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Clorox Shares Slip as Profit Rises, Outlook Disappoints

Monday, 03 May 2010 03:51 PM

Clorox Co.'s quarterly profit rose more than expected, but the bleach maker forecast earnings for next year that could miss analyst expectations as it keeps spending more to promote its products.

Clorox shares fell more than 1 percent on Monday.

The company, whose other products include Glad trash bags and Hidden Valley salad dressing, also said earnings for the current fiscal year should be near the top of its prior view, in line with Wall Street's projections.

Clorox is using more in-store promotions to attract shoppers and plans to keep doing this into the first half of its next fiscal year, which begins in July.

It is starting to see some higher prices for energy, resin and other commodities, but should be able to more than offset the impact of such increases, with its continuing drive to trim costs.

While Clorox is still shipping more disinfecting wipes than last year, the fast rate of growth spurred by H1N1 flu fears slowed in the latest quarter as concerns about that flu abated and there was a milder general winter cold and flu season.

Clorox, which took several price increases during 2008 to offset higher commodity costs, is now cutting prices on products such as Green Works cleaners and detergent. It wants to maintain the right price gap between regular cleansers and the eco-friendly line as it tries to get more consumers to buy it.

Pricing in the United States "was decidedly negative" in the fiscal third quarter, said Sanford Bernstein analyst Ali Dibadj.

With Clorox planning to keep up its spending on promotions through the first half of fiscal 2011, pressure on pricing is "unlikely to abate in the near future," he said.

The company said it now expects to earn $4.20 to $4.25 per share in the fiscal year ending in June, compared with its February outlook of $4.10 to $4.25 per share. It still expects sales to rise at the lower end of its 1 percent to 2 percent goal.

For fiscal 2011 it forecast earnings of $4.50 to $4.65 per share, with sales up 2 percent to 4 percent. Volume should rise at a faster clip than sales.

Analysts have been expecting Clorox to earn $4.24 per share this year and $4.63 per share in fiscal 2011, according to Thomson Reuters I/B/E/S.

"We expect the stock be under pressure as the (fiscal 2011 profit forecast) was within the consensus range, but less than the high end," said BMO Capital Markets analyst Connie Maneaty.

Clorox shares were down 80 cents at $63.90 in midday trading after slumping to $62.98.

Clorox expects cost savings of $90 million to $100 million to more than offset about $60 million to $70 million in higher commodity costs next year.

In the fiscal third quarter that ended March 31, Clorox earned $165 million, or $1.16 per share, up from $153 million, or $1.08 per share, a year earlier. The latest quarter included a hit of 7 cents per share from Venezuela's currency devaluation.

Sales rose 1 percent to $1.366 billion.

Analysts, on average, expected Clorox to earn $1.08 per share on revenue of $1.369 billion.

The volume of goods sold rose 3 percent after rising 5 percent in the second quarter and falling 3 percent in the year-ago period.

Sales growth was strongest in the international unit, where Clorox benefited from price increases. The pressure from Venezuela's currency devaluation was mostly offset by favorable currencies elsewhere, it said.

© 2015 Thomson/Reuters. All rights reserved.

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