Sales, strong volumes
Clorox’s (CLX) sales of $1.4 billion in fiscal 2Q17 represents a 4.5% YoY (year-over-year) rise—its highest growth in the past four years—driven by growth across its US (SPY) business segment. The company’s continued investments in product innovation and efficient marketing have led to volume expansions in each of its segments. CLX’s total volumes rose 8%, marking the company’s second consecutive quarter with 8% growth and its highest in nearly the past ten years.
As we discussed in Part 1 of this series, peers Procter & Gamble (PG), Kimberly-Clark (KMB), and Church & Dwight (CHD) reported healthy organic sales (excluding the impact of acquisitions, divestitures, and foreign exchange), coupled with higher volumes in their last reported quarters. But Clorox has outshined the lot in sales and volume growth.
Business segments remain strong
Clorox witnessed a rise in volumes in all of its four business segments, which include Cleaning, Household, Lifestyle, and International. In fiscal 2Q17, strong product demand led to a 10%, 11%, 5%, and a 2% rise in volumes in the Cleaning, Household, Lifestyle, and International segments, respectively.
Most of the Clorox’s product categories command superior market shares and are supported by effective marketing and innovation. In Home Care, Clorox Scentiva, the new line of disinfecting sprays and wipes, is witnessing a healthy initial sales trend, and the innovative new cleaner and disinfectant Fuzion is also running well ahead of management expectations.
Notably, in fiscal 2016, Clorox generated an incremental 2.7% sales growth from innovation. The company aims to generate about 3% from sales from innovation in upcoming years.
Clorox remains well positioned to drive category growth on the back of continued investments in product portfolios, e-commerce initiatives, and digital marketing. The company’s strong and innovative product pipeline planned for the second half of fiscal 2017 is likely to boost the segment’s results.
Buoyed by a 4% rise in its top line during the first half of fiscal 2017, in addition to its strong product demand and broad innovation pipeline, Clorox has raised the lower end of its fiscal 2017 sales growth expectation. The management expects sales to rise 3%–4% in fiscal 2017, as compared to the earlier guidance of 2%–4% growth.
The company’s guidance also includes the negative impact of 1%–2% from adverse currency movement. Notably, analysts expect Clorox to report a 3.9% growth in sales for fiscal 2017.
Continue to the next part for a look at Clorox’s earnings.