Cleaning products maker Clorox Co. (CLX) reported Monday a surprisingly large increase in profit for the first quarter, as more customers used disinfectants to guard against the spread of the H1N1 virus.
Excluding items, earnings per share for the quarter increased 23%, smashing analysts' expectations. The company also raised its earnings outlook, and reaffirmed it sales growth forecast for the full year 2010.
The first quarter profit was boosted by 450 basis points margin expansion and a modest 1% volume growth, despite the continued challenging economic environment and the impact of weaker foreign currencies.
The results for the latest quarter were also primarily benefited from higher U.S. and International sales of disinfecting products in response to demand associated with the H1N1 flu pandemic.
In a statement, chairman and chief executive officer, Don Knauss said, "We had a great first quarter, especially given the continued challenging economic environment and the impact of weaker foreign currencies. Most of our businesses performed well, and we exceeded our earnings expectations due to strong sales of disinfecting products related to the H1N1 flu pandemic. We also delivered our third consecutive quarter of significant gross margin improvement." First Quarter Results
The Oakland, California-based company reported net earnings of $157 million or $1.11 per share for the first quarter, up about 23% from $128 million or $0.90 per share in the prior-year quarter.
The company noted that as a result of the adoption of a new accounting standard regarding calculation of earnings per share, earnings for the year-ago quarter was reduced by a penny to $0.90 per share from $0.91 per share.
The results for the latest quarter include pre-tax restructuring charges of $6 million or $0.03 per share, and foreign-currency translation losses of pre-tax $9 million or $0.04 per share. The year-ago quarter results included pre-tax restructuring-related charges of $6 million or $0.03 per share, in addition to $3 million or $0.01 per share associated with Burt's Bees acquisition as well as foreign-currency translation losses of pre-tax $3 million or $0.02 per share.
Excluding the special items, the company's earnings for the quarter increased to $1.18 per share from $0.96 per share in the year-ago quarter. On average, fifteen analysts polled by Thomson Reuters expected the company to report earnings of $0.95 per share in the first quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 1% to $1.37 billion from $1.38 billion in the same quarter last year, but came in line with twelve Wall Street analysts' consensus estimate of $1.37 billion. Unfavorable foreign exchange rates reduced sales by 1.5 percentage points.
Total volume for the quarter increased a modest 1%, primarily due to higher shipments of Clorox disinfecting wipes and Hidden Valley bottled salad dressing, partially offset by lower shipments of Glad trash bags and the company's exit from its private-label food bags business.
Peer Performance
Among Clorox's peers, New York-based Colgate-Palmolive Co. (CL) reported last week a 18% year-over-year increased in profit for the third-quarter to $590 million or $1.12 per share from $500 million or $0.94 per share last year, aided by higher prices and volume. Quarterly net sales edged up to $4.0 billion from $3.99 billion in the same quarter last year.
Larger peer, Cincinnati, Ohio-based Procter & Gamble Co. (PG) reported last week a marginal 1% decline in profit for the third quarter to $3.31 billion from $3.35 billion a year ago, reflecting weak sales besides negative foreign currency impacts and higher base period divestiture gains on minor brands. On a per share basis, earnings for the quarter increased 3% to $1.06 from $1.03 in the prior-year quarter. Net sales for the quarter declined 6% to $19.81 billion from $20.98 billion in the prior-year quarter.
Segmental Details
The company's cleaning segment generated net sales for the first quarter increased 3% to $503 million from $487 million in the year-ago quarter, aided by 4% volume growth. The company noted that increased shipments of disinfecting products to meet demand associated with the H1N1 flu pandemic primarily boosted volumes.
Net sales for household segment totaled $381 million, down 11% from $426 million in the prior-year quarter, hurt by 7% volume decline. The company noted that lower shipments of Glad products and the company's exit from the private-label food bags business hurt its volumes, despite all-time record shipments of Fresh Step cat litter.
Lifestyle segment net sales for the quarter rose 3% to $200 million from $194 million in the same quarter last year, helped by 4% volume growth. Increased shipments of Hidden Valley bottled salad dressing and highly effective marketing boosted volumes.
Clorox's international segment fetched net sales of $288 million, up 4% from $277 million in the the prior-year quarter, boosted by a 3% volume growth. Sales were negatively impacted by 8 percentage points due to unfavorable foreign exchange rates. Volume growth was driven by increased shipments of bleach and other disinfecting products in Latin America due to increased demand as a result of the H1N1 flu pandemic.
Other Metrics
Gross profit for the quarter increased to $619 million from $562 million in the year-ago quarter, while gross margin percentage improved 450 basis points to 45.1% from last year's 40.6% in the prior-year quarter, reflecting lower commodity costs, strong cost savings and price increases.
Selling and administrative expenses were $175 million, down from $184 million in the year-ago quarter. Advertising costs for the quarter grew to $127 million from $119 million in the same quarter last year.
Outlook
For fiscal year 2010, Clorox raised its earnings outlook to a range of $4.05 to $4.20 per share from the prior guidance in the range of $4.00 to $4.15 per share. Analysts expect the company to report earnings of $4.18 per share for the full year 2010.
However, Clorox continues to expect fiscal 2010 sales growth in a range of 1% to 2%, reflecting sales of between $5.50 billion and $5.56 billion, based on last year sales of $5.45 billion. The Street is currently looking for full year sales of $5.57 billion.
The company also raised its outlook for full-year gross margin expansion to a range of 100 to 150 basis points from the earlier forecast of 50-100 basis points, and compared to 180 basis points of improvement in fiscal 2009.
Other Developments
Separately, Clorox announced its plans to begin modifying manufacturing processes in its U.S. bleach operations in order to transition to high-strength bleach from chlorine as a raw material for making its namesake bleach. The transition would start at its Fairfield, California-based plant, and is expected to be completed within six months, followed by a phased, multi-year transition for six additional plants.
The company added that its plant-by-plant approach would also enable it to apply what is learned along the way, ensure supply availability, minimize business disruptions and help make sure the transition is undertaken in the most effective manner possible.
Stock Quote
In Monday's regular trading session, CLX is currently trading at $61.01, up $0.78 or 1.32% on a volume of 1.03 million shares. In the past 52-week period, the stock has been trading in a range of $45.67 to $63.10.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.