It’s been a lost half-decade for Clorox (NYSE: CLX), the renowned maker of household cleaning and other consumer products, including its namesake brand, Liquid Plummer and Pine-Sol.
Its stock has generated negative annualized total returns of 8% over the past five years and 27% over the last year. Among the problems:
The 113-year-old company suffered a natural slowdown in sales as Covid wound down in 2022, curbing demand for cleaning products.
Inflation has stayed above 2% since 2021, increasing Clorox’ costs and forcing it to charge consumers more per ounce of its products. Consumers have responded to higher prices by trading down to private label offerings. Tariffs also have pushed the company’s costs upward.
Its 2025 rollout of a new enterprise resource planning system (ERP), part of a $580 million investment in digital operations, was rife with snafus. ERP is a software system that integrates core business processes, such as finance, manufacturing and sales, into a single platform. The problems led to shipping delays, stock shortages and market-share losses. Thanks mainly to these woes’ Clorox sales tanked 19% in the quarter ended last Sept. 30 from a year earlier.
A significant cybersecurity attack in 2023 disrupted operations and hurt financial results, leading to a loss of $380 million in revenue, the company said. The incident exposed vulnerabilities in Clorox’s aging data systems. It needed a year to rebuild the technology platform.
Impact on earnings
The problems are still evident in Clorox’s earnings. In the quarter ended Dec. 31, sales dipped 1%, and adjusted earnings per share slid 10%. For the year ending June 30, the company forecast sales will drop 6% to 10% and unadjusted earnings per share will lose 9% to 14%.
But Morningstar analyst Erin Lash still believes in Clorox. “With its entrenched retail standing and unrelenting focus on investing in its leading brand mix, Clorox has withstood the onslaught of pressures from Covid, supply-chain [disruption], rampant inflation, and the cybersecurity attack,” she wrote in a commentary.
“More recently, it has acknowledged a step-up in industrywide promotional spending, particularly in litter, bags, and wraps. Still, we don’t believe … the firm is pursuing a volume-over-value strategy. Instead, Clorox remains resolute in investing to support the long-term health of the business, ensuring its competitive edge remains intact.”
In addition to shoring up its own brands, Lash likes the company’s April purchase of Gojo industries, maker of hand sanitizer Purell, for $2.25 billion. “The addition should boost growth prospects, as Purell has grown [revenue] at a mid-single-digit clip for decades,” she said.
Lash predicts Clorox will enjoy 3%-4% annual sales growth at high-teens operating profit margins over the next 10 years, which would beat the market’s implied expectations by 200 basis points in both categories.
So maybe Clorox can clean up its mess in aisle 2026.
The author owns Clorox shares.
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