- Company name
- The Clorox Company
- Sector
- Consumer staples (household & personal products)
- About
- Clorox makes household and personal care products that people buy every week. Its brands include Clorox bleach and wipes, Pine-Sol cleaner, Glad trash bags, Brita water filters, Burt's Bees skin care, and Kingsford charcoal. Clorox sells these products to large retailers such as Walmart and Target, who then sell them to consumers. Most Clorox brands hold the number one or number two share position in their category.
- Thesis
- Clorox just finished a five-year project to replace its old SAP computer system. The final switchover caused a swing in retailer orders. Fiscal 2026 sales fell and margins dropped as a result. Investors worry this shows lasting damage from private-label competition, not just a one-time glitch. Debt from the GOJO and Glad buyouts also pushed leverage above four times earnings. That adds balance-sheet risk on top of the sales drop. A credit downgrade and an open CEO search add further uncertainty. For the gap to close, fiscal 2027 sales growth needs to reach the 3.5% to 4.5% range management has guided. Leverage also needs to fall back toward management's target of about 2.5 times EBITDA, a common measure of operating profit, by the end of calendar 2027. A permanent CEO also needs to be named and show the turnaround is working. The next test comes at first-quarter fiscal 2027 earnings, expected around early November 2026. If sales stabilize and leverage falls as planned, the gap could close over the next four to six quarters. If the CEO search drags on or sales disappoint again, the discount could persist well into 2027.
- Risks
- Debt taken on for the GOJO and Glad joint-venture buyouts pushed leverage to about 4.4 times EBITDA, above the 3.6 times expected when the GOJO deal was signed, because EBITDA itself has fallen. S&P has already cut Clorox's credit rating once. Management's plan to return to about 2.5 times leverage by the end of calendar 2027 depends on earnings actually recovering.
CEO Linda Rendle announced in May 2026 that she will step down for health reasons once the board finds a successor. This leadership transition adds execution risk at the same time Clorox is integrating GOJO and stabilizing its new SAP system.
Private-label pressure is not spread evenly across Clorox's business. The Household segment, which includes trash bags and cat litter, earns only a 10.7% margin and 16% of segment profit despite being Clorox's second-largest segment by sales. Further private-label gains here would hurt profit more than in Clorox's stronger categories.
A California judge let most of Clorox's $380 million lawsuit against Cognizant proceed in March 2026, but no trial date has been set. This is realistic multi-year litigation, not a near-term payout, and Clorox has recovered only a fraction of its claimed damages from insurance so far.
The options market already prices unusually high volatility into Clorox shares, well above a typical staples stock. This reflects real uncertainty about leverage, the open CEO search, and whether the FY2027 rebound holds up, with the next test being Clorox's Q1 fiscal 2027 earnings report, expected in early November 2026.
- Recent events
- 2026-09-09: At the Boston Global Staples Conference, Clorox management said it expects fiscal 2027 organic sales growth of 3.5% to 4.5%, matching earlier guidance, and described the year as one of transition and repair after finishing the SAP system upgrade.
2026-08-03: Clorox reported full fiscal-year 2026 results. Net sales fell 5% to $6.72 billion, organic sales fell 8%, and adjusted earnings per share fell 28% to $5.53. The company guided to 3-4.5% organic sales growth for fiscal 2027.
2026-05-28: CEO Linda Rendle asked the board to start a search for her successor, saying she will step down for health reasons after treatment for early-stage breast cancer. She will remain CEO until a successor is named.
2026-04-01: Clorox completed its $2.25 billion acquisition of GOJO Industries, maker of Purell, funded mostly with new debt.
2026-03-25: A California judge trimmed Clorox's lawsuit against Cognizant, dismissing an intentional misrepresentation claim but letting the breach of contract and gross negligence claims proceed. No trial date has been set.
2026-03-02: Clorox paid $476 million in cash to buy Procter & Gamble's 20% stake in the Glad trash bag joint venture, taking full ownership of the Glad brand.
2026-02-18: S&P Global Ratings downgraded Clorox to BBB from BBB+, citing the leverage added by the debt-funded GOJO acquisition.
2025-07-22: Clorox sued its IT services contractor, Cognizant, for $380 million in California state court, alleging Cognizant's help desk handed network passwords to a caller posing as an employee during the August 2023 cyberattack.