"First-quarter results were generally in line with our expectations. While sales were down, we're pleased that we were able to grow volume and gross margin in three of four segments as we work through challenges in our Bags and Wraps and Charcoal businesses. Importantly, we remain on track to deliver our fiscal year outlook," said Clorox chair and CEO Benno Dorer. "I'm confident our new IGNITE Strategy will provide the momentum necessary to deliver long-term shareholder value, especially through its focus on expanding our robust innovation and cost savings initiatives."
Fiscal First-Quarter Results
Sales were down 4 percent in the first quarter of 2020 compared to the prior year, reflecting about 2 points from foreign currency headwinds. The results also include higher trade promotion spending and unfavorable mix, partially offset by the benefit of price increases. On an organic basis, sales decreased 2 percent.
The company's first-quarter gross margin increased by 60 basis points to 44 percent from 43.4 percent in the year-ago quarter. The increase in gross margin was driven primarily by the benefits of cost savings and price increases, which were partially offset by higher trade promotion spending and higher manufacturing and logistics costs.
Clorox delivered earnings of $203 million, or $1.59 diluted EPS, compared to $210 million, or $1.62 diluted EPS, in the year-ago quarter, representing a 2 percent percent decrease in diluted earnings per share. Diluted EPS results were due primarily to higher trade promotion spending and to a lesser extent the impact of unfavorable foreign currency exchange rates as well as higher manufacturing and logistics costs, partially offset by the benefits of cost savings and price increases.
First-quarter net cash provided by operations was $271 million, compared to $259 million in the year-ago quarter.
Key Segment Results
Cleaning (Laundry, Home Care, Professional Products)
Segment sales were down 2 percent, as strength in the Professional Products business was more than offset by decreases in Laundry and Home Care as well as unfavorable mix from strong growth in non-tracked channels. Pretax earnings were down 1 percent due to lower sales, which were partially offset by the benefit of cost savings initiatives.
Lifestyle (Dressings and Sauces, Water Filtration, Natural Personal Care, Dietary Supplements)
Segment sales were up four percent driven primarily by the Natural Personal Care business, fueled by innovation in the Face Care and Lip Care categories. Pretax earnings grew 13 percent mainly behind higher sales, partially offset by increased demand-building investments to support innovation.
Segment sales were flat behind strong 8 percent organic sales growth from gains in Latin America and Asia, offset by foreign currency headwinds. Pretax earnings increased 39 percent, driven largely by the benefit of price increases, partially offset by the impact of unfavorable foreign currency exchange rates.
Fiscal Year 2020 Sales Outlook
Clorox continues to anticipate that sales will be down from the low single digits to up 1 percent, reflecting about 2 points of foreign currency headwinds. Importantly, the company's organic sales outlook remains unchanged, with a range of 1 percent to 3 percent sales growth.
"I'm pleased we delivered our fourth consecutive quarter of year-over-year gross margin expansion as well as strong cash flow, which allow us to continue to invest in our categories and brands," said CEO Kevin Jacobsen. "Importantly, I believe we're taking the right actions to return to delivering Good Growth—growth that's profitable, sustainable and responsible – in our ongoing pursuit of long-term value creation for our shareholders."