Clorox down 9% on narrowing sales, margins and bleak outlook

Justin Sullivan/Getty Images News

• Clorox (NYSE:CLX) trades 8.5% down after hours on reporting a drop of 8% in FQ2 net sales to $1.7B compared to a 27% increase in the year-ago quarter, or an increase of 19% on a two-year stack basis.
• Gross margin narrowed 1240 basis points to 33% driven by higher manufacturing & logistics and commodity costs.
• Segment-wise:

1. Health and Wellness net sales were down 21% led by lower shipments volume in Cleaning and Professional Products.
2. Household net sales increased 3%.
3. Lifestyle net sales were higher by 2%.
4. International net sales remained flat.

• Diluted net EPS plunged 72% to $0.56 led by lower gross margin and lower net sales.
• YTD, net cash provided by operations declined 65% to $222M, compared to $629M in the year-ago period.
• In January last week, the stock was downgraded to Underperform from Neutral at Credit Suisse basing on "upside from the shift in consumer behavior toward health, wellness, hygiene and more time at home as largely priced in. Some of the pandemic sales benefit is seen fading."
• FY22 Outlook: Net sales decline of 1% to 4% which reflects a sales decline of 7% in 1H22 compared to 27% sales growth in 1H21; by Q4, company expects sales to return to its long-term sales growth target of 3% to 5%; gross margin decline of ~750 points; diluted EPS between $3.80 and $4.05 (decrease of between 32% and 27%) and adj. EPS between $4.25 and $4.50 (decrease of between 41% and 38%).
• Analysts' consensus estimate for FY sales stands at $7.1B (-3.1% Y/Y) while EPS is seen at $5.44 (-25% Y/Y).

Comments

[Pts117]

overreaction... bought some shares pre market at $141

[Willow Street Investments]

@Pts117 Great company...but only so much they can do in the short term to fight inflationary policies of the U.S. govt. I already own it...looking at maybe SMG, SWKS, XYL or ECL. Most still expensive.

[Pts117]

@Willow Street Investments

don't disagree - CLX is a safe play in this market, especially at $140-145, which is ~12% below pre-pandemic levels. That makes no sense. CLX stands to permanently benefit from long term pandemic trends and behavior patterns - think about being under 15 years old during this pandemic... these kids are going to be terrified of germs for life

[Pts117]

@Willow Street Investments

one more thing... I really liked SMG until I enrolled in their annual direct to customer lawn care - they botched everything over and over. Still keeping an eye on it, but not as enthusiastic about the shares at the moment. Possibly will buy some if we see a broad pull back but the company does not appear to be very well run.

[keithrez]

At the low 140s, and with Covid seemingly nearing its end, Clorox just completed the Covid roundtrip.

[Willow Street Investments]

@keithrez If I didnt own it at $57, I would buy it sometime this year. I am on the look out for a dividend stock.

[Willow Street Investments]

@keithrez That round trip was created by analysts...and make no mistake ... they do it for every traded stock out there.

[User 51008808]

@keithrez everyone stocked up on bleach for a few years. i am still looking for more pain in the price and will buy around 100$

[luca-schmidt]

Inflation kicking in...

[Willow Street Investments]

@luca-schmidt yes....

[Yggsdraggl]

Yoiks! So much for “safe havens”!

[montereymd]

Getting back to pre pandemic levels . Will buy 100-120’s

[josephaoppenheim]

PG is taking market share from competition, here with cleaning stuff at CLX. PG improved when Nelson Peltz took an activist role, bought stock and got on the BOD. He just started with UL. He should do it with CLX, likely to get rid of non performing brands and focus on top brands.

CLX is on my watchlist and I’d like to own it, but only at 3%+ dividend yield would I start a position.

[igormukhin]

@josephaoppenheim It's on my watch list too and have been following it closely for about a year now. I think the time to buy is coming. Ready to pounce on shares below $145

[TigerCub911]

I thought Clorox is one of the so-called "value stock" the experts have been telling retail investors to buy, yet they still pour money into technology stocks...

[Yggsdraggl]

@TigerCub911 I think it was more commonly pegged as a defensive, economically insensitive holding rather than a value, at least at these prices.

[User 51008808]

@TigerCub911 not much value when selling at 30 p:e

[TigerCub911]

@Thrombus That was because at the height of the pandemic everyone was rushing to buy Clorox. Now that the pandemic is over the party is over. I still have over 15 gallons of clorox left, not including other cleaning products, not sure what to do with them, hopefully they won't expire. Just saying

[Carl 123]

yahoo finance reports po ratio over 120 %