Clorox’s stock fell more than 7% after a poor earnings report.
This past winter, illnesses fell by 27% and hospitalization rates dropped by 48%. While this may be good news for the average American, for some companies, it was bad for business.
At least, this is what Clorox Co. said after a disappointing third-quarter earnings report. Clorox’s earnings and revenue fell short of investor expectations and the company lowered its financial outlook for the rest of 2019. The company’s stock fell 7.2% on Wednesday, which is its largest one-day decline since 2007.
Factors that hurt Clorox
But a milder cold and flu season isn’t solely to blame for Clorox’s poor performance. Though sales in its Cleaning department did drop 1%, the company saw sales fall in several other categories as well.
For instance, sales in the company’s Household department fell by 1%, mostly due to slowed sales of Bags and Wraps. Sales of Bags and Wraps slowed after the company implemented a price increase due to elevated resin costs. In response, a competitor offered promotional discounts on its products.
And when resin prices did finally drop, the competitor increased its promotional offers, thus widening the price gap. Clorox is currently looking for ways to minimize these pricing gaps.
A number of brokers lowered Clorox’s price targets, including Wells Fargo and JP Morgan Chase. JP Morgan Chase analysts wrote that they are looking for Clorox to maintain higher prices, particularly for the Clorox Wipes and Glad Bags and Wraps.
Next steps for Clorox
However, it wasn’t all bad news for Clorox. Sales in the company’s Lifestyle department did increase by 23%. The company announced that its litter and charcoal business were both performing well. The company’s Clean Paws litter recently launched a new line of scents which have been well-received by consumers.
And now that spring is here, Clorox is looking ahead to grilling season and promoting its charcoal brand. The company is working on upgrading its advertising and packaging as well as partnering with other retailers. And the company is focused on retaining loyal customers and is especially interested in penetrating the millennial retail market.