>>> Clorox Reports Q3 Fiscal Year 2023 Results, Updates Outlook
PR Newswire
May 2, 2023
https://finance.yahoo.com/news/clorox-reports-q3-fiscal-2023-201000889.html
OAKLAND, Calif., May 2, 2023 /PRNewswire/ -- The Clorox Company (NYSE: CLX) today reported results for the third quarter of fiscal year 2023, which ended March 31, 2023.
Third-Quarter Fiscal Year 2023 Summary
Following is a summary of key third-quarter results. All comparisons are with the third quarter of fiscal year 2022 unless otherwise stated.
Net sales increased 6% to $1.91 billion compared to a 2% net sales increase in the year-ago quarter. The net sales increase was driven largely by favorable price mix, partially offset by lower volume. Organic sales1 were up 8%.
Gross margin increased 590 basis points to 41.8% from 35.9% in the year-ago quarter, due to the benefits of pricing and cost savings initiatives, partially offset by unfavorable commodity costs, and higher manufacturing and logistics expenses.
Diluted net earnings per share (diluted EPS) decreased 241% to a loss of $1.71 from $1.21 in the year-ago quarter. This decrease includes a noncash impairment charge of $445 million ($362 million after tax or $2.92) in the Vitamins, Minerals and Supplements business and continued investments in the company's long-term strategic digital capabilities and productivity enhancements (17 cents) as well as the implementation of the company's streamlined operating model (13 cents).
Adjusted EPS1 increased 15% to $1.51 from $1.31 in the year-ago quarter, due in part to the net benefits of pricing and cost savings, partially offset by higher selling and administrative expenses, advertising investments and unfavorable commodity costs.
Year-to-date net cash provided by operations was $728 million compared to $451 million in the year-ago period, representing a 61% increase.
"Our strong results this quarter reflect solid execution against our priorities to rebuild margin and drive top-line growth amid a challenging operating environment," said CEO Linda Rendle. "We continue to take a broad set of actions to address persistent cost inflation, including pricing and cost savings efforts. At the same time, we remain committed to investing in our advantaged portfolio of leading brands, innovation pipeline, digital transformation and streamlined operating model to create a stronger, more resilient company. These strategic choices, supported by the superior value our brands offer consumers and the steps we've taken to further position our business for long-term, profitable growth, are working as planned and support our decision to raise our fiscal year 2023 outlook."
This press release includes certain non-GAAP financial measures. See "Non-GAAP Financial Information" at the end of this press release for more details.
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1 Organic sales growth / (decrease), adjusted EPS and segment pretax earnings increase / (decrease) excluding the noncash impairment charge are non-GAAP measures. See Non-GAAP Financial Information at the end of this press release for reconciliations to the most comparable GAAP measures.
Strategic and Operational Highlights
The following are recent highlights of business and environmental, social and governance achievements:
Delivered organic sales growth in all four segments, supported by improved service levels, including the highest case fill rates since the start of the pandemic.
Achieved two consecutive quarters of gross margin expansion, supported by cost-justified pricing and decade-high cost savings.
Reduced inventory for the fifth quarter in a row, contributing to the 61% growth in cash from operations fiscal year to date.
Continued to implement the company's streamlined operating model, which is increasing efficiency and moving decision-making to those who are closer to consumers to better anticipate and meet their needs.
Ranked No. 1 on Barron's 2023 100 Most Sustainable U.S. Companies list.
Launched new product innovations through third-party partnerships in Burt's Bees and Glad that deliver improved sustainability benefits without sacrificing quality.
Expanded industry leadership in product transparency by listing ingredients on all Clorox SmartLabel cleaning product pages.
Key Segment Results
The following is a summary of key third-quarter results by reportable segment. All comparisons are with the third quarter of fiscal year 2022, unless otherwise stated.
Health and Wellness (Cleaning; Professional Products; Vitamins, Minerals and Supplements)
Net sales increased 7%, with 23 points of favorable price mix more than offsetting 16 points of lower volume.
Segment pretax earnings decreased 445%, primarily behind the noncash impairment charge in the VMS business, unfavorable commodity costs and advertising investments, partially offset by net sales growth primarily behind pricing as well as the benefit of cost savings. Excluding the noncash impairment charge, segment pretax earnings1 increased 70%.
Household (Bags and Wraps; Grilling; Cat Litter)
Net sales increased 2%, with 14 points of favorable price mix offsetting 12 points of lower volume.
Segment pretax earnings increased 8%, primarily due to higher net sales due to pricing and the benefit of cost savings, partially offset by advertising investments and unfavorable commodity costs.
Lifestyle (Food; Natural Personal Care; Water Filtration)
Net sales increased 15% behind favorable price mix.
Segment pretax earnings increased 26%, mainly due to higher net sales primarily behind pricing as well as the benefit of cost savings, partially offset by advertising investments and unfavorable commodity costs.
International (Sales Outside the U.S.)
Net sales increased 1%, with 21 points of favorable price mix more than offsetting 13 points of unfavorable foreign exchange rates and 7 points of lower volume. Organic sales1 growth was 14%.
Segment pretax earnings decreased 52% largely behind unfavorable foreign exchange rates, the noncash impairment charge in the VMS business, and higher manufacturing and logistics costs, partially offset by net sales growth primarily behind pricing as well as the benefit of cost savings. Excluding the noncash impairment charge, segment pretax earnings1 decreased 13%.
Fiscal Year 2023 Outlook
The company is updating the following elements of its fiscal year 2023 outlook:
Net sales are now expected to be between a 1% and 2% increase, compared previously to between a 2% decrease and 1% increase. Organic sales are now expected to be between a 3% and 4% increase, compared previously to between a flat and 3% increase.
Gross margin is now expected to increase between 250 and 300 basis points, primarily due to the combined benefit of pricing, cost savings and supply chain optimization, more than offsetting continued cost inflation. This compares previously to an increase of about 200 basis points.
Selling and administrative expenses are now expected to be about 16% of net sales, including about 1.5 points of impact from the company's strategic investments in digital capabilities and productivity enhancements. This compares previously to between 15% and 16% of net sales.
Effective tax rate is now expected to be about 37%, reflecting the impact from the impairment charge in the VMS business. This compares previously to about 24%. Excluding the impact from the VMS impairment charge, the adjusted effective tax rate is expected to be about 24%.
Diluted EPS is now expected to be between $0.45 and $0.60, or an 88% to 84% decrease, respectively. This compares previously to between $3.20 and $3.45, or a 14% to 8% decrease, respectively.
Adjusted EPS is now expected to be between $4.35 and $4.50, or a 6% to 10% increase, respectively. This compares previously to between $4.05 and $4.30, or a 1% decrease to a 5% increase, respectively. To provide greater visibility into the underlying operating performance of the business, adjusted EPS outlook excludes the noncash impairment charge of $2.92 related to the VMS business, the long-term strategic investment in digital capabilities and productivity enhancements, estimated to be about 63 cents, compared previously to approximately 55 cents, as well as the company's streamlined operating model, which is now estimated to be about 35 cents, compared previously to approximately 30 cents. While overall expectations for the streamlined operating model program remain unchanged, with $75 to $100 million in ongoing annual savings and $75 to $100 million in one-time costs over fiscal years 2023 and 2024, the timing of charges has been adjusted as plans continue to be refined. Savings for fiscal year 2023 are now expected to be about $35 million compared previously to approximately $25 million.
The company is confirming the following elements of its fiscal year 2023 outlook:
Foreign exchange headwinds continue to represent about a 2-point reduction in sales.
Advertising and sales promotion spending of about 10% of net sales, reflecting the company's ongoing commitment to invest in its brands.
About The Clorox Company
The Clorox Company (NYSE: CLX) champions people to be well and thrive every single day. Its trusted brands, which include Brita®, Burt's Bees®, Clorox®, Fresh Step®, Glad®, Hidden Valley®, Kingsford®, Liquid-Plumr®, Pine-Sol® and Rainbow Light®, can be found in about nine of 10 U.S. homes and internationally with brands such as Ajudin®, Clorinda®, Chux® and Poett®. Headquartered in Oakland, California, since 1913, Clorox was one of the first U.S. companies to integrate ESG into its business reporting, with commitments in three areas: Healthy Lives, Clean World and Thriving Communities. Visit thecloroxcompany.com to learn more.
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