Yahoo Finance Clorox (CLX) Benefits From Strategic Actions Amid High Costs
The Clorox Company CLX has adeptly responded to the challenges in the consumer goods industry by strategically implementing digital transformation, innovation and pricing and cost-saving initiatives. Additionally, its IGNITE strategy bodes well.
The company’s streamlined operating model, aimed at improving efficiency, led to gross margin expansion of 40 basis points (bps) year over year to 42.2% in third-quarter fiscal 2024. This marked the sixth consecutive quarter of gross margin expansion, driven by pricing and cost savings, somewhat offset by adverse currency fluctuations.
Driven by these results, Clorox anticipates gross margin expansion of 275 bps, reflecting gains from lower input cost headwinds and a modest benefit from exiting Argentina. The improvement reflects combined gains of pricing actions, cost savings and supply-chain optimization, partly offset by supply-chain inflation and the impacts of the recent cyberattack.
Let’s Delve Deeper
CLX has been benefiting from its IGNITE strategy, which aims for long-term financial targets of achieving net sales growth of 3-5%, EBIT margin expansion of 25-50 bps and free cash flow generation of 11-13% of sales. Management announced a streamlined operating model to create a faster, simpler company through Reimagine Work under the IGNITE strategy.
The operating model helps to increase efficiencies and transform the company's operations in the areas of supply chain, digital commerce, innovation and brand building over the long term. Implementation of this new model is expected to be completed in fiscal 2024, with management anticipating ongoing annual savings in the range of $75-$100 million.
It returned to normalized service levels enabling to unlock merchandising and restore distribution in the upcoming fourth quarter. This reflected continued progress in restoring market share, with nearly 90% of cyberattack-related share losses now recovered. Additionally, it completed the divestiture of Argentina business, supporting the goal of evolving and also to reduce volatility, and deliver more consistent, profitable growth.
Clorox's commitment to innovation and strategic execution has been instrumental in its growth trajectory over the years. The company has recently unveiled a remarkable range of product innovations, designed at enhancing both household cleaning and culinary experiences, which includes seven new Hidden Valley Ranch flavors, a new lineup of Pine-Sol concentrated multi-surface cleaners, and new Scentiva Disinfecting Mist and Toilet Bowl Cleaning Gel.
Is It All Rosy for CLX?
Clorox has been experiencing the challenges of enduring inflation and the ever-changing nature of market conditions. The company has been grappling with increased SG&A expense for a while now. In third-quarter fiscal 2024, SG&A expense rate increased 40 bps year over year to 16.6%. For fiscal 2024, management projects SG&A expense in the band of 16-17% of net sales. This includes 2.5 points of impacts from investments to enhance digital capabilities, the implementation of a streamlined operating model and costs associated with the cyberattack.
Management envisions net sales to decline low single-digits from the prior-year levels. However, sales are expected to be at the lower end of this range primarily due to the impacts of the divestiture of the business in Argentina and soft fiscal third-quarter results. Despite these challenges, organic sales are still anticipated to increase low single-digits, which is also expected to be at the lower end of the projected range.
This Zacks Rank #3 (Hold) stock has declined 15.8% in the past three months against the industry’s 4.2% growth.
Image Source: Zacks Investment Research
3 Picks You Can’t Miss
Here, we have highlighted three better-ranked stocks, namely, Vita Coco Company COCO, Colgate-Palmolive CL and Tyson Foods TSN.
Vita Coco Company, which develops, markets and distributes coconut water products, currently sports a Zacks Rank #1 (Strong Buy). COCO has a trailing four-quarter earnings surprise of 25.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vita Coco Company’s current financial-year sales and earnings suggests growth of 3.5% and 40.5%, respectively, from the year-ago reported numbers.
Colgate-Palmolive, a leading oral care company, currently carries a Zacks Rank #2 (Buy). CL delivered an earnings surprise of 4.4% in the trailing four quarters, on average.
The Zacks Consensus Estimate for Colgate’s current fiscal-year sales and earnings suggests growth of 3.9% and nearly 9.3%, respectively, from the year-earlier reported figures.
Tyson Foods, which operates through the Beef, Pork, Chicken and Prepared Foods segments, currently carries a Zacks Rank #2. TSN delivered an average earnings surprise of 24.4% in the trailing four quarters.
The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and earnings suggests growth of 0.03% and 91%, respectively, from the prior-year actuals.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Vita Coco Company, Inc. (COCO) : Free Stock Analysis Report
Colgate-Palmolive Company (CL) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
