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How Will the Sale of Better Health VMS Business Aid CLX Stock?
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The Clorox Company (CLX - Free Report) has been making smart moves to boost its portfolio structure in a bid to bolster sales and overall profitability. In the latest announcement, the company has concluded the divestiture of its Better Health Vitamins, Minerals and Supplements (“VMS”) unit in its entirety to an affiliate of Piping Rock Health Products, LLC.
Let’s delve deeper.
Latest Divestiture to Boost CLX’s Portfolio
We note that the aforesaid divestiture includes the Natural Vitality, NeoCell, Rainbow Light and RenewLife brands, trademarks and licenses, as well as related manufacturing and distribution facilities in Sunrise, FL. The transaction highlights CLX’s consistent efforts to evolve its portfolio, improve sales and structurally increase margins, with consistent growth in the long run.
Last month, management announced that the company had agreed to sell its Better Health VMS business. It had earlier cited an anticipated after-tax charge in the range of $114- $134 million from the loss on sale on completion of the transaction. The said business accounted for roughly 3% of CLX’s sales in fiscal 2024.
The divestiture, coupled with the sale of the Argentina business, will enable Clorox to create an efficient portfolio to deliver sustainable profits by focusing on core brands within the portfolio. In the fiscal third quarter, CLX divested its Argentina business, which comprised its production plants in the region, along with the rights to its brands in Argentina, Uruguay and Paraguay. Also, these actions will deliver around 100 basis points of higher gross margin. Such moves resonate well with the company’s IGNITE strategy.
Clorox’s IGNITE Strategy
Clorox is well on track with the IGNITE strategy, which is its integrated strategy formulated on a sturdy foundation of its 2020 Strategy. This initiative mainly focuses on the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. The IGNITE strategy encompasses the long-term financial targets of achieving net sales growth in the band of 2-4%, EBIT margin expansion in the range of 25-50 basis points and free cash flow generation of 11-13% of sales.
CLX’s streamlined operating model looks forward to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. The implementation has been completed and the new structure is expected to generate ongoing annual cost savings of approximately $100 million, significantly enhancing operational efficiency.
Image Source: Zacks Investment Research
The company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success. It is also recovering from the cyber-attack seen earlier in the year. The company has fully restored its distribution capabilities and reclaimed the majority of lost market share. This recovery was driven by a revitalized supply chain and robust merchandising efforts across its portfolio.
What’s More for Clorox?
Clorox’s shares have been performing well on the bourses. Shares of this consumer products’ dealer have rallied 28.6% in the past three months compared with the industry’s 10.7% growth.
Apart from the aforementioned strengths, the company has been gaining from pricing and cost-saving initiatives, which have been driving its margins for a while. The gross margin expanded 380 basis points year over year during the fourth quarter of fiscal 2024. This marked the seventh consecutive quarter of gross margin expansion. We believe the latest divestiture will help boost CLX’s portfolio structure, thereby retaining the Zacks Rank #3 (Hold) company’s momentum in the near term.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.
The Zacks Consensus Estimate for CHEF’s current financial-year sales and earnings per share (EPS) indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) offers baked items and currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter average earnings surprise of 1.9%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS implies growth of 1% and 4.2%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 5%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year EPS indicates growth of 28.1% from the year-ago reported number.
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How Will the Sale of Better Health VMS Business Aid CLX Stock?
The Clorox Company (CLX - Free Report) has been making smart moves to boost its portfolio structure in a bid to bolster sales and overall profitability. In the latest announcement, the company has concluded the divestiture of its Better Health Vitamins, Minerals and Supplements (“VMS”) unit in its entirety to an affiliate of Piping Rock Health Products, LLC.
Let’s delve deeper.
Latest Divestiture to Boost CLX’s Portfolio
We note that the aforesaid divestiture includes the Natural Vitality, NeoCell, Rainbow Light and RenewLife brands, trademarks and licenses, as well as related manufacturing and distribution facilities in Sunrise, FL. The transaction highlights CLX’s consistent efforts to evolve its portfolio, improve sales and structurally increase margins, with consistent growth in the long run.
Last month, management announced that the company had agreed to sell its Better Health VMS business. It had earlier cited an anticipated after-tax charge in the range of $114- $134 million from the loss on sale on completion of the transaction. The said business accounted for roughly 3% of CLX’s sales in fiscal 2024.
The divestiture, coupled with the sale of the Argentina business, will enable Clorox to create an efficient portfolio to deliver sustainable profits by focusing on core brands within the portfolio. In the fiscal third quarter, CLX divested its Argentina business, which comprised its production plants in the region, along with the rights to its brands in Argentina, Uruguay and Paraguay. Also, these actions will deliver around 100 basis points of higher gross margin. Such moves resonate well with the company’s IGNITE strategy.
Clorox’s IGNITE Strategy
Clorox is well on track with the IGNITE strategy, which is its integrated strategy formulated on a sturdy foundation of its 2020 Strategy. This initiative mainly focuses on the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. The IGNITE strategy encompasses the long-term financial targets of achieving net sales growth in the band of 2-4%, EBIT margin expansion in the range of 25-50 basis points and free cash flow generation of 11-13% of sales.
CLX’s streamlined operating model looks forward to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. The implementation has been completed and the new structure is expected to generate ongoing annual cost savings of approximately $100 million, significantly enhancing operational efficiency.
Image Source: Zacks Investment Research
The company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success. It is also recovering from the cyber-attack seen earlier in the year. The company has fully restored its distribution capabilities and reclaimed the majority of lost market share. This recovery was driven by a revitalized supply chain and robust merchandising efforts across its portfolio.
What’s More for Clorox?
Clorox’s shares have been performing well on the bourses. Shares of this consumer products’ dealer have rallied 28.6% in the past three months compared with the industry’s 10.7% growth.
Apart from the aforementioned strengths, the company has been gaining from pricing and cost-saving initiatives, which have been driving its margins for a while. The gross margin expanded 380 basis points year over year during the fourth quarter of fiscal 2024. This marked the seventh consecutive quarter of gross margin expansion. We believe the latest divestiture will help boost CLX’s portfolio structure, thereby retaining the Zacks Rank #3 (Hold) company’s momentum in the near term.
Stocks to Consider
The Chef's Warehouse (CHEF - Free Report) , a distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.
The Zacks Consensus Estimate for CHEF’s current financial-year sales and earnings per share (EPS) indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) offers baked items and currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter average earnings surprise of 1.9%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS implies growth of 1% and 4.2%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 5%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year EPS indicates growth of 28.1% from the year-ago reported number.