UPDATE 3-Clorox raises dividend, keeps financial targets

Thu Jun 11, 2009 10:31am EDT

* Clorox raises dividend by 9 pct

* Stands by fiscal 2010 outlook

* Launches Green Works laundry products

* Shares up 0.5 percent (Adds details on strategy, comments from company, analyst)

By Jessica Wohl

NEW YORK, June 11 (Reuters) - Clorox Co (CLX.N) raised its dividend and stood by its fiscal 2010 forecast on Thursday as it starts selling environmentally-friendly laundry detergent and promotes the value of its products to attract shoppers in the economic downturn.

The company also held to its pricing strategy and restated its long-term financial targets through 2013 at a meeting with analysts and investors.

Clorox has held up in the recession even though products such as its namesake bleach face increased pressure from less-expensive store brands.

Its lines with a natural focus, Green Works household cleaning supplies and Burt's Bees skin care products, have grown even as consumers cut back. Clorox plans to ratchet up advertising on lines such as Burt's Bees next year.

The company is also feeling a bit less cost pressure now that prices for commodities, particularly resin, have fallen from historic highs. Clorox should see a benefit of about $100 million from easing commodity costs in fiscal 2010 after years of pressure, Chief Financial Officer Dan Heinrich said.

Still, Heinrich expects Clorox to raise prices on some products next year, primarily in international markets, and is "reasonably confident" earlier increases will stick.

The company did not announce any price cuts, which may surprise some who expected it to follow its recent rollbacks on Glad trash bags with other reductions. However, resin costs are up from recent lows, and prices are still high for materials such as the clay used in cat litter and pine oil used in cleansers, Heinrich said.

NEW PRODUCTS

Clorox said it would start selling Green Works laundry detergent and stain remover next month.

While Green Works products such as wipes have been well-received, the brand faces a tough market in laundry. The detergent market is led by larger rivals, such as Procter & Gamble Co's (PG.N) Tide, while the environmentally-friendly category is already crowded with brands such as Method and Seventh Generation.

"We're intrigued by the positioning and the price point in a market where the conventional wisdom suggests consumers are gravitating toward less expensive products," said BMO Capital Markets analyst Connie Maneaty.

Green Works laundry detergent has a suggested retail price of $8.79 for 45 ounces, while 50-ounce bottles of Tide and Seventh Generation are priced at about $9.99 and $8.99, respectively, at stores such as Walgreen.

Maneaty said costs from the Green Works laundry products launch explained Clorox's fiscal 2010 outlook, which analysts found conservative when it was issued in May.

BACKS VIEW

For fiscal 2010, which kicks off next month, Clorox confirmed its May forecast calling for diluted earnings per share of $4.00 to $4.15.

Some analysts lowered their expectations after the forecast was issued and on average, they currently expect $4.16, according to Reuters Estimates.

Clorox said it still saw 2010 sales growth of 1 percent to 2 percent, including an estimated negative hit of 2 percentage points due to the impact of declining foreign currencies.

Sales should be flat to down slightly in the first half of 2010 and higher in the second half of the year, Heinrich said. He also expects to see about 40 percent of earnings in the first half of the year and 60 percent in the second half.

Clorox reiterated long-term financial targets as part of its "Centennial Strategy," saying it still expected double-digit annual economic profit growth and sales growth of 3 percent to 5 percent through fiscal 2013.

The company raised its quarterly dividend by 4 cents, or 9 percent, to 50 cents per share. When it kicked off the Centennial Strategy in May 2007, Clorox raised the dividend 29 percent to 40 cents per share, and there have been smaller rises since then.

Shares of Clorox rose 0.5 percent to $53.76. (Additional reporting by Ben Klayman in Chicago; Editing by Lisa Von Ahn)

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