- Clorox Co. dropped the most in more than two decades after forecasting a decline in sales, casting doubt on Chief Executive Officer Linda Rendle's all-in gamble that the maker of disinfecting wipes and bleach would hang on to the pandemic-driven customers it picked up over the last year.
The company, which also sells Glad trash bags and Kingsford charcoal, posted sales of $1.8 billion in its fourth quarter fiscal year, below the lowest analyst estimate. Clorox expects organic sales to decline by 2% to 6% in the current fiscal year, which strip out items like currency swings and acquisitions. Uncertain consumer demand plays a central role in the expected performance '
The stock dropped 10% on Tuesday at 11: 57 a.m. in New York, and was down as much as 12% earlier, the biggest drop since 2000. The shares had declined through Monday by another 10% in 2021.
Clorox's tone represents a dramatic shift from Rendle's March comment that consumers' behavior would be'sticky, a belief that led the company to increase its production capacity for wipes. The company said declining sales were due primarily to the deceleration of shipments from peak levels during the Covid - 19 Pandemic and a faster than expected slowdown in the health and wellness segment, which includes cleaning products. That slowdown was accompanied by a surge in costs for freight and raw materials.
"The company is confronting generational inflation and unpredictable demand for its products," Wells Fargo analyst Chris Carey said in a research note. 'This creates the need to be conservative around guidance and we think CLX is setting an outlook it believes it can hit. However, Wall Street was far below forecast, said Carey.
Clorox's guidance is a warning to investors about the bumpy road ahead for consumer-products companies that had a boom during the onset of the pandemic. Organic sales dropped 10% in the 3 months ended June 30,
Clorox reported decreased sales in all segment except one. The largest decline was 17% in the Health and Wellness Unit. Household products, which include trash bags, charcoal and cat litter, also fell by 8%, the company citing'moderating consumer demand'. In the lifestyle segment, which includes Brita Water filters and Hidden Valley salad dressing, revenue dropped 3% on the same trend.
'Clorox's 4Q total revenue miss shows that new CEO Linda Rendle needs urgently address the balance of investment in effective innovation and advertising costs vs. the current inability to retain U.S. household penetration built up through the pandemic.
Profitability was eroded by lower manufacturing and logistics costs and higher sales - illustrating the challenge of rising inflation which has sparked companies to push through round of higher prices in recent months. Clorox's gross margin dropped to 37.1%, its narrowest in more than a decade.
In response, Chief Financial Officer Kevin Jacobsen said Clorox is 'prioritizing key execution of the plans that exist to rebuild our margins, which includes price increases in 'key areas.
Clorox's results stand in contrast to those of Procter Gamble Co. which warned investors last week of $1.9 billion in higher commodity and transportation costs in its fiscal-year guidance. To the contrary, P&G is emerging from the extraordinary pandemic period in stronger position while sales growth slows for the next 12 months.