Clorox misses on Q2 earnings, cites inflation

Yahoo Finance Live anchors Julie Hyman and Brian Sozzi breaks down Clorox's second-quarter earnings results.

Video Transcript

BRIAN SOZZI: The opening bell on Wall Street is just moments away, but let's crush a few earnings reports first. And Julie, Clorox. Clorox. Clorox. And I bet if you roll the tape back to three months ago around this time, I will have said the same things about Clorox that I'm going to say right now. Disappointing quarter. I think they've lost complete control of their financial statements. At least for the first time, they admitted this on the conference call. They said, you know what? We have not done a good job forecasting the impact of inflation.

So here's what they're telling investors here this morning. They've seen the stock under a lot of pressure. Over the next 12 months, Clorox sees an inflation impact of $400 million. That is significant. They're also telling investors they're seeing trade down-- consumers trading down to private label goods because of, I believe now the third price increase they put in in July. As a result of all these things happening, Clorox is now looking for earnings of 3.85 to 4.22 for their new fiscal year, which is now underway. The Street was looking at 5.26.

That is-- by my calculations, that is the third straight earnings warning from Clorox. It continues to be a bad story, and we mentioned-- I forgot to mention in the top of the show when we were talking about jobs. They have now announced a new restructuring plan to save about $75 to $100 million. Now I reached out to Clorox asking them where are these layoffs coming. They didn't even want to acknowledge--

JULIE HYMAN: They're not telling us that.

BRIAN SOZZI: They didn't want to acknowledge if they were even layoffs.

JULIE HYMAN: Right. Right.

BRIAN SOZZI: They told me that we will know more when they begin the program. So they haven't even started yet.

JULIE HYMAN: Yes. They are talking about doing some kind-- I don't even know if they call it-- did they call it a restructuring? They just called it some-- it's some kind of plan--

BRIAN SOZZI: An efficiency driving program.

JULIE HYMAN: Right-- that responds to what's going on. Details TBD. It reminded me a little bit of what we heard from Starbucks yesterday, that they've got some kind of something coming in September, but they'll tell-- you know, they're not being very specific. Another number that stood out to me was the gross margin forecast. Now that it's for the fiscal year, it's going to be 37.8%. 38.4% was the average annual assessment. So not quite as wide a miss on that number, but that speaks to the challenge the company has had to catch up with these rising costs.

Now something else that's sort of been weighing on Clorox, in addition to all of the trends we've been talking about with inflation, and that's it's one of these companies that's experiencing a COVID hangover, so to speak, because obviously, two years ago all we were talking about was wipes. We couldn't get wipes. Everybody wanted wipes.

BRIAN SOZZI: Oh, you could find them now. Just look at that Clorox car. They just can't give these things away for free.

JULIE HYMAN: Exactly. Exactly. So that's something also that the company has now had to grapple with.

BRIAN SOZZI: Two final nuggets. They noted some weakness in charcoal. They had that Kingsford brand, which I can't say I'm surprised because we have gotten warnings the past few months from Traeger and Weber. See? See? Tying it all together.

But last but not least, and I just find it frustrating because I've covered Clorox for close to 10 years. This is generally a new management team, I believe going on two years. They just haven't done a good job. I understand the volatile backdrop, but they have done a terrible job forecasting the business. It's not the Clorox that I knew under now former CEO of Benno Dorer, and it's just a tough company to follow. Just-- it's tough to see these things.

JULIE HYMAN: [SIGHS] OK. So let's move on to something maybe a little--

BRIAN SOZZI: I'll bring this up again later, but right now--

JULIE HYMAN: I'm sure that you will.