Clorox Profit Up 22% as Sales Rise, Costs Fall

Clorox Co., the largest U.S. household-bleach maker, Tuesday said fiscal second-quarter earnings rose 22% because of lower costs and higher sales.

But the company said profit this quarter would rise less than analysts estimated. The news sent Clorox stock down more than 5%.

Net income last quarter rose to $109 million, or 51 cents a share, from $89 million, or 40 cents, a year earlier, the Oakland-based company said. Sales rose 2.3% to $947 million.

Competitors such as Procter & Gamble Co. are spending more on promotions and retailers have introduced low-price generic cleaning products, putting pressure on Clorox Chief Executive Gerald Johnston, who has added products such as spot remover Clorox Bleach Pen to revive sales.

“The world is getting more competitive,” said Franklin Morton, who helps manage about $16 billion at Ariel Capital Management in Chicago, including 3.5 million Clorox shares. “Everybody has to work harder.”

Clorox said in December that second-quarter profit would be at least 48 cents. The company had $30 million in restructuring costs, such as writing down the value of an Argentine business, in the year-earlier period.

Fiscal third-quarter profit will be in a range of 55 cents to 57 cents a share, Clorox said. The company had been expected to earn 60 cents, the average estimate of 10 analysts surveyed by Thomson First Call. Third-quarter sales may rise as much as 5%, the company said.

The profit warning sent the stock down $2.63 to $47.52 on the New York Stock Exchange. It is down 2% this year. The stock rose 18% last year, lagging the 26% gain of the Standard & Poor’s 500 index.

Clorox’s third quarter is being hurt as it increases advertising spending and it temporarily halts share repurchases, which will reduce earnings by about 3 cents a share, Johnston said during a conference call with analysts and investors.

The company forecast annual profit of $2.48 to $2.53 a share; the average estimate of 11 analysts surveyed by Thomson First Call was $2.50.

“I’m glad to get the first half of the year behind us, and we feel very good about this next half of the year coming up,” Johnston said during the call.

Second-quarter volume, or the number of units sold, rose 4%, the fastest pace in seven quarters. Volume gains were driven by demand for Clorox liquid bleach, Hidden Valley salad dressing and Scoop Away cat litter, the company said.

Higher sales in Venezuela and Argentina and price increases in some markets led to a 15% jump in overseas revenue from the household products division, Clorox said. The company gets more than 80% of its sales in the U.S., limiting the benefit from a falling U.S. dollar.

Clorox also said Tuesday that the Internal Revenue Service is auditing the tax returns of a company investment fund from 1997 to 2000 and may require an additional $200-million payment. The firm said it has set aside money for the payment and does not expect the matter to affect earnings.