- Price
- $89.77 → $83.80(−6.7%)
- Discount
- 41.7% → 45.6%(+3.9 pts)
- Thesis
- Clorox just finished a five-year, roughly $580 million project to replace its 20-year-old SAP computer system. The final cutoverswitchover caused a swing in retailer inventory whipsaw, so fiscalorders. Fiscal 2026 organic sales fell about 8%, and gross margin fell to 42margins dropped as a result.3%. Private Investors worry this shows lasting damage from private-label pressure is realcompetition, but concentrated: Health and Wellness, which includes bleach, wipes, and now Purell, still earnsnot just a 25one-time glitch.1% margin Debt from the GOJO and makes 57%Glad buyouts also pushed leverage above four times earnings. That adds balance-sheet risk on top of segment profit from just 40% ofthe sales, while Household, hit hardest by private label, earns only a 10 drop.7% margin A credit downgrade and an open CEO search add further uncertainty. Clorox funded its $2.25 billion purchase of GOJO mostly with debtFor the gap to close, pushing leveragefiscal 2027 sales growth needs to about 4reach the 3.4 times EBITDA and triggering a credit rating cut5% to BBB in February 2026, though4.5% range management targets a returnhas 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. Clorox's own options market prices implied volatility well above what a calm staples stock normally tradesA permanent CEO also needs to be named and show the turnaround is working. The next test comes at first-quarter fiscal 2027 earnings, showing investors already expect real uncertaintyexpected around theearly November 2026. If sales stabilize and leverage falls as planned, the open CEO search, and whethergap could close over the business has actually stabilizednext four to six quarters. If the FY2027 rebound plays out and a new CEO resolves the leadership questionsearch drags on or sales disappoint again, some of that priced-in fearthe discount could prove overdonepersist well into 2027.
- 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.