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Clorox Stock Plunges 14% As The Company Faces Inflation Pressure

Ollie Martin - AskTraders News writer
Ollie Martin trader
Updated 4 Feb 2022

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Key points:

  • Clorox Q2 missed analyst predictions, with EPS at $0.66, lower than the expected $0.86
  • Gross margin declined to 33% from 45% the previous year
  • CEO points to inflationary issues, but remains confident in meeting future demand

Clorox (NYSE: CLX) stock dropped heavily in Friday premarket trading, following a disappointing Q2 earnings report, missing analyst expectations, and pointing to increasing inflation issues that have negatively impacted overall growth. In a difficult period for earnings, Clorox has joined the amalgam of companies that have posted worse-than-expected earnings, with the blame focused on cost pressures in supply chains. 

Clorox earnings came in at $0.66 per share for Q2 on sales of $1.69B, an 8% drop from the previous year. The general analyst consensus was adjusted earnings of $0.86 per share on sales of $1.66B. The gross margin in the quarter also declined to 33% from last year's 45%. 

There wasn’t much reassurance in the company’s fiscal year outlook, with net sales expected to fall between 1% and 4%, and adjusted earning forecasted at between $4.25 and $4.50 – a cut from earlier guidance which was between $5.40 and $5.70.

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Linda Rendle, CEO of Clorox, pointed out the company’s attempts at navigating market headwinds:

“In the face of a challenging cost environment, we’re executing well on the factors we control. We’re driving cost savings and pricing to mitigate inflationary headwinds, while also continuing to meet strong demand across our portfolio”

Unfortunately for the company and the wider market, cost pressures are likely to increase throughout the year, hence companies should be looking at strategies to remain competitively positioned. Rendle hopes to ‘build a stronger, more resilient company, and create long-term shareholder value’.

Ollie Martin - AskTraders News writer
Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.