Clorox Earnings: Stellar Gross Margin Improvement Fuels Brand Spending; Shares a Touch Undervalued

There was a lot to like in wide-moat Clorox’s fourth-quarter print, with organic sales up 14% and adjusted gross margin surging 560 basis points to 42.7% (far above the nadir of 33% in fiscal 2022’s second quarter and approaching the 43%-44% levels that have historically characterized the business). Pricing was a large contributor, buoying the top line by 16% while aiding margin to the tune of 670 basis points. However, inflationary headwinds persist (serving as a 370-basis-point offset) and are unlikely to abate in fiscal 2024, with higher commodities prices and wages expected to dent profits by about $200 million.