Clorox's Bad News Has Led to Some Good News

Clorox, an absolute behemoth in the consumer products sector, announced earnings after the market closed on February 3rd and when the market reopened the next day
 
WAN CHAI, Hong Kong - April 5, 2022 - PRLog -- The news really disappointed investors and rightfully so in many ways. The stock has lost about 40% of its value from its high in mid-2020.

Today, it's impossible to talk about Clorox without mentioning the coronavirus outbreak. Nobody knew what was going on at the start of the crisis, which really picked up steam in early 2020. One simple precaution to take was to sterilize whatever you could in case the sickness spread through contact with surfaces. As it turned out, the coronavirus was mostly spread through the air. However, that was knowledge obtained after the fact. As a result, people and companies hurried out to get as many cleaning goods as possible early on. Because of the high demand, store shelves were left empty. Clorox, a well-known cleaning company, was one method that investors used to take advantage of the trend, bidding the stock to new highs. While Wall Street was likely ahead of reality, as is frequently the case, Clorox's cleaning line did see a significant increase in sales.

In response to this demand, the firm increased its advertising investment to solidify its image as a trustworthy disinfection brand. And it increased production to keep shop shelves stocked as much as possible, given the near insatiable demand for the items at the time. The transitory demand spike Clorox profited from has now reversed course considering that the world knows more about the coronavirus. In the just completed fiscal second quarter of 2022, sales fell 8% year over year. Q2 of the prior fiscal year saw a 27% increase in revenues.

Clorox's health and wellness segment, which includes the cleaning products company, had a major sales problem with revenues falling by a huge 21%. The corporation was well aware that a hit was on the way. Pushing through large cost increases when demand is expected to fall following an external shock that caused a rise would very certainly have exacerbated the problem. As a result, the corporation just accepted the sales impact without attempting to mitigate any of the damage.

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