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Clorox Q4 Earnings Beat, Rev Lags

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The Clorox Company (CLX - Free Report) came up with higher-than-expected earnings for fourth-quarter fiscal 2013. The company’s earnings of $1.38 per share surpassed the Zacks Consensus Estimate of $1.34 and increased nearly 4.5% from the year-ago quarter’s earnings of $1.32.

Quarterly earnings of the company were primarily driven by increased pricing and effective cost management, partially offset by adverse foreign currency exchange rates along with higher manufacturing and logistics costs.

Net sales marginally improved year over year to $1,547 million from $1,541 million in the year-ago quarter. Benefit from increased pricing, favorable product mix and reduced trade spending were mostly offset by unfavorable foreign exchange rates and reduced volume. Total volume declined 3% in the quarter. Moreover, total revenue came below the Zacks Consensus Estimate of $1,581 million.

Revenue by Segment

Sales in the Cleaning segment inched down 1% to $432 million, primarily due to a decline of 4% in volume. During the quarter, the segment witnessed volume growth in its Professional Products business while shipment of disinfecting wipes declined. Volume at Laundry business remained flat year over year.

Household sales inched up 2% to $568 million primarily due to the company’s increased pricing strategy, partially offset by a 1% decline in volume. Volumes in the quarter were adversely affected by a decline in charcoal resulting from cold weather in the U.S. in April and May. However, Cat Litter volumes improved on account of introduction of new products and increased merchandise support.

Sales at the Lifestyle segment hiked 2% to $239 million, primarily due to an increase of Brita products prices. Segment volume remained flat year over year.

In the International business segment, Clorox’s sales inched down 1% to $308 million, due to 6% decline in volume and unfavorable currency translation, partially offset by increased pricing and favorable product mix.

Costs and Margins

Clorox’s gross margin expanded 130 basis points (bps) to 44.0% from 42.7% in the year-ago quarter. The year-over-year increase in gross margin was primarily due to the company’s price increase and strong cost saving initiatives, partially offset by increased manufacturing and logistics costs. Operating margin improved 60 bps driven primarily by increased gross margin, partially offset by higher advertising and sales promotion expenses.

Balance Sheet and Cash Flow

Clorox ended the fiscal with cash and cash equivalents of $299 million and long-term debt of $2,170 million. During fiscal 2013, the company generated $777 million net cash from operations, exhibiting an increase of $157 million from the year-ago period.


Looking ahead, Clorox reaffirmed its fiscal 2014 outlook with sales growth forecast of 2%–4% while earnings are expected to range from $4.55 – $4.70 per share.

The company, which competes with Church & Dwight Company Inc. (CHD - Free Report) , Colgate-Palmolive Company (CL - Free Report) and Procter & Gamble Company (PG - Free Report) continues to expect operating margin to expand by 25 to 50 basis points in fiscal 2014, on the back of strong cost savings, the benefit of price increases and flat commodity costs forecasts.

Headquartered in Oakland, CA, Clorox is primarily engaged in the production, marketing and sale of consumer products in the U.S. and international markets. This Zacks Rank #4 (Sell) company sells its products primarily through mass merchandisers, grocery stores and other retail outlets. Clorox manufactures products in more than 24 countries and markets them in more than 100 countries.

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