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What Could Hurt Clorox’s Top Line in the Near Term

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What could hurt CLX’s sales

Clorox (CLX) is expected to disappoint with its top-line performance in the near term. We expect Clorox’s top line to take a hit from the decline sales at the Bags and Wraps category. A higher promotional environment and distribution losses are likely to affect the revenues of the household segment. Meanwhile, a milder cold and flu season is expected to drag down wipes sales. Clorox’s higher pricing amid heightened competitive activity are hurting sales.

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Also, an adverse foreign exchange rate is expected to hurt the company’s top line in the fourth quarter. Management now expects its top line to increase 2%–3% in fiscal 2019, down from its earlier growth expectation of 2%–4%. The reduction in growth guidance indicates pressure on fourth-quarter sales.

In comparison, higher net price realization, premium innovation, and a favorable mix drove organic sales of the company’s peers, including Church & Dwight (CHD), Colgate-Palmolive (CL), Procter & Gamble (PG), and Kimberly-Clark (KMB). However, currency volatility hurt sales. Both Colgate-Palmolive and Kimberly-Clark saw year-over-year declines in sales, reflecting currency volatility.

Analysts’ expectations

Wall Street expects Clorox’s top line to fall in the fourth quarter of fiscal 2019. Weakness in the cleaning and household segment is likely to drag net sales down. Also, an unfavorable foreign exchange rate is expected to restrict sales. However, higher pricing and benefits from innovation could continue to support sales.

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