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Clorox Beats Q2 Earnings & Sales Estimates, Updates FY25 Outlook
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The Clorox Company (CLX - Free Report) reported second-quarter fiscal 2025 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. However, revenues and earnings declined year over year.
Clorox’s second-quarter fiscal 2025 results highlight a mix of strategic transformation and post-cyberattack recovery. The company’s better-than-expected sales, margin and EPS in the fiscal second quarter were led by robust demand creation initiatives, supporting market share growth. The company’s core business fundamentals remain robust, with market share gains in seven out of eight categories, demonstrating continued resilience.
Despite the better-than-expected earnings report, Clorox shares dropped 2.4% in the after-hours trading session on Feb. 3. Investors seem to be assessing the company’s prospects, considering the ongoing operational transitions.
The company also achieved gross margin expansion for the ninth consecutive quarter, driven by a strong quarter of cost savings and effective demand creation plans. The results underscore the strength of its portfolio as Clorox continues to invest in its brands, delivering superior value and fostering consumer loyalty.
The fiscal second-quarter results reflect the company’s operational recovery following the 2023 cyberattack, as well as the impact of the divestitures of its Better Health Vitamins, Minerals, and Supplements (VMS) and Argentina businesses.
A Sneak Peek Into CLX’s Quarterly Performance
Adjusted earnings per share (EPS) of $1.55 surpassed the Zacks Consensus Estimate of $1.39. However, EPS declined 28% from $2.16 reported in the year-ago quarter. The bottom-line results were impacted by reduced net sales, somewhat negated by cost savings.
Net sales of $1.69 billion decreased 15% from the year-ago quarter but surpassed the Zacks Consensus Estimate of $1.64 billion. The decline was mainly driven by lapping the impact of retail inventory restoration post the August 2023 cyberattack, coupled with the divestitures of the VMS and Argentina businesses. Organic sales were down 9%.
The gross margin expanded 30 basis points (bps) year over year to 43.8% in the reported quarter, marking the company's ninth consecutive quarter of margin expansion. This growth was driven by substantial cost savings and gains from the divestitures of the VMS and Argentina businesses. This was partially mitigated by lower cost absorption and higher manufacturing, logistics and commodities costs. It remains on track to fully rebuild its gross margin in fiscal 2025.
Shares of this Zacks Rank #2 (Buy) company have lost 1.6% in the past three months compared with the industry’s decline of 1.3%.
CLX Stock's Past Three Months Performance
Image Source: Zacks Investment Research
Discussion on CLX’s Segments
Sales of the Health and Wellness segment fell 13% year over year to $628 million. Our model predicted segment sales of $590.4 million. The decline was driven by an 11-point decrease in volume and a two-point unfavorable price mix. The segment-adjusted EBIT dropped 25%, primarily due to reduced sales.
The Household segment’s sales declined 11% year over year to $446 million. Our model had predicted sales of $451.8 million for the segment. The segments’ sales were mainly driven by an 11-point decrease in volume. Segment adjusted EBIT fell substantially by 48% from the year-ago quarter due to reduced sales and higher manufacturing and logistics costs, offset by cost savings.
Sales in the Lifestyle segment fell 16% year over year to $338 million, driven by a 16-point decrease in volume. We expected net sales of $310.3 million for the segment. Segment-adjusted EBIT declined 36% on account of reduced net sales.
In the International segment, sales declined 12% year over year to $274 million. We anticipated net sales of $245.7 million for the segment. This drop in sales was led by the divestiture of the Argentina business and a two-point impact of adverse currency rates. Excluding these, organic sales rose 6%, supported by 6 points of organic volume growth. Segment adjusted EBIT dipped 34% due to the Argentina business.
Clorox plans to invest $560-$580 million in transformative technologies over the next few years, including ERP replacement, transitioning to a cloud-based platform and digital transformation. Of this amount, 70% will be recorded as incremental operating costs within selling and administrative expenses, which will adjust reported earnings per share. About 70% of these costs are tied to the ERP implementation, with the remainder for other enhancing technologies.
Clorox's Financial Update
Clorox ended the quarter with cash and cash equivalents of $290 million, long-term debt of $2.5 billion and stockholders’ deficit of $41 million, excluding the non-controlling interest of $162 million.
Other Developments in CLX’s Release
Aligning with its strategic priorities, Clorox has completed the sale of its Better Health Vitamins, Minerals and Supplements business to Piping Rock Health Products on Sept. 10, 2024. This divestiture supports Clorox’s focus on core areas and aims to unlock additional shareholder value.
Clorox and Procter & Gamble (PG) will wind down their Glad joint venture by Jan. 31, 2026, with Clorox acquiring PG’s 20% stake at fair market value. This move aligns with Clorox’s IGNITE strategy, enabling greater agility, faster decision-making and stronger innovation. After the joint venture ends, Clorox will retain key intellectual property rights on a royalty-free basis and continue licensing Febreze and Gain trademarks from PG.
CLX’s Guidance for FY25
Clorox updated its guidance for 2025. Management expects fiscal 2025 net sales to decline 1% to 2% compared with flat to down 2% mentioned earlier. This includes a 1 to 2 percentage point gain from incremental shipments related to the Enterprise Resource Planning (ERP) transition, which is anticipated to reverse in the first half of fiscal 2026. Organic sales are anticipated to increase 4-7% versus the previous projection of 3-5%. The guidance excludes 2 points of negative impacts of the divestiture of the company's business in Argentina and 3 points of unfavorable impact from the sale of the VMS business. Also, organic sales are expected to grow in the range of 3% to 5%, excluding the impact of incremental shipments related to the ERP transition.
The gross margin is expected to expand 125-150 bps compared with the 100-150 bps increase mentioned earlier, driven by comprehensive margin management efforts, partly offset by cost inflation and higher trade promotional expenses. Selling and administrative expenses are forecasted to be between 15% and 16% of net sales, indicating a 150-bps impact of strategic investments in digital capabilities and productivity enhancements.
Advertising and sales promotion spending is projected to be 11-11.5% of net sales, driven by CLX’s continued commitment to brand investment. The company expects the effective tax rate to be 26% for fiscal 2025. Excluding the impacts of the VMS sale, CLX expects an adjusted effective tax rate of 23%.
Clorox envisions a GAAP EPS of $5.52-$5.92 compared with the $5.17-$5.42 mentioned earlier. The raised EPS indicates a year-over-year increase of 145-163%.
The company projects an adjusted EPS of $6.95-$7.35 versus the $6.65-$6.90 mentioned earlier. The revised adjusted EPS suggests a 13-19% year-over-year increase. This revision reflects a 25-45 cent net benefit from the expected incremental shipments related to the ERP transition. In addition, the adjusted EPS forecast incorporates lower input costs and a reduced tax rate compared to the prior outlook.
Adjusted EPS excludes an estimated 70 cents related to the long-term investment in digital capabilities and productivity enhancements, a loss of 94 cents from the VMS business divestiture in the fiscal first quarter, and 21 cents of benefit from cyberattack insurance recovery in the first half of fiscal 2025.
The consensus estimate for United Natural’s fiscal 2025 sales and earnings indicates growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
TreeHouse Foods (THS - Free Report) , a private brand snacks and beverages company, presently holds a Zacks Rank #2. THS delivered a trailing four-quarter earnings surprise of 20.4%, on average.
The Zacks Consensus Estimate for TreeHouse Foods’ 2025 sales and earnings implies growth of 1.2% and 24.9%, respectively, from the year-ago period’s reported figure.
US Foods Holding (USFD - Free Report) , which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered a positive earnings surprise of 3.7% in the last reported quarter.
The consensus estimate for US Foods’ 2025 sales and earnings calls for growth of 5.2% and 22.1%, respectively, from the prior-year reported levels.
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Clorox Beats Q2 Earnings & Sales Estimates, Updates FY25 Outlook
The Clorox Company (CLX - Free Report) reported second-quarter fiscal 2025 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. However, revenues and earnings declined year over year.
Clorox’s second-quarter fiscal 2025 results highlight a mix of strategic transformation and post-cyberattack recovery. The company’s better-than-expected sales, margin and EPS in the fiscal second quarter were led by robust demand creation initiatives, supporting market share growth. The company’s core business fundamentals remain robust, with market share gains in seven out of eight categories, demonstrating continued resilience.
Despite the better-than-expected earnings report, Clorox shares dropped 2.4% in the after-hours trading session on Feb. 3. Investors seem to be assessing the company’s prospects, considering the ongoing operational transitions.
The company also achieved gross margin expansion for the ninth consecutive quarter, driven by a strong quarter of cost savings and effective demand creation plans. The results underscore the strength of its portfolio as Clorox continues to invest in its brands, delivering superior value and fostering consumer loyalty.
The fiscal second-quarter results reflect the company’s operational recovery following the 2023 cyberattack, as well as the impact of the divestitures of its Better Health Vitamins, Minerals, and Supplements (VMS) and Argentina businesses.
A Sneak Peek Into CLX’s Quarterly Performance
Adjusted earnings per share (EPS) of $1.55 surpassed the Zacks Consensus Estimate of $1.39. However, EPS declined 28% from $2.16 reported in the year-ago quarter. The bottom-line results were impacted by reduced net sales, somewhat negated by cost savings.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
Net sales of $1.69 billion decreased 15% from the year-ago quarter but surpassed the Zacks Consensus Estimate of $1.64 billion. The decline was mainly driven by lapping the impact of retail inventory restoration post the August 2023 cyberattack, coupled with the divestitures of the VMS and Argentina businesses. Organic sales were down 9%.
The gross margin expanded 30 basis points (bps) year over year to 43.8% in the reported quarter, marking the company's ninth consecutive quarter of margin expansion. This growth was driven by substantial cost savings and gains from the divestitures of the VMS and Argentina businesses. This was partially mitigated by lower cost absorption and higher manufacturing, logistics and commodities costs. It remains on track to fully rebuild its gross margin in fiscal 2025.
Shares of this Zacks Rank #2 (Buy) company have lost 1.6% in the past three months compared with the industry’s decline of 1.3%.
CLX Stock's Past Three Months Performance
Image Source: Zacks Investment Research
Discussion on CLX’s Segments
Sales of the Health and Wellness segment fell 13% year over year to $628 million. Our model predicted segment sales of $590.4 million. The decline was driven by an 11-point decrease in volume and a two-point unfavorable price mix. The segment-adjusted EBIT dropped 25%, primarily due to reduced sales.
The Household segment’s sales declined 11% year over year to $446 million. Our model had predicted sales of $451.8 million for the segment. The segments’ sales were mainly driven by an 11-point decrease in volume. Segment adjusted EBIT fell substantially by 48% from the year-ago quarter due to reduced sales and higher manufacturing and logistics costs, offset by cost savings.
Sales in the Lifestyle segment fell 16% year over year to $338 million, driven by a 16-point decrease in volume. We expected net sales of $310.3 million for the segment. Segment-adjusted EBIT declined 36% on account of reduced net sales.
In the International segment, sales declined 12% year over year to $274 million. We anticipated net sales of $245.7 million for the segment. This drop in sales was led by the divestiture of the Argentina business and a two-point impact of adverse currency rates. Excluding these, organic sales rose 6%, supported by 6 points of organic volume growth. Segment adjusted EBIT dipped 34% due to the Argentina business.
Clorox plans to invest $560-$580 million in transformative technologies over the next few years, including ERP replacement, transitioning to a cloud-based platform and digital transformation. Of this amount, 70% will be recorded as incremental operating costs within selling and administrative expenses, which will adjust reported earnings per share. About 70% of these costs are tied to the ERP implementation, with the remainder for other enhancing technologies.
Clorox's Financial Update
Clorox ended the quarter with cash and cash equivalents of $290 million, long-term debt of $2.5 billion and stockholders’ deficit of $41 million, excluding the non-controlling interest of $162 million.
Other Developments in CLX’s Release
Aligning with its strategic priorities, Clorox has completed the sale of its Better Health Vitamins, Minerals and Supplements business to Piping Rock Health Products on Sept. 10, 2024. This divestiture supports Clorox’s focus on core areas and aims to unlock additional shareholder value.
Clorox and Procter & Gamble (PG) will wind down their Glad joint venture by Jan. 31, 2026, with Clorox acquiring PG’s 20% stake at fair market value. This move aligns with Clorox’s IGNITE strategy, enabling greater agility, faster decision-making and stronger innovation. After the joint venture ends, Clorox will retain key intellectual property rights on a royalty-free basis and continue licensing Febreze and Gain trademarks from PG.
CLX’s Guidance for FY25
Clorox updated its guidance for 2025. Management expects fiscal 2025 net sales to decline 1% to 2% compared with flat to down 2% mentioned earlier. This includes a 1 to 2 percentage point gain from incremental shipments related to the Enterprise Resource Planning (ERP) transition, which is anticipated to reverse in the first half of fiscal 2026. Organic sales are anticipated to increase 4-7% versus the previous projection of 3-5%. The guidance excludes 2 points of negative impacts of the divestiture of the company's business in Argentina and 3 points of unfavorable impact from the sale of the VMS business. Also, organic sales are expected to grow in the range of 3% to 5%, excluding the impact of incremental shipments related to the ERP transition.
The gross margin is expected to expand 125-150 bps compared with the 100-150 bps increase mentioned earlier, driven by comprehensive margin management efforts, partly offset by cost inflation and higher trade promotional expenses. Selling and administrative expenses are forecasted to be between 15% and 16% of net sales, indicating a 150-bps impact of strategic investments in digital capabilities and productivity enhancements.
Advertising and sales promotion spending is projected to be 11-11.5% of net sales, driven by CLX’s continued commitment to brand investment. The company expects the effective tax rate to be 26% for fiscal 2025. Excluding the impacts of the VMS sale, CLX expects an adjusted effective tax rate of 23%.
Clorox envisions a GAAP EPS of $5.52-$5.92 compared with the $5.17-$5.42 mentioned earlier. The raised EPS indicates a year-over-year increase of 145-163%.
The company projects an adjusted EPS of $6.95-$7.35 versus the $6.65-$6.90 mentioned earlier. The revised adjusted EPS suggests a 13-19% year-over-year increase. This revision reflects a 25-45 cent net benefit from the expected incremental shipments related to the ERP transition. In addition, the adjusted EPS forecast incorporates lower input costs and a reduced tax rate compared to the prior outlook.
Adjusted EPS excludes an estimated 70 cents related to the long-term investment in digital capabilities and productivity enhancements, a loss of 94 cents from the VMS business divestiture in the fiscal first quarter, and 21 cents of benefit from cyberattack insurance recovery in the first half of fiscal 2025.
Three Other Picks You Can’t Miss
United Natural Foods, Inc. (UNFI - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s fiscal 2025 sales and earnings indicates growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
TreeHouse Foods (THS - Free Report) , a private brand snacks and beverages company, presently holds a Zacks Rank #2. THS delivered a trailing four-quarter earnings surprise of 20.4%, on average.
The Zacks Consensus Estimate for TreeHouse Foods’ 2025 sales and earnings implies growth of 1.2% and 24.9%, respectively, from the year-ago period’s reported figure.
US Foods Holding (USFD - Free Report) , which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered a positive earnings surprise of 3.7% in the last reported quarter.
The consensus estimate for US Foods’ 2025 sales and earnings calls for growth of 5.2% and 22.1%, respectively, from the prior-year reported levels.