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Clorox (CLX) Introduces IGNITE Strategy, Trims FY20 Guidance

Zacks Equity Research

The Clorox Company CLX recently launched IGNITE, its latest and integrated strategy, formulated on a sturdy foundation of its 2020 Strategy. This new initiative mainly focuses on the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. As a result, the company will be able to boost overall growth and reinforce competitive advantage, hence boost stakeholder value.

Notably, the IGNITE strategy mainly binds Clorox on four strategic areas namely, fuel growth through brand reinvestments, innovate customer experience, develop product portfolio, and re-imagine the company’s operations. This integrated business strategy forms part of environmental and governance, or ESG goals, which highlights Clorox's solid commitments. IGNITE’s main principle is ‘Innovating for Good Growth’, delivering sustainable and responsible growth.

IGNITE strategy encompasses the long-term financial targets of achieving net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points (bps) and free cash flow generation of 11-13% of sales.

Management revised its outlook for fiscal 2020 to incorporate current assumptions of foreign currency translations. The company now projects sales to decline low-single digits to up 1%, versus the earlier projection of flat to up 2%. However, organic sales growth is still estimated in the range of 1-3%. Further, gross margin is now anticipated to be slightly down compared with the range of flat to slightly down, guided earlier.

Consequently, Clorox now envisions earnings per share of $6.05-$6.25 for fiscal 2020, down from the prior projection of $6.30-$6.50.

Other Details

Backed by the IGNITE strategy, Clorox will aim at higher cost savings annually by emphasizing more on technology and integrated design. This will help it accomplish EBIT margin expansion of 175 basis points in a year. Moreover, the company will opt for several approaches to fulfil consumer demands efficiently. It is likely to focus on building brands with a purpose and selling them to consumers in a more personalized way. Next year, Clorox is set to launch compostable cleaning wipes in January.

Meanwhile, management will continue to strengthen the company’s product portfolio by focusing more on core business and consumer megatrends in its U.S. business. On the international front, it will capitalize on growth opportunities in the core business and focus on the segment's Go Lean strategy. It also targets to create a diverse workforce by crafting a more inclusive work environment, investing in digital capabilities and identifying ways to facilitate decision-making process.

Encouragingly, this Zacks Rank #3 (Hold) company accomplished these milestones from Jul 1, 2013, through Jun 30, 2019. It generated a compound growth rate of 2.4% in net sales, 7.6% in earnings per share and 7.5% in economic profit, annually.

Moreover, Clorox returned to shareholders around 91%. It also witnessed increase in strategic brands and product portfolio with sustainability improvements as well as maintained employee engagement at higher levels.



Price Performance

In the past three months, shares of this producer and marketer of consumer products have lost 5% against the industry’s 2.1% growth.

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