CloroxCLX

The company earned $1.66 per share last quarter, just ahead of the $1.64 analysts expected. Revenue of $1.95 billion also topped estimates. However, organic sales, which strip out the impact of buying or selling businesses, fell 13 percent. This drop was mostly because the company was comparing against a period last year when it had a one-time surge in shipments as it switched to a new software system.

Gross margin, the percentage of sales left after paying for the products themselves, fell to about 41 percent. This squeeze came from higher costs for ingredients and parts, as well as the costs of folding in GOJO Industries, the maker of Purell. While the acquisition adds a strong brand to the portfolio, the immediate hit to margins shows that the path back to historical profit levels remains a work in progress.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Strong revenue outlook: Management expects net sales to grow between 13% and 14% for fiscal year 2027, which is a major jump from the 5% decrease reported for the full year 2026. This outlook includes a 9.5 point boost from the new Purell acquisition and shows the company is moving past recent supply chain disruptions.
• Purell acquisition driving growth: The purchase of GOJO Industries, the maker of Purell, added about 10 points of growth to the company this quarter and helped the health division grow its sales by 16%. This expansion into professional hygiene is part of why the company now gets more than half of its total sales from health and hygiene products.
• Gross margins under pressure: Gross margin, which measures the profit left after making and shipping products, fell to 41.3% from 46.5% a year ago. Higher costs for ingredients and shipping, along with lower overall sales volume, caused this drop and kept the company below its long-term target of 44%.
• Inventory cleanup ending: Organic sales, which exclude the impact of new deals and currency changes, dropped 13% this quarter because the company is lapping a period where stores stocked up heavily during a software upgrade. This specific timing issue cut about 13.5 points from sales this quarter, but management expects a recovery next year as these inventory levels even out.
• Higher manufacturing costs: Adjusted earnings fell 42% to $1.66 per share as the company dealt with more expensive raw materials and higher logistics costs. These rising expenses, combined with the 2% drop in total sales, made for a tougher profit environment compared to the $2.87 earned in the same period last year.

Our take: A soft quarter that marks the low point of a major system transition. While the Purell acquisition provides a massive 14% revenue growth tailwind for next year, the current 41.3% gross margin is a concern. We still believe in the brand's strength, but these results show the recovery will take longer than expected.