Clorox Corporation (CLX) posted lower third-quarter fiscal 2011 earnings of $1.03 per share compared with $1.07 per share in the year-ago quarter. Reported quarter earnings also failed to meet the Zacks Consensus Estimate of $1.04 per share.
Clorox’s net sales during the quarter increased 1.3% year over year to $1,304 million from $1,287 million in the year-ago quarter. However, total revenue fell short of the Zacks Consensus Estimate of $1,321 million.
Total volume in the quarter inched up 1% as the company benefited from volume gains from Burt’s Bees natural personal care products, the Away From Home institutional business and Home Care category. However, this was partially offset by decline in volume in the Glad and Brita businesses.
Revenue by Segment
Clorox’s sales in the Cleaning segment jumped 3% due to a 4% growth in volume. The increase in segment volume was mainly attributable to higher shipments of Clorox disinfecting wipes, Pine-Sol dilutable cleaners, Clorox Clean-Up cleaner and Clorox bathroom cleaners partially offset by lower shipments of Tilex mold and mildew remover and Clorox 2 stain fighter and color booster.
Household segment sales inched down 3% primarily due to a decline in volume by 3%. Decrease in volume in the segment was primarily attributable to lower shipments of Glad food-storage products and Glad Trash Bags, partially offset by increased shipments of Kingsford charcoal and Scoop Away cat litter.
Clorox’s Lifestyle segment recorded flat growth in the quarter compared with the base period, a year ago, on the back of stepped up trade promotion spending and poor product mix. However, volume for the segment increased by 3% in the quarter. The volume growth was primarily driven by higher shipments of Burt’s Bees natural care products and Hidden Valley salad dressing, partially offset by lower shipments of Brita water-filtration products.
In the International segment, Clorox’s sales grew 8%, while volume came in flat. Favorable pricing coupled with positive currency impact offset by higher promotion spending led to the variance between revenue and volume. Flat growth in volume was primarily driven by lower shipments of Clorox disinfecting wipes in Latin America offsetting the positive impact of higher shipments in Canada.
Clorox’s gross margin decreased 50 basis points (bps) to 44.1% from 44.6% in the year-ago quarter due to unfavorable product mix, increased commodity costs, and higher manufacturing and logistics costs. This was partially offset by the benefit of price increases and prudent cost savings in the quarter.
Balance Sheet and Cash Flow
At quarter end, Clorox had cash and cash equivalents of $153 million and long-term debt of $2,125 million compared with a cash balance of $241 million and a long-term debt of $2,132 million in the year-ago quarter. During the quarter, the company generated $217 million of cash from operations compared with $210 million in the year-earlier period.
Rise in operating cash flow was primarily driven by positive impact from working capital changes.
Looking ahead, Clorox anticipates annual earnings of $3.85 to $3.95 per share on flat to 1% growth in sales for fiscal 2011. Gross margin is expected to decrease in the range of 75 to 100 basis points.
For fiscal 2012, the company expects annual earnings of $4.00 to $4.10 per share on 1% to 3% growth in sales. Gross margin is projected to decrease in the range of 25 to 50 basis points.
Clorox Corporation, which competes with names like Colgate-Palmolive Company (CL) and Procter and Gamble Company (PG), currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Neutral recommendation on the stock.