Clorox ‘off to a good start’ in first quarter
Clorox saw volume for the first quarter ended Sept. 30 increase 1%, primarily driven by gains in the company's professional products, charcoal, laundry and Burt's Bees businesses, which were partially offset by declines in home care.
Sales grew 2%, with increases in three out of four segments, reflecting the benefit of price increases, higher volume and favorable mix and assortment, partially offset by unfavorable foreign currency exchange rates. Excluding the impact of foreign currencies, sales grew 3.5%.
"We're off to a good start in the fiscal year," said chairman and CEO Don Knauss. "Still, like other companies, we continue to face headwinds, including foreign currency declines and increasing commodity costs. We're also facing heightened competitive activity, which we expect to continue through the fiscal year. Looking at the full fiscal year, I feel good about the plans we have in place, including a strong innovation pipeline that will support our categories while delivering value to our consumers."
In the first quarter, Clorox delivered strong pretax earnings of $208 million, an increase of 7% versus the year-ago quarter.
The company’s professional products business delivered double-digit volume growth supported by record shipments across several brands. Clorox bleach increased volume behind strong category growth following last year's conversion to a new, concentrated formula. Gains in these business units were offset by volume declines in home care, primarily driven by lower shipments of Clorox disinfecting wipes due to increased competitive activity. Sales outpaced volume primarily due to the benefits of price increases and favorable mix and assortment.
Volume growth in the household segment, which includes bags and wraps, charcoal, cat litter, was driven primarily by higher shipments in charcoal behind strong summer holiday merchandising events and higher shipments in cat litter behind product innovation. Volume in the Glad business decreased, primarily driven by base trash declines due to distribution losses and lower merchandising. Sales growth outpaced volume growth primarily due to the benefit of price increases and lower trade promotion spending.
In the lifestyle, the company’s Burt's Bees business delivered double-digit volume growth behind product innovation in lip products as well as higher shipments of face products. Food business volume was up, driven primarily by higher shipments of Hidden Valley products, including dry mixes and dips, as well as new sandwich spreads and pasta salad kits. Volume decreased slightly in water filtration primarily due to declines in faucet mounted products. Sales outpaced volume primarily driven by the benefits of price increases and favorable mix and assortment, partially offset by increased trade promotion spending.
The company’s international segment volume was essentially flat, reflecting declines in Venezuela, Argentina and Canada, offset by gains in other countries in Latin America and in the Middle East and Asia. The variance between volume and sales was driven primarily by unfavorable foreign currency exchange rates, partially offset by the benefit of price increases. Although overall segment sales declined 3%, excluding the impact of 7% from unfavorable foreign currency exchange rates, segment sales grew 4%.
"Our fiscal 2014 outlook now reflects heightened pressure on sales and earnings, primarily from the impact of unfavorable foreign currency exchange rates across multiple countries. In addition, it reflects the impact of elevated commodity costs on our margins," said CFO Steve Robb. "I feel good about the plans we have in place to limit the impact of these headwinds and support the long-term health of our business, including strong cost savings and a robust product innovation pipeline, which we anticipate delivering 3 points of incremental sales growth."
Clorox anticipates sales growth for fiscal 2014 in the range of 2% to 3%, reflecting a greater impact from unfavorable foreign currencies in Argentina and other countries, which are now expected to negatively affect sales by up to 2%, versus a previous assumption of 1%.
Clorox markets several brands, including its namesake bleach and cleaning products, Clorox Healthcare, HealthLink, Aplicare and Dispatch products, Green Works naturally derived products, Pine-Sol cleaners, Poett home care products, Fresh Step cat litter, Glad bags, wraps and containers, Kingsford charcoal, Hidden Valley and KC Masterpiece dressings and sauces, Brita water-filtration products, and Burt's Bees and Gud natural personal care products.