Consumer Staples
Household & Personal Products
$20.16B
8K
The Clorox Company is a multinational manufacturer and marketer of consumer and professional products. They operate in approximately 25 countries and sell products in over 100 markets, primarily through mass retailers, grocery outlets, and e-commerce channels. Clorox's competitive advantage lies in its strong brand portfolio, with about 80% of sales coming from brands holding the No. 1 or No. 2 market share positions.
Key insights and themes extracted from this filing
The company reported net sales of $1.762 billion for the three months ended September 30, 2024, compared to $1.386 billion for the same period in 2023, representing a 27% increase. This increase is primarily attributed to lapping impacts from the August 2023 cyberattack.
Gross margin increased by 740 basis points to 45.8% compared to 38.4% in the prior year. This improvement was driven by higher volume and cost savings.
The effective tax rate on earnings was 41.8% compared to 14.6% in the prior year. The increase was primarily driven by the nondeductibility of the loss on the divestiture of the Better Health VMS business.
On September 10, 2024, the Company completed the divestiture of its Better Health VMS business, resulting in an after-tax loss of $118 million. This action reflects the company's strategy to reduce volatility and improve margins.
Organic sales growth, excluding the effects of acquisitions, divestitures, and foreign exchange, was reported at 31%. This indicates strong underlying growth from existing operations.
The company incurred $29 million in expenses related to digital capabilities and productivity enhancements investment. These investments are aimed at long-term strategic improvements.
The company has recovered from the August 2023 cyberattack, which had significant impacts to its operations and results in fiscal year 2024. The lessening operational impacts in the second quarter of fiscal year 2024 and has since returned to normalized operations.
The Company completed implementation of the new streamlined operating model in fiscal year 2024, which continues to generate annual cost savings in fiscal year 2025 and beyond.
Selling and administrative expenses, as a percentage of net sales, decreased by 400 basis points, while dollars were essentially flat in the current period versus the prior period.
The impact of continued volatility in macroeconomic conditions and geopolitical instability, including ongoing conflicts in the Middle East and Ukraine, rising tensions between China and Taiwan and actual and potential shifts in U.S. and foreign trade, economic and other policies, have increased global macroeconomic and political uncertainty.
The risks of future negative impacts due to transportation, logistical or supply constraints and higher commodity costs for certain raw materials remain present, and the Company continues to experience corresponding incremental costs and gross margin pressures.
The Company is in the process of implementing a new enterprise resource planning (ERP) system along with a suite of other digital technologies. As this phased implementation occurs during fiscal years 2025 and 2026, the Company will change its processes and procedures which, in turn, could result in changes to its internal control over financial reporting.
The Company primarily markets its leading brands in midsized categories considered to be financially attractive. Most of the Company's products compete with other nationally advertised brands within each category and with “private label” brands.
About 80% of the Company's sales are generated from brands that hold the No. 1 or No. 2 market share position in their categories.
Net sales to the Company's largest customer, Walmart Inc. and its affiliates, as a percentage of consolidated net sales, were 26% for the three months ended September 30, 2024.
The Company completed implementation of the new streamlined operating model in fiscal year 2024, which continues to generate annual cost savings in fiscal year 2025 and beyond.
The Company has arranged for a global financial institution to offer a voluntary supply chain finance (SCF) program for the benefit of the Company's suppliers. The Company's current payment terms do not exceed 120 days in keeping with industry standards.
Beginning in the first quarter of fiscal year 2023, the Company recognized costs related to a plan that involves streamlining its operating model to meet its objectives of driving growth and productivity. The implementation of this new model was completed in fiscal year 2024.
The Company continues to invest in digital capabilities and productivity enhancements, with $29 million in expenses incurred during the quarter. These investments are aimed at long-term strategic improvements.
The Company is in the process of implementing a new enterprise resource planning (ERP) system along with a suite of other digital technologies. In the first quarter of fiscal year 2025, we began implementation of the new ERP system.
Research and development costs, as a percentage of net sales, decreased by 30 basis points, while dollars were essentially flat in the current period as compared to the prior period. The Company continues to invest behind product innovation and cost savings.
During the three months ended September 30, 2024, the Company repurchased 789 thousand shares of common stock at a cost of $107 million. The company has an open-market purchase program with an authorized aggregate purchase amount of up to $2,000 million.
Dividends per share declared were $2.44 compared to $2.40 in the prior year. Total dividends paid were $151 million compared to $149 million in the prior year.
Capital expenditures (39) million
The Company is involved in certain environmental matters, including response actions at various locations. The Company recorded liabilities totaling $28 million as of both September 30, 2024 and June 30, 2024 for its share of aggregate future remediation costs related to these matters.
In conjunction with divestitures and other transactions, the Company has provided certain indemnifications (e.g., indemnifications for representations and warranties and retention of previously existing environmental, tax and employee liabilities).
The Company is subject to the impact of Environmental, Social, and Governance (ESG) issues, including those related to climate- related transition risks, changing consumer preferences, including the environmental impact of the Company's products and sustainability on sales, operating costs or reputation.
For the fiscal quarter ended September 30, 2024, the Company continues to monitor macroeconomic conditions as a result of elevated interest rates and volatility in capital markets.
These factors are difficult to predict considering the rapidly evolving landscape as the Company continues to expect a variable operating environment going forward.
The Company is subject to unfavorable general economic and geopolitical conditions beyond the Company's control, including supply chain disruptions, labor shortages, wage pressures, rising inflation, the interest rate environment, fuel and energy costs, foreign currency exchange rate fluctuations, weather events or natural disasters, disease outbreaks or pandemics, such as COVID-19, terrorism, and unstable geopolitical conditions, including ongoing conflicts in the Middle East and Ukraine and rising tensions between China and Taiwan.