. And so I am still chair and CEO, operating as I always have and will continue to until the board finds my successor and we have a successful transition. And then the second part is our entire team is focused on executing our strategy at the moment while the board does the work on the search. And that's a great way to divide and conquer. And so I just wanted to make sure that people are aware of that and let you know nothing changes. And with that, maybe I'll spend just a couple seconds on what we saw for this year, and then you can, then I'll let you ask some questions.

Sure, sounds great.

So for this year, this was an important year for the company. We implemented the last part of our digital transformation. We executed our ERP transition in the U.S. beginning in Q1, which we finished in Q3, and we've been stabilizing that, but it's an incredibly important part of our company's future and how we create value, so we're glad to be past that and moving back into really ensuring that we have healthy brands and that we have market share plans and supporting Importantly, in Q3, we made progress sequentially on a growth and share perspective, although it was behind our expectations, and we can get into that on a couple of the categories, but we feel we're taking the right actions to return to market share growth broadly, and that is, of course, in a very difficult environment. We'll talk a bit more about what we expect in fiscal year 27. I'll let you run the show.

That's fantastic, and most importantly, speaking for everyone here and probably everyone listening, We're most happy that you're in good health and wishing you all the best, and also very happy that you're still chair and CEO and get to work with us for a little while longer. Let's pick up from where you just left off in terms of 3Q and the state of the business, exiting 26 and entering 27. Maybe we can focus in on, from your perspective, where you're, I guess, most happy and most confident to build off of into the future, and then also some of those spots where we have more work to do.

Good place to start. And I'll start with the consumer in that way, because I think that's the most important part. We're obviously seeing a consumer that is under stress right now. And we've been talking about that for a bit of time, and that's meant our category growth has been below what it normally is. You know, we typically see our U.S. retail categories growing at two, two and a half percent. This year, we expected them to grow either be flat to up one percent. They have been within that range, although very volatile week to week. You know, we saw our exit rate on Q3 a little better on category, but then it quickly went negative for a couple weeks. But generally, I would say it's in that range. And we're watching low-income consumers get under more and more stress. They're not making decisions to choose private label in our categories, but they are very value-seeking, as are all consumers, but we're particularly focused on low-income consumers at the moment. That being said, in our category context, we have done quite well in a number of categories consistently. So I would call out our cleaning, our largest, biggest, you know, most profitable business. Our businesses in international, we're going to share in those markets, as well as our pro business have been consistent winners throughout these last number of years. We've had a few businesses that we told you we all wanted to address and improve. I'll call out GLAAD and Litter. The good news is that GLAAD has reached that change in trajectory point through a holistic amount of work that we did to ensure we had the right innovation and brand building plans. And now we've seen GLAAD trash turn and is beginning to grow share. Litter, we have more work to do, but I think Steve will talk a bit more about that. So I will talk about it when you get to that part of the question. But I'm feeling good that the ERP is now behind us. You know, we're finishing the stabilization of that. And then we're going to get into optimization as we head into fiscal year 27 and beyond. And that's the value creation stage, where we drive the efficiencies. We are able to remove SG&A. We're able to get more efficient in how we do things. I mean, it'll be a key way that we drive margin improvement in the coming years. But it'll also be a really important way in how we grow, because it gives us a better data foundation and allows us to use modern technologies like Gen AI to drive product improvements and innovation off of consumer insights. So I think we're just at that tipping point where we've laid the foundation, we're getting back to what we want to do day in and day out with more focus, which is growing categories and winning with our brands through innovation. And then just as we look ahead, you know, the thing that we're watching really closely is the consumer and the cost environment.

Yeah. On the consumer, is your base case that we Do you maintain that level of category growth that we've been seeing with volatility? Or are you increasingly concerned that we see another leg down in growth? And to what do you ascribe the volatility that I think is not just unique to your categories, we've seen it across the board?

Yeah, I think a good base planning assumption is what we've seen in our categories, which is flat to up one. The question mark will be to the degree that inflation comes out of what's going on in the Middle East, that will impact the consumer even further. And we're seeing, you know, some early indications of that with gas prices, et cetera. So I think that's yet to be seen, and we're planning against a number of scenarios. What I'd call out, though, is we're household essentials. So even if you look back at 2008, when consumers were under incredible amounts of stress, our categories were mostly flat to down slightly. So that, I think, could be the delta that we're talking about if it gets worse for the consumer. Consumers need to take out their trash. They need to clean their houses. They need to change their litter box. They care for their cats like they are, their family. So we feel we're in categories that are resilient, and they're not as discretionary as some others. Now, when it comes to volatility, what we believe is that there's so much uncertainty. And when consumers are getting news in an uncertain environment, they are making decisions week to week to deal with that uncertainty. And so you see that. People might pull back on a purchase when they're hearing news, and they're nervous. The gas might go up at the pump, or they're hearing other news. The other thing I would say is they're way more sophisticated than they've ever been. So if you watch a consumer shop, they are shopping in a store with their phone and they have multiple carts going at the same time. And so I think some of it is if they don't see the deal they want, they're waiting. And they know that because they have the data now to be able to ensure that they're getting the most out of their wallet. So I think those are the two things we're seeing that are creating some of the volatility.

Okay, so... Luke, let me pivot to you, and I guess let's start with 3Q into 4Q, because I think coming out of the third quarter, when we lowered the fiscal 26 guidance, a lot of questions as to the moving parts in that EPS bridge from prior to now. Maybe we can just start there and just walk us through what happened, 3Q to 4Q, what you saw in the business, and what led you to take down the call for 26.

Sure, there's a few things to unpack. So maybe let me start with the top line, and I think Linda alluded to some of it, and then talk about the cost side of things. So on the top line, again, I think the environment is filling out generally as expected, which is consumer pressure, the categories being lower than our historical average, close to flat to 1%. From a market share standpoint, we actually saw sequential improvement in Q3, and we'll continue to see improvement in Q4. Now, this is less than improvement than we expected when we started the year, but still improvement throughout. And if you get rid of the noise associated with the ERP lab and the Gojo acquisition, you look at organic sales growth, it was negative 2% in Frontal, negative 1% in Q3, and our Q4 arc looked expected to be about flat. So that gives you a sense of the momentum. Now, on the cost side of things, there's probably two things to talk about. First, we had a higher cost to serve related with the ERP implementation. So let me talk about that, and then I'll talk about the inflation impacting Q4. So following the ERP implementation at the beginning of the fiscal year, We started experiencing some challenges on the order fulfillment part of the ERP, and our number one priority since then has been to reestablish our service level, as well as essentially stabilizing the order fulfillment system and process, and as a result, we incurred incremental expenses in the second quarter and the third quarter. Those were Most of them, logistic type of expenses, think about expediting orders, moving inventory around, or even higher level of operational labor. Now, at this point, service levels, by and large, have been stabilized, and so we don't expect higher costs to serve in the fourth quarter or going forward. So that was one element. Now, the other element is, of course, we, you know, communicated that we expect to see higher inflation and supply chain costs in the fourth quarter tied to the Middle East conflict. And we... What we communicated is we expect an incremental $20 to $25 million in cost increase on supply chains in the fourth quarter, and for perspective that represents about a little under 150 basis point of gross margin pressure, which is about double of what we experienced in the prior three quarters. And so that's what we communicated. Now, there's a little bit of noise in the fourth quarter outlook gross margin, which is currently projected at 41 to 42%. But if you exclude about 150 basis points of Gojo-related one-time transaction cost, which are not, you know, adjusted EPS, you get a fourth quarter cost margin about 43%. So that gives you a sense of the exit rate.

Yep. Yep. I think just to drill on a little bit more, I think the a little bit of the confusion, because I think I'm wondering if there's one more bucket. The Gojo dilution is a couple of cents on the year. That was incremental coming out of 3Q. And the 20 to 25 million that you called out, I think, is, you know, adding those two things together, you get about 20 cents. The midpoint of the guidance came down 40 cents. And I think you also took a reset on incentive comp. So there's a, there's a, in addition to the expenses you incurred through 3Q, there seems to be some incremental expenses that remain in 4Q. I think that is timing of cost saves, that there were some programs that were delayed, and there's some other programs that were started up. If I'm right about that, maybe you can elaborate that missing piece.

Yeah, that's right. We had a little more... A little more change in timing of cost savings, both when we're seeing cost savings and when we're incurring want times. And if you think normally, when we start a year, cost savings pipeline is pretty well established for this. What happened is, as a result of the challenges that we experienced on the order fulfillment, we had to redeploy resources to address this first and foremost. And as we did this, we ended up delaying and changing the timing of cost savings. Yes. Now, the good news is this is just delay. So, if anything, that's strengthened the cost savings pipeline for next year. For 27.

Yeah. So, if we roll forward to 27, and I know it's early, you don't have guidance out there, and visibility is exceptionally low, but is there a way to think about the ledger of pluses and minuses that you're thinking about as you start to plan and consider a 27 framework?

Maybe what I've mentioned is probably three very unique items that, you know, that I'll go through, and then you have to essentially project what you think would be categories, shares, and inflation. The three unique items are, and, you know, we mentioned them already, but first is the lapping of the ERP, the timing of shipments. So that will create a year-over-year benefit of three and a half point in sales and 90 cents in EPS. The second is related to the incentive comp that we just talked about. We have lower incentive compensation this year. This will normalize next year and then we create a year-over-year headwind. And the third one is the integration of the Gojo business, which we're very excited about. So that will add, you know, call it 600 million plus year-over-year on the top line. This will be neutral on EBITDA and neutral on EPS. Yes, and you will just create a little bit of change throughout the P&L because they have a different margin profile, NHGN profile.

Yeah, okay, very helpful. Okay. In terms of just one more question, just to round it out on the costs, maybe a little bit of education in terms of your coverage or lack thereof in the future, and also just the surety of supply, because there's one thing about just the cost of raw materials and packaging. The second one is just, is it available?

Yeah, in general, on that one, and we're continuously working on evaluating the safety of supply as well as contingency. So far, we haven't seen any material disruption in our supply. From the cost, inflation standpoint, we do have some hedging in place, and it really depends on the duration and the... The breadth of aging depends on commodities by commodities. But I'll share a few thoughts as we think about inflation for next year. First, I think there's still a level of uncertainty on what would be the level of cost inflation going into next year. We're currently working on our plans for next year, and as you can imagine, we're working through different scenarios, making different assumptions around the length and the implication of the conflict in the Middle East. Now, I think what we communicated in the fourth quarter gives you a sense of the initial and first-order impact of the Middle East conflict. But, of course, as the conflict potentially persists longer... These numbers could be bigger, either because we see even more pressure on oil price, or you start seeing secondary impact and knock-on impact from the conflict. So, there is a level of variability. The second thing I would mention is, I think as we look in the medium term, we feel very confident in our ability to mitigate inflation and rebuild gross margin. I think we have a strong track record of doing so through the different inflationary period, and I think as we mentioned, we feel good about our margin management capabilities. The last thing I would say is, it generally takes time. If you look at prior inflationary periods, there is a lag between the time you see the impact of inflation and the time you recover. And it's at least a couple of quarters, and it's sometimes been longer. So this is all the things we're wrestling with as we're looking at next year planning.

Very helpful. And a lot of moving parts, but helpful. Maybe stepping back, and Linda, I'm thinking about the top line trajectory. As Luke mentioned, a lot depends on where category demand levels off, but then there's also company-specific initiatives. As you think about the puts and takes into the next year, how much do you think of your outcome depends on the category versus your own improvement initiatives and some of those categories that you mentioned were yet lagging?

Obviously, the category will matter a lot. But as I outlined, you know, if the scenario continues in a way that is similar to what today is or resolves, we would expect our categories to be generally what they're doing today. And then if that impact would be greater, you know, if you look at history, it would say you're slightly below that. So that leads us to it's really important what we do and what we can control. And we're really focused on market share improvements. And the number one way we do that is by driving superiority on our products. And that's what we're focused on right now as we've gone product by product to understand the levers that we can pull to ensure we're offering superior value to consumers. And we are making improvements on that through innovation, using our new tools through our digital and tech foundation like RGM, price back architecture, design to value. And those are all creating different ways for us to ensure that we are extracting as much value as we can, that we're delivering the best experiences for consumers, and we're really focused on getting our innovation to be stickier and bigger, and we're off to a strong start there. Our innovation is more incremental than it was in the past, and we have larger platforms. A good example is Clorox Pure Allergy, which is off to a terrific start, but we have innovation across the portfolio, and we'll be focused on ensuring that we execute that with excellence next year.

Maybe we can talk about the three categories that you mentioned. So you have the, we'll call it the positives, the improving, and then the still to improve. So cleaning, international, professional, very different, but all relatively resilient and consistently on the positive side. Is there an element of commonality that makes those all on the positive side of the ledger? Or what has contributed to those businesses being... You know, better performing.

Yeah, that's where we execute the playbook that we believe drives categories with excellence continuously. You know, we have superior products there. We do a great job at driving marketing and communication. It's where we have growth plans with our retailers where we're leading them to what's the next thing for the category. Again, AppPure is a great example of that. It's a category that didn't exist that we created and we co-created with retailers. And so that's the commonality. It's about superior products and then executing with excellence. And we have the ability to do that on all of our businesses. And as you mentioned, there's some that are beginning to turn. So food's a good example where we've done that for years and years and years. The category has been under pressure given what's going on with GLP ones and other trends. And then we have the unfortunate timing of making a bottle change right when all of that hit. So we have since rectified that and we've returned to Share growth in Q3. And what we're just watching carefully is the category growth number, but in that one, I feel we have a great innovation pipeline of health and wellness type of initiatives, protein forward options, avocado oil for consumers who care about that. So feel good about that pipeline. GLAAD is another one that we've been talking a lot about. We turned to share growth on GLAAD Trash this quarter, and that was through that same playbook. We had some distribution gaps on the core to fix, which we did. We launched some great innovation. We have a new trash bag that has leak guard technology in it, and that has the ability for the bottom of the bag to absorb liquids. So if you were to get a hole in a bag, it wouldn't then be dripping as you're walking out to the trash barrel. That's off to a good start, as well as we released a new purple Moonlight Breeze bag. You should try that one. And that's off to a strong start as well. And in addition to that, we're using our new RGM tools to do some very detailed understanding of price gaps in the market. And we found a gap on one of our items, a very important item. It's an 80-count item we have at a number of retailers. And we saw an opportunity to narrow the price gap, and we believed would pick up share and be financially attractive. We tested it in October, and we ended up rolling it out. And that item in itself grew mid-single digits to high single digits in share, and overall has helped lift the GLAAD business. And we're going to continue to apply those tools. So it's a good example of when we are focused on all those right things, even in a very difficult category, we can get back to growing share. And I feel good about that. Litter is the one we still have more work to do on. We announced that we were making a large transition in Q3 and Q4, resetting the foundation of our fresh debt business, which is our largest brand and our strategic brand in Litter. We changed it all, price pack architecture, new sizing, pricing, we changed the naming convention, we launched some new packaging forms, we upgraded the formula, and that was a lot of transition. So, one thing that's a hard conversion, meaning... Retailers had to take the old product off the shelf, and that takes a period of time. They had to bring the new product on, so that creates a little bit of noise, but it's important that we make that transition. And then there were some things in execution. We got the distribution we wanted, more distribution. We didn't get everything placed on the shelf exactly where we wanted, and that's what we're going back and modifying, and then we're helping the consumers understand if they bought a certain package before, this is the new one to buy, and what the benefit is. That's just the first leg of improvements we need to make. We've had to go back and rebuild our innovation pipeline. This is a business that when you're doing a lot of things operationally, we had built a new plant in order to sustain volume. We had the cyber attack, which was more impactful to litter back in 2024. And then what's happened more just recently, that's one that they've been focused on operations, and now we get to get back to growth. And so that innovation pipeline will begin kicking in in earnest in calendar year 27. And that will be a further way for us to advance our progress. But right now we're focused on just getting to the place where we're growing where the category is, which is highly attractive. It's a single digit grower. And then focusing on shared growth from there. Okay.

So I guess is the expectation operational? Noise, as that gets behind you, you get, you know, incremental improvement in the back half of 26, and then the innovation kicks in and hopefully brings that up to into the positive column.

That's exactly right.

Okay. Can I just on the on the the kind of the platform revamp on litter? What was the consumer inside of the consumer? You know, yeah, I guess, consumer insight that led to that, you know, that kind of large scale of a change.

There were two things. First, and importantly, the FreshJet brand stands for odor. We have stood for that for a long time, and we have superiority in how we deal with odors. And consumers, if you have a cat, the last thing you want people to do when you walk in your house is think you have a cat from the smell. And so we're returning to our core benefit of odor control and ensuring we're communicating that clearly and strongly, and that was an insight that we had not been doing that as sharply as we could, and we will do that going forward. The second thing is, you know, we took a large number of price increases, as the industry did, back in the inflation cycle in 22 and 23, and we knew there was going to be things that we didn't get quite right. And in Litter, there were places we took too much pricing, so we needed to reset the value equation, and that was why the price pack architecture work was so important to ensure that comparably against other options in the category, consumers understand the value. So those are the two main components. And then, of course, innovation is about bringing new benefits to the category in the future.

Okay, where you've had... You know, innovation, you mentioned trash, Clorox, the allergy innovation, Centiva platform. Where that innovation cycle has been effective, are you winning new households, winning back old households, or are you seeing increased frequency of existing households? Is there a way to parse that?

It varies by category. So for Clorox Pure, it's a completely brand new category. So this is new households to a new benefit, which is great. Highly incremental, obviously 100% incremental to us, very incremental to the retailer, and there's just not been offered this benefit before. So we love. When we can find these.

There's an opportunity in France right now, by the way.

Yeah.

I'm just, allergies are everywhere.

They're killing me too. I know. I was like, I need a travel size. I immediately sent my team a note and said, where's my travel pure allergy size? And this is one where we see many benefit spaces in the future. We have our second wave of Clorox Pure launching in the fall. So we've already sold that into retailers. They're very excited about it. And we think we can offer more forms. And and deal more explicitly with certain allergens that are really meaningful to consumers. So we're excited about that. Then there are ones that offer consumers an opportunity to trade up. Maybe they're a current household, but you get a better value and they you get a trade up occasion with that consumer. A good example of that's GLAAD. You know, Moonlight Breeze. It's like, oh, that's nice. You know, I want to pay a little more for a purple bag makes taking out the trash a little better. And I certainly don't want anything leaking. So I'm willing to pay a premium for LeakGuard. And then there are things where we're doing to expand usage. So a good example of that would be, you know, innovation that we do. Things like wipes, where we have good household penetration, but there's so much more to get, and there's so many more occasions to get with a wipe. So that's how our team thinks about it, is what behavior are we trying to drive? And it depends on the category and its maturity, and then we're very clear on what that is. So you'll see a range of innovations. You know, our Hidden Valley Innovation, for example, that's about getting some new households in that may not be choosing to use a ranch because they want a non-seed oil, for example.

Right, right. Okay. All right, we haven't yet talked, we've alluded to Gojo, we haven't really talked about Gojo. Let's spend a little time there. And maybe you can tag team on this. Linda, maybe you can address the, you know, you've talked a little bit about this, but the strategic fit, the strategic rationale for the Gojo acquisition, and maybe what you, as you learn more about that business, you know, what you're, how you're framing it in your own mind into the future. And then Luke, from a financial perspective, as you mentioned, different P&L structure of that business versus the core. So the considerations that investors should have as that does layer onto the business.

Sounds great. We are really excited about this acquisition. Gojo, the makers of Purell. Purell is a leading brand in the health and hygiene space when it comes to skin health and hygiene. And we obviously compete very strongly in health and hygiene today on the surface side. And we have both a retail and a B2B business. They also have retail and B2B business, but they are much stronger in B2B and have very sophisticated technologies, etc. So we closed on April 1st. We've been hard at work at integration, which is going well, and we have more confidence than ever that this was a great acquisition for the company and will yield value. And some of the things that we're getting really confident on, one, we had a pretty conservative case when we did this, since we feel very good about that, but we also see upside. And from a strategic perspective, it makes a lot of sense because if you, I, you know, I started with cleaning as a business that's done really well. It's been one of our fastest growing, it's our most profitable business. Our international business, which has done the same over the last six years, is the majority of that business is cleaning. And so we feel this is really consistent with our capabilities, but takes us one ring out in their superior B2B capabilities. And it allows us to have a bigger platform on health and hygiene. So that's the strategic rationale. And the opportunities are, one, the category is accretive from a growth perspective. It has good tailwinds on both on the professional side and the consumer side. In the B2B space, not only do we have opportunities to take their terrific innovation and the installed base we have. So we bought 22 million dispensers basically on walls that we own the annuity and the refill for. And they're able to improve the technology on a regular basis and they price for that. For example, they've been able to remove labor from the professional side by instead of having a janitor has to come by and take a battery out and change it and consumer experience is terrible, you go in, it doesn't work. They've built the battery into the refill. So you just pop the refill in and no one has to do any work outside of that. That's a huge savings as people think about labor cost in B2B. But what we're really all so excited about is we had tremendous customer interest when we announced this on the professional side because of the incredible relationships and business Gojo has. And they see the ability for us to scale our Clorox business in addition to Purell. And then on the retail side, they have an amazing brand. It's so amazing that during COVID, they discontinued all of their retail business because they focused on healthcare. There were zero, you all know this, because you were probably looking for Purell hand sanitizer if you live in the U.S., and it wasn't available. They discontinued it, and when they were able to supply, they went back in and did a test with a leading retailer. It did so well, they immediately brought it in, and they got distribution back everywhere. But their skill is not marketing and consumer. That's where we come in, and so they have good innovation in the pipeline, but we think we can take that to the next level, And it gives us a brand to be complementary to Clorox, where we can really own surface to skin in a different way and is a great growth platform for the future. And then, of course, financially, it's creative from a growth perspective, neutral in earnings in year one and creative in year two. It has a little bit of a different P&L profile, as Luke spoke about, but strategically and financially a great fit, and it's off to a good start.

Yeah, maybe, so again, re-emphasizing, $800 million business growing very steadily at, you know, mid-single digits, and when you add the, you know, revenue growth opportunities, you could see these growing mid-to-high single digits for us to go, right? So that's the top line. On the bottom line, it's EBITDA margins are in line with that of the company, so that will become accretive once you start layering the... The cost synergies. And importantly, we don't talk about this often, but this is, you know, very high and stable cash flows, which is actually gives us a lot of confidence as we, you know, focus on delivering over the next few years. So that's the, you know, that's the big picture. Now, specifically to the P&L. You have to remember that 80% of the business is actually professional, and only 20% of the business is retail. So while the EBITDA margin is actually comparable to that of the company, the different lines of the P&L are a little different. So their gross margin is a little lower, and so that will, you know, call it a close, close to 40%, you know, 40% or so. So that will create a headwind of about alpha points on our total company gross margins when we integrate it. Um, their advertising is lower actually in line with, you know, our professional, you know, business unit. And so that will, you know, lower the total company advertising by about a point. Um, and their SG&A is a little higher because they have, you know, mostly driven by a higher sales force. It's more fragmented in the marketplace, and so that will add about a point on our SG&A as a percentage of sales. So those are the main differences.

Very helpful. It's early, obviously, but where you've started to integrate or have the teams collaborate, professional-professional, consumer-to-consumer, what's been the fit, the cultural fit, the acceptance between Legacy Gojo and Clorox, et cetera?

When we first went out and met this team, we were blown away. It was like, oh, my gosh, we're talking just an extension of ourselves. They have very similar values. In fact, if you read their values, they're very close to ours, and they view the world and the role that Purell has in it very much like the way we view the world. But we also saw cultural upgrades that they could help make. They're fast. You know, they have a culture of innovation that we're building but want to continue to nurture. So as we brought the teams together, we've just reinforced that. We've retained almost the entire management team, and people are really excited about being part of the company. We've also retained their culture. We've retained their leadership headquarters in Akron, Ohio. I get to go to Ohio a lot now, and so it's just been a great fit. You know, when we told our professional business, you can imagine that would be difficult for them, they said, oh, finally, this makes a ton of sense. So good cultural fit, integration off to a strong start, and really importantly, we retain the management team so we can keep the rest of our teams focused on improving businesses in our core.

Good. A couple of topics I want to hit before we run out of time. The first one's for you, Luke. A lot of focus across CPG on capital structure, capital allocation. The Gojo transaction does raise your leverage profile. Maybe talk a little bit about how you're seeing the capital structure and your prioritization for capital going forward.

Yeah. First of all, our capital allocation priorities remain the same. And so briefly, they're in ranked order. First and foremost, investing in the business. This is where we can strengthen our competitive advantage. And deliver profitable growth and generate the highest return for shareholders. Second, we want to continue to support the dividend. We have a long track record of increasing the dividend annually, and you should expect us to continue doing so. Third, manage debt leverage. And our targeted debt leverage ratio is two to two and a half times debt to EBITDA. And then fourth, if we have any excess cash returning to the shareholders, which we've been doing in the past few years. So with that as backdrop, in the near term, Following the Gojo acquisitions, our top priority is going to be on balance sheet discipline and delivering. We expect to end the fiscal year with a debt leverage of about 3.6 times. And our focus is to bring that down to about two and a half times within two years. Now, as I just mentioned, the great news here is we're bringing a business that generates strong and steady cash flows. And in addition, the way we structure the transactions, we expect to have pretty significant tax benefit in the first two years. So that's really giving us a high degree of confidence in our ability to deliver. But again, our commitment to dividend remains unchanged. Having said that, we have suspended share repurchase, and we continue to do so until we reach our targeted debt leverage. Leverage.

Okay, perfect. The other point I wanted to hit before we close, Linda, is ERP. We've talked about ERP a couple times today as a form of disruption, but in prior conversations, we've talked about that as a huge unlock and enabler as part of the overall digital transformation. So as we turn the page, hopefully on those disruptions, and talk a little bit about what you're seeing on the plus side and what value remains to unlock, given that the technology... So evolution has now run its course.

Yeah, I think it's really important what you mentioned, Stephen, so I'll just take a second to recap. We did a holistic digital transformation of the company. And the first thing we did was we got our data clean. And that's an enormous task with the amount of data that we have access to, and created a data lake. And we knew that that would be important as we layered technology in the ERP on top of that. So that was the first step. Then the second step was we put a bunch of technologies in place to begin to take advantage of that. An example is the work that we did in marketing personalization, which is already yielding tremendous value, and we have industry-leading advertising ROIs as a result of that. And then the final step, the most expensive step, and the hardest step, is implementing the ERP. And our ERP was 25 years old, so this was a greenfield implementation, building a completely new house, doing all modern electrical and plumbing, which means everyone has to operate in the house differently than they did before. And that's really the hard part. The technology, I dare say, is the easier part, but we've got every single person in the Clorox company working different in this technology. But that creates tremendous opportunity in the future. So having this data, having this technology layer, now the ERP gives us better insight and access to data. It allows us to move faster. It allows us to drive productivity. So there'll be a whole slew of new projects that come out of that, many of which we dreamed up. We've come up with new ones since we begin to implement it. And we'll start to see that value creation happen in fiscal year 27 and beyond. What we're seeing from our team right now is, you know, it's hard to do new things. So that's some of what the stabilization phase is about. And, you know, we used to touch kind of every order almost that came through our system. Now those things just have to run on its own. We need our team, you know, building growth cases and not doing that manual stuff. So we're well on our way there, but we feel terrific that we're past this milestone. It was a very important part of getting our company's foundation set to grow, and we just feel fortunate because as things like AI come out, we would have not been ready to take advantage of that had we not invested this time and effort and unfortunately have to deal with the disruptions, but now we're on the side of value creation and driving the ROI that we signed up for. Okay.

Maybe to close out, if investors were to ask you, you know, what they should be most focused on, one or two, you know, critical proof points as we progress forward over the next, you know, six, 12 months, what would you say?

Market share improvement. You know, we intend to improve that, and we have made sequential improvements, but we intend to win in the marketplace on our key brands. And so we will continue to report out our progress on that through innovation, etc. And the second thing I would watch is, this is, we made a large acquisition with Gojo. We intend to integrate it with excellence and drive value from that. We'll continue to report on that. And I think that's another good sign that we're executing as we intend to.

Okay. Good place to leave it. Right on time. Thank you. Thank you both. Thanks, Steve. Thank you all for joining us.