Clorox Drops Following Guidance Cut After Cyber Attack, Raymond James Downgrades

Clorox shares experienced a 4.5% decline in pre-market trading on Thursday following the announcement of a cybersecurity attack that impacted the company’s operations.

As a consequence of this incident, Clorox forecasts a drop in net sales between 28% and 23% compared to the same quarter last year. The firm expects organic sales to fall between 26% and 21% for the quarter due to disruptions caused by the cyberattack, which led to delays in order processing and product shortages.

The company anticipates an adjusted earnings per share (EPS) loss ranging from $0.40 to $0.00. Additionally, Clorox now projects that its gross margin will be lower than in the previous year, diverging from earlier expectations of an increase.

According to the company’s current assessment, it expects ongoing but reducing operational impacts in the second quarter as it works towards restoring normal operations. Clorox also anticipates benefits from replenishing retailer inventories as it escalates fulfillment efforts in the upcoming quarter.

Analysts at Goldman Sachs estimate that the fiscal year 2024 EPS could fall more than 25% below the company’s guidance. They noted that while some investors might argue this will not affect fiscal year 2025 EPS, the incident highlights vulnerabilities in the company’s IT systems, which may require additional costs to address. Furthermore, they expressed concerns about the need for price investments to regain market share, which may be difficult to retract from retailers once made.

Raymond James analysts took a more cautious stance, downgrading Clorox’s rating to Market Perform due to reduced near-term visibility. They remarked that while the company indicated that shipments and consumption were on track before the attack, it would take time to rebuild its pipeline. This delay could lead to continued sales losses at retail, with a subsequent need to increase promotions to recover lost market share. Additionally, they pointed out that year-over-year comparisons will become more challenging as the year progresses, compounded by rising input costs.