Clorox Is Working Around the Clock

Written by Jennifer Clark
Posted May 6, 2020

At the start of the coronavirus pandemic in the U.S., when Americans started to panic and realize that it was going hit at home, a lot of those Americans began panic buying disinfectant and other cleaning products: toilet paper, paper towels, and hand sanitizer. 

When no one is telling you what to expect from the spread of a novel virus, it’s easy for people to start preparing for the worst. Through all of this, as we reach the two-month mark of stay-at-home orders from state governments, grocery stores and stores like Target (NYSE: TGT) and Walmart (NYSE: WMT) have remained open to the public. They have been rightfully deemed essential businesses, making the panic buying a couple of months ago a problem that could continue through the summer.

Clorox (NYSE: CLX) has experienced a 500% increase in demand during the COVID-19 pandemic. Clorox has been around for 107 years as a bleach and disinfectant-wipe maker, and the company and its chairman and CEO Benno Dorer have been working around the clock to meet this massive increase in demand. In a recent interview, Dorer suggests that this situation may not stabilize until the summer, when households get used to their new disinfecting routines and go back to steadily buying cleaning products instead of panic buying.

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Dorer said:

If you go to stores, we’re shipping to our stores every single day. But what we’re shipping is pretty much scooped up right away. So it’s gone after a few minutes. Clearly there’s an unprecedented demand spike for some of our products, in particular wipes. We’ve seen spikes of up to 500% in terms of demand and no supply chain in our industry is built to satisfy that demand increase in a short period of time.

Clorox has increased its production capacity, but it’s impossible to keep up with the demand, especially if shoppers are not being regulated. When I go to my local grocery store, the toilet paper aisle and cleaning supplies aisle are still completely wiped out. I thought maybe people would ease up on buying these products, but it doesn’t seem so. In order to get these supplies, you either have to be lucky and in the right place at the right time, or waiting to get into that grocery store when it opens. 

I don’t see this quest for increased personal hygiene and cleaning supplies slowing down anytime soon, especially as businesses start opening up and the need for disinfecting public spaces to try to prevent the spread of the virus increases. 

Dorer adds:

We have significantly increased our production. We've done so by simplifying our lineup, which allows our lines to run faster, turning out 40% more products last quarter than we did in the previous year’s quarter. We're activating third-party suppliers who produce for us to help us. And we're investing in further capacity. So we continue to find new ways to speed up our lines and find capacity. And we think that there's going to be substantial improvement this summer. It's going to be touch and go until then, unfortunately, but help is on the way and I think should ease up in the next few months.

Clorox’s fiscal third-quarter sales increased by 15% from the previous year. Volume has surged 18%. Its organic sales increased by 17%. Clorox’s earnings soared 31%. This was nowhere near the expectations from a year ago. Clorox’s stock is up 30% this year compared to the S&P 500's 13% drop. 

This could easily be a bullish year for Clorox and America's new mission to disinfect.

Until next time, 

Jennifer Clark
Pro Trader Today
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