Why Bleach And Cleaning Products Maker Clorox's Shares Declining Today?

Clorox Co CLX shares are trading lower after it reported preliminary Q1 FY24 financial results.

Outlook: The company sees Q1 adjusted EPS of $(0.40)-$0.00 and a net sales decline of 23%-28% Y/Y, with expected organic sales decrease of 26%-21% (vs. guidance of mid-single-digits growth).

Also, Clorox projects gross margin to be down Y/Y in Q1 vs. the outlook of gross margin to be up.

The company's weak expectations are due to the recent cybersecurity attack on August 14.

Last month, Clorox identified unauthorized activity on some of its IT systems in August and immediately remediated the breach, forcing the company to operate at reduced speeds. 

Operational Update: On September 25, Clorox began transitioning back to automated order processing. The vast majority of orders are now being automated, enabling it to accelerate output and shipments to rebuild retailer inventories. Clorox expects restocking retailer inventories to occur over time as it ships above consumption levels.

The company expects to experience ongoing but lessening operational impacts in Q2 as it progresses in returning to normalized and expects to reap benefits from restocking retailer inventories as it ramps up fulfillment in the quarter.

Clorox is assessing the impact of the cybersecurity attack on FY24 results and beyond and will provide an updated outlook during its Q1 earnings call in November.

As per a report by Bloomberg, a group of hackers called 'Scattered Spider' are responsible for the cyber attack, who work with a ransomware gang called ALPHV.

The reason for the attack remains unknown, and Clorox stated that it is working with the FBI and the investigation is progressing.

The same group is being linked to recent cyber breaches at Caesars Entertainment Inc CZR and MGM Resorts International MGM in recent weeks, as per the report.

Related: Clorox Shares Could Rally As Operations Revive After Cyberattack, Says Bullish Analyst

Price Action: CLX shares are down 4.34% at $126.11 premarket on the last check Thursday.