Clorox still has an ERP implementation hangover as the company reported a 19% decline in sales "primarily driven by lower shipments related to the ERP transition."
The company reported fiscal first quarter earnings of 65 cents a share on revenue of $1.43 billion. Adjusted earnings were 85 cents a share, down by 54% from a year ago.
Clorox had been on an SAP ERP system that was more than two decades old. It set out to upgrade SAP in 2021 and the final tab will range from $560 million to $580 million. As previously reported, Clorox wrapped up the ERP upgrade and was poised for better margins ahead.
However, Clorox executives said the company shipped more inventory for a buffer as it transitioned to the new ERP system. When retailers ran out of stock, Clorox ran into procurement issues.
Here's what happened via CEO Linda Rendle and CFO Luc Bellet in prepared remarks.
- "At the end of last fiscal year, we shipped roughly two weeks of inventory ahead of consumption as retailers built stock in preparation for this transition. As those inventories were drawn down this quarter, we expected net sales to decline by approximately 17% to 21%. While the ERP systems cutover proceeded smoothly, we encountered some challenges in order fulfillment that led to temporary out-of-stocks."
- "Based on early estimates, we projected and communicated in early September that our first-quarter net sales were likely to come in at the low end of our guidance range. Ultimately, this quarter’s results exceeded these expectations for two key reasons: first, the impact of fulfillment disruptions was less significant than anticipated due to stronger-than-expected recovery in September; and second, we shipped ahead of consumption for some second-quarter merchandising events."
Clorox said it didn't help that the economy and consumers are under pressure. Clorox said consumers are showing "value-seeking behaviors across all income segments."
Now Clorox is focusing on regaining share from the temporary out of stocks. Executives also noted that the issues have been addressed and fulfillment processes have stabilized. Clorox concluded:
"Our transformation and ERP implementation strengthens our digital backbone and positions us to unlock meaningful operational efficiencies, margin expansion and superior value for our consumers. In an environment where consumer dynamics are changing rapidly, our new tools are allowing us to reach them in new and innovative ways, improving the returns on each dollar invested. With each wave of implementation, we’re gaining sharper insights and deeper operational visibility — enabling faster, smarter, and better execution."
