The Clorox Company (NYSE:CLX) is one of the most iconic and well-known manufacturers of consumer and professional products. Founded in 1913, the company began as the Electro-Alkaline Company, with its first product being an electrolytic bleach known as Purex. It wasn’t until 1919 that they changed their name to Clorox and added bleaching powder to their repertoire of products.
Over the years, Clorox grew steadily by acquiring smaller companies and expanding its presence in retail stores nationwide. By the 1950s, the company had become one of the most recognized brands in America, offering a wide variety of household items, including laundry detergent, paper towels, air fresheners, and more. Today, Clorox has provided cleaning and disinfecting products to millions of homes and owns a diversified portfolio of product offerings, including disinfecting wipes, laundry detergent, and water filtration systems. The company operates in several global markets, including the United States, Canada, Latin America, and Europe.
Clorox was founded on an innovation and quality commitment that still stands today. Its products are designed to meet or exceed industry standards, offering families peace of mind regarding their home environment. The company also prioritizes sustainability by supporting recycling initiatives and using recycled materials throughout its production process.
Business Model
Clorox has four business segments: Health and wellness, Household, Lifestyle, and International. The company’s products are sold through various channels, including mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, drug, pet, and military stores, third-party and owned e-commerce channels, and distributors. Clorox’s products are well-known and trusted by consumers, and the company portfolio has strong brand recognition in a variety of markets around the world.
Clorox Health and wellness segment is a key part of the Clorox Company, representing around 38% of its total revenue in 2022. This segment comprises a wide range of products designed to promote health and cleanliness, including home cleaning and disinfecting products, professional food service products, and vitamins, minerals, and supplements. These products are primarily marketed and sold in the United States and are recognized for their quality and effectiveness. The segment includes well-known brands such as Clorox, Clorox2, Scentiva, Pine-Sol, Liquid-Plumr, Tilex, Formula 409, CloroxPro, Clorox Healthcare, Hidden Valley, RenewLife, Natural Vitality, NeoCell, and Rainbow Light. These products help people maintain a clean and healthy environment and support overall wellness.
Clorox’s Household segment represents around 27% of its total revenue. This segment offers a wide range of products that make everyday household tasks more accessible and convenient. This segment includes bags and wraps, grilling products, and cat litter, primarily marketed and sold in the United States. For example, The Glad brand offers a variety of bags and wraps for storing and transporting food, while the Kingsford brand provides grilling products such as charcoal, wood chips, and grilling accessories. These products are known for their durability, convenience, and effectiveness and are trusted by consumers around the country.
The Lifestyle segment represents about 18% of its total revenue. This segment includes food, natural personal care products, and water-filtration products, all of which are primarily marketed and sold in the United States. For instance, The Hidden Valley brand offers a variety of dressings, dips, seasonings, and sauces that add flavor and nutrition to meals. The Burt’s Bees brand offers natural personal care products made from sustainable and organic ingredients, including skincare, haircare, and unique hygiene products.
The International segment represents around 17% of its total revenue. This segment includes a wide range of products sold outside the United States, including laundry additives, home care products, water-filtration products, digestive health products, grilling products, cat litter, food, bags and wraps, natural personal care products, and professional cleaning and disinfecting products. These products are marketed primarily under well-known brands such as Clorox, Ayudin, Clorinda, Poett, Pine-Sol, Glad, Brita, RenewLife, Ever Clean, and Burt’s Bees. The Clorox International segment helps people worldwide maintain a clean and healthy environment and support overall wellness.
Recent Challenges
Clorox recently reported a decrease in profit and margin in the fiscal year 2022, owing mainly to a return to more normal levels after experiencing abnormal profit levels during the COVID-19 pandemic. In 2022 fiscal years, Clorox’s net sales decreased by 2.3% compared to prior year, while net income decreased by 34.9%. This drop in profit and margin is likely due to a combination of factors, including higher costs associated with increased demand for cleaning supplies during the pandemic and increased competition as the market returned to more normal conditions.
While a decline in profit and margin can be concerning for a business, it does not always indicate a decrease in its overall financial health. To maintain a strong financial position, Clorox has considered cost-cutting and efficiency-boosting strategies to improve its margin over the long term. To better understand the impact of this decline in demand for Clorox products, investors should carefully monitor the company’s financial performance in the coming quarters to identify any trends or patterns that may be impact the company’s financial performance in the long run.
Dividend Profile
For the last 26 years Clorox has consistently been increasing its dividend payments to its shareholders. Despite a 123.6% payout ratio due to depressed earnings in 2022 fiscal year, Clorox remains committed to providing healthy returns for investors.
The current dividend per share stands at $4.72 with a yield of 3.36%. This is an impressive feat given the current economic climate and is testament to the resilience of its business model.
Business Risk
Competition: Clorox operates in a highly competitive market, with numerous companies vying for market share in the household cleaning products industry. This competition could put downward pressure on prices and margins.
Raw material costs: Changes in the price of ingredients or packaging materials used in Clorox’s products could impact Clorox production costs and margin.
Changes in regulatory environments: Changes in regulations, such as those related to the environment or product safety, could impact Clorox operations and financial performance.
Supply chain disruptions: Clorox relies on a global supply chain to produce and distribute its products. Any disruptions to this supply chain, such as those caused by natural disasters or geopolitical events, could impact the company’s operations and financial performance.
Closing Thoughts
Clorox has generally considered to be good dividend stock due to its impressive track record of growing its dividend payments for 26 consecutive years. The company’s annual dividend currently stands at $4.72 per share, representing a yield of 3.36% based on the current stock price. This yield is attractive to many investors and is higher than the average for consumer goods companies. However, it is essential to note that Clorox has faced some recent challenges, including declining profit and margin. These challenges may impact the company’s ability to maintain or grow its dividend payments in the future. Therefore, it is important for investors to carefully consider these factors when deciding whether or not to invest in Clorox as a part of their portfolio.