The Clorox Company CLX has encountered a notable resistance level, prompting caution among investors from a technical standpoint. It has been trading below both the 200-day and 50-day simple moving averages (SMA) for quite some time now, which suggests a bearish trend.
Closing at $147.50 yesterday, CLX remains below its 200-day and 50-day SMA of $150.88 and $154.67, respectively, indicating a possible sustained downward trend.
CLX Stock Trades Below 200 and 50-Day SMA
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CLX has shown a lackluster performance on the bourses, with its shares plunging 11.6% in six months compared with the industry’s decline of 1.9%. Furthermore, the company has underperformed the broader Consumer Staples sector’s 5.6% decline and the S&P 500's 0.2% decrease.
CLX Stock's Past Six Month Performance
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CLX’s Near-Term Concerns Prevail
Clorox has been witnessing an uncertain macroeconomic landscape, adverse impacts of cost inflation and higher advertising expenses taking a toll on performance. Additionally, the ongoing inventory normalization and strategic divestitures, including the Better Health Vitamins, Minerals & Supplements and Argentina businesses, have been hurting the company’s top lines.
In second-quarter fiscal 2025, the company’s revenues and earnings beat the Zacks Consensus Estimate, while revenues fell 15% year over year. Revenues were impacted by declines across all key business segments, reflecting ongoing headwinds. The company reported revenue declines of 13%, 11%, 16% and 12%, respectively, in the Health and Wellness, Household, Lifestyle and International segments, mainly driven by volume contraction.
Additionally, management provided a bleak view for fiscal 2025, anticipating net sales between a decline of 1% and growth of 2%. Gross margin growth for fiscal 2025 is expected to be partly offset by cost inflation and higher trade promotional expenses.
For fiscal 2025, advertising and sales promotion spending is projected to be 11-11.5% of net sales, driven by CLX’s continued commitment to brand investment. Selling and administrative expenses are forecasted to be 15%-16% of net sales, indicating a 150-basis-point impact of strategic investments in digital capabilities and productivity enhancements.
Do CLX’s Strategic Initiatives Hold Potential?
A key factor driving Clorox's success is its streamlined operating model, which focuses on improving efficiency and enhancing profitability. This has led to a significant expansion in gross margins, showcasing the effectiveness of Clorox’s pricing strategies, cost-saving measures and comprehensive margin-management program.
Clorox is on track with the IGNITE strategy, its integrated strategy, which focuses on the expansion of the key elements along with innovation in each area of business. CLX strengthens its competitive advantage, hence accelerating profitable growth and preparing for long-term success.
The company is advancing its transformation to become a strong and resilient company. It is also focused on value creation in the long run. Aligning with its strategic priorities, Clorox has completed the sale of its Better Health Vitamins, Minerals and Supplements business to Piping Rock Health Products. This divestiture supports Clorox’s focus on core areas and aims to unlock additional shareholder value. This highlights an important step in the evolution of its portfolio, supporting the company’s target to lower volatility and boost profitable growth.
Clorox plans to invest $560-$580 million in transformative technologies over the next few years, including ERP replacement, transitioning to a cloud-based platform and digital transformation. About 70% of these costs are tied to ERP implementation, with the remainder for other enhancing technologies.
Clorox is making solid progress in its core International business, leveraging the success of its Go Lean strategy to drive profitable growth. As part of its IGNITE Strategy, which focuses on enhancing profitability in international markets, the company is selectively investing in high-return platforms while continuing to explore global expansion opportunities.
Final Word on CLX Stock
Clorox faces near-term challenges, including profitability pressures, execution risks and rising costs tied to strategic investments in brand development and digital capabilities. These factors create headwinds despite the company’s efforts to enhance efficiency.
However, Clorox remains focused on long-term growth through its streamlined operating model and IGNITE strategy, which aim to improve operational efficiency and expand margins. While short-term difficulties persist, these initiatives are expected to strengthen the company’s position over time. Clorox currently has a Zacks Rank #3 (Hold).
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The Clorox Company (CLX) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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