I always think of Clorox
As with many of its consumer-goods rivals, such as Kraft
Reported top-line growth of 9% exaggerated the company's core performance. Stripped of foreign exchange and the impact of acquisitions, revenue increased just 3% in the quarter. Restructuring charges and commodities took a 350-basis-point bite out of the company's gross margin. That's a pretty steep hit, and a far cry from a year ago when the company actually improved the margin. The higher costs fell to the bottom line, and earnings per share, excluding one-time items, dropped 16% to $0.84 per share.
While Clorox is clearly trying to expand its international presence, the segment represents just 16% of net sales and less than 10% of overall operating profit. The international segment has not exactly been tearing up the track, either. Although international sales increased 14%, operating profit actually declined 16%. The operations are obviously small, and many are likely in investment mode. Still, in this environment, I'd prefer a company with more established international operations. Procter & Gamble is one example; there's also PepsiCo
I think CEO Don Knauss has Clorox on the right path, but I still don't find its product lineup or overall growth prospects all that compelling. I also doubt whether Burt's Bees products will transform the company in the way management seems to anticipate -- I swear that every time anyone from Clorox is interviewed, every other word out of their mouth is either "Burt" or "Bees." It's understandable that management would focus on the category, given its higher growth rate compared some of the company's other products, but I don't expect the new products to be a miracle profit driver.