CLOROX'S sales and profit beat expectations as higher prices helped offset a decline in volume across the business. Still, the company's chief executive officer said more job cuts are on the horizon and consumer budgets will likely come under increased pressure this year.
Earnings per share, excluding some items, for Clorox's fiscal first quarter ended Sep 30 totalled 93 US cents. That's down 23 per cent from a year earlier but above the 76-cent average estimate. The company reported net sales of US$1.74 billion, ahead of the US$1.69 billion estimate.
The shares rose 1.4 per cent to US$148.73 after the close of regular trading in New York.
"We continue to see a very challenging operating environment and frankly low visibility into what we'll experience over the coming quarters," CEO Linda Rendle said in an interview. She said the company predicts economic conditions will worsen and consumers "will be under additional pressure".
The period was marked by a drop in volume across the board. The unit that oversees household cleaning goods, along with professional supplies and vitamins, registered the biggest drop in unit sales amid waning demand. Supply-chain disruptions for trash bags and skincare products also affected shipments, Clorox said. Rendle said the company will raise prices for a fourth time in December.
A pandemic-era sales boom at the owner of Burt's Bees natural skincare and Fresh Step kitty litter has started to unwind as virus worries recede and inflation constrains shoppers' budgets. At the same time, high costs are making profits harder to come by. Clorox is restructuring its business while investing in new items, productivity and digital acumen, like the ability to personalise ads.
The company maintained its guidance for full-year net sales, with the expectation for a contraction of as much as 4 per cent to growth of up to 2 per cent. It also still sees adjusted earnings per share at US$3.85 to US$4.22.
"It's early and that's why we continue to maintain the outlook that we're seeing, given the just incredibly difficult environment ahead of us," Rendle said.
Gross margin fell to 36 per cent because of higher commodity, manufacturing and logistics costs, with lower volume also affecting results. That's still higher than the 35.2 per cent average estimate compiled by Bloomberg.
Rendle, who has been chief executive officer for just over two years, said in August that the company would transition to a new operating model designed to drive faster product development and quicker responses to changes in consumer behaviour.
Clorox got rid of a management structure in which some business units reported to more than one boss, cutting 100 jobs, or 2 per cent of the non-manufacturing workforce. Several senior employees were let go as the company removed layers of management, according to people familiar with the matter. The changes went into effect on Oct 3.
The Oakland, California-based company expects additional job cuts as part of the new operating model, Rendle said. It began recognising costs related to the changes in the latest quarter, with expenses expected to include severance payments and consulting fees, among other items.
Clorox expects to conclude the changes in the 12 months ending mid-2024. It will recognise about US$35 million in costs in the current fiscal year, it said Tuesday. BLOOMBERG