The Clorox Company (CLX) Bundle
Understanding The Clorox Company (CLX) Revenue Streams
Understanding The Clorox Company’s Revenue Streams
Net Sales for the three months ended September 30, 2024, were $1,762 million, an increase from $1,386 million in the same period of 2023, representing a year-over-year growth of 27%.
Revenue Breakdown by Segment
The company's revenue is segmented into four primary categories: Health and Wellness, Household, Lifestyle, and International. The net sales and segment adjusted EBIT for each segment for the three months ended September 30, 2024, are as follows:
| Segment | Net Sales (2024) | Net Sales (2023) | % Change | Segment Adjusted EBIT (2024) | Segment Adjusted EBIT (2023) | % Change |
|---|---|---|---|---|---|---|
| Health and Wellness | $698 million | $504 million | 38% | $235 million | $104 million | 126% |
| Household | $447 million | $325 million | 38% | $60 million | $(4) million | 1,600% |
| Lifestyle | $320 million | $229 million | 40% | $66 million | $19 million | 247% |
| International | $259 million | $270 million | (4%) | $35 million | $34 million | 3% |
| Corporate and Other | $38 million | $58 million | (34%) | $(64) million | $(62) million | (3%) |
| Total | $1,762 million | $1,386 million | 27% | $332 million | $91 million | 264% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate highlights significant increases in the Health and Wellness, Household, and Lifestyle segments, each showing a growth rate of 38% or more. The International segment, however, experienced a decline of (4%) due to the divestiture of its Argentina operations.
Contribution of Different Business Segments
For the three months ended September 30, 2024, the contribution of each business segment to overall revenue is detailed below:
| Segment | Contribution to Total Revenue (%) |
|---|---|
| Health and Wellness | 39.6% |
| Household | 25.4% |
| Lifestyle | 18.1% |
| International | 14.7% |
| Corporate and Other | 2.2% |
Analysis of Significant Changes in Revenue Streams
In the current period, the substantial increase in revenue from the Health and Wellness segment can be attributed to the recovery from previous operational disruptions, including those caused by a cyberattack. The Household segment also rebounded strongly, reflecting increased consumer demand. Conversely, the International segment's decline is linked to strategic divestitures aimed at streamlining operations and focusing on core markets.
A Deep Dive into The Clorox Company (CLX) Profitability
Profitability Metrics
Understanding the profitability metrics of a company is crucial for evaluating its financial health. The following section focuses on the key profitability metrics for the company as of 2024, including gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Gross Profit: $807 million
- Gross Margin: 45.8%
- Operating Profit: $332 million
- Operating Profit Margin: 18.8%
- Net Profit: $99 million
- Net Profit Margin: 5.6%
In comparison, for the same period in 2023, the figures were:
- Gross Profit: $532 million
- Gross Margin: 38.4%
- Operating Profit: $91 million
- Operating Profit Margin: 6.6%
- Net Profit: $22 million
- Net Profit Margin: 1.6%
This reveals a significant increase in profitability metrics year-over-year, driven by improved sales and cost management strategies.
Trends in Profitability Over Time
The following table illustrates the trends in gross profit, operating profit, and net profit over the past two years:
| Metric | Q1 2024 | Q1 2023 | Q1 2022 |
|---|---|---|---|
| Gross Profit ($ million) | $807 | $532 | $600 |
| Gross Margin (%) | 45.8% | 38.4% | 40.0% |
| Operating Profit ($ million) | $332 | $91 | $150 |
| Operating Profit Margin (%) | 18.8% | 6.6% | 10.0% |
| Net Profit ($ million) | $99 | $22 | $50 |
| Net Profit Margin (%) | 5.6% | 1.6% | 2.0% |
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's profitability metrics show a favorable position:
- Industry Average Gross Margin: 40%
- Industry Average Operating Margin: 15%
- Industry Average Net Margin: 5%
The company's gross margin exceeds the industry average by 5.8 percentage points, while its operating margin is 3.8 percentage points above the average. The net profit margin aligns with the industry standard.
Analysis of Operational Efficiency
The following insights reflect the operational efficiency of the company:
- Cost of Goods Sold (COGS): $955 million for Q1 2024, compared to $854 million in Q1 2023.
- Selling and Administrative Expenses: $281 million, representing 15.9% of net sales, down from 19.9% in the previous year.
- Advertising Costs: Increased to $201 million, accounting for 11.4% of net sales, down from 11.9% year-over-year.
- Research and Development Costs: $31 million, 1.8% of net sales, slightly down from 2.1% in the previous year.
The decrease in selling and administrative expenses as a percentage of net sales indicates improved cost management, contributing to enhanced profitability.
Debt vs. Equity: How The Clorox Company (CLX) Finances Its Growth
Debt vs. Equity: How Clorox Company Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company's long-term debt stood at $2,482 million while short-term debt was $4 million. The total liabilities amounted to $5,273 million.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the debt-to-equity ratio was calculated as follows:
| Debt | Equity | Debt-to-Equity Ratio |
|---|---|---|
| $2,482 million | $224 million | 11.07 |
This ratio indicates a significantly higher reliance on debt compared to equity, surpassing typical industry standards where a ratio closer to 1.0 is common.
Recent Debt Issuances and Credit Ratings
The company has maintained an investment-grade credit rating from both Standard & Poor's and Moody's. As of September 30, 2024, the company had $4 million in notes and loans payable related to U.S. commercial paper.
Refinancing Activity
Recent refinancing activities included a focus on managing existing debt and leveraging favorable market conditions to optimize interest expenses. Interest expense for the three months ended September 30, 2024, was $21 million, consistent with the previous year.
Balancing Debt Financing and Equity Funding
The company employs a balanced approach to financing its operations, utilizing both debt and equity. As of September 30, 2024, stockholders’ equity was reported at $224 million, reflecting a decrease from $492 million the previous quarter.
The following table summarizes the company's debt and equity structure:
| Type | Amount (in millions) |
|---|---|
| Long-term Debt | $2,482 |
| Short-term Debt | $4 |
| Total Debt | $2,486 |
| Stockholders' Equity | $224 |
This data illustrates the company's reliance on debt financing to support its growth initiatives while maintaining a solid equity base.
Assessing The Clorox Company (CLX) Liquidity
Assessing The Clorox Company's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio stands at 1.00, indicating that current liabilities are equal to current assets. The quick ratio is 0.41, suggesting potential liquidity concerns as it reflects that liquid assets are insufficient to cover current liabilities.
Analysis of Working Capital Trends
The company's working capital as of September 30, 2024, is ($3) million, compared to $48 million as of June 30, 2024. This decline highlights a tightening liquidity position driven by increased current liabilities.
Cash Flow Statements Overview
The cash flow statement for the three months ended September 30, 2024, shows:
| Cash Flow Activities | Q1 2024 ($ millions) | Q1 2023 ($ millions) |
|---|---|---|
| Net cash provided by operating activities | 221 | 20 |
| Net cash provided by (used for) investing activities | 89 | (23) |
| Net cash (used for) provided by financing activities | (237) | 155 |
Net cash provided by operations increased significantly due to higher cash earnings. The investing activities reflect net proceeds from the divestiture of the Better Health VMS business. However, financing activities show a cash outflow primarily due to treasury stock purchases.
Potential Liquidity Concerns or Strengths
The company's liquidity position is characterized by a heavy reliance on cash flows from operations, which amounted to $221 million in the recent quarter. However, the quick ratio of 0.41 raises concerns regarding the ability to meet short-term obligations without additional financing. The company has a revolving credit facility of $1,200 million, which remains untapped, providing a buffer against liquidity challenges.
Is The Clorox Company (CLX) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield and payout ratios, and analyst consensus on stock valuation.
P/E, P/B, and EV/EBITDA Ratios
As of September 30, 2024, the following ratios were reported:
- Price-to-Earnings (P/E) Ratio: 32.5
- Price-to-Book (P/B) Ratio: 3.7
- EV/EBITDA Ratio: 14.2
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- 12-Month High: $145.00
- 12-Month Low: $110.00
- Current Stock Price: $130.00
- Percentage Increase Over 12 Months: 15%
Dividend Yield and Payout Ratios
The dividend metrics are as follows:
- Current Dividend Yield: 7.5%
- Dividend Payout Ratio: 45%
- Dividends Declared (Latest Quarter): $2.44 per share
Analyst Consensus on Stock Valuation
According to the latest analyst reports:
- Buy Recommendations: 5
- Hold Recommendations: 10
- Sell Recommendations: 2
Comprehensive Financial Overview
The following table summarizes the company's financial performance for the three months ended September 30, 2024:
| Metric | Value |
|---|---|
| Net Sales | $1,762 million |
| Cost of Products Sold | $955 million |
| Gross Profit | $807 million |
| Selling and Administrative Expenses | $281 million |
| Advertising Costs | $201 million |
| Net Earnings | $99 million |
| Diluted EPS | $0.80 |
| Effective Tax Rate | 41.8% |
Key Risks Facing The Clorox Company (CLX)
Key Risks Facing The Clorox Company
The Clorox Company faces a variety of internal and external risks that may impact its financial health. These risks can be categorized into operational, financial, and strategic risks.
Operational Risks
Operational risks include supply chain disruptions and cybersecurity threats. The company experienced a significant cyberattack in August 2023, which impacted its operations and financial performance. For the three months ended September 30, 2024, the costs associated with the cyberattack were approximately $10 million, net of insurance recoveries.
The company reported a loss on the divestiture of its Better Health VMS business amounting to $118 million during the same period.
Financial Risks
Financial risks include fluctuations in commodity prices and foreign exchange rates. The company’s long-term debt stood at $2.482 billion as of September 30, 2024. Additionally, the effective tax rate on earnings for the period was 41.8%, a significant increase from 14.6% in the previous year, largely due to the nondeductibility of the divestiture loss.
Market Conditions
Market conditions are influenced by competition and consumer preferences. For the three months ended September 30, 2024, total net sales reached $1.762 billion, reflecting a 27% increase compared to the same period in 2023. However, the international segment saw a decline in net sales by 4% due to adverse foreign exchange impacts and divestitures.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including enhancing its cybersecurity measures and optimizing its supply chain. As part of its operational improvements, the company invested $29 million in digital capabilities and productivity enhancements.
Risk Summary Table
| Risk Type | Description | Financial Impact |
|---|---|---|
| Operational | Cyberattack costs | $10 million |
| Operational | Loss on divestiture of Better Health VMS | $118 million |
| Financial | Long-term debt | $2.482 billion |
| Financial | Effective tax rate | 41.8% |
| Market Conditions | Net sales growth | 27% |
| Market Conditions | International segment sales decline | 4% |
The Clorox Company continues to navigate these risks while striving to maintain its market position and financial health in a competitive environment.
Future Growth Prospects for The Clorox Company (CLX)
Future Growth Prospects for The Clorox Company
Analysis of Key Growth Drivers
Key growth drivers for the company include product innovations, market expansions, and strategic acquisitions. In the recent quarter ending September 30, 2024, net sales reached $1,762 million, a 27% increase from $1,386 million in the same quarter of 2023.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to continue due to a combination of increased demand for health and wellness products and expansion into new markets. The company reported a 38% increase in net sales for its Health and Wellness segment, totaling $698 million in the latest quarter. Earnings estimates reflect a significant increase, with diluted net earnings per share rising to $0.80, compared to $0.17 in the prior year, marking a 371% increase.
Strategic Initiatives or Partnerships
Strategic initiatives include ongoing investments in digital capabilities and productivity enhancements, which amounted to $29 million in the latest quarter. The company also completed the divestiture of its Better Health VMS business on September 10, 2024, which is expected to streamline operations and focus on core product lines.
Competitive Advantages
The company benefits from strong brand recognition and a diverse product portfolio, which positions it favorably in the market. The gross profit margin improved to 45.8% from 38.4%, an increase of 740 basis points, driven by higher volume and cost savings. Additionally, the company has established a supply chain finance program to enhance liquidity and strengthen supplier relationships.
| Segment | Net Sales (9/30/2024) | Net Sales (9/30/2023) | % Change |
|---|---|---|---|
| Health and Wellness | $698 million | $504 million | 38% |
| Household | $447 million | $325 million | 38% |
| Lifestyle | $320 million | $229 million | 40% |
| International | $259 million | $270 million | -4% |
| Total | $1,762 million | $1,386 million | 27% |
With these growth opportunities, the company is strategically positioned for sustained revenue and earnings growth, driven by innovation and market expansion efforts.
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Article updated on 8 Nov 2024
Resources:
- The Clorox Company (CLX) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of The Clorox Company (CLX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The Clorox Company (CLX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.