Clorox Falls on Lower Volumes - Analyst Blog

The Clorox Co. (CLX) posted a marginal decline in first-quarter fiscal 2011 earnings, slipping to 98 cents a share from 99 cents in the year-ago quarter and also lagged behind the Zacks Consensus Estimate of $1.13. 

Clorox's net sales during the quarter declined 3.0% year over year to $1.27 billion, missing the Zacks Consensus Estimate of $1.37 billion. The softness was primarily attributable to lower volume, the unfavorable impact of the Venezuelan currency devaluation and higher trade-promotion spending, partially offset by increased pricing.

Total volume in the quarter dropped 2% due to lesser shipments of Glad food-storage products and Scoop Away cat litter.   

Segment-wise Revenue

Clorox's sales in the Cleaning segment dipped 1%, while volumes rose 1%. The decline in segment sales was mainly caused by an unfavorable product mix and a high level of trade-promotion spending. Volume increase was driven by higher shipments of Clorox disinfecting wipes and Pine-Sol cleaner, partially offset by reduced shipments of disinfecting products.

Household segment sales plunged 7% and volumes declined 9%. Decrease in volume in the segment was primarily attributable to lower shipments of Glad food-storage products, Kingsford charcoal and Scoop Away cat litter.  

Clorox's Lifestyle segment recorded a slender 1% sales growth on the back of a 1% rise in volumes. The volume growth was mainly driven by higher shipments of Brita water-filtration products and Burt's Bees natural personal care products.   

In the International segment, Clorox's sales decreased 2% on a 2% volume decline. The top-line was primarily impacted by the Venezuela currency devaluation partially offset by increased pricing and favorable exchange rates in other countries.

Margins

Clorox's gross margin decreased 40 basis points (bps) to 44.3% from 44.7% in the year-ago quarter due to increased commodity costs, an unfavorable impact from foreign currency exchange rate and promotional expenses. This was, however, partially offset by prudent cost savings in the quarter.

Balance Sheet and Cash Flow

At quarter end, Clorox had cash and cash equivalents of $286 million and long-term debt of $2,124 million, compared with a cash balance of $237 million and a long-term debt of $2,137 million in the year-ago quarter. During the quarter, the company generated $148 million of cash from operations, compared with $94 million in the year-earlier period.

Guidance and Zacks Consensus

Looking ahead, Clorox anticipates annual earnings of $4.05 to $4.20 per share on flat to 2% growth in sales.

Clorox shares maintain a Zacks #4 Rank, which translates into a short-term Sell recommendation. Our long-term recommendation for the stock remains Neutral.