Clorox (CLX) Q4 Earnings Beat Estimates, Gross Margin Expands

Core Insights - The Clorox Company reported strong earnings for Q4 fiscal 2024, with adjusted earnings of $1.82 per share, a 9% year-over-year increase, surpassing the Zacks Consensus Estimate of $1.54 [5] - Despite a 6% decline in net sales to $1,903 million, the company’s gross margin expanded by 380 basis points to 46.5%, driven by cost-saving initiatives and lower expenses [6][7] - Management's fiscal 2025 earnings guidance exceeded analysts' expectations, contributing to positive investor sentiment [1] Financial Performance - Adjusted earnings increased due to improved gross margins and reduced selling and administrative expenses, although these were partially offset by lower net sales and increased advertising investments [5] - Net sales fell short of expectations, attributed to an unfavorable price mix and lower volumes, alongside the impact of divesting the Argentina business [6] - The gross margin improvement was supported by lower manufacturing and logistics costs, although higher trade promotion expenditures had a negative impact [7] Segment Analysis - The Health and Wellness segment's sales remained stable at $652 million, with a 15% increase in segment-adjusted EBIT due to favorable manufacturing costs [8] - Cleaning sales grew due to restored distribution channels and product innovations, while the Professional Products segment saw a decline due to reduced shipments of Pine-Sol products [9] - The Household segment's sales decreased by 10% to $597 million, with a 31% drop in segment-adjusted EBIT, despite effective cost management [10] Strategic Initiatives - Clorox has successfully recovered from a cyberattack, restoring distribution capabilities and regaining market share through a revitalized supply chain [2] - The company implemented a streamlined operating model expected to generate annual cost savings of approximately $100 million [3] - Clorox announced the divestiture of its Better Health Vitamins, Minerals and Supplements business to focus on core areas, with the transaction expected to conclude in Q1 fiscal 2025 [4] Guidance and Future Outlook - For fiscal 2025, Clorox expects net sales to be flat to down 2%, with organic sales anticipated to increase by 3-5% [16] - The gross margin is projected to improve by around 100 basis points, although this will be partially offset by cost inflation and higher promotional expenses [17] - Management forecasts earnings in the range of $4.95-$5.20 per share, reflecting a significant year-over-year increase [19]