Clorox (CLX) Q1 2027 earnings review
Clorox sales jump on easy comparisons, but cost inflation worsens
Clorox, the maker of bleach, Glad trash bags and Purell, posted a big mechanical rebound while its cost pressures worsened. Revenue jumped 33% to $1.91 billion, but by our math all 18% of growth at businesses owned a year ago came from lapping last year's software-related inventory drawdown, and the rest came from buying GOJO. Chief executive Linda Rendle said first-quarter results beat expectations partly on timing, yet gross margin still fell 1.3 percentage points to 40.4%.
| Sales from businesses owned a year ago | +18% 0% excluding last year's software disruption, by our math |
|---|---|
| Reported revenue | $1.91B +33% from a year ago (GOJO added 15 points) |
| Gross margin | 40.4% down 1.3 percentage points from a year ago |
| Full-year profit outlook | Guided to low end gross margin target cut from 42.0% to 41.5% |
⚖️ Verdict: 🔴 Bearish
The story got worse because cost inflation forced Clorox to cut its full-year gross margin target to 41.5% just one quarter into the year. Lower corporate overhead absorbed part of the blow, but management still steered full-year profit per share excluding one-offs toward the bottom of its $5.70 to $6.00 plan, which by our math points to an 11% profit drop over the rest of the year.
The question now is whether incoming chief executive Fabian Garcia, who takes over in January, will treat the lowered profit target as a floor or reset expectations again. One view is that overhead savings and commercial Purell sales can offset factory inflation; the other is that flat consumer demand and $5.2 billion of debt leave no room for cost surprises. Second-quarter margins and Garcia's first update in winter will tell.
🐂 Bull Case
Lower Overhead Costs Softened the Factory Inflation Blow
Clorox finished its five-year, $580 million software upgrade last year, and management promised that the new systems and back-office automation would cut overhead. In the first quarter, selling and administrative expenses — corporate staff and office overhead — fell by 4.2 percentage points of revenue to 15.2%, or 14.4% excluding one-offs from the GOJO acquisition.
The household goods maker also trimmed its full-year forecast for selling and administrative costs from about 16% of sales to about 15.5%. Because those overhead savings offset the 50-basis-point cut to the gross margin plan, Clorox kept its full-year profit-per-share range intact despite rising factory costs.
What to watch: selling and administrative expenses as a share of sales over the rest of the year. Holding that ratio near 15% excluding one-offs would confirm that the software upgrade is delivering permanent savings rather than one-quarter timing benefits.
Professional Cleaning Expanded With Clorox Purell ProCare
Clorox bought GOJO Industries, the maker of Purell hand sanitizer, in April 2026 to build a larger commercial hygiene business. This quarter the company launched Clorox Purell ProCare, combining its CloroxPro commercial cleaning unit with GOJO under "a unified sales and service organization and network of leading distributors" for hospitals and businesses.
Sales in the Health and Wellness division rose 62% to $918 million, with GOJO contributing 39 percentage points, or about $214 million by our math. The consumer business also launched new Burt's Bees squeeze-tube lip balms, scented Purell sprays and seasonal Glad and Hidden Valley products, though the release did not update e-commerce or retail value-tier metrics.
What to watch: Health and Wellness revenue in the fourth quarter of fiscal 2027, when Purell passes the one-year mark of ownership. That quarter will provide the first clean reading on whether the combined sales team is growing commercial sales faster than the company average.
🐻 Bear Case
Cost Inflation Cut the Margin Outlook Early
Clorox said it delivered one of its strongest quarters of cost savings on record, and chief executive Linda Rendle praised "delivering better-than-expected results through strong execution and timing benefits". Yet only one quarter into the fiscal year, Rendle warned that "the cost environment has become more challenging, with higher inflationary pressures reflected in our updated outlook".
- First-quarter gross margin: 40.4%, down 1.3 percentage points from 41.7% a year ago
- Cost of products sold: 59.6% of sales, up 1.3 percentage points on higher raw material, factory and shipping costs
- Full-year gross margin outlook: cut to about 41.5% from about 42.0% three months ago
- Full-year profit per share, excluding one-offs: kept at $5.70 to $6.00, but now expected "closer to the low end of the range"
This cuts against the company's framing that productivity and selective price increases would hold gross margin steady this year. Even after a strong first quarter, steering full-year profit per share excluding one-offs toward $5.70 implies that earnings over the rest of the year will fall about 11% from a year ago by our math.
What to watch: gross margin in the second and third quarters. By our math, Clorox must average 41.9% gross margin across the remaining three quarters just to hit its lowered 41.5% full-year target.
Underlying Sales Stood Still After Stripping One-Offs
Headline revenue jumped 33% to $1.91 billion, and sales from businesses Clorox owned a year ago rose 18%. However, a year ago US stores were burning through extra inventory they had stockpiled ahead of Clorox's software switch, which depressed last year's first-quarter shipments.
- Software transition comparison benefit: about 18 percentage points of the 18% underlying sales growth
- GOJO acquisition benefit: about 15 percentage points of the 33% reported revenue growth
- Underlying sales growth excluding the software comparison: 0% by our math
- Profit per share excluding one-offs vs last year's pre-drawdown baseline ($1.75): down 11% to $1.55 by our math
Once the one-time inventory rebound and the Purell purchase are stripped out, customer demand did not grow. Furthermore, the unchanged full-year plan for 3.5% to 4.5% growth in businesses owned a year ago leaves only 0.2% growth for the remaining three quarters by our math.
What to watch: second-quarter sales from businesses owned a year ago. With last year's big first-quarter software disruption now in the past, next quarter will show whether volume can grow without an easy comparison.
Short-Term Debt Rose as Leverage Topped $5 Billion
Clorox took on heavy debt over the past year to buy GOJO and to buy out Procter & Gamble's stake in the Glad trash-bag joint venture. Management previously said it structured the short-term notes to pay them down using cash generated over 12 to 18 months.
In the first quarter, total debt reached $5.16 billion against $184 million of cash, up 91% from $2.70 billion a year ago by our math. Instead of shrinking, short-term notes and loans payable rose by $89 million from June to $1.18 billion, while quarterly interest expense more than doubled to $52 million from $23 million.
What to watch: notes and loans payable on the second-quarter balance sheet. If short-term borrowings do not start falling during the middle of the fiscal year, high interest costs and the dividend will leave little cash buffer.
Risks This Quarter Didn't Answer
Several standing business questions received no figures in the first-quarter release and await the conference call or quarterly filing.
- Purell standalone growth: Clorox reported GOJO's 15-point addition to company sales, but still gave no year-over-year growth rate for Purell against its own prior-year sales.
- Cat litter turnaround: Household sales rose 17% on the software comparison, with no separate figure showing whether Fresh Step cat litter stopped losing market share.
- Trash bag price increases: the release did not say whether higher prices on Glad trash bags cost Clorox volume against cheaper store brands.
👓 Other Themes
Clorox Named Fabian Garcia Chief Executive From January
Alongside the quarterly results, Clorox announced that its board appointed Fabian Garcia as chief executive officer, taking over from Linda Rendle on January 5, 2027. Rendle had announced plans to step down in May 2026. Naming Garcia ends the open search, though investors still wait to see whether he keeps the current fiscal 2027 financial targets when he takes the seat.
💲 Other KPIs
Cash generated from operations rose 54% from $93 million a year ago as shipments rebounded from last year's software disruption. Even so, operating cash flow stayed below the $221 million generated two years ago in the first quarter of fiscal 2025, and the release did not disclose capital spending to calculate free cash flow.
Segment profit before interest and taxes, excluding one-offs, rose 63% in International to $31 million on 9% volume growth in Latin America and other regions. Lifestyle profit climbed 58% to $60 million, while Household profit rose only 11% to $30 million on 17% higher sales because factory and raw material inflation ate into margins.
Weighted average diluted shares dipped 0.8% from 123.0 million a year ago, and ticked up slightly from 121.8 million in the fourth quarter. With net debt near $5 billion following the GOJO acquisition, Clorox is not running a major share buyback programme.
🔮 Guidance
Unchanged. Clorox still expects reported revenue to rise 13% to 14% this year, including about 9.5 percentage points from the GOJO acquisition. By our math, after a 33% jump in the first quarter, the middle of the full-year range leaves about 8.2% reported revenue growth across the remaining three quarters.
Unchanged. The plan still calls for 3.5% to 4.5% growth, with more than 3.5 percentage points coming from lapping last year's retailer inventory drawdown. Because the first quarter already captured an 18% rebound, the middle of the full-year range leaves only about 0.2% underlying growth for the rest of the year by our math.
Cut. Management lowered the full-year gross margin target by half a percentage point to 41.5%, citing "higher-than-normal inflationary headwinds and negative mix more than offsetting the benefits from cost savings and pricing actions". That includes a 0.2-point drag from GOJO inventory accounting and requires gross margin to average 41.9% over the rest of the year by our math, up from 40.4% in Q1.
Improved. Clorox lowered its expected overhead cost ratio from about 16% of sales to about 15.5%, including 0.4 percentage points of GOJO transaction costs. That half-point improvement in overhead spending offsets the half-point cut to the gross margin outlook.
Unchanged. Marketing spending remains planned at about 10% of total sales, matching the 10.0% spent in the first quarter. Within that total, Clorox raised the assumed marketing rate for its consumer retail brands to about 12% of sales, up from "over 11%" three months ago.
Unchanged. The full-year tax rate remains planned at about 23%. In the first quarter, Clorox paid $34 million in taxes on $207 million of pre-tax profit (a 16.4% rate), which helped boost first-quarter profit per share.
Unchanged. Reported profit per share is still planned to rise 12% to 19% from last year's $4.81. The forecast includes $0.29 per share (about $46 million pre-tax, or $35 million after tax) of acquisition and integration costs for GOJO.
Guided lower within the range. While the $5.70 to $6.00 bracket (up 3% to 8%) stayed in place, Clorox now expects full-year results "closer to the low end of the range". By our math, after earning $1.55 in the first quarter, landing near $5.70 leaves $4.15 for the rest of the year — down about 11% from the $4.68 earned in the same three quarters last year.
❓ Key Questions
How fast is Purell growing on its own?
GOJO added 15 percentage points to company sales, but Clorox still has not shared how Purell's sales compare with the same quarter last year before Clorox bought it. Without that figure, investors cannot tell whether the acquired business is expanding or standing still.
Why did Household profit lag its sales rebound?
Household sales rose 17% on the software comparison, yet segment profit rose only 11% to $30 million — half the $60 million earned two years ago in Q1 FY25. How much of that gap came from raw material costs versus price cuts in cat litter?
When will Clorox begin paying down short-term debt?
Notes and loans payable rose by $89 million in the quarter to $1.18 billion. Given management's plan to retire those borrowings from cash flow within 12 to 18 months, what is the schedule for debt reduction over the remaining three quarters?
How much of the Q1 beat was shipment timing?
Chief executive Linda Rendle attributed the first-quarter beat to "strong execution and timing benefits", and the company left its full-year sales outlook unchanged. How many percentage points of Q1 sales were pulled forward from the second quarter?