Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Clorox Co (CLX, Financial) reported strong first-quarter results, exceeding expectations and fully restoring market share following the August 2023 cyber attack.
- The company achieved its eighth consecutive quarter of gross margin expansion, with plans to return to pre-pandemic gross margins this fiscal year.
- Clorox Co (CLX) completed the development of its VMS business, marking a significant milestone in portfolio evolution aimed at reducing volatility and driving consistent growth.
- The company has strong fundamentals in place and is focused on advancing its transformation to become a more consumer-obsessed, faster, and leaner company.
- Clorox Co (CLX) is seeing strong performance in its international and professional businesses, which are expected to grow in the mid-single digits, contributing positively to overall growth.
Negative Points
- The macro environment remains uncertain, with consumers under pressure and seeking value, which could impact future performance.
- Clorox Co (CLX) anticipates a decline in Q2 sales, with expectations of low-teens percentage decreases due to volume pull-forward from Q1.
- The litter business is facing challenges in recovering shelf space and consumer loyalty, requiring higher promotional spending.
- The company is experiencing increased promotional activity, which could impact margins and pricing dynamics.
- Gross margin is expected to decline in Q2 due to seasonal factors and volume deleveraging, with a projected rate of around 43%.
Q & A Highlights
Q: Can Clorox consistently expand market share, and what are the key drivers behind this?
A: Linda Rendle, CEO, stated that Clorox has restored its market share to pre-cyber levels and expects to continue growing share, albeit at a smaller level due to current market conditions. The company has invested in advertising and trade promotions to maintain brand health and expects solid share growth by the fiscal year's end.
Q: How is Clorox managing the promotional environment across different business segments?
A: Linda Rendle explained that promotional activities have returned to pre-COVID levels, with some categories like litter experiencing higher promotional levels. This is seen as temporary, with plans to normalize over time as market share is reestablished.
Q: What are Clorox's expectations for organic growth in the back half of the year?
A: Kevin Jacobsen, CFO, indicated that Clorox expects 3% to 5% growth in the back half of the year, driven by international and professional businesses, divestitures, and strong demand plans. The company is focused on maintaining this growth rate into fiscal year 2026.
Q: What factors contributed to the better-than-expected gross margin in the first quarter?
A: Kevin Jacobsen attributed the strong gross margin to better cost absorption due to over-delivery on the top line. Other cost elements were in line with expectations, and the company expects margins to stabilize around 44% to 44.5% for the full year.
Q: How is Clorox addressing consumer value-seeking behavior and category consumption trends?
A: Linda Rendle noted that Clorox is seeing consumers seek value through larger or smaller pack sizes and promotions. The company is responding with strategic pricing and promotional activities, while maintaining strong brand value and focusing on innovation to retain and attract consumers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
