COMPANY DESCRIPTION

For 100 years, Clorox has operated in the household product industry, expanding its portfolio to include such leading brands as Clorox, Glad, Hidden Valley, and Kingsford. The firm distributes its products through mass merchants, grocery stores, and other retail outlets. With its acquisition of Burt's Bees in 2007, Clorox gained entry into the fast-growing natural personal-care category. International sales amount to around 20% of the firm's consolidated total, with about two thirds resulting from faster-growing emerging markets.

 

ECONOMIC MOAT

In our opinion, Clorox’s economic moat comes from its strong brands (more than 80% of which are number one or two in their respective categories) and relative cost advantages.  Clorox is very innovative and has the ability to achieve prices increases.

 

OUTLOOK

The top line showing is being led by strength at the company's Glad , professional products, and Burt's Bees businesses. Professional products and Burt's Bees have been growing strongly for a while. On the other hand, Glad bags do well when the products have new innovative features. We expect solid results in fiscal 2016. The company will probably benefit from continued commodity price softness. Yield-conscious investors know that the company has a long streak of raising its dividends.

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STRENGTHS

  • Strong brands

  • Innovation

  • Extreme customer loyalty

  • Since 2005 - 66 price increases, 64 still in place (97% success rate)

WEAKNESSES

  • Promotional spending is expected to remain elevated

  • Clorox plays in several categories where private-label penetration is pronounced--like bleach, charcoal, and trash bags--and its volumes could be negatively affected if consumers are unwilling to pay up.

THREATS

  • Oil prices have trended lower, but the firm is still battling increased transportation costs

OPPORTUNITIES

  • The firm is extending its reach in the faster-growing organic space by expanding its Burt's Bees product set to include face and body offerings

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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