What’s Behind Clorox’s Industry-Leading Sales Growth?
Strong volumes drove sales
The Clorox Company (CLX) has managed to generate industry-leading sales despite challenges. Moderating category growth, the rise of private label products, and the price war among retailers are taking a toll on consumer goods companies’ performances.
However, Clorox’s focus on innovation and building a strong portfolio of brands has helped the company to report higher volumes in the past four quarters, as can be seen in the graph below. Notably, Clorox managed to generate higher volumes in the US (SPY), which is in contrast to most of its peers as consumer product companies are struggling to accelerate sales growth in this region.
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For instance, Colgate-Palmolive (CL), Kimberly-Clark (KMB), and Procter & Gamble (PG) witnessed lower sales in the past one year due to the moderating category growth in North America, primarily in the US. On the contrary, Church & Dwight (CHD) has also managed to report healthy growth in the domestic market led by continued business investments.
As for Clorox, the company’s focus on innovation is generating incremental sales. During fiscal 2017, the company generated 2.9% incremental sales from innovation. Meanwhile, higher pricing and benefits from the RenewLife acquisition further support its top-line growth.
Going forward, Clorox is expected to generate superior sales growth when compared to its peers. The company’s management remains upbeat as innovation-led new products and higher pricing are projected to accelerate sales growth in fiscal 2018. Clorox’s sales are expected to increase in the range of 2%–4%. The guidance includes a 3% benefit from new products and 1% from pricing. Meanwhile, adverse currency movements are likely to affect sales growth by 1%.
Also, an unfavorable mix, industry-wide softness, and increased competitive activity in key categories including trash bags and litter are expected to restrict the company’s sales growth rate.