Clorox Q2 Profit Down 7%, Misses View; Lowers 2014 Outlook

(RTTNews) - Consumer products company Clorox Co. (CLX) on Tuesday reported a 7 percent decline in profit for the second quarter from last year, reflecting the impact of unfavorable foreign currency exchange rates and higher commodity costs. These largely offset the benefit from price increases and higher volume.

Earnings per share for the quarter missed analysts' expectations, while revenues beat their estimates. Looking ahead to fiscal 2014, the company lowered its earnings as well as revenue growth outlook, primarily citing foreign currency declines.

Don Knauss, chairman and CEO of Clorox noted that like many companies, Clorox continued to face significant headwinds, including foreign currency declines, sluggish category growth and increasing commodity costs.

Oakland, California-based Clorox operates in four segments - cleaning, lifestyle, household, and international.

Cleaning segment sales for the second quarter rose 2 percent and international segment sales increased 1 percent. Meanwhile, household segment sales declined 1 percent and lifestyle segment sales were flat with the year-ago period.

Clorox's net earnings for the second quarter were $115 million or $0.87 per share, down from $123 million or $0.93 per share in the previous-year quarter.

Earnings from continuing operations for the quarter declined to $116 million or $0.88 per share from $123 million or $0.93 per share in the year-ago quarter. On average, eighteen analysts polled by Thomson Reuters expected the company to report earnings of $0.91 per share for the quarter. Analysts' estimates typically exclude special items.

According to Clorox, the latest quarter's results reflect higher commodity costs, an increase in manufacturing and logistics costs, the impact of unfavorable foreign currency exchange rates, and higher advertising as well as sales promotion expenses. In addition, a higher effective tax rate also negatively impacted the results.

These factors were partially offset by the benefits of strong cost savings and price increases, as well as higher volume.

Net sales for the quarter edged up 0.4 percent to $1.330 billion from $1.325 billion in the same period last year. Analysts had a consensus revenue estimate of $1.31 billion. Excluding the impact of foreign currency declines, sales grew 2.3 percent.

The slight increase in sales reflects the benefit of price increases and higher volume, largely offset by the impact of unfavorable foreign currency exchange rates, as well as unfavorable mix.

Volume for the quarter increased 1 percent, primarily driven by gains in the company's Professional Products, Home Care and International businesses, partially offset by declines in the Charcoal and Brita businesses.

Clorox's gross margin for the quarter was 41.9 percent, reflecting a decline of 60 basis points compared to the year-ago quarter. The company noted that the benefits of strong cost savings and price increases were more than offset by higher commodity costs, as well as higher manufacturing and logistics costs largely due to inflation in international markets.

Looking ahead to fiscal 2014, Clorox now expects earnings per share from continuing operations in a range of $4.40 to $4.55, down from the prior range of $4.45 to $4.60.

The company now anticipates sales growth for the year in a range of 1 percent to 2 percent, compared to its prior guidance range for growth of 2 percent to 3 percent.

The revised outlook reflects a greater impact from unfavorable foreign currencies in Argentina and other countries, which are now expected to negatively affect fiscal year sales by more than 2 percentage points.

Analysts expect the company to earn $4.53 per share for the year on revenues of $5.75 billion.

Chief Financial Officer Steve Robb said, "We've updated our outlook to reflect even more pressure from unfavorable foreign currency exchange rates, particularly in light of the significant devaluation of the Argentine peso that took place in January. In addition, our outlook reflects continued impact from sluggish category growth and higher commodity costs."

In Tuesday's regular trading session, CLX is trading at $86.30, down $0.06 or 0.07 percent on a volume of 106,742 shares.