Shares of Clorox (CLX) plunged 9.7% to $87.11 on Friday after the household-products company slashed its fiscal 2026 adjusted earnings outlook, signaling that the profit squeeze is far from over. The revised guidance reflects persistent cost pressures, a slower-than-expected recovery in key categories, and expenses tied to the recently completed GOJO Industries acquisition.
Clorox now projects adjusted earnings per share between $5.45 and $5.65 for fiscal 2026, down sharply from its prior range of $5.95 to $6.30. The company also anticipates a roughly 6% decline in net sales and a 9% drop in organic sales, excluding impacts from acquisitions, divestitures, and currency fluctuations. The warning comes as the broader consumer-goods sector grapples with rising oil, freight, and raw material costs, while price-sensitive shoppers resist higher prices.
Third-Quarter Results Show Mixed Performance
For the fiscal third quarter ended March 31, Clorox reported net sales of $1.67 billion, essentially flat year-over-year. Diluted earnings per share edged up to $1.54 from $1.50 in the prior-year period. However, gross margin contracted by 140 basis points to 43.2%, underscoring the impact of elevated input costs and supply-chain disruptions.
CEO Linda Rendle described the quarter as “mixed,” noting gains in certain portfolio areas but acknowledging that market share recovery fell short of expectations. “We face a tough consumer environment and ongoing cost pressures,” Rendle said. “There’s more work to do.” The company attributed part of the sales drag to retailers reducing inventory built up ahead of a major enterprise resource planning (ERP) system transition. Clorox expects the ERP-related destocking to reduce fiscal 2026 sales growth by approximately 7.5 percentage points and earnings by about 90 cents per share.
Segment Results Highlight Divergent Trends
Performance varied across Clorox’s business segments. The Health and Wellness segment was flat, while Household posted a 3% increase. The Lifestyle segment, however, dropped 9%, hurt by weaker consumer demand and inventory reductions by retailers. International sales rose 8%, benefiting from favorable currency exchange rates and higher volume.
GOJO Acquisition Adds Costs, Dilutes Earnings
Clorox completed its acquisition of GOJO Industries, the maker of Purell hand sanitizer, on April 1. The deal is expected to contribute just under 3 percentage points to fiscal 2026 sales but will dilute adjusted earnings by 2 to 4 cents per share. CFO Luc Bellet told investors that GOJO generates roughly $800 million in annual sales, with about $200 million expected in the fourth quarter.
To fund the acquisition, Clorox drew $1.25 billion from a delayed-draw term credit agreement after March 31. The company plans to replace part of that borrowing with long-term debt and has filed an automatic shelf registration for senior debt securities, signaling potential future bond sales.
Analysts Slash Price Targets
Wall Street responded swiftly to the lowered guidance. Evercore ISI’s Javier Escalante maintained an Underperform rating and cut his price target to $110 from $115. Wells Fargo’s Chris Carey lowered his target to $100 from $110. J.P. Morgan’s Andrea Teixeira reduced her target to $95 from $99, and Citi’s Filippo Falorni trimmed his to $97 from $110.
The challenges facing Clorox extend beyond cost pressures. The company must navigate ERP-related disruptions, integrate GOJO, and defend market share in a value-conscious consumer environment. With oil-linked expenses, freight charges, and potential pricing actions all in play, the next quarter will test whether Clorox can stabilize margins and maintain shelf space.
