- 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 net debt to about 4.2 times fiscal 2026 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.
- Balance sheet
- Cash: $143M
Debt: $5.1B
Net debt: $4.9B
EBITDA, last 12 months: $1.2B
Net debt / EBITDA: 4.2× (high)
Interest cover: 7.0×
Undrawn credit line: $2.0B
Ratings: S&P BBB, Moody's Baa1
Clorox borrowed to buy GOJO for about $2.15 billion in April 2026, and the debt now limits its choices. Dividends of $602 million were larger than fiscal 2026 free cash flow of $405 million before the one-time $476 million Glad payment. Most of its debt is unsecured debt of the parent company. Debt does not include $530 million of lease liabilities. At June 30, 2026, $3.98 billion was fixed-rate senior notes, including $1.5 billion of new notes from May 2026, due 2031 to 2036. $1.09 billion was commercial paper at floating rates. EBITDA is for fiscal 2026, and interest cover uses EBIT of $921 million. GOJO added profit for only one quarter. Interest cost will rise in fiscal 2027, because the new debt is outstanding for the full year. Long-term debt maturities are small until $901 million in fiscal 2028. $764 million of the undrawn credit lines expires on March 5, 2027. S&P cut its long-term rating from BBB+ in February 2026. A cut below investment grade would let derivative counterparties ask for full collateral. Equity that Clorox shareholders own was only $90 million because of years of buybacks. This is not a solvency problem by itself. The cash must go to the dividend and to debt reduction toward the 2.5 times target by the end of calendar 2027. This leaves little room for buybacks or another deal.
As of 2026-06-30.
- Checkpoints
- Nov 2, 2026 (estimate): Fiscal Q1 2027 earnings: sales rebound and leverage. Pending. Watch: Organic sales growth on track for the 3.5% to 4.5% fiscal 2027 range and lower net debt pass; another sales decline or higher leverage fails.
Feb 2027 (estimate): Fiscal Q2 2027 earnings: margin repair and GOJO. Pending. Watch: Gross margin growth and GOJO profit in line with plan pass; a guidance cut or a new credit downgrade fails.
Q1 2027 (estimate): Board names a permanent CEO. Pending. Watch: A named successor with a clear plan for GOJO and debt reduction passes; a search that continues past fiscal Q3 2027 fails.
Dec 2027 (estimate): Leverage back near 2.5 times EBITDA. Pending. Watch: Net leverage near 2.5 times by the end of calendar 2027 passes; leverage still above 3.5 times fails.
- 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.