Clorox on Thursday reduced its annual profit forecast, citing softer consumer demand for its cleaning products alongside higher operating costs. The company said that elevated energy, fuel and freight expenses - which it linked to the impact of the U.S.-Israeli war on Iran - have prompted consumers to pare back discretionary purchases such as branded floor cleaners and disinfectant sprays, creating pressure on margins.
Management lowered its full-year adjusted earnings-per-share guidance to a range of $5.45 to $5.65, down from the previous $5.95 to $6.30 projection. The company also said it now expects its annual gross margin to decline by 250 to 300 basis points. Clorox attributed the margin headwind to the higher energy and freight costs as well as to costs associated with its recently completed acquisition of GOJO Industries, the maker of Purell.
Earlier this month Clorox finalized the purchase of GOJO as part of a strategy to broaden its footprint in the health and hygiene category. The company noted that integration-related costs from the deal are among the factors weighing on near-term profitability.
"Looking ahead, we recognize there is more work to do in what continues to be a challenging consumer and cost environment," CEO Linda Rendle said.
Clorox revised its view of full-year net sales growth as well. The company now expects annual net sales to decline 6%, compared with its earlier projection that called for a decline in the 6% to 10% range.
For the most recent quarter, the maker of Pine-Sol reported adjusted earnings of $1.64 per share, topping the $1.55-per-share estimate compiled by LSEG. Quarterly revenue totaled $1.67 billion, a figure the company said was largely consistent with analysts' expectations.
In explaining the guidance changes, Clorox emphasized the dual impact of softer end-user demand for certain cleaning categories and rising cost inputs tied to energy and transportation. Those cost pressures were singled out alongside one-time and integration costs linked to the GOJO acquisition as contributors to the anticipated gross margin contraction.
The company did not provide additional forward-looking detail beyond the revised guidance ranges and the qualitative explanation that consumer behavior and elevated cost levels remain primary near-term challenges.
Bottom line: Clorox trimmed its annual adjusted EPS outlook and warned of a 250-300 basis-point hit to gross margins amid weaker demand for cleaning products and higher energy, fuel and freight costs, while noting acquisition-related costs from GOJO.