A Member of Pat McKeough’s Inner Circle recently asked for his advice on The Clorox Company, a leading consumer goods manufacturer with a portfolio of trusted household brands holding #1 or #2 market positions in over 80% of its product categories.
Pat likes the combination of defensive characteristics and high yield stemming from dominant market-leading brands. However, Pat notes the company faces meaningful near-term revenue and earnings headwinds.
The Clorox Company (Symbol CLX on New York; www.thecloroxcompany.com) makes and markets consumer and professional products.
Clorox has operations in about 25 countries or territories and sells its products in more than 100 markets. The company sells mostly through retailers, grocery outlets, warehouse clubs, dollar stores and home hardware centres. It also sells through drug, pet and military stores; e-commerce channels; and distributors.
Clorox’s brands include its namesake bleach, cleaning and disinfecting products, Pine-Sol and Tilex cleaners; Liquid-Plumr clog removers; and Poett home-care products. The company also sells Glad bags and wraps, Fresh Step cat litter and Kingsford grilling products. Its Hidden Valley brand includes dressings, dips, seasonings, and sauces. Plus, it sells Brita water-filtration products and Burt’s Bees natural personal products.
Clorox mostly markets its leading brands in midsized categories considered to be financially attractive. Most of the company’s products compete with other nationally advertised and private label brands. Notably, about 80% of its sales come from brands that hold the Number 1 or Number 2 market share position in their categories.
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Clorox operates through four business segments: Health and Wellness, Household, Lifestyle and International.
Health and Wellness consists of cleaning, disinfecting and professional products mostly sold in the U.S.
Household consists of bags and wraps, cat litter and grilling products sold in the U.S.
Lifestyle consists of food, water filtration and natural personal care products sold in the U.S.
International consists of products sold outside the U.S.
Clorox benefited from increased demand for its products during the pandemic. But demand then fell off as the pandemic receded.
Meanwhile, the inflation that followed the pandemic squeezed Clorox’s profit margins. High inventories that accumulated during the pandemic further hurt margins by ballooning storage costs.
Clorox’s woes worsened in August 2023 when the company experienced a cyberattack. This had a significant negative impact on operations and both revenue and earnings for fiscal 2024 (fiscal years end June 30). The company’s share price also dropped to as low as $115.
In response to those events, Clorox continues to rebuild its profit margins through cost-savings initiatives. The company is also working to normalize inventory levels, which suffered further from the cyberattack. Finally, it’s pursuing a transformation plan focused on modernizing its operations through digital technology. That includes installing better cyber protection.
Clorox’s computer system transition hurts results
Driven by increased demand due to the pandemic, Clorox’s revenue rose 9.2%, from $6.72 billion in 2020 to $7.34 billion in 2021 (fiscal years end June 30). In 2022, revenue fell 3.2% to $7.11 billion, as demand for health and wellness products decreased in the aftermath of the pandemic. Revenue recovered in 2023, rising 4.0% to $7.39 billion on higher pricing. In 2024, revenue pulled back again, falling 4.0% to $7.09 billion. That decline was driven by lower shipments caused by the August 2023 cyberattack.
Clorox’s earnings excluding one-time items, dropped 1.8%, from $939.0 million, or $7.36 a share, in 2020 to $922.0 million, or $7.25 a share, in 2021 on higher manufacturing and logistics costs. In 2022, earnings plummeted 44.8%, to $509.3 million, or $4.10 a share, as costs continued to rise. Earnings rebounded 24.1% in 2023 to $632.2 million, or $5.09 a share. In 2024, earnings climbed further, rising 36.0% to $860.0 million, or $6.17 a share, on higher prices and cost savings.
Meanwhile, in the three months ended, September 30, 2025, Clorox’s revenue dropped 18.9%, to $1.43 billion from $1.76 billion a year earlier. Revenue was lower due to lower shipments related to the new corporate-wide computer system transition. Many retailers placed orders in advance to avoid any disruption. In addition, the company sold its Better Health VMS and Argentina businesses.
Excluding one-time items, Clorox earned $0.85 a share in the latest quarter. That was down 54.3% from $1.86 a share. The earnings decrease reflects the lower sales.
Clorox raised its quarterly dividend by 1.6% with the August 2025 payment to $1.24 from $1.22. This marked the company’s 48th consecutive year of dividend increases, with the enhanced dividend paid on August 29, 2025. The stock yields 5.0%.
The company’s long-term outlook is sound, but results in the near term could remain sluggish, especially as consumer sentiment is still weak. At the same time, tariffs could hurt the contribution of the company’s international operations.
Recommendation in Pat’s Inner Circle: We don’t recommend The Clorox Company for new buying right now.
