Good day, ladies and gentlemen, and welcome to the Clorox Company First Quarter Fiscal Year 2018 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of the prepared remarks, we will conduct a question-and-answer session. As a reminder, today's call is being recorded. I would now like to introduce your host for today's conference, Ms. Lisah Burhan, Managing Director of Investor Relations for the Clorox Company. Ms. Burhan, you may begin your conference.

Thanks. Welcome, everyone and thank you for joining us. On the call with me today are Benno Dorer, Clorox' Chairman and CEO; 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, that's thecloroxcompany.com. Let me remind you that on today's call, we'll 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 enables 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 in the financial results 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 outcome 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 our Q1 business performance, discussing highlights in each of our segments. Steve will then address our financial results as well as our updated outlook for fiscal year 2018. Finally, Benno will close with his perspective on the business followed by Q&A. For the total company, first quarter volume and sales, each grew 4%, with sales growing across all four segments. Sales in tracked…

Well, thanks, Lisah and let me welcome everyone. We're certainly very pleased with our strong start to fiscal year 2018. We delivered strong sales growth and gross margin expansion across all our U.S. and International segments, in what continues to be a tough environment. What's more, we delivered these results on top of strong results in the year-ago quarter. Turning to our financial results for the first quarter, Q1 sales grew 4%, consistent with volume growth, and our sales results also benefited from about one point of price increases in International, which were more than offset by unfavorable mix, primarily reflecting strong club channel shipments. And as Lisah noted, first quarter sales included the benefit of slightly less than one point from incremental shipments related to the hurricane recovery. At this point, we don't expect the hurricanes will have a meaningful impact on full-year sales. Gross margin came in at 44.9%, an increase of 50 basis points, reflecting 160 basis points of cost savings and 40 basis points of pricing, partially offset by about 90 basis points of unfavorable commodity cost, particularly in resin, and about 80 basis points of higher manufacturing and logistics cost. Selling and Administrative expenses as a percentage of sales came in at 13.6% versus 13.9% in the year ago quarter. Our advertising and sales promotion investment levels were about equal to the year-ago quarter, with spending in our U.S. retail business at about 10% of sales to support the long-term health of our brands. Our effective tax rate came in at 31% versus 32% in the year-ago quarter, reflecting tax benefits from stock-based compensation. Now, net of all of these factors, we delivered diluted net earnings per share from continuing operations of $1.46, an increase of 7% versus the year-ago quarter. Turning to cash flow…

Thank you, Steve and hello everyone. Let me share with you my three key messages for today's call. First, we delivered another strong quarter and start to our fiscal year, which reflects continued broad scale executional strength against our 2020 Strategy. We delivered 4% volume growth on top of 8% in the year-ago quarter. We grew sales and gross margin in every segment and we delivered 7% diluted earnings per share growth, reflecting our emphasis on good growth; growth that's profitable, sustainable and responsible. Second, this strong execution and the fundamental health of our business are helping us partially offset the temporary cost headwinds we're facing. While gross margins will be pressured the next two quarters from the impacts of the hurricanes on our cost structure, our business remains fundamentally strong and healthy, as demonstrated by our Q1 results. It is fundamentally strong and healthy, because we have differentiated products consumers love and a solid innovation pipeline that aims to deliver three points of incremental sales growth in fiscal year 2018. We'll be sharing more about our second half new product plans when we speak with you next quarter. Our business is also fundamentally strong and healthy because we're investing in our brands and we're investing disproportionately in our growth plans, behind demand creation focused on innovation and digital marketing. And with strong ROI, we expect to spend about 50% of our working media budget on digital in fiscal year 2018. And the result of our focus on differentiated products, innovation and investing in our brands means we're winning with consumers. How do we know? We know we're winning with consumers because the majority of our strategic brands are seen as superior in value, as measured by our Consumer Value Measure or CVM, a combination of product experience, brand equity…

Thank you, Mr. Dorer. We'll take our first question today from Kevin Grundy with Jefferies.

Thanks. Good afternoon. I wanted to start with the sales growth guidance for the year, so, all in now, 1% to 3%, down from 2% to 4% previously, and that includes the one point drag from Aplicare. But setting that aside and then setting aside probably, I guess, what's like 20, 25 basis points or so from the hurricane benefit, was there any change to the 3% to 5% organic sales growth guidance for the year within that range? And then I guess is part of that, Benno, what is the expectation for industry growth within your guidance? And, I guess, I ask that within the context that your market share performance has been great, I guess, with the exception of trash bags, which I know you guys are addressing, but the category growth has been kind of flattish, at least in Nielsen channels. And I know, I understand it's higher than that outside of non-track, but still not great, seemingly, based on the syndicated data that we have. So, two parts to the question; one, any change within the 3% to 5%? And then two, if you could comment on industry growth guidance within your overall outlook and whether that's changed at all? Thank you.

Kevin, this is Steve Rob. Let me start off. First, just to reground everybody, our previous outlook that we had communicated in early August was for sales growth in the range of 2% to 4%, okay? The latest outlook that we're sharing with everyone today is 1% to 3%. The only reason we're making an adjustment to the outlook is to reflect the divestiture of the Aplicare business in late August, which will reduce sales growth by slightly less than one point. Okay? All other assumptions, there's puts and takes, but generally, all other assumptions remain the same. And we certainly feel good about our first quarter sales growth of 4%. Now, I do want to make one additional point about first quarter sales growth. We delivered 4%, slightly less than one point was related to hurricanes. But I would also remind everybody, we had the divestiture of Aplicare in the first quarter. That was slightly less than a half a point. So you kind of have to bring the two together to really understand it. And then finally, just as a reminder, all of the numbers that we're sharing today are on a GAAP basis.

Yeah, your second part, Kevin, categories, I would say, overall solid, no change. And we don't expect that to change in our outlook. We think that the future will behave more like the past, and I would say the current situation is characterized by three things; first of all, tracked channels are actually quite solid. They are now growing at about 1%. Historically, they've grown 1% to 2%, in line with population, so that's about at the low-end; but not bad, to be quite honest. Keeping in mind that tracked channels only account anywhere between less than 50% to 80% of our total category, varying by category and SBU. So, tracked channel is overall pretty solid. The second thing we're seeing is that volume is still tracking ahead of dollars in our categories, and particularly, in tracked channels. Why is that? It's the continued elevated competition, as Steve has noted earlier. That's been elevated for a while, particularly characterized by heavy merchandising, no change versus what we've communicated in the last quarters, also don't expect any change in the future. And then third, we're continuing to see particularly strong growth in non-tracked channels. Our performance has been strong there for a while. Many of our customers in non-tracked channels are growing double-digits. In Q1, just to dimensionalize, about half of our total company sales growth came from non-tracked channels. E-com is leading the way with the largest e-commerce customer up more than 70% in Q1. So, feeling particularly good about the profitable growth in non-tracked channels. So, overall, steady, and we expect the future to be about the same.

Thank you very much. Good luck, guys.

Thanks, Kevin.

We'll go next to Jason English with Goldman Sachs. Jason English - Goldman Sachs & Co. LLC: Hey, guys. Thank you for the question. Two questions. First, a small one. Steve Robb, I think you mentioned that – you reminded us that your results are GAAP results, which we always appreciate the cleanliness of that. Are there any unique costs related to either the hurricane, divestments, that you would call out, that you think most other companies would have pro formaed this quarter?

As it relates to the hurricane, no, we didn't. The only thing I would call out with respect to the hurricane that was unusual for us was one, that we picked up some incremental volume late in the quarter associated with shipments; two, I would remind everybody that our International results were negatively impacted, associated with Puerto Rico. This is a business that, you know, we're back up and running, but obviously the country is not where it needs to be. That certainly weighed on International results. And then third, I think the only other thing to note, and this is related to the Aplicare divestiture, we did, as a part of the divestiture of this business, we did take a charge in the first quarter of approximately $0.03, and that's included in our first quarter earnings per share. Jason English - Goldman Sachs & Co. LLC: Thank you. That's helpful. And then, Benno, a quick question for you. You mentioned everything that you're leaning into to drive growth. One thing that you've leaned into since you've taken the helm has been a slightly more aggressive posture on M&A, both, obviously, with Aplicare kind of shrinking out of it, RenewLife adding into it. I was hoping you could update us on where your appetite sits today in terms of M&A. And as we think about the forward, the bolt-ons that you pursued, is that the right context? Or if an opportunity for something more needle-moving were to surface, would there be interest on your end?

Thanks for that, Jason. So, in order of priority, first priority always will be to keep the core healthy and I think Q1 results demonstrate that we're doing that well, and we want to continue to do that. The second priority will be to continue to grow RenewLife. That's a category and a business we're very committed to and we want to drive for the long-term. And we feel good about RenewLife. We've obviously had a strong first year after acquisition, grew in the high-single digits in Q1. And in Q2, we'll start expanding with certain club customers, so we want to continue to make that successful as priority number two. And then three, of course, is because we are in a position where our cash flow enables us to put that cash to use for shareholders, whether that's by serving dividends or buybacks, but also by continuing to look for ways to grow the business. So, we've always said that we can do more in M&A, but that we don't have to do more in M&A because we have a healthy core, which allows us to be disciplined. So we are looking. We have continued to look in the spaces that we communicated, in particular in the health and wellness space and in areas around our core businesses. We look at companies small and big, anything that can add value to our shareholders. As Steve has noted often, it continues to be the case that we like those bolt-on acquisitions and RenewLife is a good example of that. But we're not afraid of looking at bigger things if we think that they can add value to our shareholders. But importantly, we'll stay disciplined. So, we made one acquisition over my three years in tenure. I don't know that I would characterize that as more aggressive. I'd call it discipline. Importantly, we have shown that we can integrate an acquisition well and add value. And we certainly can do more and we're looking, but we'll only strike if we feel like we're getting the right business at the right value. Jason English - Goldman Sachs & Co. LLC: Thank you very much.

Thanks, Jason.

We'll go next to Joe Altobello with Raymond James. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Thanks. Hey, guys. Good morning. First question, just wanted to go back to something you mentioned, Benno. I think you just said the your categories, at least in the tracked channels in the U.S., you're growing about 1% and I thought your guide for this year was based on flat growth in those tracked channels. So, is that part of the $0.05 offset that you guys called out this morning in regards to the hurricane-related commodity inflation?

Joe, this is Steve. Couple of things. Our sales outlook contemplates categories that will be flat to up slightly over the course of the full year; keeping in mind, it's still early days, let's see how the quarters unfold as we move through. But that's essentially what we had for the sales outlook. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. So the 1% is consistent with that.

Correct. Flat to up slightly, yes. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Got it. Okay. And the secondly, on Burt's Bees, you mentioned it was up double-digits, I guess an acceleration from last quarter. And I guess part of that had to do with, I guess, the initial sell-in for cosmetics and the expansion of lip into club. So, if you could quantify for us what that business was up ex those two items, that would be great.

I don't know that we, Joe, that we give details with that specificity. As you noted, clearly, the lipsticks, the cosmetics launch last quarter has helped. But we're also pleased to say that our core categories have grown share and have grown. Lipsticks continues to be a growth driver as well as the core lip balm. So, it's a combination of all those factors that led to double-digit sales growth last quarter. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. Great. Thank you, guys.

We'll go next to Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. A couple of questions. One is, if you could talk a little bit about pricing? We've certainly been hearing that it's been hard to take pricing to offset commodities, given competitive and retailer pressures. Is that consistent with what you're seeing and what you've done from a – although slightly lower your pricing guidance for the year? Can you in answering that give us an updated sense of what percentage of commodity cost increases you're offsetting now? And, look, I totally understand your philosophy of not changing the pricing on short-term commodity spikes, but we're seeing that it's much more difficult to take pricing and wanted to see what your observation is about that?

Ali, this is Steve. Let me try this. I would say the pricing environment is never easy, which is why we try to marry it up with innovation, and we try to be smart in terms of where we take pricing. We've been very successful in taking pricing over the last couple of years, primarily though in International where we're seeing higher rates of inflation. As you know and as we communicated at our last Analyst Day, we are looking to make some pricing adjustments. We're taking an increase on disinfecting wipes and other businesses. That's in our second quarter, and we're just in the process of rolling that out. So, I would say, over the very long-term, we're confident in the strength of our brands and the investments we're making, and the ability to take pricing. So, time will tell, but I think right now things are playing out about as we expected.

Yeah, and then, Ali, we did talk about our price increase on disinfecting wipes on Analyst Day, that's being implemented as we speak this quarter, and we'll give a more detailed and specific update in our Q2 call in February. But we expect that price increase execution to be done well, and importantly, it's just part of an overall program that on the back of pricing allows us to continue to support innovation on that business. And as you know, our Scentiva platform has been particularly successful lately on wipes and also sprays, which is why we're continuing to expand with new innovation as we speak. So, that's an example of recent price increase that is disciplined and strategic and consistent with our approach to deliver better value for consumers. Ali Dibadj - Sanford C. Bernstein & Co. LLC: So, why is your pricing guidance actually a little bit lower? Is it the price reduction that you told us at your Analyst Day on the mid-size trash bags? Is that what it is? Or – and why has the guidance been lower a little bit from a pricing perspective in this quarter versus what you'd said last quarter for the year?

Yeah. Thanks for the clarification, Ali. I think what we had said in the previous quarter is that our pricing guidance would be about 1%. I think we're now saying a bit slightly less than one point. I wouldn't over-think it. Foreign currencies are also moving a bit as well, and as you know, in International markets in particular, we try to price to recover not just inflation, but also currency effects. So, I would say when you look at the combination of pricing and foreign currency together, it's about what we would expect. And again, we need to get through the next couple of quarters and see how things play out, but no substantive change there. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. Okay. And then the other question was around just kind of leverage from top line to bottom line, 4% top line, 7% EPS this quarter looks pretty good. But going forward, it looks like there's less leverage between the top line and the bottom line. I get that some of that is because of the gross margin and the commodity pressures next quarter or two, I get that. But even when you gave your guidance for 2018, there was less leverage between the top line and the bottom line. I am just trying to understand why that might be.

Yeah. So, the short answer is, it's really two things, one of which you've already called out. If you look at the commodity forecast that we have and inflationary pressures in 2018 versus fiscal 2017, it's quite a bit higher, particularly in our second and third quarters. So I think that's the biggest driver I would call out, is margin pressures driven by higher commodity costs, which are being further exacerbated by the recent hurricanes. I would also just remind people that in fiscal 2017, we adopted new accounting update around how taxes are treated with share-based compensation. As a result, our tax rate in fiscal 2017 was lower than in fiscal 2016. We're seeing that normalize a bit as we get into 2018. So, there is a little bit of leverage on the tax line as well. So, margin pressures tied to commodities, tax rate, a little bit less leverage there. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. Thanks very much.

We'll go next to Wendy Nicholson with Citi.

Hi. First question is following up on that question regarding pricing, on the trash bags, have you seen competitors respond to your price reduction, particularly in light of the commodity environment? I wonder if other people aren't lowering their prices to follow simply because they're dealing with the commodity pressure that you're seeing as well. So that's the first question.

Yeah, too early to say on that, Wendy. We will have a better update for you in Q2. That's being implemented as we speak. We've certainly seen the first customers take pricing down as intended on our volume, and we're seeing the positive impact from that, but a little too early to call what will happen on the competitive side.

Okay. And then two other just quick follow-ups. Number one, on the shipments related to the hurricane, are you confident that that extra shipment volume that you saw late August, beginning of September, has actually sold through? Or is there a risk that some of those extra packs or whatever, are still sitting on the shelf? So does that impact the outlook for the second quarter at all? And then just second thing, just on RenewLife, I know distribution expansion is a big part of the story, and it sounds like you're making great headway there, but can you just give us an order of magnitude, how far – like, sort of an ACV type measurement, are you at 30% ACV, and you think you have 80%. I'm just wondering for how long are we going to hear about distribution expansion? Because it's all good, but I just wonder how much growth it can add to the business. Thanks.

Wendy, let me take the first question and I'll have Benno address the second question. Regarding your first question which is the incremental shipments associated with hurricane, there's no question, but some of that is likely sold through to consumption and then used in the hurricane cleanup efforts. But what's also true, and it's hard to quantify, so the short answer is we don't know exactly, is that likely some of that may have gone into the trade inventories as customers were stocking up in anticipation of the hurricane, and that may partially offset in the second quarter. So, as we look to our second quarter volume and sales growth, and sales in particular, the things we're watching carefully is, what happens with the hurricane and does some of that reverse out in the second quarter? Of course, we've got Aplicare. That will be the first full quarter where we have the divestiture in the numbers. And so, for a large reason, as we look at the outlook for sales growth on a full year of 1% to 3%, I think if I looked into the second quarter, I think it's possible we'll be at the lower end of that, just because of the Aplicare divestiture and also just because there may be some offsets to the hurricane. But we're 30 days into the quarter, we need to kind of get through and see how that will unfold.

Thank you.

Yeah, Wendy. And then on...

Oh! Yeah.

Sorry for interrupting. And then on RenewLife for distributing expansion, there's room at least through the end of the fiscal year to keep going on that; we're not done yet for a while. We're obviously in the natural channel. We have some room to grow in food, drug, mass, and obviously club is being expanded as well, but there's still room even within club customers. But then what I would say is beyond that the real opportunity here is to go from a quantity of distribution expansion to quality of distribution build. What I mean by that is, if you look at stores and you look at shelf placements, you look at clarity of merchandising, quantity of merchandising, all the things that we do so well in our established categories, there's tremendous room for us and what's required to keep building that, which is a long-term strategic approach, is to work with customers on category management as we typically do so well, guiding them on their strategies to grow these categories. And then also innovation, of course, which will help us expand distribution and placements within the customer groups that we're already in, and we will see our distribution machine turn on in the calendar year 2018 and will give you an update as we go little bit further into the fiscal year. So, distribution expansion was a big reason why we thought we can add value to the RenewLife business. It's been playing out as planned so far, and we still have quite a ways to go.

Got it. Thank you very much.

We'll take our next question from Andrea Teixeira with JPMorgan.

Hi. Hello, everybody. Thank you for taking my question. My question is regarding gross margin. So, I was hoping and I appreciate, Steve, your comment about 150 basis points impact on the quarter – on the coming quarter. But then what makes you believe that this is going to improve as we go? I think you alluded to Wendy's question on potentially some of the impacts that we saw in the pricing movements you've made. Is that something you're embedding in terms of pricing recovery at some point, pricing pass-through? Or are you just hoping or just baking into your margin – not margin gains, I'm sorry, market share gains through the balance of the year? Thank you.

Yeah. Thanks, Andrea. Well, we're not hoping. We have good plans in place to drive our margins. Obviously, we're very pleased with the 50 basis points of gross margin expansion in the first quarter. But as I indicated in my opening comments, I do think the second quarter gross margins will be challenged, likely down 150 bps; although it could be a little more or a little bit less than that. Why? Well, number one, it was always going to be the most challenging quarter that we had, because we had rising commodity costs in that quarter. And when you add the impact of the hurricanes, it's even further challenged both in commodities as well as manufacturing and logistics costs. That's the bad news. Now, the good news is, what we believe, and at least what we've seen in history over time is these elevated costs tend to go on for a couple of quarters. So, our belief is that the challenges will peak in the second quarter. They'll continue into the third quarter, but perhaps a bit better, okay? So, margins will be under pressure in the third quarter, but a bit less. By the time we get to the fourth quarter, we think that these hurricane-related costs, most – maybe not all, but most of them should have dissipated. As result, our cost savings, the pricing that we've got planned, the Go Lean efforts in International, combined with our margin-accretive innovation, that all of that should enable us to get back on track to get gross margin expansion. So, that's our outlook as we know it today. As I did indicate, there's going to be variability across the quarters. Certainly commodity markets today are fairly volatile, but we think we've got good plans in place and we'll see what happens as we go through the next few quarters.

But just to be clear, you're not putting on the guidance – including the guidance, any price increase beyond the wipes, right?

We have always planned for pricing in International. As we previously communicated, we've got wipes pricing. Beyond that, I won't comment, other than to say, I think we've got good robust plans in place. And the biggest single driver of margin expansion will be the cost savings programs, which we continue to feel very good about.

All right. Thank you, Steve.

We'll go next to Jonathan Feeney with Consumer Edge Research.

Thanks very much. Two questions. First, when you talk about the net impact of the hurricanes, at about a dime, does that include whatever profit impact – and forgive me if I missed this, from the increased Cleaning sales in the current quarter? And if you could give us a bit about how you went about the process of determining what's hurricane impact and what's not, because it seemed like the lifts in maybe August and September were pretty substantial, but there might be some other stuff going on there. And the second question was on the advertising, two of the four segments you called out specifically increased advertising and promotion. Just returns you're getting on that, is that more shifted towards digital? You've been leaders in moving advertising towards digital. Are you getting – is lift getting better, worse? Any comment about that spend level and anticipated returns? Thank you.

Jonathan, let me take the first part of the question. I'll have Benno address the second. As relates to the impact of the hurricane, these are our best estimates. It's very hard, obviously, to know exactly how much the hurricane impacted us, but we do have advanced analytics. We spend a lot of time trying to understand volume drivers. And so the numbers that we're providing reflect our best estimates as to what we think the impact was in the first quarter for sales growth. Again, we're going to watch and see how much of that may reverse out in the second quarter. In terms of the earnings impact from the hurricane, I don't think we've specifically communicated it, but it would be at a typical margin that you would expect for businesses like bleach and Glad and businesses that benefited from that lift. Although, again, I'll quickly point out, at least in the first quarter, we did take a $0.03 charge associated with the divestiture of the Aplicare business. So, I think you need to look at, when you talk the hurricane in the first quarter, you need to look at the impact of the hurricane on top and bottom line, but you also need to contemplate that we divested a business, which obviously impacted growth, and had a modest impact or a small impact on earnings. And again, how this plays out over the coming quarters is something we're all going to watch very carefully.

And, Jonathan, your question on advertising sales promotion, if I put it in strategic context, the strategic choice we've made is to be very aggressive about costs on our business that does not matter to the consumer, take that cost out, and then reinvest it into our brands to create a profitable growth, and do so with discipline and with a strong eye on ROI. And the increases in spend that benefit digital fall squarely into that camp of pursuing profitable growth with discipline and on strategy. We are pleased with the returns that we see in digital; the returns generally are better than in other media channels, whether that's TV or others. The returns are also getting better year-on-year every year, which is a tribute to our focus on continuous improvements, the capabilities that we are building, and of course, the partnerships that we have with other companies here in the Bay Area and on the West Coast. So, we like what we do in digital, which is why the spending this year is going to be about half of our total working media budget, which is yet again up from last fiscal year, and also quite substantially higher than what our peer group is doing.

Thank you.

We'll go next to Chris Carey with Bank of America.

Hi, everyone. So, just a bigger picture perspective on dynamics you've seen at U.S. mass retail, and how these have sort of evolved over the course of the year. Because clearly destocking in the U.S. impacted some at the start of the year, but not as much for you, but growth in those channels have remained somewhat sluggish into this quarter. So, can you talk to your relative outperformance here and maybe comment on dynamics around shelf space, so the total amount of shelf space maybe not expanding, but the mix or amount of SKUs are consolidating? And then, somewhat related, like kind of how have retailers approach to more premium brands evolved this year as maybe they've given a bit more support to private label? So those two.

So, in general, the big picture is the state of U.S. mass retail isn't dramatically different from what it's been over the last decade. On your first point, Chris, we certainly haven't seen any destocking. We also wouldn't expect any destocking. We manage our stocks with our customers tightly and electronically and routinely. And if you think about the nature of our products, they are products that are bought on a regular basis, routinely. So, there isn't a lot of up and down. The broad big picture that I would point you towards is that we're seeing a bifurcation in the marketplace, limited assortment retailers are winning, retailers that are focused on offering consumers value are winning, and as a result private label is gaining more support from retailers and is gaining share, but also market leaders are doing well. And as you know, more than 80% of our portfolio is in market leaders. So we are doing well too, because what retailers do is, as they consolidate shelf space is, they know they need market leaders for growth and they need private label for margin. That's a recipe that we've seen for a while. That's a recipe that retailers are pursuing that we are seeing perhaps accelerate, but that creates tailwind for our brands, which is why we're doing so well, not just with some, but with practically all of our major retailers in the U.S. Beyond, I would just point to our outperformance on sales growth back to the fact that we invest in our brands versus hunker down. We have innovation, in innovation-starved environment. We invest in digital and in keeping brands relevant and engaging to consumers. So, all the things that create growth the right way, meaning, in a profitable and sustainable fashion is something that we do well, is something that we've done for a while, and is something that, frankly, we're quite good at, and is perhaps somewhat differentiated in today's environment, which is why we are seeing results that we are quite proud of.

Yeah. That's helpful. Thank you.

We'll go next to Lauren Lieberman with Barclays.

Hi. Good morning. This is Shirley Serrao on behalf of Lauren Lieberman. I just wanted to follow-up on an earlier question around Burt's. It sounds like it's your first foray into club with lip care line. First off, did you displace another competitor here or is this sort of a new focus category for the channel? And then secondly, we didn't really see any mix degradation in Lifestyle, the way we saw in Cleaning when you gained distribution in club with wipes last year. So, was that offset by something else this quarter or just not as significant as a dynamic in the category? Thanks.

Yes. Thanks, Shirley. This was incremental, so not a displacement, but certainly a recognition of the strength of the brand not just in club but in general. And the reason why it hasn't shown up as a negative in mix is that it's actually a very profitable SKU that we have, first and foremost. We've also just started. We certainly hope that over the next few quarters, this is going to continue to grow, but I wouldn't expect it to be a significant drag on our margins in this segment, because, as I said, this is a very profitable SKU. We, as you know, are very focused on profitable growth. And when we consider expansion opportunities, like this one in club, we want to make sure that we do it based on a position of strength, and this plan certainly doesn't need excessive discounting, which is why we're pleased to see the early success behind this club expansion, but also the profitability.

Great. Thank you.

We'll take one more question.

We'll go next to Jason Gere with KeyBanc Capital Markets.

Okay. Thanks. Thanks, guys for squeezing me in. Maybe sticking on the topic of mix a little bit, you're talking about, in Brita, rationalizing some lower margin businesses. So, just wondering as you look at the portfolio, in an industry where it seems like it's very over-skewed and retailers are looking to be more nimble, and you guys are driving a lot of innovation, can you talk about the process of maybe cutting out some unprofitable SKUs or the opportunity to do more of this, which obviously would have a sales impact, but also would be margin beneficial. So, I was just wondering if you could talk a little bit about that process. Thanks.

Yeah. Thanks, Jason. So, we do this as we do everything on our business, systematically, and with an eye on the long-term, and we built this into our outlook and forecast. The process is pretty simple. Every business unit leader, general manager has an annual SKU reduction target. And then, we have a process in place that essentially looks at how incremental SKU is, how profitable SKU is, and then what you always do is cut the tail. What you always do is make other SKUs that are perhaps less profitable, more profitable through cost savings. It's always a source of creativity, and what you do is work with retailers to shift the mix towards the more profitable SKUs. Bleaches, perhaps another example where, and trash, where over the years, we've been tremendously successful to shift the mix, also enabled by innovation, towards more profitable SKUs. So, something that we routinely do and something that you should expect us to do on an ongoing basis. Certainly believe that, there continues to be an opportunity not just on Brita, but on all businesses to continue to do that. It's good business. Simplification is good. And it's part of our ongoing cost savings and margin improvement program.

Okay. Thank you.

Ladies and gentlemen, that concludes the question-and-answer session. Mr. Dorer, I'll turn it back to you for closing remarks.

Yes. Thank you. All I really have to say is that I want to thank everybody who has been on the call, and I look forward to speaking with you again in February when we share our second quarter results. Thank you, and have a good day.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. You may now disconnect.