Clorox Co. said its sales and profits are under pressure and that it has to write down the value of its Burt's Bees acquisition, sending the shares of the household products company down more than 3 percent.

The maker of Pine-Sol cleaners and Glad bags is feeling the pinch as U.S. shoppers cut back on buying its brand-name goods. In November, Clorox said the fiscal second quarter, which runs from October through December, began with "particularly soft" shipments to stores.

The economic environment remained challenging during the quarter and Clorox's categories in the United States remained soft, Chief Executive Don Knauss said Monday.

Clorox is much smaller and less diversified than competitors such as Colgate-Palmolive Co. and Procter & Gamble Co., who have benefited from their wider geographic reach, while growth at home has stagnated.

Last year, 21 percent of Clorox's sales came from international markets. At Colgate, only 19 percent of sales come from North America. Last month, P&G said it hopes to drive major expansion in developing markets as it sees "little to no category growth in developed markets."

Clorox's lack of geographical diversification is causing investors to scale back their expectations for the company, said BMO Capital Markets analyst Connie Maneaty.

Clorox shares were down 2.8 percent at $61.48 in afternoon trading. P&G's shares up 0.4 percent and Colgate's shares slipped 0.9 percent.

STUNG BY THE BEE

In November 2007, Clorox ponied up $925 million to buy Burt's Bees, a natural personal care products company. Now it is writing down the value of that business by an estimated after-tax, noncash goodwill impairment charge of $250 million to $255 million.

"It's official, the company overpaid for Burt's Bees," Maneaty said.
Burt's Bees is Clorox's fastest growing business, with sales growth and profit margins above the company average. But the weak economy and slower sales growth in new markets led Clorox to rethink the unit's growth trajectory.

Clorox said its overall fiscal second-quarter sales fell 3 percent to 4 percent, even though it gained some market share as it spent more to promote its goods.

Household product and food makers have been increasing their promotional spending, which can help sales, but eats into profits.

The second-quarter sales decline indicates the company will have to cut its outlook for its fiscal 2011, previously forecast between $4.05 and $4.20, Maneaty said.

Clorox lowered the high end of its forecast for sales in the fiscal year ending in June. It now expects sales to be flat to up just 1 percent, rather than flat to up 2 percent.

"This is a slower growth company than people had up until now expected," Maneaty said.

Clorox expects its categories to strengthen during calendar 2011, Knauss said. The CEO said sales should rise 2 percent to 4 percent in the second half of the fiscal year as the company's situation improves.

The company sees fiscal second-quarter earnings from continuing operations in the range of 57 cents to 63 cents per share, including a hit of about 5 cents due to the timing of share repurchases, but excluding the Burt's Bees charge.

That falls short of analysts' average estimate of 73 cents per share, according to Thomson Reuters I/B/E/S.

Clorox plans to resume buybacks after it reports quarterly results in February.