Clorox profit up despite volume slip, 2013 view intact
(Reuters) - Clorox Co (CLX.N) posted a higher quarterly profit and maintained its forecast for the fiscal year, buoyed by price increases, cost cuts and a lower-than-anticipated tax rate, which helped mitigate the impact of a drop in volume.
Over the past few years Clorox has raised prices on a variety of products, such as its namesake bleach, Pine-Sol cleaners, GladWare disposable containers and Brita water filters, as it has faced higher costs for materials.
While the price increases have helped offset those higher costs, they have also led some shoppers to choose lower-priced alternatives, such as store-branded products. Clorox has been advertising "bleachable moments" and using other campaigns to entice shoppers to buy its branded goods.
Clorox said on Wednesday that it saw its highest volume growth of bleach in more than two years and had record shipments of Clorox disinfecting wipes, while facing declines in products such as Pine-Sol, Clorox 2, charcoal and cat litter.
However, sales growth slowed from recent quarters and volume fell for the first time in almost two years.
"It was margin-driven and the topline decelerated a little bit," said RBC Capital Markets analyst Jason Gere.
"The story is very similar to what we saw at Colgate and what we saw at Kimberly-Clark," he said. "The last couple of quarters their upside had come from better topline growth."
Clorox bleach sales could potentially see a boost in coming weeks as East Coast residents clean up from the massive storm Sandy. Bleach is often used in cleanups after major storms.
While Oakland, California-based Clorox posted its earnings on Wednesday, as expected, it postponed a conference call until Friday as analysts and investors on the East Coast continue to deal with disruptions after the storm.
Clorox's sales rose 3 percent to $1.34 billion, just short of analysts' expectations of $1.35 billion, according to Thomson Reuters I/B/E/S. The volume of goods sold declined 1 percent.
The decline in volume was not a surprise "considering the weakened U.S. macro-environment," said Wells Fargo analyst Tim Conder.
Colgate-Palmolive Co (CL.N) and Kimberly-Clark Corp (KMB.N) last week both said quarterly sales fell while volume rose.
Shares of Clorox were down 0.5 percent at $71.75 on Wednesday morning on the New York Stock Exchange.
TAX RATE HELPED PROFIT
Clorox earned $133 million, or $1.01 per share, in the fiscal first quarter ended September 30, up from $130 million, or 98 cents per share, a year earlier.
Analysts had expected a profit of 95 cents per share.
Clorox said that its tax rate of 31.6 percent was lower than the planned rate of 34 percent because of a recent international tax settlement. It expects its full-year tax rate will be 33 to 34 percent.
Clorox started to introduce a concentrated version of its well-known bleach in August, a year after it raised the U.S. price of bleach by 12 percent.
The smaller bottles of concentrated bleach cut costs and are more environmentally friendly, as Clorox uses less water and packaging to make the product and needs less fuel for transport. They also allow retailers to fit more bottles on shelves.
Gross margin increased to 42.9 percent from 41.8 percent a year earlier, helped by cost-cutting and the lift from various price increases. Still, Clorox faced some inflation in manufacturing and logistics, as well as higher selling and administration expenses, including ongoing spending to upgrade information technology systems.
Clorox said it still expects to earn $4.20 to $4.35 per share in fiscal 2013 and that sales would rise 2 to 4 percent.
Uncertainty in some international markets, pressure from declining foreign currencies and a challenging comparison with strong sales growth in fiscal 2012 continue to weigh on the company's fiscal 2013 outlook, it said.
(Reporting by Jessica Wohl in Chicago; editing by Lisa Von Ahn, Gerald E. McCormick and Matthew Lewis)
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