Clorox Company (The)

or are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, you may press star 1 on your touchtone pad at any time. If anyone should require assistance during the conference, please press star 0 on your touchtone pad at any time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Ms. Lisa Burhan, Vice President of Investor Relations for the Clorox Company. Ms. Berhon, you may begin your conference.

Thank you, Jen. Good afternoon, everyone, and thank you for joining us. On the call with me today are Linda Rendell, our chair and CEO, and Luc Bellet, our CFO. Please note also that our earnings release and prepared remarks are available on our website at theclarkscompany.com. In just a moment, Linda will share a few opening comments, and then we'll take your questions. During this call, we may make forward-looking statements including about our fiscal year 2026 outlook. These statements are based on management's current expectation, but may differ from actual results or outcome. In addition, we may refer to certain non-GAAP financial measures. Please refer to the forward-looking statement section, which identifies various factors that could affect such forward-looking statements, which has been filed with the SEC. In addition, please refer to the non-GAAP financial information section in our earnings release and the supplemental financial schedule in the investor relations section of our website, for reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. Now I'll turn it over to Linda.

Thank you for joining us today. Our Q4 and fiscal year 2025 performance was mixed, with weaker-than-expected top-line growth balanced by strong margin and earnings performance for the year. In the front half of the year, our fundamentals on consumer, category, and shares played out largely in line with our expectations. In the back half, our category slowed when macroeconomic uncertainties picked up. While this largely stabilized in Q4, it has not yet normalized. To put the quarter in context, we executed many of the elements with excellence as we shipped higher than expected incremental orders to temporarily build retailer inventories in support of our ERP launch in the U.S. And as a reminder, our new ERP is a critical part of a strong digital foundation that enables us to better leverage data and insights to drive revenue and efficiencies. We also delivered strong gross margin in earnings in the quarter. At the same time, when consumers are stressed, the bar goes up and we didn't deliver on all elements of our plans for value superiority on some of our businesses this quarter. We also lapped abnormally high demand creation activities from last Q4 as we continue to rebuild shares following supply restoration from our August 2023 cyber attack. This led to lower than expected sales for the quarter when we exclude the ERP retail inventory build. Looking ahead, we are clear-sighted on what we need to do to win in the marketplace and and deliver clearly superior experiences and value to our consumers in this environment. We see opportunity ahead as consumers continue to seek better experiences, and we will lean into this with our innovation pipeline in the back half of the year. Importantly, we're excited to advance our transformation and begin to fully unlock the new, modernized capabilities we've built. While we have more work to do, I'm confident we have the right plans, capabilities, and investment levels not only to win with consumers, but also to deliver strong financial performance in fiscal year 2026 and beyond. With that, Luke and I will now take your questions.

Thank you, Ms. Rendell. Ladies and gentlemen, if you have a question, please press star 1 on your touchtone telephone. And our first question will come from Peter Grom with UBS.

Thanks, operator, and good afternoon, everyone. I guess I just, you know, just to start, I want to ask on the sales performance in the quarter. You know, obviously we can see in the data and from your peers, you know, category trends have been underwhelming. But if you back up the ERP benefit that you called out, the organic performance is a bit weaker than what we can see in the data and kind of a bit below what was contemplated in the guidance a few months back. So can you maybe just help us understand the gap between the implied performance and kind of the consumption data that we can see. And I understand having near-term visibility is difficult given all the many moving pieces, but just how did it all play out versus your expectations? Thanks.

Hi, Peter. This is Luke. Why don't I just give you the breakdown from our sales performance all the way to consumptions, and then I think Linda wanted to just offer perspective on our consumption performance. So, you know, if you look at our organic sales growth was about 8%, and if you back out the 13% to 14%, you know, related to the inventory build at the retailers, you get, you know, OSG call it about, you know, negative 5%. And remember, at our last earnings, we had estimated that excluding the impact of the ERP, we were expecting to be maybe negative 3%. So that's lower than we expected. That's also lower than the consumption, which was about negative three. But the gap is the inventory, the stocking that we had mentioned in our last earnings. So really, negative three consumption is lower. We would have expected to be in line with the category, which was slightly negative. And the difference is really a lower share performance than anticipated.

And Pierre, maybe I'll take on what we experienced in share and where we missed versus our expectations. And maybe it'd be helpful just to take a step back and put the quarter in an overall context and then talk about where we have confidence moving forward. This was a pretty dynamic quarter, and we knew it was going to be. We were lapping a quarter from last year that had very high spending and had high merchandising. And that was due to many of the activities we put in the marketplace to recover from the cyber attack we had experienced the year before. So we knew we were lapping that, and we had made a lot of decisions to adjust spending and adjust our merchandising plans. At the same time, we saw a very, very dynamic consumer environment as consumers were trading up, trading into smaller sizes, moving to different retailers. And then, of course, we were preparing for our ERP transition. So a lot going on. And just quite frankly, in a few businesses, it didn't go as we had expected to. Some of those elements we didn't execute as well as we could have, and things were lower than expected. On the flip side, there were some businesses that went exactly as we expected. Cleaning is a great example of that, where we continued to grow share. Innovation plans worked extremely well. The changes we made to merchandising played out. And so that's really the delta between where we thought we were going to be in Q4 and where we landed. We never like that, but we see clear opportunities to improve moving forward, and our plans for 26 contemplate that and really begin to ramp up in the back half. And we feel good about that, and obviously we'll make progress over the next couple of quarters on that. But this really just comes down to a very, very dynamic quarter, and we didn't get it all right, but we're clear-sighted on where we didn't and what we need to do moving forward. The other thing I'll note is, you know, really importantly for us, we look at our brands to say, was this a brand issue or was this an execution issue? And our brands continue to be incredibly healthy with consumers. We grew household penetration in fiscal year 25. And although we lost share in Q4, we grew share for the year. and we came off of a quarter in Q3 where we maintained share. And if you look at our consumer value metric, that remains at a high point in fiscal year 25. So we know it's not our brand. They still resonate with consumers and have every right to perform, and we're going to make sure that that execution comes through for fiscal year 26.

Thank you for that. And I guess maybe just to that point, You just mentioned kind of the sequential improvement. It was mentioned in the prepared remarks that consumption trends would remain sluggish but improve in the second half. Can you just unpack that a bit and kind of what drives the confidence that trends are going to improve? Is that a category-based assumption or is that a reflection of some of the actions you're taking to drive improved share performance?

Yeah, Peter, it's both. But let me focus on what we control and kind of walk you through it. What we're really seeing in the front half of the year is continued sluggish categories, and we've adjusted our plans, which will take effect over time to address what we're seeing in consumer behavior. So as they're going after larger sizes, we've adjusted our plan to deal with that. You're going to see those types of activities ramp up through the front half of the year, but really take hold firmly in the back half. And then the other thing that I would mention, we have a very strong innovation plan in the back half of the year. As you might recall, we talked about in fiscal year 25 that we would be building on current platforms, innovation platforms that we had. And then beginning in 26, we would be launching new platforms. And that really was a result of the cyber attack we experienced. We decided to double down on what we had versus launching new. But now we're at that point, we'll be launching new innovation in the back half, which we're excited about. And that will support not only category growth, which we care first and foremost about, but also we believe market share improvements. So, you know, looking at the category lens, I would say it still remains uncertain. Consumers are definitely still under stress. We continue to expect our categories to perform below what they normally do, and we'll see how that progresses throughout the year. But I can't tell you with certainty what the categories will look like, but what's under our control will sequentially improve throughout the year.

Got it. Thanks so much. I'll pass it on. Thanks, Peter.

Our next question will come from Andrea Teixeira with JPMorgan.

Thank you, operator. And I wanted Linda and Luca just to go through the math of getting back to the levels as you did the ERP and then the pull forward. Then the impact, the negative impact seems a little more outside it, actually not a little, probably more outside than the benefit. I just want to go through the map, or like any other peer in the industry, having the same impact from destocking. So in other words, the destocking that is happening as we see channels shifting to e-commerce, that is even exacerbating that impact. Is that an additional destocking on top of the destocking from the ERP?

Got it. Why don't I hit two things? Let me address your more just industry destocking question. Then I'll get into the ERP and I'm going to pass it to Luke to walk you through how to think about Q4 as it relates to the ERP from a performance perspective and then how to think about 26 coming out of that and what will happen in numbers because we acknowledge there is a lot of noise right now going on in that and we'll try to provide as much clarity as we possibly can. So first on destocking, you know, as we talked about at the end of Q3, we did expect some destocking to continue in Q4. And largely what we saw was in line with our expectations. We saw a bit more in a couple of our businesses. We don't look at that as a structural issue. You know, we look at that as more retailers continuing to do what we do, which is get better at inventory management without experiencing out-of-stocks. We do not have any material retailer destocking outside of the ERP, which we'll talk about, which is a different thing in our plan for fiscal year 26, but we continue to watch it very, very closely. And that wasn't the big story for Q4 and as we think about fiscal year 26. With that, let's turn to the ERP, and I'll do some framing and then again hand it to Luke. First of all, we're on track to complete the implementation of our ERP this year in the U.S., which is terrific. And I think it's helpful to remind everybody that the ERP happened at the beginning of July, and it happens in phases throughout the year, but the big portion really went live at the beginning of July. And we are now in a stabilization phase. So I wouldn't say we're done, but we're still in the ramp-up phase. And to put the size of this ERP transition in context, which will connect the data that Luke will share on the actual numbers, this was not an upgrade of an ERP. This was a complete greenfield implementation of an ERP in the U.S. And that's because our current ERP or our former ERP now was 25 years old. So we really needed to start from scratch. And that means this was incredibly complex. And it took years of planning. And, of course, these types of implementations come with exceptionally high complexity. And, you know, if you think about what we just executed over the last, call it eight weeks, we had to build our own pre-build and ensure that retailers had the right amount of inventory for when we shut our system down because there's a period of time you can't take orders and then you have to bring the system back on. You have the nervousness of when you turn the system on and turn it off and turn it back on. And then, of course, beginning to ramp up those processes. And the good news is most of that went exceptionally well. We experienced the normal bumpiness as we're in the ramp-up phase. And the good news is retailers have been terrific partnering with us so that as we encounter issues, we're able to solve them quickly and move on. But we are still in the middle of that ramp-up phase here and will be for the next few weeks, and then we'll finish the implementation for the rest of the year. So as I hand it to Luke, just the takeaway is, You know, there is a lot of noise between fiscal year 25 and 26 because of the size of this implementation. And we have to make sure that we have the right inventories at the right places to ensure that this went smoothly. And that's why I think you're seeing more than what you might for other companies, a much bigger pre-build. And then, of course, we have to deal with that in the year. And again, it is just noise between years and nothing structural. But I'll hand it over to Luke to walk through the different timelines.

Yeah, thanks, Linda. Let me offer a couple of comments on what happened in Q4, because it was a little different than our expectations. And once I do that, just let me work you through the impact of the early ERP shipments to the Outlook. So the retailer inventory build ended up being much higher than we anticipated. If you remember, we had anticipated that, you know, the retailers would order between one and one and a half weeks of inventory. And that was equivalent to about two to three points of annual growth. Now, you know, it is short discussion with retail partners in the spring. They all indicated about one and a half weeks. And based on the learnings from the pilot we did in Canada, also based on some benchmarking we had done versus prior implementation, we we expected actual orders to be a little lower than their commitments. Well, most others ended up ordering more, not less than their commitment. In fact, actually, many retailers ordered the maximum allowed. I think it speaks volumes of their past experience with those type of transitions and the risk involved with those transitions. So we ended up shipping about two weeks of inventory, which is equivalent to 3.5% to 4%. Now, why do we have a range? We do have a very robust tracking process in place, but there's still an element of triangulations. Probably as many of you know, several of our customers have an algorithm-based ordering system, which makes it challenging to separate all the pre-buy orders and regular orders. So we expect that we will have a better perspective and a point estimate sometimes after the inventory drawdown, and we appreciate that this creates even more complexities. The last thing I mentioned on Q4 is that the gross margin impact was higher than what we had anticipated. We had anticipated a fairly minor impact on margin, about 50 basis points for the quarter and about 10 basis points for the year. And there were two drives. First, we expected the benefits from operating leverage from the higher shipments. And second, we were actually planning to incur incremental expenses like external warehousing as we built as we build up our own internal inventory. And so the reason the gross margin impact is higher, about 50 basis points for the full year and 150 basis points for the quarter is twofold. One, the higher shipment created higher operating leverage. And second, because we ended up shipping a lot more than we anticipated, we did not build inventory internally. And so we did not incur the expenses that we had planned. So let's just give you a little bit of perspective and kind of bridge the actual impact of the ERP in Q4 relative to the expectation that we had set. Now, looking at the impact of the ERP on the outlooks. And again, we appreciate that this is both material and complex. And so maybe what I'll do is first let's step back and let me describe a little bit what happened in the transition, because I think that provides the right context to understand what happened from a timing standpoint. So as we transition in a new system at the beginning of July, essentially we had a blackout period where for about a week we were not able to process orders. And after that, just as Linda mentioned, you start processing orders, but you ramp up and you do so progressively. So retailers knew that they would not be able to receive product for a period of time in July. And as a result, they really essentially ordered about two weeks of July orders in June. And, you know, and temporarily build their inventory for, you know, for that period of time. So really, when you look at our sales, June sales were higher than what they would have been if there had been no transition, and July sales are lower than what they would have been if there were no transitions. And so because those two weeks of inventory are worth about three and a half to four points of annual sales, fiscal year 25 sales are higher by three and a half to four percent, and fiscal year 26 sales are lower by three and a half to four points. And when you look at the P&L, the same thing happened in margin and APS. So maybe the last thing I mentioned is that from a phasing standpoint there's really two quarters in fiscal year 26 where the year-over-year growth is going to be impacted that'd be the first quarter as i just mentioned the absolute dollars in sales are lower because we're missing two weeks of sales uh and that impact you know would be about negative 14 to 15 percent but then you will also have the fourth quarter because you will be laughing a quarter prior year that add two additional week of sales And so those are like the two, the two quarters that be impacted. So how that helps frame a little bit the year over year impact, which gets pretty material and complex. The main thing to remember is it is transitory. And, you know, just when you start looking in aggregate, we're looking at seven and eight point of organic cells, 100 basis point of margin and 22 to 25% of adjusted EPS growth. And when you exclude that, essentially, or our outlook assume minus 1 to plus 2% organic growth, gross margin being flat to 50 basis points, and adjusted EPS growing 2% to 4%.

That's super helpful. I just wanted to... Figure like the 7 to 8% volume impact is greater than the positive 3 to 4. that's why in 20 in fiscal 25, that's very simplistic to say, but just to feel how the impact is bigger. These the upcoming fiscal against what the benefit was in fiscal 25.

Andrea, I think what it is is you just have a higher base than 25, and so you have to take that out, and then you have the reversal. And that's why it's not double the impact. It's simply the math between years. That's right.

Great. I'll pass it on.

Thank you very much for both.

Thank you.

We'll move next to Filippo Filoni with Citigroup.

Hey. Good afternoon, everyone. So maybe just starting with the top line guidance, excluding the ERP cycling impact, the negative one to positive two, the look you just mentioned on the number of line bases. Can you talk to us a little bit about what category growth are you assuming within that guidance from an organic sales standpoint? And then also from a promotional level, we've seen a lot of your categories being very promotional, some from your competitors, some from some of your action in Cal later. How do you think the promotional environment will play out in fiscal 26? Thank you.

Yeah, thanks, Filippo. Yeah, let me provide a little perspective on the organic sales growth range. And, you know, I believe I can just provide a little more on the promotion. So, We have a fairly wide range, and this is really a reflection that we continue to assume that external environment remains volatile and challenging. So we continue to expect that consumer will continue to display value seeking behaviors. We continue to expect competitive activity to remain at a heightened level, and we continue to expect also cost and tariff environment to remain uncertain. So as I look at the organic sales growth range, it might be easier to talk about what we assume for the middle and then just talk a little bit about the high end and lower for the middle of the range and the midpoint of our estimates we essentially assuming the u.s category would be stabilized but not yet normalized and so essentially growing at an average of zero percent to one percent now we could and may see numbers outside that range in any specific months because of the volatility From a share standpoint, we assumed a little continued pressure in the front half, and as Linda mentioned, just improving sequentially and especially in the back half. We're clearly not satisfied with our current performance in the back half of fiscal year 25, but we feel really good about our plan in fiscal year 26. We have strong innovation plans and strong net revenue management plan as well in the back half. Maybe two more comments on the range. I would say volume growth would be fairly close to organic sales growth. We expect price mix to be maybe negative one or slightly better, which is an improvement of what we've seen this year. And while we continue to expect to see some headwinds from consumer-seeking value behavior, channel shifting, and promotions, that will be generally offset, partially offset by strong net revenue management initiatives. And again, as I mentioned, a lot of them are in the back end. So from a phasing standpoint, you know, if you look at the front end, it's probably we expect negative low single digits and in the back end, probably positive low single digits. So that's for the range. As far as promotions, I'll pass it on to Linda.

Yeah, we've seen largely the promotional environment fairly rational, and we're not seeing significantly elevated levels in aggregate. There are a couple of pockets where we're seeing more competitive activity, particularly in our trash business, as well as cat litter, where we're continuing to see some pretty high promotional levels and some very deep discounting. But, you know, that is pretty consistent with what we've seen over the last several months, and we do expect that to continue for fiscal year 26. So largely a rational promotional environment with a couple of pockets in cat litter and trash that we would expect to continue to be more competitive. You know, as we think about this in our approach, what we've really thought about for fiscal year 26 is continuing to pull all levels, levers of superiority in our plan. And we believe that's the right way to drive categories. We want to make sure that we continue to drive profitable growth. So, of course, merchandising will be an important part of our plan to remind people that we have new innovation and to ensure that we capture them during periods like back to school and cold and flu. But we really want to make sure that we're leveraging our claims and advertising and we'll continue to spend strongly next year focusing on innovation, communicating value, ensuring that we have the right promotional activity going on in the categories, et cetera. So that's what you're going to see from us is that continued focus on ensuring that we have superiority across our brands and across all the elements that we control. And we will deal with those categories where it's a bit more promotional, but we want to make sure that we are continuing to preserve good, profitable category growth.

Great. Thank you. And maybe a quick follow-up. On the tariff front, what are your expectations in terms of tariff impact for fiscal 2016?

Yes, we expect higher costs from tariffs to be around $40 million. Now, this is based on tariffs announced as of today and, of course, assumed and also assumed USMCA exemption for some of the imports that we have from Canada and Mexico. Now, we expect to offset the impact through, you know, a broad range of mitigating actions, you know, with that includes, sourcing change, sometimes reformulations, productivity improvements. But that will also include some level of strategic pricing, although I would say it's fairly targeted and surgical and generally very modest in magnitude. Now, as you know, the situation continues to be very fluid and dynamic, and so the exposure could change, and we're staying very close to it.

Great. Thanks, guys. I'll pass it on.

And we'll move next to Anna Lazoom with Bank of America.

Hi, good afternoon, everyone. Thank you for the question. I was wondering if you could clarify. Hi, Linda. I was wondering if you could clarify on your expectations for an improvement in the back half of the year. I was wondering if this is based on your expectations for improving underlying consumption given innovation or also an assumption in an improving consumer environment. And then I wanted to follow up on the promotion question just to better understand the dynamics around trade promotion. You did mention in your prepared remarks unfavorable timing, but given the consumer environment, was wondering if this makes sense to be continuing with promotion if you are seeing unfavorable mix? And basically, where do you expect these promotional dollars are best allocated in your portfolio? Do you expect to cut down on promotion if this is unproductive and not meaningfully lifting a more challenging consumer landscape. Thank you.

Yeah, on the back half, we really do expect what we control to be the main driver of what we will experience from the back half improving. That includes things like innovation that we talked about, and we, again, are launching some new platforms and continuing to expand on existing platforms we have in the company. Very excited about the innovation plans for the back half. and they have good spending behind them. As well, as Luke mentioned, from a net revenue management perspective, we start to see many of the benefits flowing through in the back half of the year. And so we expect the fundamentals, our execution, and, of course, the things that drive value in our categories over time, like innovation and good net revenue management, to take hold mostly in the back half, and that's why we see the improvement. At this point, we are not predicting a significant change to the consumer environment. We expect our categories to be about flat to one-ish, you know, sluggish. But that's very difficult to predict, quarter to quarter, moment to moment. And we're really focused on reinvigorating our categories through, you know, good advertising spend, pulling all the levels of superiority, including innovations. And then that leads to your point on promotion. And, you know, we've always felt that promotion is a very strategic activity in the way that we view it. It is a great way to remind consumers and at times when they have a life event going on, for example, I'm getting ready to send one of my kids to college. And I'm thinking about all those things they need, and consumers have the same attitude. And we help them during that back-to-school period to maybe see products they haven't seen before, remind them that their kids are going to need access to fresh water and a Brita pitcher, helping them to stay well when they're staying up all night, to do clogs, disinfecting wipes, those types of things. That promotion is very strategic and helps bring in new consumers and remind current consumers to stock up when they need to for those events. It also allows us to introduce innovation. So in the back half, you would expect us to use promotion to introduce the new innovations that we have to the consumer and put it in a place where they can easily find it in the store, particularly because many of our categories, people are not going to spend 10 minutes in front of the shelf shopping, and that's why promotion is so effective to get them to see new items quickly in the store. That being said, because the consumer is so dynamic, we are absolutely being dynamic with our promotional spend. And I'll highlight that's one of the things we didn't execute as well as we could have in Q4. As consumers are buying smaller sizes, we need to adjust our promotions to ensure that we are giving them the right options in promotion. So those are the things, Anna, you'll see us do throughout the year is ensuring that we have the right promotions at the right place on the right items to ensure that we communicate value and superiority to our consumers. What I don't anticipate, though, is using promotion as a way to differentially reinvigorate the category. We don't want to put spending in there that isn't good and efficient. We want to use it strategically, and we see that mainly in our categories. Again, it's fairly rational. That's what we're seeing from competitors. And we think that's the right way to go in our categories, given most of the volume for our businesses is done off-shelf and not on promotion. We want to continue to use it that way. That being said, it's very dynamic right now, and if that changes, we'll adjust our plans. But it is an important tool for us, and we feel like we have the right mix of it in for fiscal year 26 and have a good line of sight to what we expect to happen in the categories and how we can drive them.

Great. Thanks so much. Very helpful. And just one follow up on private label. I know you mentioned you haven't seen a significant change overall, but we are seeing some uptick in certain categories like wipes, for example. Are you seeing this starting on your end or is this, you know, maybe certain household income tiers or retail channels that we're seeing just a greater penetration of private label starting to uptick here? Thanks.

Yeah, in aggregate, we're not seeing any material shift to private label. The one exception we did call out was GLAAD, and that mainly has to do with retailer assortment. As consumers are moving into channels like Bob, et cetera, that's having more of an impact on our GLAAD business. But in aggregate, we're not seeing it. There are some nuances. If you look quarter to quarter, you're right on wipes. We've seen a little more private label in wipes. But if you look at our wipes business, we grew very strongly, including our new Centiva wipes, that were four times the rate of our growth. And so we, at this point, again, are not worried about private label expansion based on what we've seen. But we're watching it very closely. We're adjusting our plans to make sure we have the right sizes. that people aren't forced to make a trade into a private label item because they have a lot of pocket. We're doing all of that work to make sure that we can capture the consumer along the entire value cycle. But for now, you know, we feel confident in our brands and the fact that consumers continue to remain in our portfolio and that we give them the options to do that through sizing and price pack architecture.

Great. Thanks so much. Very helpful.

Thank you.

Our next question will come from Bonnie Herzog with Goldman Sachs.

All right. Thank you. Hi, everyone. I just had a quick follow-up question on the ERP transition. Was there a greater build in certain businesses or segments versus others? And then I did want to ask about Kingsford. Linda, you mentioned Kingsford. you know, the pressure on the business, or at least it was called out in the preparative marks in your quarter, but sounds like trends improved in July and you're optimistic for the rest of the summer. So could you maybe talk about how Kingsford is positioned to win and maybe touch on some of your innovation and activation plans and essentially how you're also thinking about the price gaps within or with the rest of the charcoal category? Thank you.

Yeah, starting with the ERP, Bonnie, no material difference between businesses that I would call out. You know, the only thing you might have noticed in the press release would be that we do have some export business. So there was a lower impact for international simply because the size of the export business isn't corresponding to the size of what we would ship. But on all the rest of the businesses, there's nothing material to call out in terms of the differences in the segments, etc., Particularly for Kingsford, we did call out that was a business where the execution just didn't meet our expectations for the quarter. And there was a lot going on. I think you all know there was some pretty terrible weather in Q4 for Memorial Day. But frankly, it came down to us not executing to the degree we know we can. And we must execute on Kingsford in the key holidays. And that's what happened in Memorial Day. We had slightly less merchandising and not necessarily on the right sizes as we shifted our plan. And so the good news is we adjusted our plan for July 4th and we saw improvement in the plan and we're seeing the trend on share move in the right direction. Bonnie, I don't think this is an issue of our price gap versus private label, our value versus private label. All that remains what it was before. This was really just execution, and we are adjusting our plan to ensure that we do that. An example would be, as we can see, consumers want some smaller sizes for those who just want to have one or two grilling occasions. We are doing that to ensure that they have a smaller size and are able to do that, and we're not just offering them a very large size for them to stock up on when they don't have that out of pocket. Those are the types of adjustments that we're making for Labor Day coming up here in a month, but don't feel like this has anything to do with our value equation between us and private label. It really just was execution.

Okay. Thank you. I'll pass it on.

Thank you. Our next question will come from Chris Carey with Wells Fargo.

Hi, everyone. Hi, Chris. Hi, Chris. I think when, you know, we on this side are confronted with these sorts of situations where there's swings and sales from one year to the next and, you know, there's a lot of volatility in the numbers and there's really just a search for, I suppose, the true north. And I guess in that context, right, Luke gave, you know, some figures for how he sees how you all see the underlying business for fiscal 26. But certainly, I think as early as it is, we'll all be, I suppose, looking over the horizon at fiscal 27 for when we can assess the business perhaps a bit more clearly, at least from a high-level perspective, right? So with that kind of as a foundation, how are you thinking about what this business should be delivering over a medium-term horizon from a top-line perspective? The 3% to 5% is a long-debated target. Many of your peers have category growth plus ambitions that give some flexibility for category. Do you continue to see room in your gross margin? given ERP and some of the mix shifts, do you still see S&A, you know, savings as longer-term objectives? I know it's a big question, but I think, at least for us personally, you know, here, it would be helpful to kind of understand how you see more, you know, the medium term and whether, you know, some of these debates, you know, the markets have evolved your own thinking. Thanks so much.

Thanks, Chris. First, I just want to acknowledge it's never easy to go through these types of transitions, and we want to provide real clarity on the shifts because we know that it's difficult to do that. But I also want to emphasize how absolutely necessary, unfortunately, this noise is to do exactly what you talked about, Chris, which is get back to a place where we're delivering that accelerated profitable growth as a stronger company moving forward. And so I just appreciate everyone's patience as we go through this. And we're frankly excited about what's ahead of us because of this transformation. And what it does unlock is our ability to accelerate revenue, having the access to data and insights that we've never had before, being able to move as fast as consumers do. seeing end-to-end to ensure that we're able to remove waste in new ways that we haven't done before are all of the reasons we're going through this pain now to get to the other side and build a stronger company that does this more consistently. And I know it's hard in the noise to get all that, but I want you to hear how excited we are and I am as a company to do that. That being said... It is, you know, a year where we have volatility. And also, as we've acknowledged, and I think everybody's acknowledging right now, it's a tough consumer environment. So, unfortunately, our categories are lower growth. Of course, it's incumbent upon us to reinvigorate that category growth, and we intend to do that through innovation and through good spending, which we have in our plan. And then, of course, we want to win share over that period of time. And very, very importantly, we have built a capability and a flywheel that behind our margin improvement to fund that type of activity. And we feel very confident in our ability to do that going forward. And that's reflected in the plan in fiscal year 26, as Luke talked about it, if you exclude that variability that the ERP is driving. So maybe fast forward ahead. Of course we're not providing fiscal year 27 guidance or beyond that, and I know you all know that. But, you know, just if I take a step back, how do we get back to that three to five? You know, obviously we need categories to come back to what we thought they would be. And, you know, that was in the two, two and a half range. We also continue to see good performance and better than company average from our international and professional business, and we would expect both of those over time to add a point. In addition, we would expect some share growth. And you'll see that through the innovation capabilities that really start to take off in the back half of the year through net revenue management, which is really just ramping up. And I want to acknowledge we've been talking about these capabilities for a while. It takes a while to build them. But if I remind you, you know, we talked about this with margin transformation back when we had a significant inflationary cycle in our business. And we showed that what these capabilities can do, and we've been able to restore that margin and continue to show expansion. So we have the same confidence in these other capabilities we built. Given the cyber attack, they're a little bit delayed in the value creation, but you really start to see them come through in the fiscal year 26 plan, and we would expect to continue in 27 and beyond. So that's what we're looking forward to. We remain confident in our ability to deliver our financial algorithm. We're going to have to get those categories back to what they were. And then we feel confident in the capabilities we're building. We have to execute them, and we intend to do that. And we know this year is a year of a lot of noise, and we just appreciate everyone's patience as we go through it. And we'll continue throughout fiscal year 26 to show you those signs that we're seeing of the things that we are building and how they're taking hold. And then, of course, you know, when we get closer to 27, we'll talk about what that looks like.

Okay. Thanks, Linda. That was a long question. I dare not ask another one. Thank you for the insights.

Thanks, Chris.

Our next question will come from Cuomo Gajorawala with Jefferies.

Paul Miller, you're there?

I'm here. Sorry about that. I wanted to talk a little bit about the, or dig in a little bit more on the consumer in that, you know, we're hearing from yourselves and other household goods companies on a weak consumer, but we're also hearing the opposite from, you know, a lot of other industries and retailers and banks and things like that. So have you been able to dig into what it might be that's, you know, specific to Household goods and personal care that the consumer seems to be a lot more, I guess, value-seeking or sensitive or pressured than perhaps they are in some other sectors?

Yeah, I think it's helpful to start and take a step back on the consumer and aggregate. And we've talked about this a bit over the last couple of quarters and what's really unique and going on. If you take a step back and look at consumers overall, if you look at jobs, if you look at income inflation, if you look at the broader fundamentals, yeah, you see some strength in the consumer. And that was, I think, what made people very optimistic heading into this period, that we would start to see improvements in places where it was a bit weaker. But the dynamic that's going on, and I would highlight one word, is uncertainty. And maybe I'd add volatility to that, is that there's so many things uncertain right now for consumers as they see macroeconomic policy, trade, other things coming to light. that they are making tradeoffs based on the information that they have at the moment. And that information, to be fair, has changed pretty rapidly over the last number of months. And we talked about a little bit of this in the last quarter. At the end of February through March, we saw people making purchases of goods they thought were coming from Mexico and Canada, for example, to get ahead of tariffs. We saw an influx of spending into edibles versus non-edibles. People were really trying to be sharp on their spending in these stores in order to make sure that they could kind of deal with the uncertainty that they had in their wallet because consumers have one wallet at the end of the day. At the same time that you see this value-seeking and you see this uncertainty behavior from consumers, interestingly, you also see this really – maybe an accentuated trend right now on convenience and experiences. Consumers are still buying things and experiences they like. You know, you're still seeing them do things outside their home, go out to eat, et cetera, which might not be rational at this moment, but you can see how consumers are starting to shape those experiences. We're seeing that in our categories. We're seeing significant move to convenience. So our wipes business, which might be counterintuitive, is growing very strong right now. The trade-up to our business, Centivo, which is a highly experiential fragrance cleaning line, we saw 40% growth in Centivo this year. So we're seeing all these dynamics of consumers having to manage this uncertainty, which is meaning they're moving their dollars in their wallet across different places, and they're doing it very, very dynamically. In aggregate, they're pretty healthy. And that's why we have confidence over the long term this is going to work out because we are in essential goods. At some point, they will run out of pantry inventory. You know, we don't see at-home behaviors changing that much in terms of the amount of cleaning or the times they're changing their litter box. But they're definitely dealing with a lot of uncertainty right now. And that's why we're so focused on ensuring superiority. And I'll tell you, in times that are tough, superiority matters most. More than ever. And every element has to come together to ensure that we're conveying superiority to that consumer. And that's what we are laser focused on right now with our categories, with our brands to ensure we're doing that. That's what our innovation is focused on. But I think, Camille, that's the difference you're seeing in where there are some places where you're seeing a more healthy consumer. And I would say they're not unhealthy in our categories. They're under stress is the way I would describe it. And, again, that's due to that uncertainty. But given the strength of our brands, the strength of our plans, you know, I'm confident that we'll control what we can this year to deal with that and hope to reinvigorate category growth so we see stronger numbers in our categories moving forward.

Okay, I got it. That's useful. Thank you.

Our next question will come from Olivia Tong with Raymond James.

Great. Thanks. Good afternoon. I wanted to ask you about the efforts that you're making in the next fiscal year to improve your value superiority. Talked about innovation in the second half. Talked about more promotion potentially. If you could talk about also the flexibility you have either on promotion and other brand support, if necessary, to really sort of drive home that message. And then maybe if you could step back and just talk about, you know, some of the major drivers of the weakness beyond obviously the consumer environment, you know, because some of this is trade down, but perhaps, you know, how much of an impact is, The product lineup needs some improvement. You're channeling category exposure and where you're over-indexed versus under-indexed and just a mix of your categories. That would be helpful. Thank you.

Sure, Lydia. So superiority is fundamental to how we went in our categories over the long term. And as you know, it's incredibly important that our 26 plans improve that superiority. And there are places that we're starting from a very strong place. And if you look at our categories overall, our consumer value metric, we're 60% superior, which is higher than it was even pre-pandemic. And we've continued to maintain that even through the tough times of the last few years. And so what we want to do is in those categories where we already have fairly good superior, we want to continue to raise the bar. And we will do that through new innovations, through continued good claims work, through making packages work better for consumers, not just what's in the package, to ensure their shopping experience is as simple as it possibly can be and being assorted wherever they are. And we have pretty... Good assortment now, but those are things that we want to make sure we're really tight on. All of the right locations have the right sizes, that things are available on e-commerce as we see e-commerce accelerate. Those are the things, the sharpening that we do every single day on our businesses. The places that are starting from a place of superiority, we want to be driving the narrative and changing what superior means. We want to set the bar. And then there are some places where we don't have the superiority. And I think CatLitter is very fair to say that's a place where we need to improve our superiority. You've seen us have to go through what we did on cyber. We lost some of our consumers. We got that distribution back. We've gotten a lot of consumers back. But we fell behind in that period. And we've talked about that that's why it's taking some time to get it back. And that's a place where we're laser focused on getting back to a place of superiority we feel good about. The good news is we have those plans to do that this year. And as we move through the year, we'll see that improve really, you know, culminating in the back half. But those are the places that we're focused on maintaining a superiority and setting the bar in categories we're already leading and then getting back to a place where we are superior in places that we're not. And I think Cat Litters is the best example of that. And then on your flexibility question, this is about the flywheel that I spoke about a little bit in my earlier answer. We built a flywheel where we're generating good savings that we can reinvest back in our business, and we feel really good about our ability to do that. And so we do have the financial flexibility if we need to adjust our plan accordingly. to put more spending in, to adjust our spending. And, of course, with our ERP implementation and our full digital transformation, we have more visibility into the data to be able to make those changes more real-time. And so those things will go hand-in-hand, but we feel we have the right investment level for next year. And, again, we'll adjust that if we need to and certainly have built that flywheel to have the flexibility to do that next year or in the future.

Got it. That's helpful. And then just following up on gross margin for fiscal 26, you're still looking for something in the flat to plus 50 XERP despite the top line challenges. So can you talk about your level of confidence here and potentially driving continued expansion and just the key drivers there? Because you're already back to peak levels now and you don't have a ton, but you do have some exposure to tariffs. It sounds like there's going to be more promotion next year. So I'm just trying to think about the the tailwinds that get you to the flat to 50 when we know the headwinds that could be appearing.

Yes, sure. Thank you. I'll take that on. Well, you'll notice that we provided a fairly wide range, excluding the impact of the RP, of it basically being flat to 50 basis point. And that's acknowledging there's a lot of uncertainty in the cost environment in the first place. But, you know, I mentioned the current assumptions for tariff. We'll have to see how that evolves. But in terms of general supply chain inflations, we probably expect between 80 to 90 million dollars of aid wins. So you're right with, you know, with the tariff, this is this is slightly higher than what we normally experience. Having said that, we just talked about it. We've been ramping up for the past two to three years our margin transformation and holistic margin management effort, I should say. And we really still have a pretty strong pipeline. And so I think we feel generally good about offsetting the current cost assumptions. We'll have to stay close to it, especially with tariffs. And the good news is, you know, while, again, the ERP creates a lot of effort, complexity, and noise from a reporting standpoint, once we stabilize, this will provide another source of productivity for years to come. So, but in general, I think, you know, right now, albeit, you know, staying close to what happened from a tariff standpoint, we generally feel good about, you know, our ability to deliver our guidance.

Understood. Thank you. We'll move next to Kevin Grundy with BNP Paribas.

Great. Thanks. Good afternoon, everyone. I also wanted to maybe pull out a little bit away from the quarter and ask a longer-term question, kind of along the lines of Chris Carey's question, but further down the P&L. So, Luke, this may be for you, but Linda as well. So I think, you know, the way I understand it, you know, some of the ERP benefits here, the idea is to get to around an 18% operating margin. There was some noise, obviously. This year, there'll be noise again in 26. I think the expectation is you're probably around a 16% or so operating margin this year, all in, including the noise from the ERP and the deleverage associated with it. So the question is, I think the target is to get to 18% with some of the benefits the ERP is going to afford you. I fully appreciate everyone on the call does the amount of volatility over the next three months, let alone, you know, the next three years. But I'm really curious when you guys are putting together the plan, how quickly you think you can get to that 18% before you kind of get back to sort of like a normal 25 to 50 basis points or a cadence. And I'm also curious too, Linda, for you, if this gives you any pause, like what you thought was potentially going to flow through Now it just seems like there's more necessity for investment, you know, up and down the P&L, whether this is artificial intelligence, supply chain, you know, the market share is not what you want it to be, et cetera. So what you thought was potentially going to flow through, we can all agree getting the top line going is what's going to drive the most value for shareholders. So how you're thinking about that. So sorry, I know that was verbose and a bit rambling, but I hope you get the gist and I'd love your thoughts. Thank you very much.

Yes. Maybe I can take a first pass as we look at the P&L. I mean, you're right, there's so much volatility. And you have, you know, sales that, you know, are higher than they should have been, you know, in the base year, lower than it should have been. But, you know, I would say we're pretty much close to that target of 18%. And it's been mainly driven by the fact that, you know, we're now fully rebuild our gross margin, you know, beyond where they were actually at, you know, when we had 18% EBIT margin. Now, the goal is going to be, and I think once the noise settles down, we are pretty confident that, you know, we'll be essentially there by next year. And then the goal will be to continue, you know, improving, you know, 25 to 50 basis points. And, of course, you know, that can come from different places from the P&L. We're going to, you know, continue being extremely focused on, you know, driving the gross margin because that really creates the fuel for the strategic investments, both from a brand and capability standpoint, as you mentioned. And then, you know, we have to acknowledge that our current, you know, selling and admin is higher than we'd expected. And, you know, this year, again, it's propped by the one-time price. you know, the last year of one-time investment associated with the RP transitions, but it doesn't include any of the productivity that we expect from the RP. And so that would be another source, you know, going forward. So that's, you know, as we think about the P&L over the next, you know, year or two. But essentially, you know, where we want to be from an EBIT margin once, you know, once the noise settles down and we feel like we are between the gross margin and between the work we're doing Unless, Jenny, we feel like we have the fuel to continue expanding its margin going forward, as well as reinvest in the business.

And I'll just emphasize that point that Luke just made, Kevin, to the question that you passed to me. That's exactly why we've made these investments. We made investments in solidifying our supply chain coming out of COVID and ensuring that we had more protection as we saw dynamic events happening. And that has served us really, really well. We invested significantly in this transformation for both our digital transformation and new processes and tools for our team. I mean, that includes AI. So we've already put investments in AI in this plan. We're using it today, both generative AI and AI across how we plan, etc., And, you know, we'll continue to invest in our business over time, but that's at more of a normal rate like we normally would over time. You see the capital investments that we make in the company year after year to ensure we're improving our supply chain. And, of course, we make those same investments in technology. This was just a big reset given we hadn't had a technology upgrade in so many years. You know, 25 years our ERP was in place. So that being said, I feel confident in our ability to get the value from these investments, and that is what our team is laser-focused on. just like we were in getting those margins back from a gross margin perspective. And you saw that we've done that and exceeded that target. We're doing the same to make sure we realize that benefit and EBIT margin, and then the same to extract the revenue and the productivity benefits moving forward. And we see that, again, as a virtuous cycle, and we feel confident in our ability to do that. So I believe we have the right investments. We have about 11% of advertising and sales promotion next year. We have healthy promotional levels. We have healthy investments in our different businesses. We're getting better and better at using those. And we have industry-leading return on investment from an advertising perspective, and we continue to expect our team to improve that. So I feel like we do have the right plan, the right level of investment, and we've created that flywheel. And again, to your point, it's a bit noisy right now as we get through that other side, but remain confident in this transformation and this ability to ensure that we deliver profitable, accelerated growth moving forward.

That's great. Thank you both very much. I appreciate the thoughts. Good luck.

Thanks, Kevin.

Thanks, Kevin.

Our next question will come from Javier Escalante with Evercore ISI.

Hi. Good afternoon, everyone. I guess a question first for Luke. Could you help us understand why price mix in the quarter changes?

got so negative uh i understand that you guys are not promoting is this channel package uh and then i have a follow-up for for for linda yes hi javier yeah you're right it was abnormally high you know price mix was about negative four points in the quarter and we did have some one-time item that increased trade spending for the quarter We have a normal process at the end of our fourth quarter to really evaluate trade spending accrual and trade promotion that took place throughout the year. And we added adjustment, and that was really one time in nature. I think if you exclude this, price mix would have been about minus 2%. And that's generally about the average that we've seen throughout the year. And as I mentioned, going forward, we expect it to be about minus 1%.

And particularly in household, why it was down 6%. is that which of the businesses saw such a negative price mix?

Yeah, this is driven by significant merchandising events that didn't take place in the prior period. So the year-over-year was impacted by that. That's an additional two points for the segments.

Sure, I got it. So, Linda, more kind of like a bigger picture question, I understand the promotionality and the value-seeking behavior, and these are transient, these are not structural. But the two categories where problems reoccur are categories, and there are two, one is GLAAD and the other is Pet Leader, is categories where you have value brands And I understand that the impetus is behind innovation, but have you considered a price realignment so you stabilize market share? And if not, why not? Thank you.

Javier, you're right that we've spent a lot of time over the last year talking about cat litter and GLAD. Those are two very competitive categories and different dynamics going on. Just so everybody is on the same page, primarily we compete in very premium segments in both of those categories. Our Fresh Step brand is a premium in cat litter as well as GLAAD. We play in the premium tier, and we've leveraged innovation for a number of years to grow in both of those categories. What I would just call out, you know, just frankly on cat litter, our superiority is not where it needs to be. So this is not about price, in my opinion. This is about ensuring that we have better innovation, that we execute that better in market, that we get our price pack architecture right, et cetera. And we absolutely have plans to do that. And, of course, you know, I will acknowledge that was one of the businesses most hit by the cyber attack because of the behaviors that are unique to cat litter owners. But I felt confident in our ability to do that over time, confident in our ability to command a premium over time. But you'll see our plans in this year start to take hold and realize that. And then in GLAAD, you know, the way that we have created value in a category where consumers are, you know, generating more trash is getting more value out of every single trash bag. And that's by offering them a better experience. And trash can be a pretty terrible experience. If it smells in your house or if you take it out in the bag, Rick's, And we have launched innovation after innovation platform to strengthen the bag, to make it a better experience, to add some visual to light. And we know that's worked for consumers. For example, we launched, and we talked about this in the last few quarters, our Bahama Bliss line. That's done very well. We've been expanding that. And we continue to see opportunities to do that. We need to make sure now, given how competitive this category is, that those elements work even harder, Javier, than they have in the past when you're faced with competition that is doing deep discounting. And we want to make sure that we continue to drive profitable category growth through innovation that helps consumers have better experiences in categories like these. And that remains true today. As I noted, we're seeing consumers continue to value that. They're willing to pay a premium. They're willing to trade up if you offer them that. And that's where you'll continue to see us sharpen on both GLAAD and Catletter and, frankly, across the rest of our portfolio, our superiority to ensure that we can continue to win in two very competitive categories.

And we'll move to our next question. This will come from Robert Moscow with TD Cowan.

Hi. Thank you. Luke and Linda, I wanted to ask about the 35 cents of spending on digital capabilities that you exclude from your adjusted earnings this year, 68 cents in fiscal 25. I assume that this will eventually get down to zero, I think, in fiscal 27 when you're done with your projects. But I think you might agree that the digitization and things like AI are a moving target. And you're probably going to have to keep investing in your capabilities and adjusting to an ever-changing world just to keep up. So what makes this spend so unique that there's an endpoint to it? And we don't end up having to think about another investment a year or two from now. Thank you.

Yeah, Robert, you're absolutely correct that every business, including ours, will need to invest over time to ensure that they have modern capabilities, modern technologies. And we definitely intend to do that moving forward. But I would consider that to be normal course of business. And we have spending that we have in our plan every year behind us. capital spending as well as operating expense dollars that are to invest back in our business in all sorts of technologies. That might be improving technologies in a manufacturing plant. That can be implementing different AI technologies, et cetera. And we do view that as normal course of business and accounted for in how we think about the overall algorithm for the company. What's so unique about what you just spoke about and the fact that we've been concluding this is this is kind of a once in a... generation reset of our technology platform. We hadn't upgraded our ERP in 25 years. And the corresponding set of technologies that go around that needed to be upgraded as well. We're talking things like just having a warehouse management system, some basic things that are in the industry. And so what we chose to do is to do a big project to do that all at once and to maximize the value and, of course, the resources that we have to put that could be doing other things in our company or having to do this implementation. And that's why it's one time in nature because it really is less about just upgrading the normal course of things that we'll do from here on out And it's about, I'll call it a once-in-a-generation reset. And moving forward, again, you would expect to see that in our normal capital spending, in our normal op-ex dollars. And if there was ever anything that we needed to do one time, of course, we raised the ability to that. But we believe we have the right spending in place to be able to deal with that technology transformation over time.

Okay. Thank you.

Thank you. Our next question comes from Lauren Lieberman with Barclays.

Hey, thanks so much. I have two quick questions. The first is that the advertising spend this quarter was down dramatically in dollars, the lowest level of spend since the fourth quarter of 2019. So just curious if you could comment on that. That was a big swing factor in the quarter. And I know you're talking about it going back up as a percentage of sales next year, but just overall, it was surprising to be advertising that low. And the other thing was earlier the question on drivers of gross margin next year, or I guess this year now. I think the GLAD JV was coming to an end, so it was just in January, I believe. So I was just curious what kind of benefit that should look like to gross margins. Thanks.

Yeah, sure. On the advertising spend, in Q4, maybe, you know, just to put this in context, we obviously don't provide guidance at a quarterly level on advertising. We are lapping a very large spend of advertising from last Q4, which, of course, was about returning, you know, shared growth to our business post-cyber. So we knew we had that lap. But if you kind of take a step back and look, we said we spent about 11% for the year. We spent 11% in the front half. We spent 11% in the back half. And we expect to spend about 11% next year. So it's really just noise between quarters, Lauren, and not something that's an indication of our investment in the business.

Yeah. Yeah, I'll talk about that. Maybe I'm just on the advertising. There's a little bit of optics, too, because your revenue is essentially 13% or 14% higher. And, of course, the shipments were not concerned. So really, if you just adjust for that, I think you're about 10%, which is within the normal variability between quarters. So, on GLAAD, yes, as we talked, we're going to be exceeding our contractual agreements that we have with P&G this coming January. And so, essentially, we will repurchase 20% that P&G currently own, and we'll probably finance that through a mix of cash and borrowing. So there's probably two impacts that I was mentioning. The first one is the impact on the P&L that you alluded to, Lauren. Under the current agreement, we pay P&G about 20% of our cash flow every quarter. And that generally chops through the cost of goods sold. So of course, when we buy back their interest, we will no longer pay that 20%. And from perspective, that will present about 50 basis points of gross margin annually. Now, Given that we will exceed the agreement at the end of January, the impact for 26 is probably around 20 to 25 basis points. And there's another impact that we'll keep an eye on is potential one-time EPS impact of the acquisitions. Because right now we're making a very simple assumption that the acquisition price will be in line with our current estimated value on the balance sheet. So if the purchase price was to be different, higher, lower, that would create a one-time impact on EPS.

Okay, great. Thanks so much.

Thanks, Lauren. And our next question comes from Steve Powers with Deutsche Bank.

Oh, hey, thanks. I got two quick ones for me, too. You know, obviously a long way to go before we get to the end of the year, but just to net everything that we've been talking about so far and just confirm your base case thinking, I guess, is there any way, any reason why from where we sit today that we shouldn't be thinking about kind of the midpoint of your normalized earnings exiting the year at around $7 or maybe slightly higher if I just take the midpoint of this year's headline EPS guidance range and add back? 90 cents or so for the ERP shift. Is there any reason why that's not the right way to kind of think through the noise and come up with kind of a normalized base?

That's exactly right, Steve. You know, that's the simplest thing to do. Of course, there's a range because he acknowledged all the noise that, you know, is related to the ERP and, of course, all the uncertainty in the environment. But, you know, right now, obvious thinking is the big thing. All right.

Perfect. Perfect. And then on the ERP transition, clearly a number of benefits that I know you're excited about, given that you're effectively leaping forward the IT capabilities of the company by a couple of decades. So that's exciting. But I guess, is there any potential risk of transition from an offsetting standpoint? I'm thinking, I guess, in some kind of structural period of essentially what would translate into a destocking headwind on your top line as retailers take advantage of your theoretically better capabilities, better agility, better service levels, and essentially run Clorox at a leaner level of trade inventory, which as we transition would be a headwind on your revenue. Is there any consideration that we should be thinking about there as we think through the transition?

Interesting question, Steve. The way I would look at this is no. And the reason why is this doesn't fundamentally change any retailer processes. You know, this is not about them improving. They're doing that work all the time to ensure that they are, like we are, managing our inventories. Now, on our end... It absolutely gives us the ability to better manage inventories, have better line of sight to where things are in our network, and move them most cost efficiently. But there's no structural reason why our ERP should translate into a different posture from retailers on their inventories with us. We already have to do that stuff manually on our site, so it's really just a cost that we get to remove over time. Because we are on an old version of ERP in the past, they didn't give us more inventory in their system in order to account for that. It's just that we had to work harder and cost us more on the back end to ensure that we could meet their expectations. So I don't see that as a structural risk moving forward. What I am excited about though is what you highlighted, which is our ability to do things like manage inventory over time and better manage trade spend and advertising and have better line of sight to end-to-end costs and places that we can drive savings. And those are the structural things that we are excited about.

Yeah, yeah. Okay. Thank you very much. Appreciate it.

Thanks, Steve. And this concludes the question and answer session. Ms. Rendell, I would now like to turn the program back to you.

Thanks, Jen. As we close out today's call, I'd like to note that this is a big moment for our transformation as we lay the foundation for a stronger future and unlock new value streams. While I recognize the timing noise from our ERP implementation in the U.S. is not ideal, in the short term, it's absolutely necessary for our long-term growth aspirations. The costs are winding down and the benefits are just ramping up as this new digital foundation and operating model will help us continue to reimagine work, scale our digital tools, and move faster as an organization for years to come. I'm excited for the future and I'm confident we're taking all the right steps as we advance our Ignite strategy. Our fiscal year 26 plan lays a strong foundation for new, scalable innovation platforms as we work to reinvigorate category growth and deliver solid margin and earnings growth. Through it all, we are transforming Quark into a stronger company poised to deliver more consistent, profitable growth and enhance long-term shareholder value. Thank you for your time and questions. We look forward to updating you on our continued progress.

And this concludes today's conference call. Thank you for attending. the host has ended this call goodbye