COMPANY OVERVIEW Business description The Clorox Company is a global manufacturer of market consumer and professional products
Question:
COMPANY OVERVIEW
Business description
The Clorox Company is a global manufacturer of market consumer and professional products in four key segments: health and wellness, household, lifestyle, and international. It was founded in 1913 and is headquartered in Oakland, California, with about 8,800 employees worldwide.
(Sources: Annual Report FY 2020 and Company Portfolio 2013)
The company’s products and brands vary from laundry additives (including bleach products under the Clorox brand, as well as Clorox 2 stain fighter and color booster); home care products (primarily under the Clorox, Scentiva, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, and Tilex brands); naturally derived products (under the Green Works brand); professional cleaning, disinfecting, and food service products (under the CloroxPro, Clorox Healthcare, and Clorox Total 360 brands); professional food service products (under the Hidden Valley brand); and vitamins, minerals, and supplement products (under the RenewLife, Rainbow Light, Natural Vitality, NeoCell, and Stop Aging Now brands).
In addition, it also provides grilling products (under the Kingsford and Match Light brands); bags and wraps (under the Glad brand); cat litter products (under the Fresh Step, Scoop Away, and Ever Clean brands); dressings and sauces (primarily under the Hidden Valley brand); water-filtration systems and filters (under the Brita brand); and natural personal care products (under the Burt's Bees brand).
Clorox markets its products under the Ayudin, Clorinda, and Poett brands and offers them primarily through mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, third-party and owned e-commerce channels, military stores, and distributors, as well as a direct sales force.
Clorox calls their current business strategies IGNITE. The objective is maximizing economic profit and pursuing a profitable, sustainable, responsible growth through brands, innovation, re-imagination, and internationalization.
Corporate governance
Executive Team (you do not have to follow the same table – make your own judgement)
Title | Name | Gender | Age | Since | Expertise (Rating 74/100 or B+) |
Chief Executive Officer, President | Linda Rendle | Female | 42 | 2020 | BS Econ Harvard, joined as sale analyst in 2003 after working for Proctor & Gamble |
Chief Financial Officer, Exec VP | Kevin Jacobsen | Male | 53 | 2019 | BS Finance UC, MS Finance UofR, joined 1995, VP Finance 2011, worked for GMC |
Chief Operating Officer, Exec VP | Eric Reynolds | Male | 49 | 2020 | MBA Northwestern, joined 2008, former CMO, worked 5 years for General Mills |
Chief People Officer, Exec VP | Kirsten Marriner | Female | 47 | 2019 | MBA Cleveland, former Chief Human Resources Officer for Omnicare in 3 years |
Chief Customer Officer, Senior VP | Troy Datcher | Male | 51 | 2019 | BS Gettysburg, joined 1999, after JTG/Daugherty Racing and 9 years in P&G |
Chief Growth Officer, Exec VP | Tony Matta | Male | - | 2020 | BS MacMaster, MBA UToronto, worked for Nestle, Starbucks, Heinz, P&G, so on. |
Chief Information Officer, Senior VP | Chau Banks | Female | - | 2020 | BS FSU, former Chief Tech and Digital Officer at Revlon, innovation awards |
Chief Innovation Officer, Senior VP | Denise Garner | Female | 56 | 2015 | BS ASU, MSc UCDavis, joined 1988, former VP R&D since 2004, from Krafts |
Chief Marketing Officer, Senior VP | Stacey Grier | Female | 56 | 2019 | MBA WU, joined 2016 as VP brand & marketing after 25 years in advertising |
Chief Product Supply Officer, Senior VP | Andy Mowery | Male | 53 | 2017 | BS Penn State, MBA Villanova, joined 2009 after 20 years at Johnson & Johnson |
Exec VP, General Counsel | Laura Stein | Female | 58 | 2016 | JD, speaks 6 languages, joined 2006, as Senior VP, worked 5 years for Heinz |
Senior VP | Michael Costello | Male | 53 | 2014 | BS Chemistry, joined 1988, VP 2007 in charge of international division |
Senior VP | Bill Bailey | Male | 53 | 2016 | BS Wesleyan, MS public policy Harvard, worked for Fidelity, Goldman Sach, etc. |
Senior VP, General Manager | Diego Barral | Male | - | 2018 | BA marketing Uni Buenos Aires, joined 1995, VP 2012, off 2004-2006 |
(Source: 2020 Annual Report, Company Website, Investing.com, and Comparably)
6 out of 13 are female executives (46%). The average age is 52, and the average time in position is very short at 1.84 years. Compared to peers of similar sizes (such as Procter & Gamble, Unilever, Dollar General), the company is ranked the best in gender composition, executive diversity, and CEO performance (rated by their employees). All executives are industry veterans, and while some of them offer expertise from their long tenures with Clorox (since around 1990), others brought in experience from a series of key positions in multiple consumer staples companies.
The new CEO Linda Rendle who took over the job in September is the youngest executive to lead a Fortune 500 company and the first woman to lead Clorox. She was responsible for launching the initiative to create new products and innovative marketing strategies and to cut costs through technology and sustainability.
Board of Director (same here – a summary table could be fine – such as % female, average age… only)
Title | Name | Gender | Age | Since | Affiliation |
Chairman | Benno Dorer | Male | 55 | 2020 | Insider |
CEO | Linda Rendle | Female | 42 | 2020 | Insider |
Director | Amy Banse | Female | 60 | 2016 | Managing Director & Exec VP at Comcast |
Director | Richard Carmona | Male | 70 | 2007 | Chief of Health Innovation, Canyon Ranch |
Director | Spencer Fleischer | Male | 66 | 2015 | Managing Partner, FFL Partners |
Director | Esther Lee | Female | 61 | 2013 | Exec VP & Global Chief Marketing Officer, Metlife |
Director | David Mackay | Male | 64 | 2016 | Retired President & CEO, Kellogg Company |
Director | Robert Matschullat | Male | 72 | 2015 | Retired Vice Chairman & CFO, Seagram Company |
Director | Matthew Shattock | Male | 57 | 2018 | Non-Executive Chairman, Beam Suntory Inc. |
Director | Kathryn Tesjia | Female | 57 | 2020 | Former Exec VP & CMSCO, Target Corporation |
Lead Director | Pamela Thomas-Graham | Female | 56 | 2016 | Lead independent director |
Director | Russell Weiner | Male | 51 | 2017 | COO & President, Domino’s Pizza the Americas |
Director | Christopher Williams | Male | 62 | 2015 | Chairman, Siebert, Williams and Shank LLC |
(Source: 2020 Annual Report and Investing.com)
11 out of 13 are outsiders (85%) and the only two insiders are the Chairman and the CEO which is great. The CEO does not hold the Chairperson position, which is also a good practice. 5 out 13 are female directors (38%). The average age is 59.5 and the average tenure is 3.23 years. The board members are diverse in their roles and responsibilities at other organizations.
… elaboration
Ownership structure
Top 5 institutional holders | % ownership | Top 5 mutual fund holders | % ownership |
Vanguard Group | 12.35% | Vanguard Total Stock Mkt Index | 2.85% |
State Street Corporation | 9.54% | Vanguard Mid-Cap Index Fund | 2.48% |
Wells Fargo & Company | 5.94% | Vanguard 500 Index Fund | 2.06% |
Parnassus Investments | 2.06% | Parnassus Core Equity Fund | 1.39% |
Geode Capital Management | 1.89% | SPDR S&P 500 ETF Trust | 1.02% |
Total of top 5 (not too large) | 31.78% | Total of top 5 (small) | 9.80% |
(Source: Yahoo! Finance in Holders)
There are currently only three institutions with ownership stake of 5% or larger. The less dependent on these blockholders and their voting rights, the more financial decisions the top executives have. At the same time, the more institutional holders, the more financial stable for the company (better sentiment score). Only 0.12% of shares are held by insiders through stock awards (good). 83.91% of shares are held by 1,575 institutions (good).
Clorox investors should be aware of a decrease in hedge fund sentiment lately (it could have been better if we have data for the rest of 2020). Clorox was in 41 hedge funds’ portfolios at the end of Q1 (all-time high) and in 36 at the end of Q2. Clorox isn't among the 30 most popular stocks among hedge funds. Overall hedge fund sentiment score for Clorox is 50.9 which is a slightly negative signal. Top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. However, for Clorox, investors were disappointed as the stock returned -5.1% since the end of June through end of October and underperformed the market.
(Source: Insider Monkey)
ESG Performance
(Source: Yahoo! Finance)
ESG is becoming more and more important in evaluating the overall performance of any company, but especially companies that deal with chemicals and potential environmental consequences.
On their website, Clorox states their commitment to good growth and their four ESG IGNITE goals as:
- Planet: Be a leader in environmental sustainability, with a focus on plastic and other waste reduction and science-based climate action.
- Product: Be a leader in responsible product stewardship, with a focus on progressive actions to enhance our own and consumer packaged goods industry practices.
- People: Help our consumers and employees through purpose-led choices that enhance well-being.
- Governance: Enhance our leadership in ESG through an unwavering commitment to strong corporate governance and ESG performance overseen by the board of directors.
(Source: https://www.thecloroxcompany.com/corporate-responsibility/ - Appendix A)
In their corporate social responsibility attempts, Clorox has been donating disinfectant products during epidemics, supporting educational programs outside and within the US, or other assistance during times of natural disasters.
Check company website for their Cause Marketing, Employee Volunteering, Donation, among others.
INDUSTRY POSITIONING
Competitiveness
The top competitors in household products are Colgate-Palmolive Company (CL), Kimberly-Clark Corporation (KMB), or The Procter & Gamble Company (PG), The Unilever Group (UL/UN), and Johnson & Johnson (JNJ), with the latter ones of much larger sizes. Competitors of similar sizes in packaged foods include General Mills (GIS), Kellogg Company (K), McCormick & Company (MKC), or Hormel Foods Corporation (HRL). Note that in some sources, Clorox is categorized as a company in basic materials sector and chemical manufacturing industry, which reflects the segment for cleaning products. Because Clorox is an integrated manufacturer, it also competes in lifestyle products.
(Source: SeekingAlpha - Peers)
Compare a bit about the operation – geographical coverage, market size, products, etc.
The market for consumer products is highly competitive. The competition also comes from private label brands and local brands in foreign countries and the competition seemed more intense in the last five years, shown by some stagnation in sales that was reflected in industry stock performance.
(Source: Young Dividend Blog)
SWOT analysis
Strengths | Weaknesses |
- Strong executive team and skilled work force - Diverse and integrated product portfolio - Strong brands and recognitions (Appendix B) - Competitive pricing, strong R&D and innovation - Great corporate social responsibility | - Limited geographic presence, expansion challenges - Limited success outside of core business or products - Anemic sales growth struggles in certain products - Dependence on retailer and supplier networks - Costly R&D and innovation investments |
Opportunities | Threats |
- Strong sales and low costs continue in 2021 - Multi-year strong demand for wipes even with vaccines - Potentials in new markets and new brands - Government support in green initiatives - Stable economic condition, low inflation and interest rate | - Competitive industry, consumer behaviors, seasonality - Shortage of skilled employees, higher labor costs - Exchange risk exposure in foreign markets - Concerns about environmental impacts/ regulations - Criticism from advertizing/ marketing messages |
Pandemic impacts
Clorox is considered a COVID-19 “safe-haven” stock, especially when the list of so-called “safe cleaning products against SARS-CoV-2, the novel coronavirus that caused the disease of COVID-19” was released by The Environmental Protection Agency (EPA) with many Clorox products on it.
Tell a story about how COVID hit and the stock market tumbled in March. And how Clorox had a tall pike and recovered much better than the market.
Its industry peers did slightly better than the overall market (SPY) but mimicked similar pattern.
(Source: Yahoo! Finance – Chart – Comparison for 1 year)
Overall, Clorox is one of the companies that enjoyed boosted sales and stock price spikes from the pandemic.
FINANCIAL PERFORMANCE
Earnings and dividends
(Source: Yahoo! Finance – Summary – Right column)
Clorox’s revenue grows consistently with earnings per share (EPS) beating the forecasts remarkably in 2020.
Financial ratios
Profitability ratios
Make some comments
The consumer staples/ household goods companies did very well and Clorox is among the top (Clorox, Colgate-Palmolive, and Procter & Gamble). While Clorox has lower gross profit margin (due to possibly higher cost of goods sold), this gap shrinks for EBIT margin and net profit margin. Clorox and Colgate-Palmolive are more comparable in sizes and they match in almost each ratio, most notably return on equity which would make shareholders happy.
(Source: IndigoTools.com)
The pattern of GPM and NPM seems to remain stable in the last two years and expected to stay the same for 2021. Sale spiked for two quarters of 2020 and started to slow down. (Better have a table as below to calculate the ratios – can do either quarterly or yearly all items come from either Income Statement or Balance Sheet).
Time (from historical data) | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
(A) Sales | ||||||||
(B) Gross profit | ||||||||
(C) GPM = (B) / (A) |
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