Profit at Clorox Declines as Costs Rise

From Bloomberg News

Clorox Co., the maker of Pine-Sol, Armor All and household cleaning products, said Thursday that its fiscal first-quarter profit fell 11% as it spent money to market a new food wrap and paid more for raw materials.

Net income declined to $129 million, or 60 cents a share, from $145 million, or 65 cents, a year earlier, the Oakland-based company said. Sales in the period ended Sept. 30 rose less than 1% to $1.05 billion.

Spending on research, development and promotion for new items rose 32%, and product costs climbed 8.6%. Chief Executive Gerald Johnston is increasing Clorox's marketing and adding about 20 items this year to counter sluggish demand and keep customers from switching to retailers' lower-priced versions of consumer products including bleach.

"In order to command a premium price, you got to offer something that generics don't," said Franklin Morton, who helps manage $14 billion in assets at Ariel Capital Management, including 3.2 million Clorox shares. "You got to keep your product line up to speed and fresh."

Glad Press 'n Seal, a food wrap and Clorox's first item from a 90%-owned venture with Procter & Gamble Co., reached stores in September, and a lot of marketing dollars were spent on promoting the product.

Clorox is the largest U.S. maker of household bleach and sells a variety of other products, including Hidden Valley salad dressings, Kingsford charcoal and Fresh Step cat litter.

Analysts surveyed by Thomson First Call had expected Clorox to have profit of 60 cents a share in the first quarter, after the company said in September that it would earn at least 59 cents.

Shares of Clorox fell 33 cents to $46.94 on the New York Stock Exchange.

Annual profit is still expected to rise to as much as $2.57 a share, and sales as much as 5%, Clorox said. The company had net income of $2.23 a share last year.

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