Stephen M. Robb - The Clorox Co. Lisah Burhan - The Clorox Co. Benno O. Dorer - The Clorox Co..

Bonnie L. Herzog - Wells Fargo Securities LLC Faiza Alwy - Deutsche Bank Securities, Inc. Jason English - Goldman Sachs & Co. Stephen R. Powers - UBS Securities LLC Kevin Grundy - Jefferies LLC Andrea F.

Teixeira - JPMorgan Securities LLC Olivia Tong - Bank of America Merrill Lynch Nik Modi - RBC Capital Markets LLC Jonathan Feeney - Consumer Edge Research LLC Ali Dibadj - Sanford C. Bernstein & Co. LLC Shannon Coyne - BMO Capital Markets (United States) Lauren Rae Lieberman - Barclays Capital, Inc..

Good day, ladies and gentlemen, and welcome to The Clorox Company Fourth Quarter and Fiscal Year 2017 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. As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference call, Mr. Steve Robb, Chief Financial Officer for The Clorox Company. Mr. Robb, you may begin your conference..

Thank you, and hello, everyone. Before we start with our prepared remarks, I wanted to acknowledge Lisah Burhan's participation on the call.

As you may recall, Lisah had previously worked in Investor Relations and is now back and we're very pleased we're going to be able to expand the team with Lisah taking on several responsibilities including the quarterly earnings calls. She has worked in every one of our business segments and will be a great addition to our team.

Steve Austenfeld, who you have known for years, will continue to be a leader in Investor Relations. And going forward, you'll continue to see both Lisah and Steve at investor meetings, conferences and at our next Analyst Meeting on October 5 in New York. The flow of the call will be the same as in the past.

Lisah will cover performance by segment, I'll address our financial results and outlook, and finally, Benno will close with his perspective before we open it up to your questions. With that, I will turn it over to Lisah to cover our segment results..

Thanks, Steve. Good morning, everyone. I'm glad to be back in IR and I certainly look forward to working with all of you in the future. But before we jump into results, let's remind you of a few things. 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.

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 providing insights on these measures enable investors to better understand and analyze our ongoing results of operations.

Reconciliations 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 on our website as well as in our SEC filings.

In particular, it may be helpful to refer to tables located at the end of today's earnings release. Please also 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. With that, I'll cover results.

For the total company, fourth quarter volume and sales grew 3%, with sales growing all across all segments. Our sales in the track channels remain healthy. We continue to see particularly strong growth in non-track channels including growth in e-Commerce, Home Hardware and Club.

Turning to results by segment; in Cleaning, Q4 volume grew 4% and sales increased 2%. Cleaning segment topline was driven by Home Care behind record quarterly shipments of Clorox disinfecting wipes, early successes of new Scentiva wipes and sprays, as well as broad-based strength across the Clorox equity portfolio.

We are especially pleased with the growth of our wipes business this quarter, given we have fully lapped last year's distribution gain in the Club channel. Overall, Home Care delivered a third consecutive year of very strong market share growth, hitting 20% on a 52-week basis, its highest share in six years.

Our Professional Products business volume increased, although sales were flat following double-digit sales growth in the year ago quarter. Volume gains were broad-based with contributions from a number of recent innovations in the surface disinfecting space.

Lastly, within our Cleaning segment, laundry sales and volume declined, primarily due to category softness. Positively, however, we continue to grow our premium Clorox Splash-less Bleach resulting in share gains on total Clorox liquid bleach.

Turning to Household segment; fourth quarter volume increased 5% and sales grew 4%, reflecting strong topline growth in Renew Life, Cat Litter and Glad. Starting with Cat Litter; sales grew double-digits behind innovation and strong merchandising support.

This also was the third consecutive quarter of market share growth for litter supported by our prior launch of Fresh Step with Febreze. Our Glad bags and wraps business saw solid topline growth behind ongoing success from our premium OdorShield trash bags, particularly in the Club channel, which more than offset the decline on our base business.

Although overall track channel market share for Glad was down in the quarter, we continue to see – we continue to gain share consistent with our strategy in the higher-margin premium trash bag segment and our OdorShield trash bag delivered all-time record volume in fiscal year 2017.

In addition, we continue to see strong growth in non-track channels, including Club, Home Hardware, and notably, e-Commerce. Fourth quarter non-trackable shipments were flat, in line with our expectations. We continue to feel good about our plans for this business going forward and the category is on track. Finally, we remain excited about Renew Life.

Our distribution expansion plans remain on track with gains in the Food/Drug/Mass channel and behind dual placement strategies at key accounts as well as very strong growth in e-Commerce. We will continue to focus on expanding distribution in fiscal year 2018. And we've begun supporting this business with a new national marketing campaign.

Turning to Lifestyle; volume declined 1% and sales grew 2%. Burt's Bees delivered solid topline growth this quarter on top of double-digit topline growth in the year ago quarter. The business also drove share gains behind incremental distribution and merchandising activities in lip care.

We have a strong innovation lineup for fiscal year 2018 with some of these items already on shelve. In our Food business, volume declined slightly due to lower shipments of KC Masterpiece barbecue sauces.

That said, consumption and shares in our key segments remain healthy and we are especially pleased that our Hidden Valley equity delivered a tenth consecutive quarter of share growth.

To wrap up the Lifestyle segment, Brita sales were flat in Q4 as gains from innovation behind our Stream pitcher were offset primarily by strong competitive activities and a strategic choice to rationalize a lower margin part of our portfolio.

Finally, turning to International, volume and sales were up in Q4 despite more than 3 points of FX headwinds, and slower category growth in countries like Argentina and Peru due to macroeconomic trends. We continue to take pricing to offset unfavorable foreign exchange as part of our larger effort to improve margin.

Now I'll turn it over to Steve, to provide more details on our fiscal 2017 performance as well as outlook for fiscal year 2018..

Thanks, Lisah. And we are certainly very pleased with our results in the fourth quarter and fiscal year. We're performing well in a challenging environment, delivering strong sales and earnings growth while generating healthy cash flows.

Turning to our financial results for the fourth quarter, Q4 sales grew 3%, reflecting 3 points of volume growth, which included about 1 point of benefit from the Renew Life acquisition and about 1 point of pricing, primarily in International. These factors were partially offset by about 1 point of unfavorable mix.

Gross margin for the quarter came in at 45.7%, an increase of 30 basis points, and was our highest quarterly gross margin in eight years. Contributing to the gross margin expansion were 150 basis points of cost savings and 50 basis points of pricing.

These factors were partially offset by 130 basis points of higher manufacturing and logistics costs from continued inflation, and about 90 basis points of unfavorable commodity costs consistent with the rising trends we've previously communicated.

Fourth quarter gross margin also reflected 50 basis points of benefit from lapping one-time integration costs related to the Renew Life acquisition. Selling and administrative expenses came in as expected at 12.9% of sales, compared to 14.1% in the year-ago quarter, largely driven by lower incentive compensation costs and productivity gains.

Advertising and sales promotion investment levels for the quarter remained healthy at about 11% of sales, compared to 12% of sales in the year-ago quarter when we made particularly strong investments to support our brands and drive trial behind our innovation programs.

Our fourth quarter effective tax rate came in at 31.7% versus 34.3% in the year-ago quarter and included excess tax benefits from stock-based compensation. Now net of all of these factors, we delivered diluted earnings per share from continuing operations of $1.53, an increase of 21%. Now, I'll turn to our results for the full-fiscal year.

Sales grew 4%, reflecting 6 points of volume growth, which included about 3 points of incremental sales growth from our innovation programs, about 2 points of benefit from the Renew Life acquisition, and 1 point of pricing benefit, primarily in International.

These factors were partially offset by nearly 2 points of negative mix and about 1 point of currency headwinds. Gross margin for the fiscal year decreased 40 basis points to 44.7% compared to 45.1% in fiscal 2016 when gross margins increased significantly at 150 basis points.

Our fiscal year gross margin results reflected 150 basis points of cost savings and 60 basis points of pricing, which were more than offset by 170 basis points of higher manufacturing and logistics costs and 60 basis points of negative mix.

Selling and administrative expenses for the full fiscal year came in at 13.6% of sales, in line with our expectations and consistent with our long-term goal to be less than 14% of sales. Advertising spending as a percentage of sales for fiscal year 2017 came in at a healthy 10% of sales. And for the full fiscal year, our effective tax rate was 31.9%.

Net of all of these factors, our fiscal year diluted earnings per share from continuing operations was $5.35 compared with $4.92 in the year-ago period, an increase of 9%. This, on top of an 8% increase in fiscal year 2016. Turning to cash flow for the fiscal year.

Net cash provided by continuing operations came in strongly at $871 million versus $768 million in the prior year, an increase of 13%. We're real pleased with our track record of generating healthy cash flows. This allows us to reinvest in our business with a focus on keeping our core healthy.

What's also important, this allows us to return excess cash to shareholders. And we're particularly proud that for 40 consecutive years, we've been able to increase our dividend.

At the end of fiscal year 2017, our debt to EBITDA ratio was 1.7, which gives us the financial flexibility to continue investing in growth and meeting our capital allocation goals. Now I'll turn to our fiscal year 2018 outlook. As we mentioned in our press release, we anticipate sales growth in the range of 2% to 4%.

As always, this reflects a number of assumptions, including about 3 points of incremental sales growth from new products, approximately 1 point of pricing and about 1 point of negative impact from foreign currencies which remain volatile. Turning to margin.

We anticipate gross margin to be up slightly, reflecting the benefits of cost savings and price increases partially offset by ongoing inflationary pressures as well as higher commodity costs.

Importantly, based on our assumptions for gross margin as well as improvements across other P&L line items, we anticipate fiscal year 2018 EBIT margin to expand modestly. Now for our fiscal year tax rate. We expect our fiscal year effective tax rate to be between 32% and 33%.

As previously communicated, we continue to anticipate variability in our quarterly and annual tax rates, given the inherent uncertainty of share-based transactions. Net of all of these factors, we anticipate fiscal year 2018 diluted earnings per share from continuing operations to be in the range of $5.52 to $5.72, an increase of 3% to 7%.

While it's still early in the fiscal year, I'd like to highlight a few significant trends we're actively working to address. First, we're operating in a more competitive environment. We're experiencing it in key categories, such as trash bags and litter. And the competitive dynamics in retail remain elevated.

Second, we continue to be pressured by rising commodity costs and ongoing inflation. And finally, we're continuing to face challenging economic conditions within International, including a more difficult pricing environment and a longer recovery period in Argentina.

Consistent with our 2020 strategy, we're responding to these challenges by continuing to invest strongly in product and brand differentiation to keep our value proposition sharp. We're leaning into our cost savings pipeline and our productivity initiatives to support our margins.

And finally, executing our Go Lean strategy in International, which emphasizes improving margins through operational efficiencies. In closing, we're very pleased with the strong finish to fiscal year 2017.

We're making the right strategic choices to support the health of our business and to continue delivering long-term value creations for our shareholders. And, with that, I will turn it over to Benno..

Thank you, Steve, and hello, everyone. There are three things I want you to take away from this call. First, I'm particularly proud of the more than 8,000 Clorox people around the world for delivering yet another year of strong year-over-year financial results in fiscal 2017.

We delivered sales growth in every quarter of the fiscal year, which is not common in an environment where growth is so hard to come by. Growth was broad-based, as we grew volume at 24 of our top 30, or 80% of our U.S. retail customers.

And while our focus on traditional retailers remains core, we are seeing strong progress in e-Commerce, where sales are up ahead of our objectives at more than 30% for the fiscal year, having accelerated into the fourth quarter.

While gross margin declined modestly for the year, notably off a very strong year-ago increase, in Q4 we had our highest gross margin in eight years, driven by very strong cost savings and the beginning of a turnaround in International.

And we delivered 9% diluted EPS growth and, in what is a hallmark for Clorox, we delivered another year of strong free cash flow at about 11% of sales. Second, we continue to focus on consumer value to differentiate our products and brands in an environment where value remains king.

We made great progress against what we call the Clorox Value Measure, or CVM, which reflects a combination of product performance, price and the consumers' perception of our brands.

In fiscal year 2017, based on CVM, the majority of our brands are seen as superior by consumers, and this is because we place such strong emphasis on innovation, staying tight on our price gaps and continuing to invest heavily in brands that consumers love.

We continue to see strong returns on our demand creation investments, which we focus disproportionately on our profitable growth brands. In line with our strategy, digital marketing expanded from 41% to 45% of our media spending in fiscal year 2017, and we invested a healthy 10% of sales in advertising overall.

And we had another strong year of innovation, delivering about 3 points of incremental sales to the top line. Third, we have a strategy that continues to work, which gives me confidence, even in the face of what we anticipate will be a more competitive retail environment.

As retailers increasingly compete based on value and competition in categories like trash bags and cat litter remains elevated, we'll continue to keep our price value sharp and to continue to invest in brand building and innovation. We'll stay focused on margin enhancement in the U.S.

and International as we aim to extend our track record of delivering 10 consecutive years of cost savings at $100 million or more and lean into the more profitable parts of our portfolio. And we remain committed to our overall strategy.

And we'll share more with you in October at Analyst Day about how we're staying agile on our priorities and operating plans in the face of this challenging and ever-changing environment.

So in summary, remaining committed to our 2020 strategy means we remain committed to you, our shareholders, and creating value for you by staying the course while making the adjustments necessary to continue to deliver good growth. And that's growth that's possible, sustainable, and responsible. Operator, you may now open the line for questions..

Thank you. Our first question comes from Bonnie Herzog from Wells Fargo..

Hi, everyone..

Good morning, Bonnie..

Morning. My question, my first one is on cost savings.

I was hoping you guys could just give us a sense as to whether you still think 2% of your total addressable spending is a reasonable cost savings target? I guess also in looking at FY 2018, should we expect this to be more heavily-weighted towards COGS-related savings or more towards SG&A-related savings? And then finally, how should we expect this to ramp over the course of the year?.

Bonnie, this is Steve. Let me take that question. So a couple of thoughts about the cost savings program. We always target to get 2 points of productivity out of all of the addressable spend. I would actually tell you that we've been doing quite a bit better than that over the last couple of years. We've been getting about 150 bps of margin expansion.

Now, that's across all lines of the P&L.

And I think just based on the health of the cost savings pipeline that we have, importantly, as you probably heard us on recent calls talk about stepping up our level of investment behind cost savings, I think we feel very confident that we can continue to deliver healthy cost savings well into the future and our goal for fiscal 2018 would be to deliver something in the area of 150 bps of margin expansion from those cost savings programs.

You're going to have some variability across quarters, but I would say you should expect healthy cost savings in each of the quarters as we move through the year..

Okay. And then in terms of your SG&A, it was 12.9% of sales in the quarter, and I guess that was a little bit lower than what we were expecting, so I'm wondering if there was any pull forward in savings that might have helped you guys meet this objective for the year that now might limit how much SG&A savings you can achieve in FY 2018.

And then along those same lines, you're again guiding to SG&A at less than the 14% of net sales, so does that imply flattish SG&A or are you guys expecting to generate incremental relative savings there?.

So just a couple of reminders. Well, first off, I was very pleased with SG&A cost coming in at 13.6% of sales for the full year. And that was very much consistent with our plans including the fourth quarter.

The fact that the fourth quarter was so much lower than what you saw in the same period a year ago is a reflection of the fact that we were anniversary-ing compensation costs, which were a bit elevated last year based on the strength of our performance, both top and bottom line, but also cost savings this year.

Just from a forward-looking standpoint, I think as we've said for many years, we'd like to get that below 14%. We've done that, and I think we feel good about it. I think there's more opportunity here. It is going to take time. It's not going to happen in one quarter. It's not going to happen in one year.

But I do think there's an opportunity to continue to move that number down even below the number that we just experienced in fiscal 2017, although I would say the rate of decline will probably slow a little bit from here. But I think that will be an area to contribute to future margins.

As it relates to margins overall for fiscal 2018, as I indicated in my opening comments, we do expect modesty EBIT margin expansion and I think a little of that will come from our gross margin.

Some of that will come from just optimizing all of the other lines in the P&L and I think on balance, while there will be variability across the quarters, I think we should have another year of good margin expansion at the EBIT level..

All right. That was helpful. Thank you..

Our next question comes from Faiza Alwy from Deutsche Bank. Please go ahead..

Yes. Hi. Thank you. So I just wanted to talk a little bit about private label and how you think things have changed.

So I know you've been competing successfully with private label for a long time, but are you sensing some change, especially as you have retailers like Amazon coming on that are trying to compete in specific categories? And then are there categories where you're seeing more private label? And then how do you square the potential increase of private label with the increase in commodities at the same time? So would just love to get sort of your overall view on where you think things are going to go from here on that front.

Thanks..

Yes. Thank you, Faiza. So private label, pretty stable. Let's make that the headline. As a reminder, we compete in nine major categories and in three of those nine, private label is a major competitor, so just to put it in perspective.

But as you rightly said, we've competed very well in the past against private label, and we continue to do so as you look at volumes, as you look at sales, as you look at market shares. And it's been relatively stable.

Certainly, there's a lot of talk about German discounters and perhaps Amazon focusing on private label, but overall, I would characterize the situation as pretty stable and for us something that we're pretty comfortable with.

We're always watching private label, but if you look at it over a prolonged period of time, over the last decade, the gains that they've made are pretty modest, but we have also gained at the same time in an environment where value remains king for the consumer, and that's perhaps the reason why we've done so well.

We keep our price gaps sharp, but importantly we keep our products differentiated and we invest in our brands, and as a result, as I mentioned in my introductory remarks, the majority of our brands is perceived as superior versus everybody in the marketplace in their categories, and as a result, we've also been able to grow household penetration on our brands.

We have gained a substantial amount of household penetration across our entire portfolio, led by the Clorox brand, and that just suggests that in an environment where certainly value, like I said, remains king, we continue to operate effectively and as long as we continue to focus on value, which is the core pillar of our strategy and perhaps the most important non-financial metric that this management team is focused on, I expect us to continue to do well..

Okay. Thank you..

Our next question comes from Jason English from Goldman Sachs. Please go ahead..

Hey. Good afternoon, folks. Thank you for let me ask a question. I guess I wanted to start with topline outlook. You have a solid year, congrats on that, but clearly, we're finishing the year with one-handles on organic sales. Your guidance implies acceleration to 3% to 5%, inflection in pricing, strong volume.

It's hard to get comfortable with that in context of everything we're seeing in the industry. So help walk us through that. Maybe a bit of an outlook by segment could be helpful and some of the puts and takes that get you comfortable with the acceleration implied on the forward..

Yes. Jason, let me give you my perspective. Now recognizing we're 30 days into the fiscal year and we're pretty early in this, we think 2% to 4% is a balanced outlook. I think it's prudent outlook.

It does make a couple of assumptions that I laid out at the beginning that we're comfortable with, things like getting three points of incremental sales growth from our innovation programs, which we've been doing quite successfully over the last couple of years, and equally importantly, I think we're feeling good about the innovation we launched in 2017 that should carry over to fiscal 2018.

So that's one piece of the assumption. The second assumption is around pricing. Now, of course, we've been taking pricing in markets like Argentina and other countries with higher rates of inflation, but we're also going to take a hard look at pricing in targeted areas within the U.S.

portfolio to the extent that commodities and inflationary pressures continue to remain elevated. So I think that's something else we're looking at.

I would also just point out that while we are lapping Renew Life, it's in the base now, this is a business growing faster than the rest of our portfolio, and we would anticipate it should contribute modestly to the growth rate on a go-forward.

And when you combine that with our Burt's Bees business, which has got momentum, our Litter business behind Febreze and some the other trends, we think 2% to 4% is a balanced outlook at this point, but let's get farther into the year and we'll take a look..

So that's really helpful, thank you. It sounds like a lot of it is predicated on getting price inflecting from negative to positive territory, clearly, right, since you're looking for plus one price.

And at the same time, it sounds like you kind of need competitors to go along so we don't get some volumetric disruptions, some of these great penetration gains you've achieved, don't unwind the other way.

Is there anything you're seeing in the market today that gives you confidence that competitors, the kind of environment will be conducive of that type of development?.

To be clear, while we have built-in about a point of sales growth, more than half of that is likely to come from international. This is not a sales outlook that's contingent on pricing to be successful. It is contingent upon base business remaining healthy and growing, we're investing behind that.

It's contingent upon continued momentum on the innovations. Those are the things I would point out. But I would also just call the pricing out because we are committed to protecting our margins, and I think there is some opportunities for targeted pricing.

And importantly, we've got a very good track record of doing this and doing this well, and having the pricing stick market. But it's a smallest piece of the top line growth plan..

And, Jason, this is Benno. Perhaps to build on Steve's remarks. The two things I would remind us all on that give us confidence that a selected look at pricing can be successful is, one, that we do pricing when it's cost justified, and of course cost increases is something that all the players in our categories are seeing in a similar fashion.

Second, I think we are seeing now and we have remarked upon it during our introductory comments that categories from a value point of view are a little softer, volumes are still pretty healthy, but values are a little softer. And that doesn't help anybody. The least of which is retailers who are looking for category growth.

And as you know, we are advising our retailers as a strategic partner on how to grow categories. And pricing and trade up continues to be a very effective way of growing the categories and retailers know that. So while this certainly is not an easy environment to take pricing, we certainly know about price sensitivities on major brands pretty well.

We know about the costs and we know about the discussions that we have with retailers pretty well. So while we don't take it lightly, we certainly think that taking a hard look at selected categories where pricing may be cost justified here in the U.S. is prudent..

Very good. Thank you, guys. I will pass it on..

Our next question comes from Stephen Powers from UBS. These go ahead..

Yes. Hey. Thanks. Maybe just following up a little bit on that. The guidance outlook you've given, obviously, has a pretty wide range of outcomes built into it. And just how would you handicap the factors that are not fully in your control? In past year, I think we all would've said the macro-environment, inclusive of commodity and FX.

But it sounds like from the discussion, you know from your prepared remarks and the discussion we've had so far that maybe you're more concerned about the competitive environment, and the retailer environment be it Amazon, hard discounters or incumbent retailers and how they are reacting.

Is that a fair take on the world as you see it that you're more focused on the competitive environment, maybe then the macro as opposed to in past year?.

I have to say it's both. I would say, however, that the competitive environment has really stepped up, and across the retail landscape you're seeing the same thing we are seeing. That something we are watching closely. And that's why in our outlook this 2% the 4% sales growth, we are assuming in tracked channels, the categories are basically flat.

Now let's be clear, in non-track channels, e-Commerce, et cetera it's growing quite a bit faster. But we've tried to be prudent in assuming that in-track channels it's likely to be about flat. So we are certainly watching that carefully as well as the competitive landscape. The other thing we're going to continue to watch s foreign currency.

We think it's about a point of headwinds. All we know is, it's volatile. I would point out that in a large part of the foreign currency headwinds will come from the emerging-market, including Argentina. So that's a number we will track pretty closely. And of course, commodities. Improvement played out about as we expected.

We started talking about this I think almost a year ago, the fact that we thought commodities would start to increase. We are certainly are seeing it, it's something we watch carefully. So for a lot of reasons, we think the outlook for the top line is balanced.

The earnings outlook has obviously got a range on it because of currencies, commodities, and even the effective tax rate which, as we saw in the last year can move quite a bit based on share-based compensation.

So, it's early in the year, seems like an appropriate balanced outlook, again, given the variables and I think we just need to get farther into the year to see how some of these things unfold..

Okay. That's fair enough. As you try to make good on e-Commerce, I was wondering if we could just take a little step back and ask you to talk about how you're going after that opportunity.

To what extent is there a separate e-Commerce team at Clorox versus it being integrated into each division and operating unit? My guess is that there's a bit of both going on, but if you could just talk more about how you're set up to make the most of e-Commerce and how that might vary across businesses, obviously, Burt's and Brita and Renew Life, we talked about the opportunity there is more immediate versus, say, core Glad or legacy cleaning.

So just a little bit more of how you are kind of operationally going after the opportunity. Thanks..

Yes, just to put it in perspective, Steve, and your instincts are pretty good on this. So e-Commerce for the fiscal year grew 30%. So we're certainly seeing an acceleration as we end the fiscal year and e-Commerce in total now accounts for 4% of the company for the first time.

And if I look at the largest customer that we have in the e-Commerce space and I look at the last quarter, business almost doubled. So we certainly like where we are. The growth is broad-based across most of our businesses. Certainly intuitive that businesses like Brita, with Brita Stream innovation, is doing particularly well.

Businesses like Renew Life, but, frankly, also businesses like Glad Trash, more traditional businesses are doing very well. So broad-based and healthy and that's because we have brands that matter in e-Commerce and we are building and have capabilities and partnerships in the e-Commerce space that matter, too.

The way we're organized is that there's a separate P&L. So there is a general manager overseeing the e-Commerce activity. But it's very tightly linked to our corporate functions and very tightly linked to our business units. The corporate functions are in charge of building capabilities, in this case, capabilities that matter in the e-Commerce space.

And the business units, of course, have to contribute resources and have to be very tightly strategic aligned with our e-Commerce plans.

So this is not unlike how we're operating in other fields and what this does is provide a good balance between having strong focus on the channel and building channel-specific capability, but also ensuring that whatever we do is consistent with the business strategies and, importantly, that it's profitable.

As a reminder, I think you all have heard us say before that on average, by and large, e-Commerce profitability is about in line with brick-and-mortar profitability, and that's what we care about given that we're not just after growth, but as you heard us say multiple times in the past and also today, good growth and good growth for us is profitable and sustainable..

Okay. Thank you very much..

Our next question comes from Kevin Grundy from Jefferies. Please go ahead..

Good morning, guys..

Good morning..

Benno, I want to get your perspective, I guess, on the level of satisfaction with the trade spend over the past year. And I guess I ask this in the context of a lot of discussion on the level of intensity, particularly in the U.S. at this point. And you touched on some of this.

There seems to be some level of satisfaction with increases in household penetration. But with the benefit of hindsight now looking back over the past 12 months where the depth of promotion here was pretty deep, are you generally satisfied with the longer-term health of the brands? You got seemingly the volume pickup.

But now with the benefit of the past 12 months and seeing the data, are you satisfied with key performance indicators, like household penetration? Are you seeing repeat purchase rates? And I sense the answer is yes and that's what's giving you the confidence to lean in here on this 3 points of growth from innovation and new products you're looking out to fiscal 2018.

But I was hoping to get your perspective there just because it seems to be a pretty hot topic in the space..

Yeah. Thank you, Kevin. Trade spend for us is not necessarily evil, but we have certainly increased our trade spend over the last few years as part of our strategy to continue to invest in our brands. We have spent a significant amount of trade to generate fast trial and awareness on innovations.

And, again, if I can spend in-store on things like displays, given that trade spend goes far beyond price promotion, then that's a really good spend. And we have done a lot of that and, as a result, our innovation has been successful.

And as a result, we've expanded household penetration and we're gaining market share in most of our big and strategic categories. So can't help but feel very positive about the consumer fundamentals that we have.

I want to be very clear, and we've said this in the past, we are not interested in buying volume growth or buying market share growth, but earning volume growth and earning share growth. And a strategic and smart approach to trade spend certainly is part of that.

Having said that, there are certainly categories, and we've named Litter, Glad Trash and also Disinfecting Wipes, as examples of that where we have invested perhaps more tactically and in response to heightened competitive activity.

And that's simply the name of the game and always a balance to respond to competitors and make sure that we send signals that don't lead to an exacerbation of a price promotion in the marketplace. Responding in kind often is the best way of getting trade promotion to subside in the mid and long term..

Okay..

So in a nutshell, I feel good about where we are on trade spend, but there are always opportunities to optimize. And we are a very disciplined company. We always look at ROI. The businesses and the general managers are doing that on a quarterly basis. And if there's an opportunity to improve ROIs, they will take advantage of it.

And typically you will find more opportunities in buckets where you have increased spending over time. And trade spend certainly falls into that category. So I would expect that, as you would expect as well, we would see trade spend over time probably as continuing to be elevated, but also as an opportunity to be optimized..

Okay. Thanks for that, Benno. That's helpful. Just one quick follow-up on an unrelated issue. Your portfolio is doing really well and you can see that in Nielsen data, the share trends have been positive broadly across the portfolio. One area I guess where it still struggles is Brita. And at least based on the Nielsen data, it's down double digits.

Can you give us an update there? That's probably like a 20 basis point, 25 basis point drag or so on total company top line results. Is there more investment that's needed there? More innovation would you consider selling that? Or is that a potential exit? Any update there would be helpful. Thank you..

We're seeing green shoots on Brita, but it's certainly not where it needs to be, And we've always said that this is going to take time. Again, we will earn growth, not buy growth. As a reminder, track channels, what you're seeing, accounts for less than two-thirds of sales on this category.

And we're seeing certainly better performance in non-track channels. So perhaps that gives you additional perspective. But what we've done is invest behind the brand, in particular the recent innovation, Brita Stream. And Brita Stream results are really encouraging. It's now become the number-one pitcher family.

And in Q4, what you've seen is sales were flat as the lift from innovation was offset by a strategic choice that we made to rationalize the lower-margin part of the portfolio as part of our efforts to drive growth profitably.

If you just look at the core business, back on the topic of green shoots, which is poured through systems and filters and accounts for about 80% of the business, volume actually has grown mid-single digits behind this innovation.

So as I look forward, we'll continue to focus on this core segment, we'll continue to invest behind the innovation, which is successful and my hope is that in 12 months from now, we'll see continued improvements on Brita. But admittedly, it's not exactly where we want it to be. But it's moving in the right direction..

Thank you very much for the time. Good luck..

Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead..

Hi. Good morning, there, and thank you for taking my questions, so and congrats on the results.

So following up on the comments of the increased marketing investment, the 200 basis points that you alluded in the slides and it doesn't sound to me, by the way, too high given your performance, but how do you break down in terms of trade spending against advertising? So and given incremental spend that you mentioned, and it doesn't seem potentially not incrementally in total amount, but just a better distribution of it.

Why should the sales growth in fiscal year 2018 be below the long-term kind of like more the long-term algorithm of 3% to 5%? Should we see the 2% to 4% as the new long-term normal? And related to that, do you see some additional distribution gains? Perhaps some innovation as you replace faster-moving items against your core, let's say, core portfolio? Thank you..

Okay. Andrea, you've got a couple of questions there. Let me see if I can answer each of them in turn. But let me start off with the outlook, and answer the question around 3% to 5%, which, as we have said for some time, we do believe that over the very long term is the right growth rate for the company.

Now, there's a couple of things I would point out. It presumes that the categories – this is in track channels, of course, but also untracked, grow 1% to 2%. As we said in our opening comments, as we've said subsequent, the categories are flattish, at least on a track basis. So that's certainly weighing on the results a little bit.

We also have about 1 point of FX headwind built in there. So that's part of the reason you're more in the 2% to 4% than the 3% to 5%. But again, I think 3% to 5% still feels right for the company. As far as investment, the choice between advertising or trade spending, your question seemed to allude to how do we think of that? We follow the money.

We look at returns on investments. So we have significantly, over the last few years, stepped up our level of advertising. Why? It's working. We've stepped up digital. Why? Because it's working. And we are getting the returns, and we can see the returns, both in volume and in sales and importantly in terms of profit. That's why we've been increasing it.

We've also increased trade promotion spending. We brought that number up because when the consumer's ready to spend, it's great to put a situation in store where it really helps that.

So I think you will continue to see us adjust spending both in absolute as well as by mix of spending based on where the opportunities are, innovation portfolio, et cetera. But I think on balance, we feel good about the level of investment, but we will adjust that up and down and adjust the mix as needed..

And just to be clear, Steve, the 2% that you have on this slide includes both, right, trade spend and advertisement? It looks low.

Or that's the 2% that you talk on the slides is everything?.

I think to be clear, what we had talked about going back several years ago, you're not referencing the quarter or the year.

I think you're referencing that several years ago as a part of our 2020 strategy, what we had said is we wanted to invest one point of incremental sales growth, call it $60 million, in incremental consumer demand building investment, whether that be trade, maybe a bit of R&D or advertising. We've gone well beyond that.

And we've done that because we've had the innovation programs to invest behind, and we've done it because it's worked. I would say today we feel very good about the level of investment.

Although, as Benno pointed out, we are going to continue to really look at all of these buckets and just make sure that we are getting the highest possible ROIs for all of the spend. But, today, we feel good about the investments we have made and we are going to stay the course..

And the shelf space, lastly, sorry – just building to the growth. Do you still have some potential additional shelf space? Because what we see the TDPs (47:45) we can't really track everything. As Benno said before, a bunch of these other categories, especially the probiotics, we can't track.

So you still have embedded in this guidance there is also some gains in distribution, right?.

I think over the next couple of years, yes, we do believe there's distribution opportunities certainly with Renew Life in food, drug, mass and expanding that. We've got opportunities as we bring consumer meaningful innovation to shelf. We believe that will create opportunities for incremental shelf space. So I think the short answer is, yes..

Yes, Andrea, maybe just a quick add on. I actually think that shelf space rationalization is an opportunity that's as big as shelf space expansion.

What I mean by that is that a lot of retailers, among them our biggest retailer, are realizing that having more variety on shelf isn't necessarily something that the consumer rewards them for, because consumers love to have clarity at shelf and want to find the brands that they love, which happen to be market leaders quickly and without a lot of barriers.

We, of course, have a lot of those market leaders and brands they love, and we expect to benefit from more rationalized shelving, that is less cluttered and more consumer friendly, and we are seeing that with several of the customers.

So I would look at that as an additional opportunity whereas perhaps less about expanded shelves, but a fewer SKUs at shelf to make consumers' shopping trip easier and make it easier for consumers to find the Clorox brands..

Great. Thank you, Benno, and thank you, Steve. Appreciate it..

The next question comes from Olivia Tong from Bank of America Merrill Lynch. Please go ahead..

Great. Thanks. Just wanted to follow up a little bit on levels of brands as far as fiscal 2018 goes, because as we sort of think about, first on advertising, do you expect much of a change in advertising level, you know, just the ad ratio in fiscal 2018? So that's question number one, actually..

Well, to answer question number one, we would say the advertising level, which is at about 10% of sales in fiscal 2017, that feels about right to us. You're going to see some variability across quarters depending on what we emphasize and, of course, the number could move up or down a bit but we think that number is about right to support our brands..

Got it. Perfect. And then, so pricing is going up. It's a little bit from international to recapture FX. It's a little bit from potentially commodities, so recapture that. And then perhaps a little bit opportunistic as well.

So I guess I am just trying to better understand your level of confidence in realizing all that price benefit, especially considering the backdrop of retail competition right now, which your peers are doing, particularly, your more domestic peers?.

Yes, I think the confidence level is fairly high. Keep in mind the majority of the pricing that we're anticipating is coming from international markets where we're dealing with much higher rates of inflation and it's pretty well accepted by the consumer in that area that you're going to see rising prices.

And if you go back and look at the last couple of years, we've got a very strong track record of taking pricing in international. Of course, it's never easy, which is why we try to marry it up with innovation and other things we can do, but I think we feel pretty good there.

I think all we are saying is that in the U.S., as we now start to see commodity costs continue to move up on a consecutive basis, higher rates of inflation, we're going to go back, not broadly, but we're going to go back on a very selective basis and go look at where there may be some opportunities for pricing and where it's cost justified, where it makes sense, where we can marry it up with innovation hopefully.

We're going to take a look at that and see if there isn't an opportunity there. But again, our outlook for 2% to 4% contemplates a small amount of U.S. pricing. Our outlook is reliant on innovation and keeping our base healthy and driving against our growth initiatives for each of our business. It's not a pricing driven growth plan..

Got it. Thanks.

And then just on innovation, I imagine you will give us a lot more detail at Analyst Day, but is it fairly uniform in terms of the expectations across the board? Or are there certain brands that are seeing more activity this year versus prior years?.

Yes, Olivia, on innovation, I would say that past is a good predictor of what's going to happen in the future. Certainly, we like broad-based innovation across the entire portfolio. We also like a skew of our innovations towards what we call the growth businesses and I think that will continue.

We also like multiple year innovation platforms, so I would say there's an opportunity, the first opportunity for us, is actually to continue to invest in some of the very successful fiscal year 2017 innovations in the back half and I would name Clorox Scentiva, Fresh Step with Febreze and also Brita Stream as examples.

And then as you rightly pointed out, you will get more information during Analyst Day on what this will look like. I'd also remind everybody that innovation for us typically tends to be skewed more towards the back half and this fiscal year will be no exception.

The one innovation I'd like to point everybody's attention to, perhaps, that we can talk about because it's going on right now is as we talk about differentiation and product improvements on our large brands to keep value sharp is on Clorox liquid bleach, where last month we began rolling out a new technology that we call CLOROMAX.

And CLOROMAX is a patented polymer technology which for the first time in what is a 104-year-old history on the product, not just cleans surfaces but also protects surfaces, also has a laundry benefit in that it keeps laundry whiter longer.

So it's a really consumer noticeable and meaningful innovation that we'll start supporting through marketing next month and that we're excited about.

And that's part of an ongoing program to keep our brands healthy and not just get into new spaces but keep core brands and core categories differentiated and deliver better value to consumers, which we continue to think, in this environment, is the right way to go..

Great. Thanks so much, Benno..

Our next question comes from Nik Modi from RBC Capital Markets. Please go ahead..

Thanks. Good afternoon, everyone. Just a couple of big picture questions, Benno, maybe if you can help out. Housing formation has been an important part of category growth in the businesses you compete in, as well as the unemployment rate. And those two have looked pretty good recently.

And every company across the space this quarter has been talking about a weak environment.

I'm just trying to maybe understand from the research you've done, what exactly is going on? What do you think is really happening with the category and the consumer? And then the second question is when you really get out of the here and now and think about the future, disruption obviously has been coming at an accelerated pace.

If you were to identify three to five things you think would really shape and evolve this industry or the industries you compete in and the way you think about your strategy, what would you call out?.

Yes, Nik, thank you. On the first one, yes, you look at consumer fundamentals quite positive, right? You look at the metrics, but you certainly also look at confidence, unemployment, overall spending, that's all quite healthy, which is why, as we think about our categories, consumers buy our categories.

We're not seeing a malaise in the consumer at all. That's quite healthy and steady, which maybe isn't a surprise, because we mostly deal with everyday products that are somewhat indispensable and we have a lot of market leaders and we invest in them. So feel good about the consumer environment, frankly.

When we talk about a more competitive retail environment, then it's largely driven by heightened competitive activity and it's driven by retailer activity.

Certainly, retailers are pushing value, right, well documented in this environment where there's retailer overcapacity, in this environment where perhaps there's a little bit of elevated anxiety around the emergence of discounters. So I would say a lot of it is driven by the players in the field and by retailers. Consumer environment, quite healthy.

Disruption, I would point at two. And those are the two that I think are also well documented.

One is the retail environment, where there's overcapacity and where there's certainly speculation about perhaps more consolidation and a disruption in this space, and we'll have to see how well the said discounters will do, but I think the retailer space continues to be one that we're watching.

I'll also point out that our company has continued to do extremely well no matter whether times were good or bad with retailers, and we think that it's not an either/or world, but an and world for us, meaning that we have to do well with core brick-and-mortar customers, but also with emerging customers, for instance in the e-Commerce space and last quarter is a really great example of how we're doing that exceedingly well.

So retailers is perhaps the one disruption, and the second one that will also probably not surprise you when I mention it is technology. Consumers migrate towards technology and, of course, that means that commerce is also migrating towards technology and there will be winners and losers.

And what's important for us is to continue investing, and we're doing that well, and of course the growth rates that we have on e-Commerce are a good way of letting you know that we're quite successful and we're of course also doing very well as we think about technology marketing, and that's evidenced by the fact that we now in fiscal year 2017 spent 45% of our working media dollars in digital and social, and that's up from fiscal year 2016, and I wouldn't be surprised if that's up again in fiscal year 2018.

On that note, we can also talk about the fact that we have recently started the strategic marketing partnership with Facebook, elevating the commitment that we've had with them to a strategic level. We've had a similar partnership that's been very successful and working very well for us with Google in place for a number of years now.

And Facebook is next in line. And we have really great complementary capabilities that work for them and work well for us. And what that will hopefully continue to do is make sure that the ROIs that we are seeing in digital, which are very strong, need to continue to be healthy. And I think there may be even room for improvement.

So I pointed retailers and technology as the most prevalent sources of disruption. And the good news is that our strategy has provided leadership in both areas for the company for a while now, and we'll update everybody in October on how we'll keep driving that..

Thank you, Benno..

Our next question comes from Jonathan Feeney from Consumer Edge Research. Please go ahead..

Good morning. Thanks very much. Couple of questions. First, what products, Benno, would you say – thank you for all that data.

What products would you say you're selling best proportionately through e-Commerce as a whole? And outside of e-Commerce, your whole company, do you think it's fair to say as you emphasize consumer value that you're getting a disproportionate amount of growth from a higher income household maybe than you have in the past? Any insight you have around that.

And my second question is,. you've haven't had this little debt for a long time and it's never been cheaper. So does that indicate any course of action to you from a capital allocation standpoint? Does it make looking at acquisitions harder? Or are there modes of capital usage? Thank you very much..

Yeah, I'll let Steve comment on that. And I'll take the first two, Jonathan. The best businesses on e-Commerce, I've touched upon them earlier, are businesses like Renew Life and Burt's Bees and Brita. On those businesses, e-Commerce accounts for north of 10% of sales.

And if that's a precursor of things to come for the other businesses, then that's great. But I'd also say that the growth is really broad-based. We're seeing really nice growth in our Professional business, we're seeing nice growth in trash.

We have a lot of brands that resonate with consumers in e-Commerce, and I feel good about how we're driving it across the entire portfolio. On consumer value, no, actually, your question was are we getting a disproportionate amount of growth from the higher end of consumers? No. Our brands are as relevant for less affluent consumers.

We're seeing strong growth across the entire spectrum. Also, as you look at different age groups, we're seeing strong growth across various age groups, including Millennials. And that's because we're investing in the business and we're going where consumers are.

And that's because we're keeping the value sharp in our categories at high price points, but also at lower price points. And we manage our business across the entire spectrum of the consumer landscape very well. And, with that, I'll let Steve comment on that..

Well, we're seeing the same thing you are in debt. It has been, and continues to be, fairly cheap actually. And we'll see how that unfolds over the coming years. Interest rates are anticipated to begin rising at some point.

What have we been doing about it? Well, every time we've had debt come due, we've generally put debt long in the market to try to lock that into our capital structure and take advantage of it. We think it's good for shareholders. And since it's a permanent part of the capital structure, it seems to make sense to us.

If you look at the next 12 months or so, we do have some debt coming due in October. We've got about $400 million coming due. So we'll take a hard look at that and see what our financing choices are. But in terms of capital allocation priorities, those remain unchanged.

We're going to continue to be disciplined in how we allocate capital, how we run this business. It's great when debt is cheap. We're certainly taking advantage of that by going long in the market with our debt placement.

But it doesn't change how we think of investment decisions, which is really about investing for the long term for the benefit of our shareholders..

Thank you..

Our next question comes from Ali Dibadj from Bernstein Research. Please go ahead..

Hey, guys. I wanted to go back to top line a little bit, please. So in 2017, obviously that's 4%. Renew Life made up about 2 points, Costco kind of roundabout 1 point, or less than 1 point. So it was really more like 2% of top-line growth in 2017 without those things. 4% actually more like a 2%.

So if I look forward to 2018, you're saying 3% to 5% ex-currency. You're saying the world is more competitive, but at the same time, you're saying you're trying to take pricing. And it sounds like maybe the pricing is more outside the U.S. except for strategically in the U.S.

So I'm struggling getting from 2 points up to 3 points or 5 points, unless you already have pricing locked in or you already have shelf space gains locked in. So I just struggle with that gap, especially when you say things are just tougher from a competitive perspective. And we know everything is tougher broadly from a retailer perspective as well.

So just another crack at that might be helpful for me at least..

Okay, Ali. I'll echo what I think I've said in my opening comments as well as answering the question a few times. I do think the 2% to 4% outlook we have is balanced. It's prudent. As you say, it does have a couple of assumptions. Innovation, 3 points, feel good about that. A bit of pricing.

It's not a huge amount of pricing, most of it's coming from international, but there is some pricing in there. Renew Life, no question we'll be lapping that, as I said earlier. But importantly, it will contribute to the growth rate of the company because it's growing much faster than the portfolio with attractive gross margins, I might add.

So I think that's going to help us. And then finally, it's our U.S.-based business. I feel good about the base business in the U.S. Our Burt's Bees business is continuing to do well and we've got an exciting innovation plan for 2018. Our litter business, (1:05:46), Febreze and other initiatives is doing well.

Our cleaning business, particularly in disinfecting wipes, but even more broadly, continues to do well. And I'm excited by the new product launches, like Scentiva and some of these platforms we're creating. So I think when we look at the totality of that, we believe we've got a solid plan to get into 2% to 4%. Let's see what happens with currencies.

Let's see what happens with categories as we go through the year. Again, we're 30 days into it. But that's the outlook that we have and that's the business plan that we're executing against today..

So on those business plans, again, about a 3% to 5% organic is what you're aiming for.

How much of it is already locked up? So do you have agreements on pricing for the year already and do you have the shelf space placements for Renew Life and others already? How much of that is actually in the bag, so to speak, versus still in negotiations for those pricing and shelf space in particular?.

Ali, I don't think we're going to get into that kind of granularity retailer by retailer, brand by brand. Again, I would say that we certainly feel good about the distribution expansion plans for Renew Life. We've been well underway with those plans for some time. We're already starting to see that distribution pick up.

And as far as pricing, I think we've got a very good demonstrated track record. So I think we provided quite a bit of color to the investment community this morning around our outlook and how we're thinking of it..

I'm not asking very specifically. I'm just saying how does this stuff work. At this point, would you have pricing agreed to over the next year, shelf space agreed to over the next year? I totally get it. Don't tell me brand by brand, just in terms of the operations how this works..

That depends on when you take the pricing. Obviously, in the second half of the fiscal year, the answer would be no. For pricing actions in international that are bit more imminent, the answer would be yes, we've been working on it. Again, I would just reference you back to the bridges we've provided historically.

And I think the track record for sales for innovation, even for distribution, is quite good. So you're just going to have to take it on faith that we've got good business plans that we're executing against it. That doesn't mean we can't be wrong on the 2% to 4% outlook.

It just means it's our best estimate at this point and based on the prevailing trends that we're seeing and how we've been executing..

Yeah, if I go back to many of your remarks over the past, I don't think our company is seen as exuberant when we look at our outlook when I go back to Steve's remarks that this is a balanced outlook that reflects confidence in our strategy. It certainly also reflects what we know is a difficult retail environment. But it's balanced.

Right? It's early in the fiscal year, but it's balanced, but we feel good about the 2% to 4%..

And then just my last one, on that balance, you say in your press release and you've talked before, from an innovation perspective in 2018, three points of incremental sales and about 1 point of price increases, those are the words in the release.

Just for clarity sake, is that 4% total, 3 points of incremental sales and about 1 point in price increase? Is that just 3%? And is it really balanced, quote, unquote, or is it really dependent on innovation, so we're seeing any wavering interest in your innovations at this point? That's it for me. Thanks..

Ali, I think we're getting into too much detail, but three points is incremental sales growth on a year-over-year basis, one point of pricing best estimate, that's the net effect of the rate impact in sales that we have calculated. But with that, I think we've provided what we can provide for today.

If you have other questions, we're happy to answer those..

Okay. Thanks..

The next question comes from Shannon Coyne from BMO Capital Markets. Please go ahead..

Hi. Thanks for taking my question. So in looking at some data we have access to, it looks like AmazonBasics made it into the top 10 brands by bestseller share of voice on Amazon in the household cleaning supplies category year-to-date. And I was happy to see that you have two brands in the top 10.

And I know you addressed private label as a whole already, and I understand that.

But can you talk a little bit more specifically about your strategy to fend off Amazon specifically, given their potential increase control over search going forward? And how does that play out over time as you increase your online penetration, for example? Do you see the cost of placement with Amazon going up over time?.

Yeah, Shannon, a lot of questions in there. So I'll maybe leave it as our business with Amazon as is our business with other e-Commerce retailers. It's very strong. I surely expect private label to play a role in e-Commerce as is the case in brick-and-mortar.

You've noted from my previous remarks that I feel comfortable in our ability to compete with private label. And at the end of the day, the U.S. consumer is a brand buyer, and our brands resonate very well in e-Commerce, which is why we have such strong growth rates.

And which is why you noted our brands play extremely well, including in the research or survey that you suggested. So I don't look at Amazon as a customer that's in any way different than our other customers, and I would look at that as an opportunity as well as a risk. But the opportunity far outweighs the risk, and we're taking advantage of it.

We are partnering with Amazon on how to grow the categories, on how to build virtual shelves, on how to help them create a supply chain that is efficient and that works for us. So there's a lot of good news here. And we certainly are counting on that good news to continue. There's a lot of growth upside for us as a company..

Thanks. That's helpful. And just one more question and then I'm done. Burt's Bees was up double-digit this quarter.

Can you talk about how big you think that brand can become, and then what you're doing to gain or defend market share given the likely heightened competition going forward, given the category growth that we're seeing in the natural category. For example, The Honest Company entering Target.

Would you do an M&A transaction in this category to move faster? Or can you just talk a little bit about that category? Thanks..

Yeah. So, perhaps as a clarification, Shannon, so the business, this last quarter, was up solidly off of a double-digit growth last year ago. We have talked about Burt's Bees a lot over the last few years as one of our growth SKUs and the results have certainly warranted that.

We have a healthy core, and the core is growing with key customers, and we have a lot of innovation that continues to be on track. Last year's highlight was lip color; lip color's the number five brand in the category right now. It's overtaken a lot of large companies and larger brands based on a strong reception from consumers and customers.

If you think about Q4, we saw particularly strong consumption in sales in the core lip care category and strength across most key customers.

So, really strong business with a healthy core, with innovation that's on track, and certainly continued plans to invest in the consumer to invest in more innovation, and you'll see some of that during Analyst Day, and continued strong focus on the core lip business knowing that we have a lot of tailwind from the consumers.

So I feel really good about that, and we've had a really nice track record of growing this business for 10 years now and I don't expect that to stop anytime soon..

Okay. Thanks..

I think we have one more question after this..

Yes. And our next question comes from Lauren Lieberman from Barclays..

I'm fine. We can pull the call. You've covered a lot of ground. Thank you so much..

Thank you..

Thank you. Thank you, all. Thanks for joining us on this call, and I look forward to seeing all of you hopefully in October at Analyst Day in New York, and to speaking with you again in November when we share our first quarter results. Thank you..

And this concludes our conference for today. Thank you for your participation. You may disconnect..