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Clorox (CLX) Expands Portfolio With Hamilton Beach Deal

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The Clorox Company CLX collaborated with Hamilton Beach Brands for a multi-year trademark licensing deal. Hamilton Beach, which is a fully-owned subsidiary of Hamilton Beach Brands Holding Company HBB, is gearing up to launch premium air purifiers under the brand name of Clorox. The move can be attributable to the continued demand for air purifiers from consumers concern about indoor air quality.

The new product line has been designed to remove 99.97% of allergens and particulates from pollen, dust and smoke to mold. The products will be sourced, marketed and distributed by Hamilton across both online and store channels. It will be available at between $89.99 and $229.99.

Per the deal, some products will be introduced this year, while the rest will be launched in 2022. Also, the agreement is in sync with Clorox’s IGNITE Strategy and will help expand the portfolio of surface and air disinfecting products.

Speaking of the IGNITE strategy, the initiative focuses on four areas namely, fuel growth through brand reinvestments, innovate to deliver enhanced customer experience, develop product portfolio, and re-imagine the company’s operations. The IGNITE strategy encompasses the long-term financial targets of achieving net sales growth of 3-5%, EBIT margin expansion of 25-50 basis points and free cash flow generation of 11-13% of sales.

What Else Should You Know?

Clorox has been gaining from persistent strong demand for cleaning and disinfecting products globally and aggressive investments in its global portfolio. It continues to envision sales growth of 10-13%, both on a reported and organic basis, for fiscal 2021. This suggests robust sales trends for the first half of the fiscal year and expectations of moderating demand for the rest.

Apart from these, management’s increased focus on technology and integrated design as well as cost-saving efforts annually, backed by the IGNITE strategy, bodes well. With this, it expects to achieve an EBIT margin expansion of 175 basis points annually. These cost-saving and pricing actions should continue to support its investment in long-term brands and category growth.

Despite such upsides, the company has its fair share of struggles. Notably, lower gross margins and increased advertising investments remain threats to the bottom line. In fact, management lowered its earnings per share view for fiscal 2021. Adjusted earnings for fiscal 2021 are now estimated to be $7.45-$7.65 per share, down from earlier mentioned $8.05-$8.25. Further, elevated spending related to higher brand investments to support its innovation pipeline along with rise in logistics and commodity costs acts as headwinds.

In the past three months, shares of this Zacks Rank #4 (Sell) company have lost 4.1% compared with the industry’s decline of 2.7%.

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