Yahoo Finance Clorox Co (CLX) Q3 2024 Earnings Call Transcript Highlights: Strategic Wins Amid Challenges
Sales: Lower than expected due to slower supply recovery in some businesses.
Gross Margin: Higher, benefited from margin transformation program and modest environment.
Adjusted Earnings Per Share (EPS): Finished ahead of expectations despite lower sales.
Market Share: Regained nearly 90% of lost market share, with expectations to progress further in Q4.
Service Levels: Normalized, supporting brand investment and volume growth potential.
Gross Margin Target: Positioned to exceed the original target for the fiscal year.
Strategic Actions: Completed divestiture of Argentina business, supporting portfolio evolution for consistent, profitable growth.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide more details on the expected 4Q organic sales growth and its implications for future growth? A: Linda Rendle, CEO & Chairman of Clorox, explained that Q4 plans include fully restoring distribution lost due to the cyberattack and returning to normal merchandising levels. Kevin Jacobsen, CFO, added that improving volume trends and increased trade spending are expected, which should lead to flat to slightly down organic sales growth in Q4, aligning with the annual growth target of about 1%.
Q: What areas of the portfolio experienced slower supply recovery impacting Q3, and what gives you confidence in consumer return? A: Linda Rendle noted that Glad and Litter faced supply challenges longer than anticipated, affecting Q3 sales. However, these were resolved by the end of Q3, setting a positive outlook for Q4. She expressed confidence in regaining consumer trust and market share due to restored distribution and inventory levels.
Q: Regarding the increase in gross margin and the outlook for fiscal 2025, how do you see the impact of commodity prices? A: Kevin Jacobsen mentioned that while the plan for fiscal 2025 is still being developed, they expect to continue expanding margins. The divestiture of the Argentina business, which was margin dilutive, and ongoing margin transformation efforts are expected to offset potential moderate cost inflation.
Q: How are you addressing the challenges in sales delivery and competitive dynamics in key divisions? A: Linda Rendle acknowledged that Q3 sales were below expectations due to supply constraints in key businesses like Glad and Litter. However, she reassured that these issues were resolved by the end of Q3, and robust plans are in place for Q4 to fully supply and meet increased demand.
Q: Can you discuss the long-term outlook for the International business following the divestiture of the Argentina business? A: Linda Rendle highlighted that while the Argentina business was part of their growth strategy, its high volatility led to its divestiture to stabilize and improve profitability. The focus will remain on growing stable and predictable markets like the Middle East and maintaining growth in other international markets.
Q: What is the expected impact of the Argentina business divestiture on financials going forward? A: Kevin Jacobsen explained that the exit from the Argentina market, which was below the company's average gross margin, would positively impact overall margins. The absence of this business will remove associated FX and inflation impacts, simplifying financial management and potentially improving profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
