Clorox Co (CLX) Reports Strong Sales Growth and Margin Expansion in Q2 Fiscal 2024
Net Sales: Increased by 16% to $1.99 billion in Q2.
Gross Margin: Improved significantly by 730 basis points to 43.5%.
Adjusted EPS: Surged by 120% to $2.16, reflecting operational efficiency and sales growth.
Operational Cash Flow: Year-to-date net cash provided by operations declined by 55% to $173 million.
Segment Performance: Health and Wellness, Household, Lifestyle, and International segments all reported double-digit net sales growth.
Fiscal Year 2024 Outlook: Updated net sales expected to be down low single digits, with a gross margin increase of about 200 basis points.
On February 1, 2024, Clorox Co (NYSE:CLX) released its 8-K filing, announcing the financial results for the second quarter of fiscal year 2024, which ended on December 31, 2023. The company, known for its diverse portfolio of consumer products, including its namesake bleach and cleaning supplies, as well as brands like Pine-Sol, Kingsford, and Burt's Bees, demonstrated a strong recovery from the operational disruptions caused by a cyberattack in August.
Financial Performance and Challenges
Clorox Co (NYSE:CLX) reported a robust 16% increase in net sales to $1.99 billion, driven by higher volume and favorable price mix, which helped to rebuild customer inventories post-cyberattack. Organic sales, which exclude the effects of foreign exchange rates and acquisitions or divestitures, were up an impressive 20%. However, the company faced challenges, including a 55% decrease in year-to-date net cash provided by operations, which fell to $173 million compared to $387 million in the year-ago period.
The gross margin saw a significant increase of 730 basis points to 43.5%, attributed to the benefits of pricing, cost-savings initiatives, and better cost absorption from strong shipment growth. Despite these gains, diluted net earnings per share (EPS) decreased by 6% to 75 cents, impacted by a noncash pension plan settlement charge, investments in digital capabilities, productivity enhancements, and expenses from the cyberattack. Adjusted EPS, however, increased by 120% to $2.16, showcasing the company's ability to expand margins and grow net sales.
Segment and Operational Highlights
Clorox Co (NYSE:CLX) experienced net sales growth across all segments. The Health and Wellness segment saw a 25% increase, while the Household segment grew by 9%. The Lifestyle segment reported a 21% rise, and International sales grew by 9%, with organic sales in this segment up by 31%. Adjusted EBIT for these segments also showed significant improvements, with the Health and Wellness segment's adjusted EBIT increasing by 109%.
The company's strategic and operational highlights included strong progress in recovering from the cyberattack, delivering another quarter of cost savings, and introducing new product innovations. Clorox Co (NYSE:CLX) also received recognition for its environmental, social, and governance achievements, further solidifying its reputation as a responsible and sustainable company.
Updated Fiscal Year 2024 Outlook
Clorox Co (NYSE:CLX) has updated its fiscal year 2024 outlook, now expecting net sales to be down low single digits, an improvement from previous expectations. Gross margin is anticipated to be up about 200 basis points, and the effective tax rate is expected to be between 22% and 23%. The company's fiscal year diluted EPS is projected to be between $3.06 and $3.26, marking a significant increase from prior estimates. Adjusted EPS is forecasted to be between $5.30 and $5.50, representing an increase of 4% to 8%.
Clorox Co (NYSE:CLX) remains confident in its recovery plan and its ability to drive top-line growth and rebuild margin in a challenging environment. With a focus on executing with excellence, the company is poised to win with consumers through the strength and value of its brands and ongoing investments in innovation and brand-building.
For more detailed financial information and to view the full earnings report, investors and interested parties are encouraged to visit the Clorox Quarterly Results page.
Explore the complete 8-K earnings release (here) from Clorox Co for further details.
This article first appeared on GuruFocus.
