U.S. News

Clorox Shares Fall on Profit Shortfall; Sees Charges Ahead


Clorox Thursday posted quarterly profit and sales below analysts estimates and forecast larger one-time charges for the current year, sending its stock down as much as 8%.

The company, known for its namesake bleach, has been hit by higher costs for ingredients like soybean oil in its Hidden Valley Ranch salad dressing, stepped up competitive activity in laundry and cleaning products, and poor weather that cut into sales of Kingsford charcoal and its auto-care products.

At the same time, Clorox is trying to overhaul its supply chain and take other steps to boost profit, which led to charges in the near term.

While cost-cutting measures helped lift gross margin in the fourth quarter, "these efforts were partially offset by unfavorable commodity cost pressures, higher logistics expenses and higher trade promotion in response to competitive spending," CIBC World Markets analyst Joseph Altobello said in a research note.

"We remain cautious on Clorox until we get a better sense of the commodity cost pressures and investment spending for (fiscal year 2008)," he said.

Clorox said commodity costs in the first half of the current fiscal year will be higher than anticipated.

Profit was $164 million, or $1.07 per share, in the fourth quarter ended June 30 compared with a profit of $142 million, or 92 cents per share, a year earlier.

The company had forecast fourth-quarter earnings of $1.05 to $1.11 per share, while analysts, on average, expected $1.10, according to Reuters Estimates.

Clorox, which also makes Glad trash bags, Brita water filters and STP auto products, said sales rose 1.9% to $1.34 billion. Excluding the impact of the bleach businesses Clorox bought from Colgate-Palmolive sales were about flat.

Analysts had expected sales of $1.38 billion.

Bank of America analyst April Scee said the biggest sales misses versus her expectations came in the laundry care, bags and wraps, litter, food and charcoal segments.

Volume, a measure which factors out foreign currency and price fluctuations, rose 2% after an 8% increase in the third quarter. The company cited lower consumption following the strong third-quarter shipments, lower shipments of charcoal and auto-care products due to poor weather, and aggressive competition in laundry and cleaning products.

Clorox forecast 2008 earnings of $3.27 to $3.46 a share.

This includes 6 cents to 8 cents a share in previously announced restructuring charges and an additional 15 cents to 17 cents a share in charges for a supply chain overhaul and to write off investments in new venture investments the company has decided not to pursue.

Excluding charges, the forecast is $3.52 to $3.67 a share.

On that basis, analysts on average forecast $3.60 a share, according to Reuters Estimates.

The company still expects 3% to 5% growth in sales this year from existing brands.

Clorox shares were off $4.32, or 7%, at $57.31 in late morning trading on the New York Stock Exchange after falling to $56.64, their lowest level since January 2006.

Through Wednesday, shares of Clorox traded at about 16.7 times next year's expected earnings, slightly below the multiples of peers such as Colgate.