高樂氏 (CLX) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the Clorox Company first-quarter FY15 earnings release conference call.

(Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference call, Mr. Steve Austenfeld, Vice President of Investor Relations for the Clorox Company. Mr. Austenfeld, you may begin.

Great. Welcome, everyone, and thank you for joining Clorox's first-quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO; Benno Dorer, Clorox's CEO Elect; and Steve Robb, our Chief Financial Officer.

We're broadcasting this call over the Internet, and a replay of the call will be available for seven days at our website, thecloroxcompany.com.

Let me remind you that on today's call, we will refer to certain non-GAAP financial measures, including but not limited to, free cash flow, EBIT margin, debt to EBITDA, and economic profit. Management believes that by providing insights on these measures enables investors to better understand and analyze our ongoing results of operations.

Reconciliation with the most directly comparable financial measures, determined in accordance with GAAP, can be found in today's press release, this webcast's prepared remarks, or supplemental information available in the financial results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today's earnings release.

Please recognize that today's discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans.

Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results or outcomes to differ materially from management's expectations and plans. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

Turning to our prepared remarks, I'll cover highlights of our first-quarter business performance by segment. Steve Robb will then address our financial results and financial outlook for FY15. And finally, Don and Benno will close with their perspectives, followed by Q&A.

As we said in today's press release, results from Clorox Venezuela are now included in discontinued operations for both the current and year-ago quarters. All of our commentary today is on a continuing operations basis, unless otherwise stated. For more detail on our past results from continuing operations, please see the additional schedules included in the press release we issued this morning.

So, turning to our top-line results -- in Q1, volume was up 1%, and sales grew 1%, including the impact of unfavorable foreign currencies. On a currency-neutral basis, sales grew nearly 3%.

Our growth reflects the benefit of price increases taken mostly in international markets and higher volume, as well as a price increase on our Glad business, taken earlier in the calendar year. These results were partially offset by unfavorable foreign currencies, primarily from Argentina, as well as higher trade spending. Steve will provide more details on sales drivers in a moment.

In the first quarter, our US 13-week market shares decreased 2/10 of a point versus the year-ago quarter, reflecting continued intense competitive activity in our cat litter and Brita businesses. The slight decline in the quarter was an improvement from the prior quarter, driven by solid market share gains in several categories, including Kingsford Charcoal, laundry, and our home care business. This positive trend has continued, as the latest data as of mid-October reflected our first total Company share gain in more than a year.

Looking at our categories, they were up 0.5 point in the first quarter, a nice improvement versus the decline in the prior quarter. However, this still remains below historical category growth rates, and sustained category growth has been difficult to achieve. Continuing to invest to improve our category trends and market shares remains our top priority.

With that, I'll review our first quarter results by segment. In our cleaning segment, Q1 volume decreased 1%, and sales were down 2%, due to lower shipments of home care and laundry products.

In home care, which is our largest US business unit, sales decreased modestly, primarily due to a distribution loss of Clorox disinfecting wipes at a major club customer earlier this calendar year. At many other customers, wipes are performing very well. In response to the intensely competitive environment on wipes, we've increased investments on 3D demand building, including increased consumer promotions; consumer communication across TV, radio, and digital, highlighting the value of Clorox wipes versus competitors' products; high levels of quality merchandising; and innovation with a number of new wipes products.

In the last two quarters alone, we've launched four new variants of wipes, including those for glass, bathroom, and heavy duty cleaning, as well as a larger-size wipe. Clorox remains the clear leader in the wipes category, with market shares remaining near 50% in tracked channels and with share trends improving. We're optimistic this trend will continue.

Looking ahead, in October, we've seen an uptick in sales of disinfecting products related to strong back-to-school execution and the start of the cold and flu season, as well as recent concerns over enterovirus and Ebola. However, it's too soon to tell if this will have an ongoing impact on consumer use in the coming quarters.

We are prepared to meet a potential increase in demand if needed. Don will talk more in a few minutes about consumer concerns regarding the spread of infection, including Ebola.

In our laundry business, Clorox bleach lost volume, as it lapped 11% volume growth in the year-ago quarter, due to the earlier introduction of our concentrated formula. From a market share standpoint, our investment in this brand and our focus on value are paying off, as September marked the third consecutive quarter of market share growth on Clorox bleach.

In our household segment, we delivered strong 4% volume growth and 5% sales growth. The segment's top-line results were driven by strong performance in our charcoal and bags and wraps businesses. The charcoal business grew volume 16%, due to promotions and consumption behind the Labor Day holiday and outstanding execution at retail.

In bags and wraps, volume and sales were up, behind solid category growth and incremental merchandising and distribution gains on Glad OdorShield trash bags, which delivered all-time record shipments behind great consumer acceptance of some of our new scents. These results were partially offset by lower shipments of Glad base trash bags, behind a shift to premium trash bags.

Turning to cat litter, volume was flat, and sales and share decreased as a result of continued intense competitive pressure. In response, we're investing more aggressively in innovation and on communicating our value proposition versus the competition, particularly focusing on excellent clumping and odor control. While it's only been recently launched, we are optimistic about the recent introduction of our Fresh Step Extreme Lightweight products.

In our lifestyle segment, volume was flat, and sales decreased 1%. These results reflected lower shipments of Hidden Valley salad dressing and Brita products.

In August, we started shipping an improved Brita filter that is faster and easier to change than competitive filters. We plan to continue introducing innovation that differentiates Brita from the competition, and we are optimistic that our water filtration business will return to growth in the second half of the fiscal year.

Partially offsetting these decreases were double-digit volume and sales growth on Burt's Bees products, largely due to innovation in lip and face care products. In particular, our new lip crayons, new lip balm flavors -- vanilla bean and wild cherry -- and our face towelette products were all very strong in the quarter.

Turning to international, volume was up 5%, behind solid market share performance. But sales were flat, reflecting unfavorable foreign currency exchange rates, primarily in Argentina. On a currency-neutral basis, sales for international grew a strong 10%.

While we expect modestly slower growth in some countries to continue, our market shares remain generally healthy across our international markets, and we're seeing improvement in most core countries and categories. With the exception of Argentina, we're continuing to invest in demand-building initiatives and innovation to support category growth.

Looking at the balance of FY15, we remain committed to growing our categories' market shares through strong brand investment and clearly demonstrating the value that our products provide consumers across the 3Ds. We continue to anticipate sales to be about flat or to grow in the range of 1% to 3% on a currency-neutral basis.

Now, I'll turn it over to Steve Robb to provide more detail on our Q1 performance and our outlook for FY15.

Thanks, Steve. And welcome, everyone. Before I discuss our first-quarter results, let me echo Steve's comments regarding our recast financials. Unless otherwise noted, all of my commentary today is for continuing operations, with the results of Clorox Venezuela now reclassified to discontinued operations in the current and year-ago quarters.

We're pleased to have started the year with a solid quarter. Sales came in a bit better than we expected, due to stronger shipments of charcoal and slightly improved market share. This contributed to the Company delivering diluted earnings per share from continuing operations of $1.10 versus $1.05 in the year-ago quarter, for an increase of 5%.

In our first quarter, sales grew 1%, reflecting the benefit of nearly 2 points from pricing and more than 1 point of volume growth. This was offset by about 2 points of negative foreign currency impact, primarily from Argentina, and nearly 1 point of higher trade promotion spending. On a currency-neutral basis, sales grew nearly 3%.

Gross margin for the quarter declined 70 basis points to 42.8%, compared to 43.5% in the year-ago quarter. The biggest factors contributing to the gross margin decline were about 170 basis points of higher manufacturing and logistics costs, reflecting inflationary pressures internationally, particularly from Argentina, and higher trade spending.

Commodity cost increases, primarily for resin, contributed another 40 basis points to the decline. Now, although [oil] prices have declined recently, resin, our largest commodity purchase, continues to see higher prices, due to tight supply.

Partially offsetting these impacts were the benefits of about 120 basis points of cost savings and about 90 basis points of pricing.

Selling and administrative expense was lower in the first quarter, at 13.3% of sales, versus 14.4% of sales in the year-ago quarter. In the prior-year quarter, the Company made incremental investments to change IT service providers and upgrade our Burt's Bees systems and processes. In the current quarter, cost savings and a one-time change in the Company's long-term disability plan to make it more consistent with the marketplace also contributed to the lower selling and administrative expense.

Advertising and sales promotion came in at 9% of sales, reflecting continued strong support behind our brands. In addition, our US retail advertising was nearly 10% of sales.

In total, demand-building investment, including trade and advertising expense, increased $16 million versus the year-ago quarter. The increase was primarily due to increased merchandising behind Clorox disinfecting wipes and other disinfecting products and the litter business.

Our effective tax rate of 33.7% was lower by about 0.5 point in the quarter versus year-ago. Net of all of these factors, we delivered diluted earnings per share from continuing operations of $1.10, a 5% increase versus the year-ago quarter.

Free cash flow for the quarter was $205 million, or 15.2% of sales, compared with $157 million in the year-ago quarter, or about 11.7% of sales. The increase in free cash flow is primarily due to reduced employee incentive compensation payments, reflecting significantly lower year-over-year payouts and somewhat higher tax payments in the year-ago quarter. In FY15, we continue to anticipate free cash flow as a percentage of sales to be about 10%.

Now, I'll turn to our FY15 outlook on a continuing operations basis. First, let me clarify the impact to our FY15 outlook from reclassifying Venezuela to discontinued operations.

From a sales standpoint, exiting Venezuela has only a small benefit to the sales outlook, since current year sales were not expected to be significantly different than prior year sales. Our initial outlook had assumed significant and ongoing price increases would partially offset the impact of currency devaluations. We are, therefore, not changing our sales growth outlook.

From a profit standpoint, our previous outlook had anticipated only a modest loss in Venezuela in FY15, as anticipated price increases were expected to significantly reduce the loss. Therefore, reclassifying Clorox Venezuela to discontinued operations does not have a significant impact on our EPS outlook.

With that, let me provide details of our FY15 continuing operations outlook. We continue to anticipate sales to be about flat, as the benefits of innovation and pricing are expected to be offset by the continuing headwinds of category softness and about 2 points of negative foreign currency, as the strong US dollar is having a significant impact across most markets and in particular, in Argentina, where we continue to anticipate double-digit currency devaluations. On a currency-neutral basis, we continue to anticipate sales growth of 1% to 3%, as previously communicated.

Turning to margin, we continue to anticipate gross margin to be up slightly for the fiscal year, as the benefit of cost savings and pricing will be mostly offset by higher manufacturing and logistics costs as well as higher commodity costs, especially resin. In response, we are taking a 6% price increase on our Glad business in November, which is cost justified.

We continue to anticipate selling and administrative expense at about 14% of sales, and advertising at about 9% of sales. We now anticipate EBIT margin will be about flat versus the prior year, a change versus the prior outlook, which had assumed 25 to 50 basis points of expansion.

This change in outlook is primarily due to somewhat higher resin prices and the reclassification of Venezuela to discontinued operations. For perspective, exiting Venezuela and recasting the historical results improved our FY14 EBIT margin from continuing operations by 60 basis points to 17.8%, versus 17.2% previously reported.

Our FY15 tax rate is now assumed to be slightly more favorable than before, likely closer to 34%, versus the prior outlook for 34% to 35%. Net of all of these factors, we continue to anticipate diluted earnings per share from continuing operations to be in the range of $4.35 to $4.50, with a slightly lower EBIT margin outlook to offset by the tax rate.

Looking forward, the US environment remains intensely competitive, and we are committed to accelerating top-line growth through product innovation and stepped up investments in our demand-building programs. We will also continue to lean in harder on our strong cost savings programs and drive efficiencies to increase productivity.

With that, I will turn it over to Don.

Okay. Thanks, Steve. Hello everyone. Happy Halloween to everybody.

I'm pleased to see the fiscal year is off to a really solid start in the midst of, as we all know, a tough environment out there, in part, reflecting the benefits of a strong summer barbecue season, as both Steves talked about, on our charcoal business. But I think it's also important to note that we're seeing improving market share trends in several categories supported by increased demand-building investments and innovation. You certainly saw that in the first quarter.

A question being asked a lot lately is whether concerns over enterovirus and, particularly, Ebola have had a material impact on driving growth of disinfecting products. Well, in Q1, we obviously saw no real impact from Ebola, given the cleaning division was down 2% in sales, as we noted earlier.

Although, we did see an impact on certain disinfecting products from stepped up execution behind our typical back-to-school season and the start of the cold and flu season. In fact, if you look at the wipes category in the quarter, the wipes category was up 9%. And we were up a bit above that, gaining almost a share point.

Now, in the most recent four weeks of [Lulo] data, this is data ending October 19th, we have seen a continued uptick in disinfecting product purchases related to those consumer concerns about the spread of infection. If you look at the wipes category in that latest four week period, it's up in the mid-teens. And we're growing at a faster clip than that, continuing to gain share.

At the same time, as Steve said, it's really much too soon to tell if those concerns are going to have an ongoing impact on consumer use and product consumption over the course of the coming quarters. We'll see how that plays out.

Certainly, offering solutions such as household disinfectants like Clorox regular bleach and disinfecting wipes, which meet the Centers for Disease Control's current criteria for use in hospitals, that aligns with our health and wellness strategy to help stop the spread of infection in general. So as part of our Stop the Spread of Infection campaign, we're always looking for ways to help educate consumers on how to best protect themselves and their loved ones against disease.

So for example, information about enterovirus and Ebola have been posted on Clorox.com, including the CDC's recommendation on disease prevention. In addition, we've posted a list of our disinfecting products that meet the criteria established by the CDC. So we think the consumer is well-informed.

Also, consistent with our values as a Company and our long-standing practice of helping at times of crisis, we're working with governments and non-governmental organizations to meet critical needs in the US and abroad. Just recently, we donated thousands of bottles of Clorox Bleach to West Africa, where bleach is, obviously, one of the most urgently needed supplies. Bleach is essential for disinfecting safety equipment and sanitizing health facilities, and we, obviously, believe our donations will help protect health workers who play a pivotal role in containing that epidemic.

We're also working with USAID to assess the ongoing needs in that region and we stand ready to assist further, as is needed. I think it's -- reasons like that have made me proud to have led this company for the past eight years.

I've certainly appreciated speaking with all of you each quarter. I think today is actually my 33rd earnings call. And at various meetings and conferences around the country and around the world, I think you've always pushed our thinking, and you've made us better for that. And for that, we're all grateful.

I'm pleased to be staying on as Executive Chairman of the Board, and I couldn't be more pleased with the selection of Benno Dorer as the Company's next CEO. I think many of you have met Benno over the years, so I know you're familiar with his experience and his strong strategic skills.

Benno and I have worked closely together for the past eight years that I've been here, and I can certainly testify that he's got a broad perspective and tremendous domestic and international experience here at Clorox and from his days at Procter & Gamble. He's got a strong track record of achieving results and driving change and shares with me, I think, a very similar approach to leadership.

While it is certainly no nonsense, and we focus very much on execution, it's also based on a strong set of core values. And I think those values start with a focus on integrity and putting our people first. And I have every confidence he's going to be a great leader for Clorox.

And I think, in addition to Benno, as you all know, we've got a terrific set of executive leaders from Steve Austenfeld; Steve Robb, the CFO; Dawn Willoughby and Nick Vlahos as the new Co-Chief Operating Officers; and the rest of the executive team. So I'm very pleased that all these changes have been done with internal candidates. We've got a very strong bench in this Company.

It's a great Company, great people. It's been a privilege and an honor to have served them over the past eight years. So with that, I'll turn it over to Benno, and we'll wrap it up and kick off the Q&A.

Hello, everyone, And thank you, Don. I very much appreciate your words, and I look forward to taking over the reins of the Company next month. I'm deeply honored and excited.

As everyone on the call knows, Don's just done a tremendous job leading Clorox. During his tenure, he led the Company through the successful Centennial Strategy and went on to lay the groundwork for the future by establishing the Company's 2020 Strategy. He does leave big shoes to fill, and I'm excited to be working with the executive team and leaders across the Company to build on the strategy Don has led over eight years.

Now, with Don staying on as Executive Chairman, we'll be able to make this transition seamless for the Clorox organization and the benefit of all of our stakeholders. There is no better time to be CEO at Clorox. Our people are second to none, and I believe our focus on big share brands in mid-sized categories, countries, and channels is the right one for us.

As I've been sharing with folks in the past six weeks or so, this transition has a lot to do with continuity. No extreme right or left turns. I believe we're on the right path with the 2020 Strategy.

At the same time, the defining issue for Clorox is accelerating profitable growth. So we're leaning into the strategy and accelerating the key elements that I believe drive the greatest value.

First, we will increase our investment in demand building programs to reinforce the value proposition of our brands, to reinvigorate our categories, and to profitably grow market share. That means, first and foremost, creating values for consumers by delivering superior, innovative products that delight them and ensuring our communications make clear why our products are the ones to choose.

Second, we will grow into profitable new categories and channels through innovation, partnerships, and acquisitions. And third, we will remove waste in our work, products, and supply chain to create organizational capacity, and to fund growth.

Underpinning all of these will be a continued focus on our people. As CEO, my job is to keep Clorox people focused on our 2020 Strategy and empower them to deliver results in a way that's consistent with our values as a Company.

With strong plans in place for the current fiscal year, and a 2020 Strategy that sets clear objectives and focuses everyone on value creation, I am very optimistic about the future and firmly believe we have what it takes to succeed. And near-term, of course, it's about hitting our fiscal year annual goals, which is why I'm pleased we're off to a solid start this fiscal year.

And with that, I'll ask the operator to open up the lines for Q&A.

Thank you. (Operator Instructions) And our first question will come from John Faucher from JPMorgan.

Yes, thanks. I guess, I want to talk a little bit about -- there's a perception that the US, in general, is getting better. If the consumer comes back, can you talk about where you stand from a marketing standpoint, relative to peer's share of voice, et cetera, in order to be able to take advantage of that on a consistent basis?

And then, also wanted to follow a little about the pricing question. Don, you guys talked -- or Steve, I'm not sure which one -- talked about the pressure in the resin market.

Is that something that you're going to be able to pass through to consumers? And do you need the consumer to be a little bit stronger in order to absorb some of that pricing? Thanks.

Yes, John. I think, in terms of the US, clearly, the slight uptick we saw in the categories in the quarter, with the 0.5 growth rate that Steve mentioned, is certainly an improvement sequentially over where we saw the prior quarter. And looking at the University of Michigan's Consumer Confidence Index this morning, which came out in pretty good shape, I do think the consumer in this country is becoming a little less cautious.

Now having said that, we still have one-third of the households in this country making less than $35,000 a year, and those wages are stagnant. So we're cautious about this. I think that's one of the reasons we're committing to spending more in marketing dollars to support the brands in the coming months.

So if you look at this quarter, for example, you saw about a 5% increase in our demand spending. I think that will be fairly consistent throughout the year. A lot of that spending is supporting innovation like Fresh Step Lightweight litter. It's supporting increased merchandising behind disinfecting products as we go into the flu -- cold and flu season.

All in all, I think you'll see that increase in spending, John, continue to support the innovation we've got. We've got another wave coming out in January with brand news across most of the major brands. I think we'll be in a good position to capitalize on that, as the consumer improves.

It was also interesting to note that, when you think about the low income households in this country, you're going to see more innovation from us on what we're calling LOOP products -- low out-of-pocket. For example, we're just launching a $0.99 Clorox Bleach product that will, particularly, probably most likely show up heavily in the dollar channel. So we think the innovation, the focus on LOOP products, and the increased spending behind that innovation should put us in a pretty good place.

Okay. Don, I guess if, I could just follow up, more spending, do you think -- are you spending enough after you get these adjustments, relative to some of the declines we've seen in brand support over the past couple years? So I appreciate that you're spending more. Is it back up to the levels you need for the right level of share of voice?

Yes. I think so, John. If you look at spending in the US, for example, this quarter, we were at nearly 10% in advertising and consumer promotion. So I think that we're going to try and continue to push the envelope on that.

I think -- and when you look at the categories where we face off with private label on bleach, charcoal, and trash bags, we virtually have -- we have a 100% share of voice in bleach. We have a 100% share of voice in charcoal. We've got near a branded share of voice of 100% in trash. I think we're in a pretty good place.

John, this is Steve. Let me weigh in on your second question, which has to do with resin prices.

It's interesting, as we've all seen, energy prices have really traded off pretty sharply over the last couple of months. But the resin market has actually been climbing steadily higher -- it's a pretty tight supply/demand balance right now.

As a result of that, we have announced that, effective in November, we are taking a 6% increase on our Glad business. What we typically see when we do this is, you can see volume be somewhat depressed for a couple of quarters -- sometimes two to four quarters -- which is pretty normal. But then the consumer tends to come back.

And again, Glad is a category that, as resin prices move up we tend to take pricing as cost-justified. It takes time, but the consumer adapts to it, and competitors have historically followed pretty quickly on that. We think it's the right decision to protect our margins, and we think it will be fine with the consumer over time.

I think what's interesting, John, if you look at the data in the quarter -- if you look at trash, the category was up almost 4.5%. And our share traded off about 4/10 of a share point. If you look at the September data, the category was up 5%, and we were up in share 3/10 of a share point.

It seems like it's that same pattern paying out, that after a few months of absorption, consumers will come back. And that's what we're seeing in the data.

Great. Thank you.

Thanks, John.

And next we'll take a question from Steve Powers from UBS.

Yes. Hey, thanks. So you've mentioned the category acceleration in the quarter -- better share trends, new innovation. And all that signals a basis for optimism on the top line, I think. And then on the bottom line, the exit from Venezuela, the $0.05 disability plan benefit this quarter should help as well.

So just given all that, just trying to understand the maintenance of your full-year guidance. Is that just -- should we view it as more conservatism early in the year, or are there things out in the horizon that are offsetting some of those more positive trends so far?

Well, I think, as you say, we're certainly off to a good start on the year. And we feel very good about the plans we have in FY15 and how we're executing against it.

But I think it's important to note, we're 90 days into this year. And we are going to have to continue to watch what happens with foreign currencies, commodity costs, and how the consumer holds up as we go through the holiday season and get into the back half of this fiscal year.

So I think we need more time to see how some of these things unfold as we move through the year. But at this point, we certainly feel like we're off to a good start and feel very good about the outlook that we have out there.

Okay. And then, a separate question on Venezuela, if I could. As you think about that exit, is that, at this point, a fairly cut-and-dry exercise? I mean, do you have a clear blueprint to follow and that you've got line of sight to the end point? Or are there key unknowns, risks, that we should be aware of that might alter the expected P&L impacts or cash costs over the course of that exercise.

Yes. As you saw in our press release, and I guess, I would echo, we continue to believe that the after tax cost of the exit will be about $70 million to $80 million. Now, a large portion of that will fall in FY15. Some of that will, obviously, continue onwards.

But I would say we have a plan. We've executed the plan, I think, very well. But it's, obviously, a tough situation, and there are unknowns.

I think we're going to need to continue executing the plan that we have and moving through it. But at this point, we think the after tax cost of $70 million to $80 million and the cash cost, on an after tax basis, of $5 million to $10 million -- these numbers feel right to us.

Yes. I think the after tax cost is something to really focus on in the $5 million to $10 million range. I think that, as you look at FY16 and FY17, we expect very minimal impact from that. We're in the process now -- we have been in an expedited sales process on the assets in Venezuela. We'll see how that plays out over the next coming weeks.

Great. Thanks.

Next we'll take a question from Olivia Tong with Bank of America Merrill Lynch.

Hi, good afternoon. Thanks. You talked earlier about improving US macros and how they're looking a touch better. But I'm just curious, how much do you think your improved performance is a function of better macros and people's willingness to trade up, perhaps, versus the business building initiatives that you guys have done?

You know, it's interesting, there was a survey out this morning, Olivia, from the -- that said we were the only large Company not to go down in consumer satisfaction in the last year. I think our focus on 60/40 blind wins superior products. I think the in-store execution that we're seeing around assortment, merchandising, pricing, and shelving is really paying off.

I think the fact that we're starting to see share gains for the first time in a year as a total Company -- and October, certainly, looks to be the same trend as September in that regard -- I would say that says that a lot of this is due to the team's execution in the field and the strategy and focus across the 3Ds. So I'm pretty bullish when I look at the rest of the year, given the next wave of innovation coming in January and the superior execution I've seen in the first quarter.

And again, if you look at the overlaps into the second half of the year, we were negative two in sales. We were positive in the first half, which is what we're lapping now.

So as you look at all those factors -- really good innovation, increased brand support spending levels, really good execution in store, and a bit of easier overlaps as we get into the back half -- I think a lot of it's due to this team's effort, rather than any surge. Certainly, having some tailwinds helps, but we'll always prefer to swim with the current than against it.

Olivia, this is Benno. I'd also be cautious to call it a trend, just yet. I think we've had quarters in the past where we've seen improvement, and then that was followed by a disappointment. So I'd love to wait another quarter or two until we call it a trend.

I'm still cautious about this, and we're still focusing on what we can control, which is predominantly emphasizing the value of our brands, increasing our investments to drive market share, and making sure that we execute our innovation with excellence. So I share the optimism, but I'd also say we want to remain cautious, as far as the consumer is concerned. It remains a very challenging environment.

Yes. I think as Steve said and Benno said, I think we've got a quarter under our belts. There are headwinds out there, in terms of currency and, certainly, commodities to some extent. So we're cautiously optimistic, is probably the best way to put it.

Got it. Understood. Maybe, to follow up, in household, that was -- that certainly beat my expectations. So I'm just curious what your think about the sustainability of those gains. Clearly, new distribution in bags and wraps probably means at least three more quarters of benefit. But what about charcoal? Was that a surprise to you -- how strong charcoal was?

You know, we had very strong execution, especially in our top five customers. And two of those top five are not in the syndicated data, which is Home Depot and Lowe's. That's why the share was flattish. But when you look at the performance, as Steve said, we were up 16% in volume in the quarter.

So I think that as we look forward, we're going to continue to focus on that level of execution, going forward. I think we've got -- last couple years, we've got a really good game plan in place on charcoal. If you look at the innovation on litter, we're cautiously optimistic, too, about litter trends improving as we get into the next quarter and the back half of the fiscal year.

And of course, Glad, we'll see how we play out in the next -- with this next price increase. But if you look at Glad in the quarter, Glad's volume was up almost 2%. As I said, we're starting to gain a little bit of share back in September. So charcoal was a driver, but we've got the game plan in place on how to drive that brand.

Olivia, just as a reminder, as Don pointed out, charcoal is performing quite well right now. But we are moving into the smallest quarter of the year, just due to the seasonality and heading into the winter season. Even if it continues to perform well, at least for the next quarter or so, it won't have the same impact it had in Q2 -- or in Q1, I should say.

Got it. Thanks a bunch. Appreciate it.

Next, we'll take a question from Jason English with Goldman Sachs.

Hey. Good afternoon, folks.

Hello, Jason.

Benno, congratulations on the new assignment. And Don, congrats on retirement.

Thank you, Jason.

I'm sure you'll stay busy.

I'm looking tanner already. (laughter)

Sure. I'm sure. So I wanted to drill down a little bit more on the cost outlook. You're talking about elevated resin prices now. I guess the trade's talking about some of these poly reactors coming back online soon and the potential for some loosening. As you mentioned, some of the feed stock is quite down.

It appears that resin markets are poised to roll over. So I guess first, would love to get your thoughts on that. And then secondly, what does it mean for your pricing?

I know, looking back in time, October 2008 you took prices on Glad trash bags up 10%. Two months later, in December, you had to roll them back. Then there were a number of roll backs that followed that. Why would this time be different if we get the relief?

Well, let me start off with talking a little bit about the resin market. It's a tough situation because, to your point, feed stock prices are down pretty significantly. But at the same time, we've really got a situation where supply remains fairly tight, demand remains fairly solid, and when you bring it together, it translates into rising prices.

And it's certainly what we anticipated coming into the year. But we recently saw another several penny move upward in resin prices that, certainly, looks like it's sticking in the marketplace.

So our expectation is that prices are moving up; that they're likely to stay elevated. You could see some up and down over time, but these markets have tended to float up, level off for a period of time, and then go to new highs. That's certainly what we're planning for.

As it relates to the pricing we've taken on Glad, again, this is a category that tends to follow what happens with resin prices. So as prices go up, we try to price to the long-term average cost in resin. If, by some chance, resin prices go back down, you might have to step up the merchandising spend at that point.

But at this point, we think prices are up. They're likely to stay elevated. And we're taking price accordingly.

Great. Thanks a lot, guys.

Thanks, Jason.

Our next question will come from Ali Dibadj with Bernstein.

Hey, guys. Don, we are going to miss you. You've done a great job, here. And Benno, we look, certainly, from hearing more from you.

Thanks, Ali.

I had a couple questions about Venezuela first. So, if I look at the supplement table where you break out and restate the adjusted with the $17 million shift to the losses from discontinued section, does -- so just for clarification perspective, does that include the devaluation or not? Because I thought the devaluation was about $0.13 -- that it ends up being $0.13.

If it does, I guess I want to ask -- even if it does or doesn't -- I want to ask your thought process in getting out of Venezuela. You clearly, are the first ones to do it. You have been ahead of your peers on Venezuela.

So I want to get a better sense of how you think about it. What you thought tomorrow was going to look like in Venezuela, if it's [just a $17 million hit] today and a $70 million charge to get out of it. And then if you can parlay that -- sorry -- if you can, parlay that also to what your vision is for Argentina, given you guys again have been ahead on the Venezuela story, here.

Let me start, Ali, with the thought process on Venezuela. And I'll let Steve jump in on the question you had on the chart.

The thought process was, we have been under price controls for three years in Venezuela. And as you know, we believe that we may have been uniquely disadvantaged in the fact that about 70% of our portfolio was under price control. And of course, over that three-year period, absorbing over 100%, and in some cases, 200% inflation cumulatively over that period of time took our gross margins from about in the high 30%s to 40%, which was fairly consistent with US gross margins. It was not materially different. And it was, certainly, a competitive gross margin for us, down into negative gross margin territory, most recently.

We had 29 meetings with the government, between July of 2012 and July of 2014, explaining the predicament we were in and the real need for pricing in that market to be able to create a sustainable business. And of course, last year ended with $77 million in revenue and a $23 million operating loss.

Although we had a more modest loss built into the margin -- or into the budget for this year, the pricing that we had been promised in June was delayed by three months. Each month was, really, another hit to the P&L. And of course, the pricing that was actually delivered in September was significantly below what we were promised.

We saw no hope that we could create a sustaining business in that country. And given the issues -- the other macro issues they were dealing with, including the price of oil dropping, we didn't see any sustainable model for continuing to operate in that market. And that's what drove the decision.

So over a two year period after 29 meetings, it was time to make a call. And it was clearly in our shareholders' best interest to exit, and that was the thought process.

Ali, this is Steve. Let me address, at least, a portion of your question regarding Venezuela financials.

All of the activity of Venezuela in the quarter has been reclassified from continuing operations to discontinued operations. That would include things like the operating losses in Venezuela for the quarter, which were about $6 million; asset charges associated with inventory, property, plant, and equipment; as well as certain exit costs, including severance and recognition of foreign currency translation losses.

This is one where it's pretty technical and detailed. I think we've got some good schedules in the web attachments to help you with this. We also have a 10-Q coming out early next week that really details this.

But happy to take your call offline if you'd like us to step you through more of the details on this.

Okay.

And then you asked about Argentina.

Yes.

First of all, I'd say Argentina is not Venezuela. First of all, we actually made a profit in FY14. And the country -- our performance in the country was actually better than we expected, in part because we are getting pricing from the government. And also, the fundamentals in the country are better, which includes the fact that the middle class consists of about 40% of the population, versus only about 10% in Venezuela.

And keep in mind that Argentina historically, if you look at the last 40 to 50 years, is moving in about 10 year cycles economically. And right now, we're near -- even though probably not at the bottom -- but near the bottom of that cycle.

So what we're focused on in Argentina is executing what we can control with excellence. That includes a strong focus on cost savings. That includes offsetting, as best as we can, inflation through pricing. That includes margin accretive innovation.

[Said that all,] I will say that we're closely monitoring the situation in Argentina. And we fully expect the situation to remain challenging for a while.

Okay. Can I ask one question, which has three quick hits on different categories? One is on Glad trash shifting to more premium. I guess, I would have expected more of a pricing increase.

You mentioned price, but I don't know if that includes price mix. I would have expected more of a price mix kind of increase as you go into Force Flex, or what have you, versus the traditional Glad trash there.

More details, if you can, on Hidden Valley. It seems that some shelf space has been lost, I guess, when we do our in-store checks. Want to get your perspective on that, whether that's a short-term thing or just misread.

The third is, if you play forward on Glad on the price increases, based on the oil price -- based on the commodity price from the resins perspective, historically, that has come from oil prices over time. And certainly, you start seeing an impact maybe four, five months later from oil into the supply chain for resins. Is that contemplated, or is it a different situation this time?

Thanks for those three things.

Ali, let me start with your last question first. As it relates to resin prices, here in North America, those resin prices are actually more closely aligned with natural gas, ethylene, ethane. They're not directly tied to oil prices.

Now, oil prices can, obviously, influence the global market for resin pricing. And we're, obviously, working in global markets. But from a feed stock standpoint, oil can go down, and it's quite possible that resin prices can go up.

The biggest factor driving resin prices up right now is something we've been talking about for quite some time, which is supply and demand. And I think the good news is, as you look out over the long-term, several years from now, there is new capacity being built here in the US that will bring new supply to the market. But that's several years out.

And therefore, as we look forward into the market, we think the supply/demand situation is going to remain fairly tight. That's likely to put some upward pressure and a floor underneath resin pricing.

Ali, as far as your question on Hidden Valley and the other brands, on Hidden Valley, we've seen no distribution losses. In terms of shelving, we have seen some of the larger customers cut back on inventories, which is a short-term blip before merchandising, as merchandising comes out of the summer. So there's nothing structural there at all.

In fact, if you look at shares of Hidden Valley salad dressing in September, for example, it's basically flat. The category's down about a half a point. I think we were down 1/10 of a point, so basically flat.

We've got some innovation on Hidden Valley, like premium dry dips. So the brand's as healthy as ever. So we've seen nothing in terms of any structural change to shelf spacing -- to shelf space.

As far as Glad goes, we've got about 70% of that brand now is in premium trash. I think the fall off in the base trash has dragged down a little bit on the pricing. But that mix, as we go through the balance of the year, should continue to improve. And we'll see, with this latest price increase, what that does to pricing on the brand in general.

Thanks very much, guys.

Okay, Ali.

Our next question will come from Bill Schmitz with Deutsche Bank.

Hey, guys. Good morning.

Hey, Bill.

First of all, congratulations to both of you. I hope we're not going to have to do the call in German from now on. (laughter)

Only the last part of it. (laughter)

The guidance part. So on the promo spend line, I think you said you had $16 million of incremental strategic spending in the quarter. Is the right way to read that as advertising is up like $1 million and the other $15 million was higher contra-sales promotions?

Yes. That's the way to look at it, Bill. And when you look at that $15 million, it was basically in merchandising support behind innovation and cold and flu.

Okay. Got you. All right. Because pricing was still pretty healthy, and I would have thought that spend would have come out against.

It was more couponing, merchandising, display support, those kinds of things. So it wasn't TFIs, if you will, so much, in terms of temporary fund increases for price reductions on shelf.

Okay. Got you. And then, on the charcoal side, the growth was, obviously, pretty extraordinary. Is there anything one-off there that we should be mindful of as we model the first quarter of next year? Was there a big promotion, like a fence thing at Costco or whatever, that might not get repeated?

It's hard to know. I think, again, at the end of the day, we had really good plans we put in place. We executed them extremely well, and the weather was good. You bring it all together, and it turned out to be a very nice quarter for the charcoal business.

I think, again, over the long term, we feel good about the plans to grow that business. But obviously, lapping double-digit growth is going to be challenging as we get into the first quarter of next year.

Okay. Great. Thanks. And then just lastly, on the professional business, we didn't talk much about it on the call.

Yes.

There hasn't been deal activity there in a while. Is it just because it's taken a while to find the right assets? Are you guys putting that on hold, or what's driving that?

I'm sorry, Bill, I didn't hear the first part of your question.

I was talking about professional.

Yes.

We didn't hear a lot about it on the call. And there hasn't been a lot of deal activity there from you guys. I know it's a pretty clear strategic priority, so I was just wondering why we haven't seen more on that front.

I think we're still -- recall that when we had the analyst meeting a couple years ago, we talked about the three legs of our stool -- US retail, PPD, and international. PPD, we said would grow in the 10% to 15% range. We don't see that changing, Bill.

It grew at a single-digit rate this quarter, but we had some challenges with a claim on one of our products that we've reinstated. And so we see that business continuing to grow at the double-digit rate, going forward. So I don't think there's any issue there.

As far as M&A goes, that's one of our primary focus areas, obviously, is M&A in that space -- bolt-on M&A, that is. We'll see what happens there. But nothing really changing in terms of what our expectations are for that business. And clearly, as you look at the retail trends in October around Stopping the Spread of Infection, we're seeing that same thing translate into healthcare facilities as well.

And then Bill, again, so our ambitions for the professional business, going forward, is to grow it in the 10% to 15% range. That continues to be a mix of organic and M&A.

While it's always tougher to plan for obvious reasons, as Don said, we continue to be focused on finding the right M&A partners for that business. But we'll also stay disciplined, and we'll want to be focused on finding the right opportunities at the right time.

Great. Thank you, guys.

Okay, Bill.

Next we'll take a question from Wells Fargo, Chris Ferrara.

Thanks, guys. Can you talk a little bit about -- I guess, your thoughts early on in the process of the disinfecting products picking up? Like, wipes are good. You cited that into October. They were decent in September, right?

So how do you think about how much of that is consumer pantry loading, versus what's actually coming through? And again I, know it's early on, but you've seen this sort of stuff before, right? We've had other instances of this.

Is it your sense that pantries are being loaded, or do you think this stuff is actually being used? And then also are retailers now -- do you think you're going to see more sell-in, in anticipation of consumers picking up?

Like you said, it's really too early to say. So we're pleased with the incremental activities we got in merchandising as a result of our planning, which was mostly around back-to-school and mostly around the flu season. And we've certainly seen an uptick.

But historically, we have seen seasons where that has led to incremental consumption and also incremental household penetration, keeping in mind that household penetration in this category is still only at about 50%. And there's ways to go. But we've also seen other seasons where it's led to a trough in the periods post the flu season.

So I would say it's, really, too early to say. We are seeing an uptick in merchandising and an uptick in initial sales, but I would say it's too early to say.

Got it. That helps. And I guess, on the guidance -- the EBIT margin number, obviously, is coming down. I think I understood you guys right.

But are you basically saying that, because Venezuela -- the re-class of Venezuela is what's driving that margin target down? In other words, the pricing you were expecting in Venezuela is why you had thought EBIT margin would have been up 25% to 50%? Is that -- am I getting that right?

Yes. It's -- first of all, and this is important, the absolute EBIT margin in FY14 as a starting point is 60 basis points higher. So we're starting from a higher place.

All we're saying is that for FY15, we think EBIT margin will be about flat. Could be a little above or a little below that, but we think it's about flat. And the reason for that is because some of the expected EBIT margin improvement that we were counting on was coming from improving Venezuela.

And we're actually going to get that. We're just getting it a different way. We're getting it because we decided to exit the business.

We've also had a bit more pressure in resin than we had anticipated. All of that said, as we look to the longer term, I think we continue to feel very good about the cost savings program, the pricing actions we're taking, the tight controls we have in place on SG&A. All of that gives us pretty good confidence that we'll continue to see good, solid EBIT margin expansion of 25 to 50 BPs over the long term.

That's great. Thanks. Real quick. I don't know if you said it, but did disability help -- or $0.05 in benefit? Where did that -- did that flow through COGS and SG&A, or was that in other?

Your accounting is really good. It flows through both, as a matter of fact. Some of that floated through SG&A, some of it floated through COGS.

You did notice that our SG&A cost, as a percentage of sales, came in lower than the year ago. Part of that was because of the cost savings programs that we were driving in the Company. And then a portion of that's just this one time accrual adjustment that we needed to make in the quarter.

Thank you.

Thanks, Chris.

Next we'll go to Lauren Lieberman with Barclays.

Thanks. I was wondering if you could talk a little about international volume trends. It's just been so long, given the pressure from Venezuela, that we've seen a quote, unquote -- clean number.

Would you say that this kind of mid-single-digit pace is something you see as sustainable and, really, what's been underlying the reported trends for a while now? Or not really?

Lauren, our stated goal, as far as sales is concerned for international, is 5% to 7% in year-on-year sales growth. And that remains our goal. We're seeing some slowdown, particularly in the faster-growing LAT AM markets. Said that, it's important to remember that the absolute growth in those markets is still faster than in North America, and these are still attractive and profitable areas to invest.

I would say no change to our ambitions. What we are focused on is shifting the investment within international from less profitable and more stable markets into those faster-growing markets like Chile, Peru and Colombia. And we're focused on improving our 3D plan execution to drive market share, and I'm pretty pleased with the progress. But we can do more.

I'd also think that this is a good time to remind ourselves that, really, what we want to do in international is to improve the profitability of the growth in those markets as a primary objective. And we're doing that through cost savings. We're doing that by reaping the benefits of the SAP implementation in Latin America, through pricing and through margin accretive innovation.

So really no change to innovation. 5% to 7% sales growth, but more profitably, to reverse the margin decline that we've seen as a result of one-timers as well as inflationary trends in international.

I think, Lauren, just to build on Benno's comments, I think where we have really focused our investment -- when you look at the countries we talked about in the past, Peru, Colombia, Mexico to some extent -- all those countries in the quarter had high-single-digit volume growth, which is pretty encouraging from our standpoint. Even Argentina had low-single-digit volume growth. It was still volume growth, which we felt very good about. So those countries where we have invested resources, we're seeing those pretty good trends continue.

Great. Thank you. And then, just another follow-up on both professional products and Ebola concerns. Nothing to sneeze at, in terms of your aspirations and growth rates you've been getting in professional. But I would think that bleach being, [among many] of your products, CDC approved for fighting Ebola, that there would be an enormous sales opportunity around this concern -- to get doors to open you've had trouble getting into before for whatever reason. Is that something you're trying to push harder with your sales force on right now?

I think, we're always very careful, Lauren, about trying to take advantage of some public health scare for people. So we're trying to be very mindful of that.

I would say this, that bleach, which is the most effective and cheapest disinfectant in general, has had -- there are some barriers with hospital usage and acute care facility usage, given the odor if you work around it all day, there's residue. Bleach is basically salt water with an electric charge through it, so if you wipe down a black toilet in a hospital, there's a little salt residue that you have to go back and clean up.

What we're seeing from hospitals, now, is some of those concerns around odor and a little pit of residue, those pale in comparison to the concerns about stopping the spread of infection. I think to your point, bleach has always been acceptable, but it's probably becoming more acceptable in this environment, that this is the thing that is the most effective against most bacteria and viruses out there. So clearly, as I said, the step up we're seeing in the wipes category in October is not unlike the step up we're seeing in professional and acute care facilities either.

Okay. Great. Thank you.

Our next question will come from Erin Lash with Morningstar Investment Company.

Thank you for taking the question. Most of my questions have been answered, but I wanted to follow up on the uptick, or the pressure, from manufacturing and logistics costs in the quarter. We've heard from a few other consumer product companies that the driver shortage is weighing on their cost of delivery.

And I was wondering if that's what your increase in cost was related to. And if it wasn't, what that reflects. Thank you.

Yes. I think that's right. I think it's several things. It's driver shortage and just a shortage of trucks in general, I think, is putting a bit of upward pressure. Wage inflation, obviously, is contributing somewhat.

Even on rail -- I think rail costs are starting to go up. You've got more oil moving on rail as opposed to other forms of transportation, and that's crowding things out.

So I don't think it's any one thing. I think it's a collection of things. We've certainly seen the pressure, and we would anticipate that pressure's going to continue for some time.

Erin, it's interesting, I wouldn't say there's necessarily a numerical shortage of drivers, as much as the new federal regulations around limiting drivers to 8 hours versus 12 hours. Obviously, it cuts down the capacity that an individual driver can have. That's what's really fueling part of this. No pun intended.

Thank you very much. That's very helpful.

Thank you.

Next we'll take a question from Javier Escalante from Consumer Edge Research.

Hi. Good morning, guys. How are you?

Hi, Javier.

A couple of questions on -- very category specific -- on wipes. I understand that the category overall has picked up.

When you see the data, though -- and we haven't seen that October data that you are referring to -- we still see very strong growth of private label and growing double-digits; lapping huge growth from last year; and now [private label can] have, essentially, 50% share. So to what extent you feel that the category -- the pricing architecture of the category -- is safe, given the growth of private label?

And secondly, on cat litter, if you can explain to us, in terms of what is lacking on the innovation or marketing side or pricing side on your end, that Nestle and Church are doing so much better on the pet litter category. Thank you.

Yes, Javier. Let me take wipes, and I'll turn it over to Benno on litter.

On wipes, we feel very good about the pricing we're getting in the market. Of course, wipes is one of those products where we didn't really take pricing for 14 years. So the architecture in that category's been fairly -- in fact, very -- stable and consistent.

If you look at the share data over the last four months, we've seen very positive share gains for us. If you take our share, which is almost back to a 50, we're equal to the private label and our branded competitor combined. So we feel very good with our trends in that category and our pricing and our margin structure in that category.

So with the innovation we've got rolling out -- as Steve noted, we've got four different new wipe formats out there -- we feel very good about how that category's performing. It's kind of promising made, promises kept. We told all of you we thought we'd see those share gains coming back, and that's what's happening.

And then, Javier, on litter. First of all, litter is a business we believe we have the right to win and certainly also has attractive tailwinds from a consumer standpoint. And our belief in the right to win is certainly grounded in the fact that we think we have a superior product that controls odor better than the competition.

I think it's fair to say that, over the last few months, we've been somewhat under pressure because the execution in that category on our side wasn't where we wanted to be. But we're moving fast to correct that and putting plans in place to reverse the share trends. And while we don't expect that to happen overnight -- it will take a few quarters -- we're optimistic that we will be able to grow share in that business within a few quarters.

And the plans that we're putting in place starts with new advertising that's squarely focused on demonstrating why our product delivers superior value to consumers. It includes an investment, and Don spoke to this earlier, in the right merchandising frequency. And we're starting to see some of that.

And then finally, a real step-up in innovation programs, which includes, of course, the Lightweight litter, which is out there right now and really off to a nice start.

In some ways, this program follows the program and the model that we started to implement on bleach and on disinfecting wipes a few quarters ago, where we're now seeing a return to share growth. Our ambition, certainly, is on litter to drive the same results. So a business where we think we have a right to win, where we're putting improved plans in place, and where we're cautiously optimistic that we will see a reversal of the share trends in the near future.

And a follow-up -- thank you, guys. And a follow-up on laundry additives and bleach and that kind of products. During the price war -- or at least, the price promotions that Procter ran in July and August -- we saw a lot of -- I don't know whether it's retailer sponsor or if there was communication between you and some products. But there was a lot of co-merchandising of Clorox products and [Sun] detergents.

Is it something that you guys conducted? Is it something that is going to continue? What should we read, in terms of, is this some sort of strategic alliance that you're getting? If you can comment on that, it would be helpful.

Yes. On bleach, this is something that we've been focused on. If you think about the category, any time a retailer is able to sell more than one product in the category -- meaning a bleach or a laundry additive along with a detergent -- that leads to an increased dollar ring for the retailer and is, of course, valuable.

And we've been driving that strategy with our retailers, including partners like Sun, for a while now. And we're seeing good success behind that. So to answer your question, that is strategic, and it's intentional, and it's something that you should expect to continue to show up in the marketplace.

Why don't we take one more question.

Certainly. That question will come from Connie Maneaty from BMO Capital Markets.

Thank you for letting me sneak in one last question. I was interested in the comment that you made about one-third of households making less than $35,000 a year. I'm wondering if you know what percentage of that big population is a core Clorox consumer and if you are adequately reaching them? Or if -- and if not, how big do you think this LOOP program can become? How many categories can it spread to?

Yes. Connie, it's interesting. Our market share of cleaning products with that low income consumer is almost identical to our market share in the general population. Now, the risk is that if that share erodes and is more fragile than our share with the general population. And that's one of the reasons why we're so focused on these LOOP products, which I think can cover a number of different categories that we compete in.

We're focused first on cleaning. But clearly, when you think about trash bags or you think about Hidden Valley or you think about any of our brands, there's a way to get a lower out-of-pocket price point on the shelf by adjusting package size.

So that -- the good news is that people in that low income group want brands. They want premium brands. And they also tend to buy premium brands around the first of the month when the pay period hits.

So we're also trying not only to influence our packages and the size of -- to get to the right price point -- but also tie our merchandising support in those channels to the first part of the month, so we can capitalize and help them get access to our products when they have the money to afford them.

Did the LOOP -- is it just a change of packaging, or is it also a change of formulation? Because it would seem to me that you'd already been serving the dollar stores pretty well. So what's the difference between?

Yes. It's more of a change in packaging size. For example, on Clorox Bleach it's identical to the product we put in the 64 or the King size. It's just in a smaller package, whether it's 16-ounce or a quart size type package.

We don't want to do anything that would jeopardize or put a cheaper product in. Now, there are other brands that we've launched, like Fragranzia, that have a different formulation that are targeted, for example, to a lower-income consumer that would be the same product. So regardless of what package size we'd be in, we would not do anything to cheapen the product from the core sizes.

Okay. Great. Thanks.

Thank you, Connie.

Thanks, everyone, for joining us on today's call. And we look forward to speaking with you again when we share our second-quarter results.

This concludes our conference for today. Thank you for your participation.