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Clorox stock bleaches out
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August 12, 1999: 4:44 p.m. ET
4Q earnings meet Street, but sales decline as do expectations for 2000
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NEW YORK (CNNfn) - Shares of Clorox plummeted more than 16 percent Thursday after the company reported fiscal fourth-quarter earnings that matched Wall Street expectations but nevertheless disappointed analysts, who were jarred by a 2.6 percent drop in sales, and warnings about upcoming charges and reduced profit expectations for 2000.
The New York Stock Exchange dive was prompted also by PaineWebber's decision to cut its rating on Clorox to "neutral" from "attractive," and Merrill Lynch's decision to cut its forecasts for fiscal 2000 earnings to $3.51 a share from $3.75.
"We are lowering our estimates," Merrill Lynch analyst Heather Hay said in a report. "The bulk of the estimate changes relate to outlook for the 1st half of FY00 (fiscal 2000), in particular the September quarter, which the company had previously been expected to be up (in the) mid-single digits (and) is now expected to be down 14 percent related to a variety of factors."
Clorox (CLX) shares closed Thursday down 16-11/16 to 86-9/16, a drop of more than 16 percent, on volume of 7.7 million shares, 15 times its average turnover.
4Q sales drop 2.6% due to First Brands
Excluding charges, Clorox reported net earnings of $115.3 million, or 96 cents a diluted share, for the quarter ended June 30. That was up from $109 million, or 91 cents a diluted share, in the year-ago period.
But during the latest quarter, the maker of household cleaners like Clorox Bleach and Pine Sol took charges totaling $79 million related to its acquisition of First Brands, known for a diversified line of products including Glad storage bags, kitty litters and Hidden Valley salad dressings.
Including those charges, Clorox reported diluted earnings per share of 42 cents.
Product volume for the quarter increased 4.5 percent, but sales fell 2.6 percent to $1.1 billion.
Chairman and CEO Craig Sullivan said the disappointing sales results were due to First Brands' aggressive trade promotion practices prior to its merger with Clorox.
"We anticipated a short-term negative impact associated with changing the marketing and sales practices for First Brands products," Sullivan said.
Clorox also issued a warning that it expects to take an additional $23 million in charges in fiscal 2000 related to its First Brands purchase. The company noted, however, this would bring the total cash-related charges in line with the company's original estimates at the time of the merger.
2000 estimates lowered
In a conference call after the news release, company executives told analysts Clorox profits in the first half of 2000 would be lower than expected due, among other things, to lower sales for First Brands products.
"When we look at the estimates ... even at the low end of the range, (you) may not be factoring in the continuing softness in sales that we've indicated we will see in the first half due to First Brand's inventory issues," Karen Rose, Clorox chief financial officer, told analysts.
She said estimates needed to take into account difficult comparisons to previous quarters and costs of new product initiatives, which would be incurred in the first half of 2000.
-- from staff and wire reports
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Clorox
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