Clorox Ekes Out a Gross Margin Bounce in Q2; Shares Still Offer Upside

Rampant cost inflation has dogged Clorox the past few quarters, but it finally appears efforts to raise prices and extract inefficiencies are gaining traction. Clorox chalked up a 320-basis-point improvement from last year in adjusted gross margin to 36.2%, as a 680-basis-point boost from higher prices and 180-basis-point benefit from cost savings offset a 340-basis-point drag from stepped up commodities, manufacturing, and logistics costs. We don’t think Clorox will back down in its pursuit of margin enhancement, as it works to rebuild gross margins to historical 43%-44% levels.