Here’s Why Clorox Is Outperforming Peers
Clorox defying sluggish industry trend
Consumer product companies are having a tough year. Moderating category growth in the US (SPY), the rise of private label products, and heightened competition among the retailers are adversely impacting their sales. Meanwhile, currency headwinds and rising commodity costs further pose a challenge to the bottom line. However, the stock prices of consumer product manufacturers are up modestly on a YTD (year-to-date) basis in anticipation of a rebound in demand led by innovation. Plus, increased focus on productivity measures and cost-saving techniques has helped these companies to post healthy margins despite weak top-line performances.
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Amid weak demand and increased competitive activity, the Clorox Company (CLX) has been consistent with its performance in the past one year and has reported industry-leading sales growth driven by higher volumes. The company’s strong portfolio of market-leading brands, an innovation-driven product pipeline, and efficient marketing set it apart from other consumer goods manufacturers.
Meanwhile, the company’s ability to increase prices coupled with cost and productivity savings initiatives have further facilitated its strong bottom-line growth despite headwinds stemming from inflation in commodity costs and increased manufacturing and logistics expenses.
In comparison, most of its peers are struggling on the top-line front and have reported soft sales, reflecting weak volumes, which we’ll discuss in the later parts of this series.
YTD stock performance
As the graph above shows, the share prices of consumer product companies have witnessed modest gains on a YTD basis. As for Clorox, the company’s stock has outperformed our select set of peers and generated a return of 12.5% as of September 11, 2017. During the same period, Kimberly-Clark (KMB), Colgate-Palmolive (CL), Procter and Gamble (PG), and Church and Dwight (CHD) have risen 4.8%, 10.1%, 11.8%, and 12.3%, respectively.
Meanwhile, Clorox stock has also generated better returns than the S&P 500 Index (SPX) and the iShares US Consumer Goods ETF (IYK). Since the beginning of the year, both the S&P 500 Index and the iShares US Consumer Goods ETF are up by 11.1%.