Clorox Stock Falls as Analyst Warns Post-Pandemic Sales May Fall Further Than Expected
Sales of Clorox Disinfecting Wipes and other Clorox products surged early in the pandemic.
Chris Delmas/AFP via Getty Images
Clorox shares were falling early Thursday, hurt by a downgrade from D.A. Davidson, which worries that the cleaning products maker will have trouble living up to expectations as it laps last year’s pandemic surge.
Analyst Linda Bolton Weiser cut her rating on Clorox (ticker: CLX) to Neutral from Buy and lowered her price target to $189 from $234.
The move comes after recent reports from data analytics firm IRI that found the company’s sales turned negative by 10.8% in the four weeks ended March 7, as Clorox passed the one-year anniversary of the start of a Covid-19-driven spike in sales. The analyst notes that at the moment, consensus estimates are pricing in only a 1.7% decline in sales for March, which may be too optimistic, and comparisons get only more difficult from then on.
Clorox sales spiked more than 19% the week ended March 8, 2020, and then soared by nearly 75% the following week. “After that, Clorox will face double-digit prior-year comparable sales for four more months,” lasting through late July, she wrote.
All of that leads her to lower her sales estimates for the first half of Clorox’s fiscal 2022 year, which begins in July, as she now thinks the company will see a 7% decline, compared with her previous 5% estimate. For the full year, she is looking for a sales decline of 2%, up from a 1% decline in her prior model. Average analyst estimates are looking for a decline of less than 1%.
Of course, plenty of investors are already anticipating a slowdown, as mass vaccination reduces the risk of Covid-19 transmission, and consumers are less likely to stock up on disinfecting wipes.
Yet Bolton Weiser warns that the market may be underestimating the impact of higher commodity costs, which she thinks will “significantly pressure gross margin” in Clorox’s fiscal third quarter.
Falling revenue and higher input and manufacturing costs lead her to cut her full-year fiscal 2022 earnings per share estimate to $8.01 from $8.16, below the $8.21 average analyst estimate.
Shares of Clorox were down 4.3%, to $181.37, in Thursday morning trading.
Write to Teresa Rivas at [email protected]
