Clorox was one of the bigger beneficiaries of the Covid economy, as people rushed out to buy bleach, wipes and other disinfecting supplies. The company couldn’t keep wipes on store shelves.
But now that nearly 155 million Americans are fully vaccinated and resuming normal activities, consumers aren’t practicing the whole cleanliness is next to godliness routine as much.
Clorox said in April that its quarterly sales were flat compared to a year ago and adjusted earnings fell nearly 15%. Revenue and profit for the company’s next fiscal year, which begins Thursday, are expected to be flat as well.
In other words, people aren’t obsessively wiping everything down now that Covid-19 cases are falling. Clorox’s market value has taken a hit as a result.
Shares are down more than 10% this year, making Clorox one of the worst performers in the S&P 500. The stock has fallen about 25% from its pandemic peak price last summer. Sales and earnings are expected to be flat in 2022.
Is there anything Clorox can do to reignite growth? The company is trying to focus more on products for businesses as people head back to the office and go out to restaurants and movies again.
But it’s not going to get better for Clorox any time soon. The company has been warning investors to not expect growth to return to the levels of the spring and summer of 2020, when concerns about Covid-19 infections were peaking.
“During the height of the pandemic, we were growing at 20-plus percent. We believe long term, we’ll be growing 3% to 5%,” said Clorox chief financial officer Kevin Jacobsen in virtual remarks at a Deutsche Bank global consumer conference earlier this month.
“So we’ve got to work through this period of moderation in demand,” Jacobsen added.
Many Wall Street analysts are concerned. Five have Clorox rated a “sell” and eight have “hold” recommendations on the stock. Only four rate Clorox as a “buy,” according to Refinitiv.
One of those Clorox bears, Kevin Grom of UBS, initiated coverage on Clorox earlier this month with a “sell” rating.
The title of his report was paraphrased from Bruce Springsteen’s 1984 hit: :”Glory Days, They’ll Pass You By.” His price target on Clorox is $166, about 8% below where it’s currently trading
Grom noted that although market share “in some cleaning categories has stabilized of late as supply chain pressure has eased…it is still down substantially when looking at a multiyear period.”
The UBS analyst is worried that competitors caught up to Clorox while it was facing supply shortages. He cited Procter & Gamble, which owns Microban and Spic & Span, as well as Lysol, owned by UK-based Reckitt, as companies that have gained market share on Clorox.
“Some of the key players that did not have the same level of supply chain issues … may have greater staying power,” Grom wrote.
But others think Clorox has a chance to grow beyond its core namesake cleaning products.
“Clorox was the poster child for the Covid lockdown. But there is an opportunity beyond wipes,” said John Boylan, senior equity analyst with Edward Jones.
Boylan noted that Clorox also owns Glad trash bags as well as some other well-known consumer brands, most notably Fresh Step cat litter and the Hidden Valley Ranch line of salad dressings.
Still, Boylan conceded that Clorox will face tougher sales comparisons as demand for wipes wanes. That’s one of the reasons he has a “hold” rating on the stock instead of a “buy.”