Clorox is the latest company in the household and personal products industry to feel the negative effect of Venezuela's currency devaluation. For its third quarter, which ended March 31, 2014, Clorox reported a 2% decline and $1.05 diluted earnings per share (EPS) from continuing operations for 5% diluted EPS growth. On a currency-neutral basis, sales grew more than 1%.
"We're pleased to have delivered 5% diluted EPS growth in the third quarter, notwithstanding the Venezuela devaluation," said Chairman and CEO Don Knauss. "Looking ahead to the fourth quarter and fiscal year 2015, our top priority is to invest significantly in demand-building programs that will help grow our categories and market shares. Importantly, in fiscal year 2015, we anticipate delivering earnings per share growth, even with significant brand investment and anticipated continuing foreign currency declines."
In the third quarter, the company's sales decreased 2%, primarily due to the impact of unfavorable foreign currency exchange rates and higher trade promotion spending, partially offset by the benefit of price increases and favorable mix. Excluding the impact of 3% percentage points from foreign currency declines, sales grew more than 1%. Volume decreased half a percentage point, reflecting decreases in the home care and Brita businesses, partially offset by growth in the Glad, charcoal, professional products and cat litter businesses.
The company's current-quarter gross margin was 41.8 percent, reflecting a decrease of 30 basis points versus the year-ago quarter. The benefits of strong cost savings and price increases were more than offset by higher commodity costs, as well as higher manufacturing and logistics costs, due in large part to continued inflation in international markets, particularly Venezuela and Argentina.By segment, cleaning (home care, professional products) volume fell 5% and sales fell 4%. Pretax earnings dropped 6%.
Segment volume decreased, reflecting lower shipments in home Care primarily driven by the distribution loss of Clorox disinfecting wipes at a major retail customer and heightened competitive activity in the disinfecting wipes category. These factors were partially offset by disinfecting wipes distribution gains at other key retailers. Laundry volume also decreased from lower shipments of Clorox 2 stain fighter and color booster due to competitive activity and category softness. These factors were partially offset by higher shipments of Clorox bleach driven by product innovation. Volume growth in the Professional Products business reflected higher shipments of healthcare and cleaning products. The variance between volume and sales was primarily due to favorable mix. Pretax earnings decreased primarily due to lower sales and higher commodity costs, partially offset by the benefit of cost savings.
Looking ahead, the company anticipates sales to be down slightly in fiscal 2014 due to anticipated softness of the company's US retail business, including lower-than-anticipated charcoal sales in the back half of the fiscal year, as well as foreign currency declines, including the Venezuela devaluation. In fiscal 2015, sales are expected to be flat.