Clorox Co. reported sales and profit that handily topped analysts’ projections after consumers absorbed higher prices for household goods such as cleaning products and Brita water filters.
(Bloomberg) — Clorox Co. reported sales and profit that handily topped analysts’ projections after consumers absorbed higher prices for household goods such as cleaning products and Brita water filters.
The results, which also included higher-than-anticipated gross margin, show that the company’s reorganization, designed to cut costs and get products to market faster, is paying off. They also suggest that consumer demand remains robust, although the company sees economic activity becoming more challenged in the coming months.
The shares rose 1.3% at 4:12 p.m. in New York trading. The stock has advanced 8.7% this year, roughly half of the S&P 500 Index’s gain.
The maker of Glad trash bags said revenue was $2.02 billion in its fiscal fourth quarter ended June 30. Analysts projected $1.87 billion, according to data compiled by Bloomberg. Earnings per share also topped estimates.
“The consumer is still very resilient,” Chief Financial Officer Kevin Jacobsen said in an interview. “We’re seeing growth broadly across the company.”
The company’s outlook for the full fiscal year, which began in July, was in line with expectations. Clorox sees organic sales, which strip out some items such as acquisitions and currency volatility, climbing 2% to 4%. The average of analyst estimates for the period is 2.8%.
“We expect it’s going to continue to be a challenging economic environment. We continue to expect ongoing cost inflation,” Jacobsen said. “We think there will be a mild recession in the US” during the first half of calendar 2024, he added. That would typically mean “some additional pressure on both our categories and consumers,” he said.
Volume fell about 2%, while Clorox’s organic sales growth was 14% in the quarter. Analysts estimated 5.9% on average. Peers, including Procter & Gamble Co., have reported similar trends, with higher prices driving sales gains despite declining volumes.
Strong consumption of cleaning items, bags and wraps, cat litter and food drove sales in the quarter, along with improvements to supply. Jacobsen said the company is still rebuilding supplies for both of its litter brands — Fresh Step and Scoop Away. “Litter’s the one we’re still working to catch up to the demand,” he said.
The company has said it expects gross margin to expand this year due to higher prices and cost savings. Quarterly gross margin was 42.7% in the quarter, above the estimate of 40.8%. Clorox is trying to restore margins to pre-Covid levels and boost growth after demand for its cleaning items tumbled as the pandemic receded.
The company has also forecast $75 million to $100 million in ongoing yearly savings from its restructuring, which has included layoffs.
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