Clorox Earnings: Pricing and Cost Savings Buoy Gross Margins, but Shares Fairly Valued

The question heading into Clorox’s third-quarter print was whether, following its 320-basis-point second-quarter boon, it would again chalk up gross margin improvement amid inflationary headwinds. Clorox delivered, posting a 590-basis-point bump in gross margin to 41.8%, which was above the sub-36% level it eked out in fiscal 2022, but still shy of typical 43% marks of previous years. The improvement resulted from actions to raise prices (750-basis-point benefit) and unearth cost savings (150-basis-point benefit) that partially offset increased commodity, manufacturing, and logistics costs (350-basis-point hindrance). Moreover, we anticipate Clorox will continue to rebuild profits.