Clorox sales slump as consumer demand drops

Clorox shares are under pressure after the company's fourth quarter sales plunged due to consumer demand shifting away from products like disinfectants and wipes.

The company reported a 9% revenue decline and a 68% decrease in diluted net earnings per share in the fourth quarter. Clorox reported total quarterly net sales of $1.8 billion, down from $1.98 billion a year ago, and net income of $97 million, or 78 cents per share, compared to $310 million, or $2.41 per diluted share, in the quarter ended December 31, 2007.

Clorox's Health and Wellness segment, which includes cleaning, professional products, minerals and supplements, posted a 17% sales decrease for the quarter.

Sales decreased in two of three businesses, reflecting lower shipments of cleaning and disinfecting products both retail and professional, as consumer demand decelerated, the company said in its earnings release. Segment sales results were also affected by the normalization of the product mix from the negative condition of supply.

Excluding this charge, Clorox adjusted diluted net earnings per share came in at 95 cents, a 61% decrease to the year-ago quarter, mainly due to lower sales, higher manufacturing and logistics costs and increased commodity prices, partially offset by cost savings initiatives.

Clorox's Household segment saw low sales in fourth quarter due to lower sales in its bags and wrappers and grilling - businesses due to unfavorable pricing mix and lower shipments from moderating consumer demand. The pretax earnings fell 31% due to higher sales and lower manufacturing and logistics costs. In its Lifestyle segment, quarterly sales dropped 3% due to lower price mix and unfavorable shipments in its water filtration and food businesses. Pretax profit fell 22% due to lower manufacturing and logistics costs and higher sales.

While, the Saudi sales in the quarter exceeded 5%, driven by higher revenues from the acquisition of the company in a joint venture. Gross margin expansion in the segment also increased 70% due to higher sales and pretax margin expansion.

For the full 2021 fiscal year, Clorox delivered sales growth of 9% driven primarily by higher shipments due to COVID - 19 across all reportable segments.

The company's total net sales for the year came in at $7.34 billion compared to $6.72 billion in fiscal 2020. The net income for the year came in with $710 million, or $5.58 diluted EPS, compared to $939 million, or $7.36 diluted EPS, a year-ago, which represented a 24% decrease in diluted EPS. Excluding noncash items, adjusted EPS was $7.25, representing a 2% decrease.Net cash provided by operations sold 17% to $1.3 billion in fiscal year 2021, compared to $1.5 billion in fiscal year 2020. Clorox delivered total savings of $122 million for the fiscal year, up from 2011 level.

Fiscal year 2021 was an extraordinary year for Clorox, with the pandemic putting us through the test of volatility, including rapid changes in consumer demand and inflationary pressure, which are reflected in our fourth quarter results, Clorox CEO Linda Rendle said.

Rendle noted Clorox has made progress on expanding its production capacity and has nearly doubled its e-commerce business over the past two years as a result of its investments and higher levels of consumer engagement.

Looking ahead at fiscal 2022, Clorox anticipates a revenue loss between 2% and 6% in the first half of the year. Sales are expected to normalize toward the lower end of the company's growth target of 3% to 5% in the second half of the year and increase by 10%. The company anticipates consumer demand to be the largest headwind impacting sales in fiscal year 2022.

The company also expects diluted earnings per share between $5.05 to $5.35 and adjusted earnings per share between $5.40 to $5.70. Starting in the first quarter, adjusted EPS will exclude the company's long-term strategic investment in digital capabilities and productivity enhancement to provide greater visibility into the underlying operating performance of the overall business.

Clorox will invest approximately $500 million over the next five years, including about $90 million in fiscal year 2022, toward digital capabilities and productivity enhancements, including to replace its enterprise resource planning system to generate efficiencies and better position the company in supply chain, digital commerce, innovation and brand building over the long term.