2017 Integrated Annual Report

GRI

CEO
Letter

Fellow
Stakeholders:

I believe that every company should remember their source of inspiration — what makes them tick, what sparks their creativity and what motivates them to make a difference. At Clorox, we’re continually focused on understanding the evolving needs and expectations of you, our stakeholders, because you serve as our source of inspiration in our mission to make everyday life better, every day.

Benno Dorer
Chairman and
Chief Executive Officer

You — our consumers — inspire the imagination, hard work and passion that go into the superior experiences of our leading brands.

In fiscal year 2017, consumers were front and center of our 2020 Strategy. We continued our relentless focus on delivering products and brands that offer superior value through strong investments in our demand creation programs, including product innovation across our portfolio. Among many examples, we introduced Clorox® Scentiva® wipes and sprays, using fragrance to deliver a more delightful cleaning experience; we launched the Brita® Stream™ pitcher in response to millennials telling us they wanted a pitcher that filtered on demand; we launched Clorox Healthcare® Fuzion® cleaner disinfectant in healthcare settings to kill life-threatening pathogens; and we introduced a new oxygen bleach in Korea, which is now the brand leader in its category. We also continued to tap into the best technology partners — many of which are near our headquarters in the San Francisco Bay Area — to deliver the right message to the right consumer at the right time. And today, we’re investing about 45 percent of our media spend in digital marketing to continue leading the industry in technology-enabled, real-time consumer engagement.

Importantly, our demand creation programs were successful in introducing our family of brands to even more consumers. In fiscal year 2017, our brands were in over 1.4 million more U.S. households compared to fiscal year 2016, with Clorox-company products in 90 percent of households.1

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You — those who live in our communities around the world — inspire our commitment to growing the right way: responsibly and guided by our values.

At Clorox, we continue to be focused on good growth — growth that’s profitable, sustainable and responsible. We’re very mindful of our environmental and social impacts because the long-term well-being of our communities and planet is as much a priority for us as it is for our stakeholders. That’s why we continued to drive our eco strategy, making sustainability improvements to 34 percent of our product portfolio since our baseline calendar year of 2011. Our progress puts us on track to hit our 50 percent goal by 2020.2

Our relentless focus on
superior value contributed
to our strong results in
fiscal year 2017.
4%

Sales growth, with sales increasing every quarter

3 pts

Incremental sales growth from product innovation

$112M

Cost savings from productivity gains

$5.35

Diluted EPS from continuing operations

9%

Diluted EPS increase, on top of an 8% increase in fiscal 2016

$871M

Net cash from continuing operations, a 13% increase

$11.1M

in cash grants, product donations and cause marketing
contributions.

“We’re very mindful of our environmental and social impacts because the long-term well-being of our communities and planet is as much a priority for us as it is for our stakeholders.”

We’ve also lowered our greenhouse gas emissions by 18 percent, water usage by 21 percent, energy usage by 15 percent and waste-to-landfill by 41 percent since 2011.

We continue to believe that vibrant and healthy communities play an important role in the health of our business. In fiscal year 2017, our total impact to support our communities came to more than $11 million in cash grants, product donations and cause marketing contributions.

As a signatory to the United Nations Global Compact, we reaffirm our commitment to its Ten Principles by driving our corporate responsibility strategy, a comprehensive set of commitments across our company — from human rights, labor and product safety to transparency, environmental sustainability and contributions to our communities. We value being a signatory to the UNGC as it provides an opportunity to continue learning from and sharing ideas with key sustainability influencers and other companies.

We’re proud that others are recognizing our corporate responsibility progress. Once again, the U.S. Environmental Protection Agency named Clorox a Safer Choice Partner of the Year, and Corporate Responsibility magazine included us among the top 100 companies on its Best Corporate Citizens list.

You — our employees — inspire our ongoing quest to make Clorox a dynamic workplace that attracts and develops the best and brightest people.

Our 8,100-plus employees around the world drove our strong results above and beyond financial performance this fiscal year.

With inclusion and diversity as a business imperative, we continued our focus on making sure Clorox benefits from the diverse minds, experiences and backgrounds of our employees, which mirror the diversity of our consumers around the world. It starts at the top. Notably, female leaders make up 36 percent of Clorox Executive Committee members. In addition, female and minority leaders each make up 33 percent of our board of directors.

I’m very proud the company has been recognized for our strong inclusion and diversity programs. We earned another 100 percent score from the Human Rights Campaign for our LGBT workplace practices — a recognition we’ve achieved since 2006 — and Diversity MBA magazine ranked Clorox No. 7 on its list of the 50 best employers for women and diverse managers, among other recognitions.

It’s especially gratifying that all this has led to Clorox achieving high levels of employee engagement. Our current engagement score is 88 percent, higher than both the fast-moving consumer goods industry norm and the global high-performance norm.3 This matters a great deal to the Clorox management team since there’s a strong correlation between employee engagement and financial performance.

Returned

$412M

in cash dividends to our shareholders.

We also continued our commitment to you, our shareholders.

In fiscal year 2017, we returned $412 million in cash dividends to our shareholders. As we’ve done every year since 1977, we raised our annual cash dividend, announcing in the fourth quarter an increase of 5 percent. As of Aug. 15, 2017, Clorox’s dividend yield was 2.4 percent. Our total shareholder returns of 6 percent for the one-year period ending Aug. 15, 2017, ranked Clorox No. 5 in our peer group.

In fiscal year 2018, we’ll continue to be guided by our 2020 Strategy and draw on you, our stakeholders, for inspiration.

For consumers, that’s focusing on superior value through our differentiated products and brands. For our communities, that’s maintaining our strong commitment to our values and corporate responsibility. And for Clorox employees, it’s fostering a workplace where they can thrive and grow professionally and personally. For all our stakeholders, we’ll remain steadfastly committed to our values.

Sincerely,

Benno Dorer
Chairman and Chief Executive Officer
August 15, 2017

1.IRI Panel Data, Total US All Outlet, NBD weighted, 52 weeks ending June 25, 2017.
2.For the calendar year ended Dec. 31, 2016. All sustainability metrics represent cumulative progress against CY 2011 baseline, and percentage is based on net customer sales. There are four types of sustainability improvement criteria that can be met either by fully meeting one or by partially meeting two or more: 1) a 5 percent or more reduction in product or packaging materials on a per-consumer-use basis; 2) an environmentally beneficial change to 10 percent or more of packaging or active ingredients on a per-consumer-use basis; 3) a 10 percent reduction in required usage of water or energy by consumer; or 4) an environmentally beneficial sourcing change to 20 percent or more of active ingredients or packaging on a per-consumer-use basis.
3.The Willis Towers Watson global high-performance companies norm is based on responses from 142,506 employees at 26 companies. Companies qualify for the norm by meeting two criteria: 1) superior financial performance, defined by a net profit margin and/or return on invested capital that exceeds industry averages; and 2) superior human resources practices, defined by employee opinion scores near the top among the most financially successful companies surveyed by Willis Towers Watson.
Reviewed by Ernst & Young LLP. Please refer to the Review ReportReview Report.