Time flies when you are having fun and managing the leader in household cleaning products amidst a health pandemic the likes of which this generation of humans has never endured.
Such is the case with Clorox (CLX) Chairman and CEO Benno Dorer, who stunned a few on Wall Street Monday by announcing he will step down as the company’s leader on Sept. 14 to pursue philanthropic endeavors. He will hand the reigns to 17-year Clorox veteran Linda Rendle following years of being groomed for the position by Dorer.
This writer vividly remembers when Dorer was appointed CEO back on — yes — Sept. 14, 2014. At the time, the then 10-year Clorox veteran was carefully groomed (succession is taken extremely important at Clorox) for the position by well-regarded CEO Don Knauss. Dorer received high marks on the Street for his strong tech background, innovation prowess, communication skills and all-around good guy nature.
He hasn’t disappointed ever since walking into my now former office back in November 2014 for our first meeting. Clorox shares have skyrocketed 145% since Dorer’s appointment, dusting (no pun intended) the S&P 500’s 65% gain. Dorer has injected consistent streams of innovation into Clorox’s bread and butter cleaning business, bought a vitamin business (Renew Life), led new product introductions in personal care brand Burt’s Bees and kept costs at bay.
More recently, Dorer has led Clorox through the COVID-19 pandemic — quickly ramping up production to meet insane demand for cleaning products. Fiscal fourth quarter earnings out Monday showed a 22% sales increase and a 28% pop in earnings.
Shares of Clorox fell slightly as analysts speculated about a cautious full-fiscal year guidance.
All in all, a successful six-year stint atop Clorox for Dorer. His final win could be appointing Rendle to the CEO post, marking Clorox’s first female CEO in its 107-year history. Similar to when Dorer took over in 2014, Rendle’s resumé suggests she bleeds blue and red as well (Clorox’s corporate colors).
Yahoo Finance caught up with Dorer to discuss his departure and the company’s latest earnings. What follows is an edited and condensed version of our chat.
Brian Sozzi: A lot of folks are sad to see you stepping down as CEO given what you have accomplished at Clorox.
Benno Dorer: It’s better when people are slightly sad than happy to see me go. But this has been a long term process, really a strategic well thought out plan with the board. It's just a good time to make this transition not just because we have a successor who is more than ready and will do a great job, but also because the business is healthy, irrespective of the pandemic. We have so much momentum on the core business. We have a strategy that we have great confidence in and, importantly, it's such a pivotal moment in our history, where we have an opportunity to change the long-term growth trajectory of our company and for that I've always felt like it's important to have somebody who's got a long-term runway left.
I don't normally comment on stock valuation but given the run up in the stock, I think it's great for shareholders to have somebody as a CEO for whom this went up, and this is the floor and not the ceiling. That means that we're investing aggressively and we're going to continue to be all on offense, which is exactly what we intend to do here.
Sozzi: When did you decide it was time to pass the CEO baton?
Dorer: I mentioned our very strategic process here at Clorox. We started to talk about my succession in my very first board meeting in November 2014. It’s important to make sure that we have an eye on long-term success. So two months after I was appointed we talked succession, and then every year we talked about successor development and various candidates. I think this is what good boards do, and I certainly have had the good fortune to have a very supportive board.
I can't tell you specifically about when I started thinking, but we knew about two or three years ago that we really needed to zoom in on candidates. We really needed to make sure that I have the right development both on the job and off the job. And we knew that we would then need to expose Linda to the board and expose her to investors and analysts as part of the process. And of course I only made a formal decision last Friday afternoon, but the process was a three-year process and I think that's really a best in class process to make sure that the successor is ready to go.
Sozzi: Clorox has always been viewed as among the best in succession planning. What is it about the process at Clorox?
Dorer: Well, first of all we place great emphasis on internal succession. Even though you know my predecessor Don Knauss came from the outside, which was mainly because we had an unfortunate health issue with the previous CEO and it was a little early in his tenure. But there's a strong commitment to people development at all levels. I think that's first.
Second, we always talk about doing the right thing. It's simply the right thing to take a long-term view to the business development and to succession planning, and to make sure that that successor is ready. That's one of the things we have always enjoyed with our board and they've always supported that as a business. We have built the business for the long-term. We have made decisions firmly with an eye on the long-term, we never ran this business with an eye on the next quarter, but with an eye on the next three to five to 10 years. We make acquisitions with an eye on the next 10 to 20 years and we build long-term growth runways. Everything we do is built for the long-term.
And even today's outlook, which I know was seen as conservative by some. It’s about investing in this incredible long-term growth opportunity that we have. If there's a year that maybe is slightly below analyst expectations from an earnings perspective that's OK, because we're building for the long-term and we're building to accelerate the growth trajectory for the company. And that takes investments and we're not afraid to make them.
Sozzi: I do want to discuss that outlook. But before we do, for investors not too familiar with Linda Rendle — how did you know she was the right person to succeed you?
Dorer: I met her in 2007 when I took on what was then the cleaning division. And I saw her when she was a sales manager in a meeting and I knew that she was a special talent. So what I did since then was essentially put her into new roles, stretching roles, and challenging roles to grow her. And she knocked it out of the ballpark every single time.
The first thing that I look for as a leader is leadership. It's very simple. Does this person have an idea of where to go. Is she able to articulate it. And does she make people follow her. Is it somebody who is strategic and smart. Does she have strong values and is transparent. And is she humble, that she puts the team’s interests ahead of individual interests. Those are qualities that I look for, and those are qualities that Linda has in spades.
Lastly, I think that our industry needs leaders with courage not only to do the right thing but courage to envision the future and courage to make unpopular decisions and courage to be an aggressive manager. In the face of adversity and uncertainty, somebody who doesn't run away from difficult situations but somebody who runs towards those difficult situations. And that's exactly what Linda is, and you will recognize that right away. And she's rewarded me for this this development that I've put in her over the last 15 years richly, and I'm quite confident that she will reward shareholders in the future.
Sozzi: Let’s go back to that fiscal year outlook that some on the Street think is conservative. Where did that come from given strong demand for cleaning products during the pandemic?
Dorer: It's hard for me to speculate what analysts or investors feel, and certainly I want to wait until I read the write ups by some analysts.
The first thing is that we were contemplating whether to do an outlook at all because it's so difficult. Right now, there's so many factors. There's so much uncertainty and there's so much volatility. How long is COVID-19 going to last? Will there be a vaccine or effective treatments? There's the recession, which I think is going to be deep and long. So there's a number of external factors, too, such as foreign exchange headwinds. That also makes it so, so hard.
We've got tremendous amounts of confidence in our strategy, thinking that we're investing aggressively in the momentum that we have in our business. And we'll have continued momentum — which we've already said that for this coming quarter that we're in. We expect continued double-digit growth in the business. But it's also a reflection of this uncertainty and volatility and perhaps some one-time factors like FX that it's going to be a headwind. We have added costs related to COVID-19.
So we feel like this is a good place to start. It's a good balanced outlook. We're not trying to win the day, we're trying to win the year and we're trying to win the decade. And like I said, we're taking a long-term view. So, I'm less concerned about the initial reaction that we may have seen today in the stock. I'm quite confident that based on strong operational results, investors will continue to see the value of our company in their portfolio.
Sozzi: How do you think COVID-19 will have changed Clorox when looking out into the future?
Dorer: I think it will mainly change us in two ways.
The first one clearly is in cleaning and disinfecting. The world of disinfecting will have changed forever. People will engage more with disinfecting products long after this pandemic is history. In previous more benign pandemics, we saw things return back to normal. Also the same with other categories that we’re not in like hand sanitizers. But, this will fundamentally change behaviors. This will also change the behavior of institutional customers. The way offices, airlines, ride-sharing companies, movie theaters will clean and disinfect their buildings has kind of changed forever and that's going to be here to stay. And that's going to give our company so much opportunity to accelerate growth both here in the United States as well as internationally. A third of our business in the U.S. and half of our business internationally is in disinfecting, and we have a unique pivotal moment here to accelerate growth that's going to be here to stay for a very, very long time.
The second way it’s going to change us and I think change all companies, of course, is how we work. We've made so much progress in doing things digitally that we would have struggled to do before. The way we work and the way we make decisions, the speed with which we operate is a day and night difference between now and before.
I read somewhere that household penetration and buying online before the pandemic was 15%. I know that sounds low, but that's the number I read. Today it is 35%. When you think about it that's a giant leap for our own business. Our e-commerce business last year grew north of 50%. This is an explosion online.
The way we will do work and the way consumers will engage with our brands online is going to accelerate, and the degree of the speed with which our business is going to transform and our company is going to lead this transformation is going to accelerate beyond belief.