Good day, ladies and gentlemen, welcome to The Clorox Company fourth quarter fiscal year 2023 earnings release conference call. At this time, all participants 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 one on your touch-tone pad at any time. If anyone should require assistance during the conference, please press star zero on your touch-tone pad at any time. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Ms. Lisah Burhan, Vice President of Investor Relations for The Clorox Company. Ms. Burhan, you may begin your conference. Thanks, Ross. Good afternoon, thank you for joining us. On the call with me today are Linda Rendle, our CEO, and Kevin Jacobsen, our CFO. I hope everyone has had a chance to review our earnings release and prepared remarks, both of which are available on our website. In just a moment, Linda will share a few opening comments, then we'll take your questions. During this call, we may make forward-looking statements, including about our fiscal 2024 outlook. These statements are based on management's current expectations, may differ from actual results or outcomes. 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 of our earnings release and the supplemental financial schedules in the Investor Relations section of our website for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. Now, I'll turn it over to Linda. Hello, everyone, and thank you for joining us. We closed out fiscal year 2023 with strong results, underscoring the significant progress we've made against our strategic priorities. Over the course of the year, we've been relentlessly focused on driving top-line growth and rebuilding margins in a challenging operating environment, while continuing to invest in the long-term health of our brands, categories, and capabilities. Thanks to our team's strong execution across a comprehensive set of actions, we delivered on these commitments. For fiscal year 2023, we generated net sales growth of 4% within our long-term target, gross margin expansion of 360 basis points, and adjusted EPS growth of 24%. Our performance reflects our commitment to driving operational excellence and margin improvement, supported by the strength and resilience of our portfolio and the relevance of our IGNITE strategy. In addition to delivering results over the short term, we made progress on our IGNITE strategy. The investments we're making to deliver consumer-inspired innovation, strengthen the superior value of our brands, advance our digital transformation, and streamline our operating model are positioning us to drive long-term profitable growth. As we look ahead to fiscal year 2024, we are clear on our priorities. While we expect the environment to remain difficult, with macroeconomic uncertainty persisting, we are committed to building on our progress and have plans to enhance our value superiority at a time when it matters most to consumers. We believe these actions will enable us to continue to drive top-line growth and rebuild margins back to pre-pandemic levels and put us in a position to grow share and helpful penetration over the long term. I'm confident we're taking the appropriate actions to build a stronger, more resilient company, positioned to win in the marketplace, deliver on our operational and financial goals, and create long-term value for stakeholders. With that, Kevin and I will take your questions. Thank you, Ms. Rendle. Ladies and gentlemen, if you have a question, please press star one on your touchtone telephone pad now. Our first question comes from Peter Grom from UBS. Please go ahead, Peter. Thanks, operator, and good afternoon, everyone. I wanted to ask, you know, two related questions on the top line. Maybe first, I, I know you called out stronger shipments in cleaning and, and some early shipments for, for back to school, but the -2% volume performance was, was certainly stronger than what we can see in the track data. Was that largely due to the shipment timing that you mentioned, or is there just strength elsewhere that's not being captured by the data? Just second, on, on the organic sales guidance of 2%-4%, you mentioned a mild U.S. recession in the back half. You provided some color on, on phasing, starting with mid-single-digit growth in 1Q. I just would be curious to get your perspective, you know, on the balance of pricing versus volume in that outlook, specifically as we, we move through the year. Do you expect volume growth at some point in the back half? Thanks. Hi, Peter. I'll start with your first question, then I'll hand it over to Kevin. On Q4 over delivery versus what we had expected, as we noted, we did see stronger consumption across the board, across our categories in aggregate, and that's a result of two things, mainly. The first being elasticities continue to be better than they have been historically, and that's an aggregate comment. You know, we see differences by category, but in aggregate, they're favorable. Trade promo has been normalizing at a slower pace than we'd expect, and we'll continue to see that normalize as we go through fiscal year 2024, but for Q4, it wasn't to the degree that we thought it would be. That's, that's the first bucket, stronger consumption. The second is, better operational performance by our team, and that's just a broad statement across the supply chain. We were able to make some supply that we didn't think we would have. Our, our shipments to retailers were stronger than we had expected. Just a lot of the things operationally came together with great execution and, and supported that growth. Then finally, in Kingsford, and we spoke about in Q3, you know, we did not perform to our expectations in Q3. We made significant adjustments to the plan, including working with retailers on category growth plans, centered in having the right merchandising, and those performed significantly better than we had expected, which was great to see. The consumer reacted very favorably, and retailers executed with excellence. Those are really the big three main buckets between what we saw, and what we expected. Then, Peter, I can, I can talk about our plans for fiscal year 2024 as it relates to sales. As you saw, we're projecting 2%-4% for the year. If you think about the front half and the back half, our expectations are sales will be closer to mid-single digits in the front half, excuse me, then low single digits in the back half. That, that phasing from front half to back half, I, I'd call out a few items. The first is, as you saw in our prepared remarks, we're projecting a mild recession in the back half of our fiscal year, which would be the front half of calendar year 2024. I think that will put a little bit of pressure on consumers and our categories, and we've reflected that in our outlook. The other item to be aware of is, we are now going to lap the four rounds of pricing we've taken when we get to the middle of the year. That fourth price increase we took last December, we will lap that when we get halfway through the year. The second half of the year, we'll now have lapped all the pricing we've taken. As a result of that, what we expect to see is you'll see improving volume trends as we move through the year, and you'll see the benefit of price mix larger in the front half and then really start to tail off in the back half. As we get that, that low single-digit growth, it'll be a, a combination of some price mix, 'cause we're still doing a little bit of pricing internationally, improving volume trends, but recognizing we still think it's gonna be a, a difficult economic environment for consumers. Thank you, both. I'll pass it on. Our next question comes from Anna Lizzul from Bank of America. Please go ahead, Anna. Good afternoon. Thanks very much for the question. In your fiscal 2024 guidance, you are expecting a flat to 2% net sales growth. This is a little bit below your long-term algorithm from your IGNITE strategy of that 3%-5% annual sales growth. I was wondering if you can comment on, you know, when you expect to return to the 3%-5% net sales growth on a more normalized basis. In addition, what do you see as the drivers of really achieving that sales growth longer term? Thank you. Yeah, you know, 2%-4% organic sales growth and 0-2% from a reported is, is what we're expecting now, and that is slightly below what we want from a long-term perspective. You know, just to put that in perspective, of course, if you look at our four-year CAGR and our, our strategy period, we did deliver in the midpoint of that range at 4%, and again, 4% this year. You know, this year coming up is a, kind of a tale of two halves, is the way I would talk about it. We expect stronger growth in the front half as we continue to lap the two price increases that we have. Then in the back half, you know, we expect it to get tougher for consumers, and right now, our expectation is a mild recession. When you put those things together, I think, you know, in aggregate, we feel good about the top line that we've committed to. In addition, that includes about 1 point of a headwind from our Vitamins, Minerals and Supplements business. As we spoke about, over the last couple of calls, we have reengineered that plan to focus more on profitability, and we've done that at a trade-off from a top-line perspective. That does include a 1-point headwind, and, you know, over time, we would expect that that wouldn't be the case, and that that would help us return to getting in within that, that 3%-5%. You know, the way that I would think about this, as we march through the year, you know, we are expecting, again, lapping two price increases, we are expecting our elasticities to be more normalized as we go through the course of the year. We're expecting trade promotion to normalize as well. We're expecting a mild recession in the back half. Those are all of our assumptions in forming that growth. If those come true, we feel, you know, this plan is a very balanced plan. We'll be watching really carefully as we move through the year. If any one of those assumptions change, and we need to adjust our plan, that could impact both, you know, on the high end and the lower end of us delivering against what we put out there from an outlook perspective. Thank you. Just wanted to ask a follow-up on, j ust on, you know, marketing spend versus promotional levels, you've mentioned that advertising as a percent of sales, you intend to spend about 11% in fiscal 2024 versus about 10% in fiscal 2023. Do you feel this is the right level of investment, given a ramp in marketing spend versus some peers in this space? Also, just in terms of the balance of advertising spend versus promotional levels in fiscal 2024, it does sound like you're ramping back up on, on promotional levels, and is this an intention to get back to pre-COVID levels of promotion as well? Thanks. Sure. In the marketing spend, as you rightly noted, we've spent about 10% of sales on advertising and sales promotion, you know, over our history, and there's times we've spent more than that. This year, we're targeting 11%, and we think that's a prudent investment, given the pressure the consumer is gonna be under from a macroeconomic perspective, the fact that we are coming off of four rounds of pricing, you know, significant price increase, obviously cost justified, but we wanna continue to support the consumer as they transition through that. So we think 11% is the right number. You know, two data points that give us confidence that 11% is the right number: During the pandemic, we took our advertising spending up, even at a time when we couldn't fully supply. That increase in advertising led to stronger superiority ratings for our brands, that gave us the confidence to take the four rounds of pricing that we took. We think, again, in a time where consumers are pressured and stressed, investing that additional point of advertising makes a lot of sense. The second data point I would give you is that we've been on a journey to get to know 100 million consumers in the U.S., that allows us to personalize to them. This was part of our IGNITE strategy. We've nearly met that goal, that has led to a ROI in our advertising being the highest it ever was. We reached a high point this year, so we feel really good about putting that extra point in because we know what we're gonna get from a returns perspective, in addition to supporting the superiority of our brands. Again, we'll continue to evaluate this moving forward. Doesn't mean it will necessarily be 11% the year after. This is really a roll-up of what we think our general managers need to, to best support our brands during this time. Then from a promotion perspective, you know, promotions continue to be lower than they were pre-pandemic, but are ramping up. Our expectation is throughout the course of the year, we'll return to more normalized promotions, so similar to what we were pre-pandemic. You know, we, we've assumed to be fair, though, this year it would ramp up faster, and it hasn't. Based on what we're seeing in the data, we think that's a fair assumption. Again, we wouldn't be targeting going beyond what we were pre-pandemic, but just returning to those levels that we had. For our categories, that still means the vast majority of our sales are done off the shelf with no price reduction. Most of this is good quality merchandising, you know, targeting the consumer, around key health points, et cetera. We think those in combination are the right level of spend, given the consumer dynamics, given what we see from a return perspective and what we think is needed to grow categories and, and to grow share over the long term. Great. Very helpful. Thank you very much. Our next question comes from Dara Mohsenian, from Morgan Stanley. Please go ahead, Dara. Hey, guys. Good afternoon. I just wanted to touch on the fiscal 2024 guidance. You're assuming gross margins come in well below the fiscal Q4 level and the level in the back half of the year. I know you've got $200 million of higher costs you mentioned in prepared remarks. First, can you just give us some more details, specifically on that bucket and what's driving cost increases? Then B, just as you think about it, conceptually, the lack of sequential progress versus the back half of the year, even though obviously it's up year-over-year for the full year, just I'm wondering how that fits in with your goal to eventually move back towards those pre-COVID gross margin levels, and why not more progress this year, again, specifically relative to that back half? Thanks. Yeah, happy to take those questions, Dara. Maybe let me start with cost inflation and what we're projecting for this year. Maybe if I step back and just think a little longer term in terms of what we've been dealing with, you folks know, fiscal year 2022, a really difficult year, given the extreme levels of cost inflation, about $800 million. Last year, we experienced about $400 million worth of cost inflation, and this year we're projecting about $200 million. Sequentially getting better, it's moderating, but we're still expecting to operate in a higher cost environment. As we look at that $200 million worth of supply chain inflation, there's really two areas we're predominantly seeing those cost increases coming through. I would say about a third of that we're projecting will hit in commodities. You know, there's a number of items we're still seeing inflating, particularly chemicals, substrate, corrugate, and liner board. We're still looking at rising costs year-over-year. Resin, for us, we're looking at as a fairly neutral cost. It came down last year, and we're assuming it'd be relatively flat this year. We are seeing some cost declines in some of our ag products and diesel, but overall, we think that bucket will be modestly inflationary. The other item we're looking at really hits particularly manufacturing and warehousing, primarily driven by labor, that we continue to expect to be operating in an inflationary environment. Those are the primary buckets where we expect to see the $200 million. Now, on the, the gross margin goals this year and the phasing of those, as, as you said, Dara, we're expecting to continue to make progress rebuilding gross margin. You folks know, we've talked about this quite a bit, we're committed to getting back to those pre-pandemic levels of margin. I, I think we made good progress last year. We improved about 360 basis points. We expect to build on this this year, expecting to get another 150-175 basis points of improvement. By the end of this year, assuming we deliver this plan, we'll have recovered a little over 500 basis points of that 800 we lost. Now, in terms of the phasing, I'd say, Dara, typically, Clorox has some seasonality in terms of our margins. Typically, our fourth quarter is our highest margin, and that's particularly because we do a disproportionate amount of our Kingsford business in the fourth quarter. I think as you folks know, we sell about 50% of Kingsford in the fourth quarter, and it's a very profitable business, so that tends to generate our highest margin. Typically, Q2 is our lowest margin point, one, because we do very little Kingsford, as well as we do some, a lot of gift packing on our Burt's Bees business, which is a great, great activity to drive awareness and trial, but it comes at a lower margin. You should normally think about our business once we've gotten past the normalization and the pricing and all the disruptions. Historically, Q2 is a low point, and then Q4 is our high. I think it's, it's better to look on a year-over-year basis versus sequentially quarter by quarter. In, in Q1, I expect we'll make good, solid progress. Not to the same degree in Q4, you know, 560 basis points, because we've now lapped that third round of pricing starting now, and so you should expect it to step down the benefit of pricing. I expect to have a good, solid Q1, and then what I expect to do is continue to advance margins on a year-over-year basis, and as we said, we're, we're targeting to get to about 41% this year. Okay. Are you assuming any incremental pricing next fiscal year? I'm assuming you're not. Is that more just a pause after all the pricing you've taken, and, and maybe you can return later on? Then if I'm not overstaying my welcome, Linda, can you just comment on household penetration and your performance this fiscal year, particularly in light of the comments around ROI on marketing being an all-time high and, the personalization reaching nearly 100 million consumers? Thanks. Yeah, Dara, I can start with our pricing assumptions. In the outlook, we have not assumed any broad-based pricing in the U.S., similar to the, the first four rounds we've, we've taken. We will continue to price internationally because of the higher inflation rates we're experiencing there. We'll also continue to focus on net revenue management activities. In terms of broad-based pricing, we don't have anything assumed, in the U.S. this year. Then your question on household penetration. you know, when we've talked about this a bit over the last few quarters, household penetration, along with volume, were things that we knew were going to take a hit as we took the level of pricing we have over the last 18 months. We've certainly seen that, and this is a category comment, not just a Clorox brand comment. What we tend to see is people having short-term reactions from a behavior perspective, and they adjust as they see the initial shock of pricing, and certainly, they've seen four rounds they've had to adjust to. Typically, what we see is we see consumers looking to go to alternates. Maybe they use the inventory they have in their home, they delay a purchase cycle, they, they engage in value-seeking behavior, they trade up to larger sizes or smaller sizes, and in very extreme cases, they leave the category. Then from a household penetration perspective, a number of those factors play in. We've seen some light users exit the category, which isn't a big surprise. It's typically what we've seen, during price increases. I think importantly to note, again, this is a category behavior, not a Clorox brands behavior. Then what we're focused on, of course, is over time, returning that household penetration. I think it's important to put in perspective, we're still in nine out of 10 U.S. households with our portfolio, but we want to be in a place where we're growing household penetration again. What I would, what I would think about is all the investments that we spoke about a little earlier, you know, increase in advertising and sales promotion, as well as our focus on innovation and category growth plans, are all in service of returning to volume growth, returning to household penetration growth, and then, of course, our aim over the long term to grow share. We would expect household penetration to begin to improve as we get through pricing, and as we move through the course of the year and then through the course of our plan. What I would say is very in line with our expectation, and we feel good about the plans we have in place to continue to make progress on household penetration in fiscal year 2024 and beyond. Our next question comes from Filippo Falorni from Citi. Please go ahead, Filippo. Hey, good afternoon, guys. Just want to ask a question on gross margin, again, following up to Dara's question. What drove the outperformance relative to your planning Q4? It seemed like cost saving came in well ahead of expectation, and it was a record year for you guys, particularly Q4. How much was the incremental volume leverage from the better from the better volume trends? Then as you think about next year, how should we think about cost savings? Is like also another year above algorithm? Thank you. Yeah. Thanks, Filippo, for the question. As it relates to Q4, you're right, the over-delivery on gross margin versus our expectation, we went into the quarter targeting 40%-41% gross margin, and as you saw, we delivered just under 43%. I, I would say for the most part, as you look at the, the various drivers within gross margin, they're generally in line with our expectation. That was certainly true for cost savings, pricing, and commodities. The biggest variance was our top-line performance, and particularly on volume. Volume only declined 2% for the quarter. We had projected a larger volume decline in the quarter, and as a result of that, and had improved operating leverage, that really flowed through the entire P&L. It certainly benefited gross margin, but it also was the primary driver of our very strong earnings performance for the quarter. Then, you know, as we go forward, and, and on your question on cost savings, look, our, our team did some just terrific work this year. We target 175 basis points at EBIT margin expansion each year through cost savings. In fiscal year 2023, we delivered well north of 200 basis points, and that's really a credit to the team and the work they're doing to drive costs out of the system. I fully expect to have a very strong year this year as well. I would expect this year, we'll have another strong year that's probably north of 200 basis points. That's incredibly important because, as we said, we continue to operate in an inflationary environment, and for us to continue to grow margin, it's really based on the good work our team is doing, both on driving cost savings and driving the supply chain optimization work we're doing. That's allowing us to absorb that increased inflation and continue on our, our progress rebuilding margin. Really good work by the team and, and exceeded our goals both last year, and I expect to do it again this year. Great. That, that's super helpful, Kevin. Then a high-level question, Linda, just in your guidance on top line, you mentioned, you know, you expect a sequential improvement in volume throughout the year. Just what gives you guys the confidence of the volume coming back other than obviously the comparisons? Like, at a high level, is it that incremental advertising investment or any other specific point that you can point to give us some confidence on the volume improvement? Thank you. Yeah, you know, in volume, maybe just to take a step back, I think would be helpful and, and talk a little bit more, similar to my comments on household penetration, of what impacts volume, and then what we believe we'll see over time, as we return to more volume-based growth from more pricing-driven growth. You know, the big picture on this, we knew we were gonna make a volume trade-off with the level of pricing that we took, and certainly, that pricing was cost-justified. I think that's the right trade-off, given the fact that we were able to deliver the top line and, and margin progress that we committed to. It's only one lever that we look at in understanding, you know, brand and category health. So if we, if we look at volume, again, what, what impacts it? You know, consumers are, are adjusting to pricing right now. We still have two price increases that will lap here in Q1 and Q2, they're still adjusting to what the pricing is. They're adjusting to pricing well beyond our categories. I think it's also important to note there's an element of cross-elasticity here. Everything in their world has changed from a wallet perspective, they also just came through a pandemic, they want to have experiences, we're watching that consumer settle out. What we're seeing in our data is volumes are beginning to improve. You saw that if you looked 52 weeks, our volumes were down more than they were in the latest 13 weeks, for example. We are making improvements. We still have to lap those two price increases, but from a consumer behavior standpoint, what you'll see is consumers will return to their old routines because those routines were the most efficient and effective for them, and particularly in essential categories. You know, they don't want to have to work harder to do this stuff. Perhaps they've run through the inventory they have in their house. Maybe they tried an alternative, and it doesn't work as well, and we tend to see those people start to come back. We also, those light users that the category loss tend to come back again because we reintroduce our products to them through innovation. We use our advertising spend to talk to them about the benefits of the product. We remind them that, and they pick us up again as they send their child back to school, or if their family experiences, you know, a run of cold and flu in the house. So those moments, we tend to bring those light users over, and volumes tends to grow again. And we've seen that every time we've taken pricing, and that's consistent in categories. You know, I think what's unique for this time is, the amount of inflation our industry and Clorox experienced specifically, is, is unprecedented. We've certainly not taken this level of pricing, so it really will be about the pace that this happens at. We're happy with the progress we've made so far. We think we have the right plans in place. We're making the right investments. Our brands are still a, a superior value versus what they were pre, pre-pandemic, so they're very strong, and we believe over time, again, we will make progress on volumes and return to more volume-based growth moving forward. Great. Thank you, guys. Our next question comes from Andrea Teixeira from JP Morgan. Please go ahead, Andrea. Thank you. Good afternoon. Hello, everyone. My question is on the shipments and consumption trade-off, if there is any trade-off. You mentioned volume, volumes coming in better than anticipated, Linda, was driven by, w as it driven by consumption, or do you think retailers were also rebuilding inventory, given that consumption was better than feared? As you, as you exit the quarter, do you feel inventory levels are where they should be? Related to that, I also have a clarification on the assumption for the mild recession for the second half and your comments about, like, volumes coming in is likely better than anticipated. On top of that, you said category behavior has been changing. Is that, some more price elasticity that you, that you saw towards the back end of the quarter, or, are you exit rate on the quarter, or you're just assuming prudently that at some point you're gonna see the, the historical price elasticities you want to kick in? Hey, Andrea, let me maybe start with your shipment consumption question, and then Linda can address price elasticity. As it relates to the fourth quarter, I think there's a few things we are seeing, and I'll talk both versus our expectations and on a year-over-year basis. Versus our expectations, as you know, we had anticipated about 3%-6% organic sales growth, and we delivered much stronger growth in the quarter. That was primarily driven by consumption coming in stronger than we anticipated. The consumer is still quite resilient, and we haven't seen any drop-off in consumption as we look Q4 to Q3, and we expected we might see some drop-off in consumption, and that didn't materialize. Then the other driver of our performance was Kingsford, and as you know, we talked quite a bit about that last quarter. We were disappointed with the results in the third quarter. We made some changes to our plans. I would tell you, we're a bit cautious on what exactly we'd be able to accomplish in the fourth quarter. A credit to our team, we had very strong execution. That business grew both volume and double-digit in sales. It had a very strong performance. That was the primary drivers to the over-delivery. The other element to think about, though, as it relates to inventory, we, we think retailers generally have the right inventory levels. One of the reasons we had very strong growth on a year-over-year basis is, if you think about last year, retailers were reducing inventory levels, and at the time, as we were all getting more comfortable with the resiliency of the supply chain, everyone was starting to take down their safety stocks, and we saw that last year with retailers reducing inventory. If you think about what's really happened when they do that, what that means is retailers continue to sell to their customers, but they don't reorder from the manufacturers. They're still selling product and not reordering from us. Last year, our shipments lagged consumption. This year, as you fast forward, we saw our shipments much closer to consumption 'cause retailers are not adjusting inventory levels. On a year-over-year basis, that drove much stronger performance. That was particularly true in our, in our home care business, where we saw inventory reductions a year ago. We saw, and particularly in wipes, we saw very strong wipe shipments this Q4, which was really now we're shipping in line with consumption, which was not the case a year ago, and that really contributed to very strong year-over-year performance and that 14% growth. Then, Linda, I know she can speak to elasticities. On elasticity, you know, what we saw in Q4 specifically was continued in aggregate, lower elasticities than pre-pandemic and lower than we had expected. Again, this is nuanced by categories. There are some categories that are less favorable, et cetera, but in aggregate, our elasticities were more favorable than we expected. What we expect to happen in fiscal year 2024 is, over time, those elasticities return to more normalized levels, and it's not anything related to particularly our categories, but just the broader pressure the consumer is under. So if you look at what, what's going on, certainly balance sheets for them are returning to pre-pandemic levels, particularly savings rates, where the consumer had a lot of excess savings over the last few years. Right now, we are anticipating a mild recession in the back half. We think that's the most prudent plan based on what we're seeing for economic predictions in the U.S. That will put additional pressure on the consumer as well, and we think those factors in combination will lead to more normalized price elasticities, and that's what we have assumed in the plan. That's helpful. On the, just a clarification, the impact of the, the inventory write down, not write down, but the inventory rationalization last year, was it like a low single-digit headwind that then disappeared this year or normalized? Yeah, Andrea, you're exactly right. Last year, we anticipated there was a couple point headwind as a result of inventory reductions at retailers, and so we didn't have that impact this year. Year-over-year, that's a source of benefit and part of the 14% organic sales growth we delivered this year. Part of that was driven by lapping that inventory reduction in the prior period. Super helpful. Thank you. I'll pass it on. Our next question comes from Chris Carey from Wells Fargo. Please go ahead, Chris. Hey, everyone. Hi, Chris. Just one quick follow-up on the gross margin assumption. Kevin, you said in the prepared remark that commodities would still be a bit inflationary. You know, what are those commodities? I know, I know there's always a lag, but I would just be curious, you know, where you're seeing that, just given the favorability, you know, that we can see on this side. I have a quick follow-up. Sure. Chris, as it relates to commodities, and within that $200 million, we said about a third of that we see is coming from commodity inflation, so that'd be roughly, you know, $60 million or so. I would say there's a few areas. We're seeing substrate, some chemicals, and some corrugate liner board inflating year-over-year. That's partially being offset in a number of areas where we are expecting some deflation, particularly in ag products, soybean oil. We also expect diesel down year-over-year. In resin, we've got about flat on a year-over-year basis, so it's not necessarily contributing or helping. But that's really what we're seeing in terms of our commodity basket, and it's modestly inflationary. Certainly an improvement from where we were last year, but still modestly inflationary is what we're projecting. Okay. Just on the organic sales, over delivery, non-tracked charcoal, comping, you know, some under shipment in the base, and then stronger consumption, just to make sure I have those. Anything else? Yeah. It's coming up a lot this evening. Okay. All right. Thanks. Yeah, those are the. Just the, the more. The primary drivers. Okay, great. Just like a strategic question, Linda. You know, it's, it's, it's, it's, it's interesting, you know, how far this whole spectrum on investment has come, that, you know, this evening it's almost like, are you spending enough? You're talking about higher advertising spending, really strong SG&A. I guess maybe it'd be helpful because, you know, we're getting through earning season now. You know, what's your take on why we're seeing this, you know, really significant step up in investment levels? It's not just from Clorox, it's from all of your peers, marketing, spending, SG&A, are just going to levels that, you know, have not been seen in a very long time. Is this just a lot of manufacturers saying, "We need to get volumes going," or are you, are you feeling a lot more push from the retailers to, to get volumes going? What are your thoughts on maybe why this investment cycle is coming together and, you know, some of the key drivers and, you know, potentially where it's going? I know it's a big question, but thanks for any thoughts. Sure, Chris. I won't speak on behalf of the industry. I'll certainly let everyone speak on their own behalf, but I can just give you the insights into how we're thinking about it, and, and I think it's a, a, a pretty clear understanding. You know, we headed into COVID, we had learned a lot about volatility and the impact that it had on our business. So we began investing more a number of years ago to ensure that we had the right digital foundation, that we had the right organization suited to a more volatile environment, that we have the right capabilities to ensure that we continue to lead from a consumer insights perspective, and that the data we have flows as fast as we possibly can get it, so that we can make quick decisions. That was certainly an area for us where we needed, needed to invest within our digital transformation and our operating model to ensure we could react as fast as consumers could be. We want to be more consumer obsessed, faster and leaner. Then if you look at, you know, the bucket on promotional spending, you know, I look at that as more of a return to the norm. And for us, that spending is, you know, on good things. We spend mostly on quality merchandising. We do that to introduce consumers to innovation, we do that to remind them in key pulse points of the year, like back to school, back to college, remind them the great products that we have, introduce them to new benefits, et cetera. Seeing that return to more pre-pandemic levels, I think, you know, makes good sense given the industry can fully supply now. We can certainly supply now, and so we get back into that good cadence of giving the right information to shoppers. Then on A&SP, which we have decided to take up as, as you know, from 10 to 11, and we addressed earlier, you know, I think this is another case where the number one thing that we can do right now is ensure that we have superior value for our consumers. We have that from a ratings perspective. You know, over the last couple of years, we reached the highest brand superiority overall from a portfolio perspective we've ever had. We continue to have more of our portfolio superior than we did pre-pandemic, we think given the stress the consumer is going to be under, it would make absolute sense, given the improvement we've made on margin, to invest a bit more in advertising and sales promotion to secure that with consumers. That's how we're thinking about it. We have great brands, great innovation, great products, and we want them at this time when they're making those choices in their total basket of spending, to remind them in our household essential categories, no one delivers a better value than Clorox. That's exactly what we're focused on. To me, I think it is, it's exactly what we do. We focus on the long term, we focus on building brands, and the spending is right in line with doing that. Thank you, both. Thanks, Chris. Our next question comes from Javier Escalante, from Evercore ISI. Please go ahead, Javier. Hi, good afternoon, everyone. I have another permutation of the same, observe, you know, retail sales in track channels versus the over-deliver in the quarter, but hopefully it's from a different angle. If you can talk about all channel retail sales growth, if you give us a sense of what were Clorox's Q4 retail sales, including, you know, online and Home Depots and things like that, so we can better understand your guidance going into fiscal 2024. If we can start with that, and I have a follow-up. Javier, let me, let me see if this helps. If you look at our Q4 performance, I think your question is sales across many different channels, as you saw, very strong growth. If you look at track channels, that's true, but what I'd also tell you is some of the areas that are not showing up in track channels, we had very strong performance. Our PPD business grew both volume and sales in the quarter. In international, we held volumes and grew sales 14% organically. Our non-track sales were even stronger than track. We're seeing broad performance, not only in track channels, but we're seeing it in all the areas where we're selling product. That contributed to the overall performance of the, of the business, and that's why you'll probably see even stronger results than what you're seeing if you're just looking at, at track channel performance. Well, the reason I'm asking that is because, I think Linda mentioned that consumption was stronger, right? This is part of the over-deliver in the quarter, but we don't see that in track channels. We see retail sales growth at 6%, both in the March and the June quarter, and then there is this very big difference in, in, in, organic sales, and particularly on the volume side. Wondering if you could at least. Let me tackle differently. What percentage of your sales is in non-track channels, specifically in this quarter, given the seasonality of Kingsford? That would be helpful. Javier, maybe it would be good just to back up again and make sure we go through all the drivers of what drove track consumption versus organic sales, and Kevin just covered part of it. We do have a fair amount of our sales in non-track channels. It's a little complicated because non-track does not include international PPD, which is why Kevin broke it out the way he did. You know, just to break it down, we had Q4 organic sales growth of 14%, and we saw track channel consumption of about 7%. The delta would be what Kevin highlighted, international and PPD are a portion of that. PPD grew volume, international held volume. Remember that we're lapping wipes inventory that Kevin spoke about, and that's a portion of it. We saw stronger non-tracked performance in a number of retailers and a number of businesses, and that's across e-commerce and brick-and-mortar, et cetera. In addition to that, we haven't spoken a lot about this yet, but we do always ship some of our Q1 events in Q4, and that contributed to that delta as well. We do have a strong non-channel, track channel presence, yes, that absolutely can move the number. This is pretty normal for us to have a quarter that is a bit disconnected from track channel sales. In addition, that you have the fact that we have very strong merchandising in Q1, as we normally do, and we typically ship some of that in Q4. Those are really if you look at those, those four buckets, those are the four buckets of the difference between the 14 and the 7. Well, thank you. If I could squeeze in something when it comes to pricing for next year, how much is the carryover impact in fiscal 2024? Javier, at this point, it's pretty minimal. What we have left to lap is the 4th round of pricing we took for half a year. If you look. Okay. This year, we had in total about 670 basis points of total benefit for the year. You should expect a much smaller benefit in fiscal year 2024, because now we're looking at just half a year on one of our pricing actions, and the fourth round was not as large as the third round. Okay, thank you so much. Very helpful. Our next question comes from Olivia Tong, from Raymond James. Please go ahead, Olivia. Great, thanks. I just want to revisit gross margin, because the pace of gross margin expansion in fiscal 2024 versus the year just reported, obviously, a fair bit of deceleration. I'm trying to understand, I mean, fiscal 2023 recovery and gross margin was, was so meaningfully ahead of your expectations. Why is the pace of expansion slowing so much in fiscal 2024? Because cost inflation, well, maybe not down, is certainly less of a pressure versus last year. Pricing is by and large, working. The top line, you know, is, is, is growing, and gross margin is still quite a bit below pre-COVID levels, so would love a little bit more color on that. Thanks. Sure, Olivia. As it relates to gross margin, as you said, we, we continue to expect to make progress this year, so our commitment is to rebuild gross margin back to pre-pandemic levels. This year, we're looking at about 150-175 basis points of progress. That's slowing from what we delivered last year and is primarily driven by pricing. We took four rounds of pricing over the last 18 months, and that had a significant benefit last year. It contributed, you know, over 650 basis points to gross margin. As we look at fiscal year 2024, as I was just mentioning to Javier, we have fairly limited pricing in the plan. We're gonna get a little bit of carryover on that 4th price increase, so it'll have a, a smaller impact on gross margin. Then we're really able to grow margin based on all the very good work our team is doing on cost savings and supply chain optimization. In spite of still dealing with about $200 million worth of cost inflation, we believe we can more than offset that through the good work we're doing within the supply chain and continue to grow gross margins. While we're making good progress, I'd expect that to continue. As we move into fiscal year 2025, I expect that progress to continue. You know, the one thing we'll have to look at over time is, you know, we've bought these, these commodities for decades. They are cyclical. At some point, they'll turn deflationary. That's not our expectation this year, but certainly, when that occurs, that'll certainly accelerate the pace of recovery. It's just hard in this environment to predict exactly when that's gonna occur. We feel very good about our ability to rebuild margins back to those pre-pandemic levels. We know that's gonna take some time to get there. I have to tell you, I feel very good about the progress we're gonna continue to make this year, in spite of ongoing inflation we're dealing with. Olivia, I'll add just one point to that. Kevin underscored the $200 million, which is, you know, significantly better than what we had, of $500 million in fiscal year 2023. I just wanna underscore, that's still three times the level of average we had, you know, before we got into this inflationary cycle on an average year of inflation. I, I think the point that Kevin is making is really important to understand. This is still a, a very challenging environment with significant cost inflation, although certainly better than we experienced over the last two years. Got it. Then on the top line, as you look towards rebuilding volume as the year progresses, can you talk a little bit about innovation and what role that plays? In your view, what, you know, what kind of impact does innovation have on this year versus last? Sure. Yeah, innovation continues to be the lifeblood of how we grow our brands over time, we set out to deliver bigger, stickier innovation platforms as part of our IGNITE strategy. We've talked about the fact that we've been able to have more net contribution from innovation in our strategy period than we did in the prior strategy period. We're gonna continue to focus on accelerating that this year. We have innovation across our portfolio, just as we did this year. All of our major brands launched innovation in fiscal year 2023, and we would expect something similar in fiscal year 2024. We're really focused on value and value superiority in that innovation, so we're looking at a combination of product improvements and new innovations, as well as good claim support. Of course, we'll support that innovation with that 11% of sales from an advertising and sales promotion perspective. We think as we lap these price increases, as the consumer comes under more pressure, innovation will be as important as it ever has been. Certainly, our retailers are looking for innovation to help them grow their categories, to ensure that we're getting shoppers down the aisles, et cetera. What I would say is, it's a continuation of what we've done. Of course, we wanna have additional progress as we can, and we think we have the right investments to ensure that that continues in fiscal year 2024. Great. Thank you. Our next question comes from Lauren Lieberman from Barclays. Please go ahead, Lauren. Great. Thanks so much. Just taking a look, playing around my model and looking at kind of the dreaded multi-year stacks. Looking at the two-year stacks on volume and on price mix for this quarter, in particular, like, all your comments make, frankly, more and more sense on the things you were lapping and, you know, the contribution, for example, for charcoal to price mix, the inverse probably, I guess, for wipes on health and wellness. I was curious, as we look forward, any other periods, 'cause the stacks are messy, that you think should be called out, where there is a dynamic of retailers having reduced inventory in the prior years, so that we should be particularly keen for differences in shipments versus what we're seeing in track channels, knowing there's always untracked that we won't see? You know, Lauren, it has certainly been, as we said, bumpy. Now, this is everyone understands, I think, the definition of bumpy, and that we have, you know, lots of laps, et cetera. I would say we are at a pretty good period of normalization now, where I, I don't see anything that we look ahead and say there was a significant inventory buildup or something that we have to lap that's very notable. You know, we've gone through the COVID wave, lapping. Pricing would be the one thing I'd call it. We're still lapping pricing, and Kevin, I think, and I have been clear on that. I think you can predict that based off of, you know, what we put out there. Of course, that, that, that comment is barring any other changes that we see, any other shocks in the environment. I, I wanna knock on a little bit of wood saying that. I don't see anything material that we would be looking ahead and saying, you know, there, there's a big lap ahead of us that we have to consider, pricing being the one exception. Okay, great. And then, j ust in follow-up, I was curious if you could comment on kind of where you stand, I guess, in terms of shelf space or distribution, and knowing that, you know, and we've talked about several times in the past, pre-COVID, there was some, you kind of lost shelf space, and now you've had, as you pointed out in the release, you know, really strong innovation agenda. I guess, you know, where do you stand on, on kind of shelf space? How are you thinking? You know, do you think there's opportunities to be growing shelf space with innovation in 2024? Is that part of the outlook or not so much? Yeah, we made good progress as we returned to full supply and getting our total distributions point up. We, we made good progress over the last, call it, 18 to 24 months across a number of our businesses. You all remember that in many cases where the current, you know, us and our competitors couldn't fully supply, there were a lot of third-tier brands that had entered in. For the most part, that is cleaned up, and we've been able to gain distribution points. As a result of that in aggregate. What we're focused on for fiscal year 2024 is exactly what you said. We wanna gain distribution on our innovation. We wanna make sure that we have the right SKUs on the shelf, as we think about the right pack for the consumer, given their value seeking. We think we've done most of that work, but we wanna continue to make progress, and particularly ensure that we get our innovations on shelf as fast as we possibly can on both the physical and digital, digital shelf, and that's what the team will be focused on. That will contribute to 2024. You know, we expect the category growth plans and the plans we have with retailers and our execution of those plans to contribute, but we feel good about what we're walking into and, and what we have for both the front half and the back half. Great. Okay, thanks so much. Thanks, Lauren. Our next question comes from Steven Powers from Deutsche Bank. Please go ahead, Steven. Steven, is your line muted? Sorry, can you hear me? Yep, can hear you now. Go ahead. I can hear you. Okay, great. Sorry about that. Following up on, on that conversation you were just having with Lauren, actually, so it sounds like things are relatively normalized from a supply and inventory standpoint, so the guidance implies shipping to consumption. I guess I, I'm curious if, you know, if it also you've guided to what you expect category growth rates to be, both, you know, from a value perspective and a volume perspective, or if you're embedding any bias of, of share gain or even, or even some share sacrifice as you still continue to rebuild the margins. Just how do I, how do I think about your guide relative to category growth expectations? We've certainly taken into account. That's the foundation of any year that we plan. We look at what we expect the categories to contribute, and our assumptions in both as we lap pricing and as we head into what we predict is a mild recession in the back half of our fiscal, assume category rates commiserate with that. By category, we're looking at our plans, comparing it to that, and adjusting based off of if we see headwinds or tailwinds. You know, we wanna make progress over the long term on share. We've built that into these plans. We've built in the fact that we're spending additional advertising and sales promotion, that we have good innovation plans, and that lands us at the total outlook that we've provided, but they're very much grounded in the realities of the categories and what we expect. Okay. Just to, to summarize that, on a net basis, it doesn't sound like you're, it sounds like the, the, the, the top line call you're making is essentially in line with category growth. If things go well, maybe, you know, top end will market share gain. If not, you're kinda in the, in the zone. Is that, that fair? That's fair. Okay. Thank you. Thanks, Steve. Our next question comes from Jason English from Goldman Sachs. Please go ahead, Jason. Hey, folks. Good evening. Thank you for swapping me in, and congratulations on a strong finish to the year. I'm gonna totally date myself by going back in time to a time where you guys used to give us a log of all your price increases and decreases. The point there was, there was decreases back in, I think, 2009 and 2010. You, you had some decreases on, on Glad, on Litter. More recently in 2018, I think you rolled back the prices on Glad. Obviously, all that was accompanied by pretty substantial downdrafts in commodities. My, my question is: if, if we get to your point, Kevin, another downdraft in commodities, because these commodities, to your point, are cyclical, would we expect or should we expect you to roll back some of these price increases that you put through, one of the four in the last year or two? In light of the investment you're making, like, are you trying to manage the business differently? Instead of give back that, that relief in the form of, of pricing, you spend it back into the ability of the P&L through lines like A&P and marketing. Hi, Jason. Thank you for your comment. Then on your question on price rollbacks, just to be completely clear so we're all on the same page, we've rolled back one price increase in a, in a category we no longer own, from a truckload perspective after taking an increase. The other ones that you're referring to, I think rightfully on Glad, is we've always used trade as a way to evaluate, given resin is such a volatile commodity. So as we've taken pricing, we've used trade in the past in order to make up a difference if we've seen favorability in resin that we needed to deal with or, or we saw something change in the category. The pricing that we've taken has stuck in the marketplace. Given what we're facing right now, obviously, we have not fully recovered margins, have made great progress through the pricing action we've taken, but we have additional work to do. Given the fact that we continue to see an inflationary environment, with what we talked about three times the average year, certainly better than last year, but still a big headwind, we are planning to and anticipate that price increases will stick, and that we'll bring back volume and household penetration through innovation and through investment in advertising and sales promotion. We don't see any structural reason why these price increases wouldn't stick like they have in the past. Again, we're really focused on ensuring we grow categories the right way through those other levers. If we need to make an adjustment, I think Kingsford is a good example. We did not roll back pricing, so we took pricing. Competition did not follow. We made an adjustment to our plan by putting incremental merch in place. We did not roll back our truckload pricing. We continue to hold that. It's a good example of how we're approaching it, that if we see a dynamic in a category we need to react to, we will try to do that in a short-term manner, and maintain the truckload pricing we've taken. Okay, that actually sounds like you do intend to manage pricing differently than you did a decade ago or so. Last time we came through a commodity supercycle, where you didn't just adjust by trade. You actually announced list price increases, you published list price increases, you gave us a log of the list price decreases on the back end of it. I'm hearing you say now that that's not the intent. The intent is to manage it differently with, with trade, flexing trade, if we find ourselves in that scenario. I totally appreciate that you don't see that scenario. That's not what you're calling for in 2024, given the commodity and the overall inflation environment. Yeah, I see it as a continuation of what we've done in the past, Jason. Sounds like we have a little bit of different data, but yes, I think we're getting to the same conclusion, which is we intend for these in price increases to stick. We think we have the right tools in place to do that, and we're focused on all the other levers we can pull to continue the strong category performance we've had from a top-line perspective, as I noted on spending and innovation. You're landing on the same conclusion, which is we believe these price increases will stick and, and have a good structural reason to do that. Understood. Thank you. Thanks, Jason. This now concludes the question and answer session. Ms. Rendle, I will now like to turn the program back to you. Great. Thank you, everyone. We look forward to speaking with you again on our next call, and until then, please stay well. This concludes today's conference call. Thank you for attending. The host has ended this call. Goodbye.