The US disinfectent maker announced its results
Clean up in aisle four. Shares in Clorox Co. sank by nearly 10% today, after the household products giant reported $0.95 cents in adjusted earnings per share, well below the $1.32 consensus, and took an axe to its 2022 guidance with a projected $5.55 per share (using the midpoint of the provided range) compared to analyst expectation of $7.60.
Dueling factors conspired to bring the hammer down. On the one hand, management noted a “deceleration of shipments from peak levels [seen] during the Covid-19 pandemic,” as customer spending habits mean revert from the widespread stockpiling last year. That’s a change from the prior quarter, when the company anticipated that spending habits would remain “sticky.”
Indeed, last year’s spate of panic buying helped goose sales and push CLX shares higher by 56% over the first half of 2020, setting the stage for subsequent disappointment and providing an opportunity for the skeptics. As a bearish analysis in the Oct. 2 edition of Grant’s Interest Rate Observer concluded, “Mr. Market may be valuing Clorox on a fancy multiple of spurting, one-off earnings.” Shares are since off by 20%, dividends included, compared to a 33% advance in the S&P 500.
Broader factors also loom large. Management warned on today’s call that it expects gross margins in the current fiscal first quarter to contract by 1,000 to 1,300 basis points year-over-year due to “significant cost inflation.” For context, gross margins declined by 970 basis points year-over-year in the quarter ended June 30, nearly double the shrinkage anticipated by Wall Street. ( input price inflation which they are not able to pass on)
Not taking that lying down, the c-suite relayed that it is in the process of raising prices on products representing 50% of its total portfolio. Additionally, Clorox is laying the ground work for price hikes across other product categories to be announced “at a later date.”
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