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Clorox Plunges as Costs Seen Inflicting More Than Expected Damage to Profits

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By Dhirendra Tripathi

Investing.com – Clorox stock (NYSE:CLX) plummeted 14% Friday after the company revised its outlook to project a steeper decline in annual profits and margins than it earlier anticipated.

Commodity, manufacturing and logistics are to blame, with extra costs from transportation and commodity costs now seen at $500 million for the year, the company said on its conference call. The erosion in earnings will come even as the company expects revenue to decline by 1-4% for the year vs. a previous forecast of a 2-6% drop.

Clorox’s product portfolio ranges from cleaning agents to salad-dressings to health and wellness products. The inflation in sourcing the raw materials for those goods, supply-chain related transportation pressures, and the surge in demand over the last two years It has thus been under pressure for last two years as demand for its products soared in the pandemic while supply lines were stretched. Delivery of both raw materials and then its own products took time.

To counter the surge in costs, the company will cut costs and raise prices on 85% of its portfolio by the time its financial year ends in June, CFO Kevin Jacobson said on the conference call. This is versus an earlier plan to raise prices on 70% of Clorox's products. The price hikes will have a bigger impact in the company's fiscal 2023.

Clorox now expects gross margin to decline by about 750 basis points to 36.1% compared to its previous forecast of a 300-400-basis point erosion.

Adjusted profit per share is seen coming in between $4.25 and $4.5, compared to the previous forecast of $5.4-$5.7.

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