Clorox CEO: Economic Recovery To Be Slow
12 June 2009 - 5:25AM
Dow Jones News
Clorox Co. (CLX) Chairman and Chief Executive Don Knauss said he
expects the economic recovery to be slow and hard-earned.
In an interview with Dow Jones Newswires on Thursday at the
company's analyst conference, Knauss described the recession taking
the shape of an elongated "W," with an initial uptick in consumer
spending from government stimulus in the near-term, followed by a
dip once those funds are exhausted, then a leveling off.
"It's going to be a long, slow ride out of this thing," he
said.
Knauss sees Clorox as well-positioned amid the recession,
describing 90% of its products - which include everything from
Pine-Sol house cleaner to Fresh Step kitty litter - as basic needs,
with only 10% as "discretionary wants."
Items such as Clorox's Kingsford charcoal have especially
benefitted, he said, as consumers have preferred to stay closer to
home in tougher times.
Still, the company has seen some pullback in the robust growth
of its natural care products, such as Green Works and Burt's Bees.
However, Clorox management expressed confidence about the
category's long-term growth prospects at the analyst meeting,
adding it plans to increase advertising spend on lines such as
Burt's Bees next year.
Clorox also said it would start selling Green Works laundry
detergent and stain remover next month.
In the interview Thursday, Knauss said Clorox is seeing a bit
less pressure from most commodity costs, as many inputs, such as
resin, have fallen from their highs.
Clorox said in its analyst meeting it should see a $100 million
benefit from those easing commodity costs in fiscal 2010, after
experiencing years of pressure.
Notably, Clorox said it doesn't expect to take any further price
cuts, after it took two rollbacks on its Glad trash bags in recent
months.
"We've done a good job of going back to retailers and explaining
how our recent pricing actions have been justified," Knauss
said.
He noted Clorox has been able to recoup only about 60% of the
roughly $600 million it has had to absorb in commodity costs in
recent years through pricing actions, with the rest coming from
cost-savings initiatives.
Also Thursday, Clorox backed its fiscal 2010 guidance and
boosted its quarterly dividend 8.7% to 50 cents a share, in a move
investors and analysts had been counting on. The company sees
future margins rising more than expected on cost savings.
Shares of Clorox were recently trading up less than 1% at
$53.81.
-By Kelly Nolan; Dow Jones Newswires; 201-938-4049;
kelly.nolan@dowjones.com