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The Clorox Company CLX appears in good shape thanks to its robust strategic efforts. The company has been gaining from pricing and cost-saving initiatives for a while now. Its integrated IGNITE strategy focuses on the expansion of key elements under the 2020 Strategy to ramp up innovation across each area of the business.

Let’s Delve Deeper

Clorox’s robust pricing and cost-saving initiatives have been offsetting elevated manufacturing and logistic costs. These positives have been bolstering the company’s margins for a while now. This led to a gross margin expansion of 40 basis points (bps) year over year during third-quarter fiscal 2024. This marked the sixth consecutive quarter of gross margin expansion on the back of such efforts, somewhat offset by adverse foreign currency fluctuations.

For the fiscal 2024, the gross margin is projected to expand nearly 275 bps year over year on gains from lower input cost headwinds and the modest benefit from exiting Argentina. This reflects the combined benefit of pricing actions, cost savings and supply-chain optimization.

The company’s streamlined operating model will create a faster, simpler company through the Reimagine Work under its IGNITE strategy. The operating model helps increase efficiency and transforms the company's operations in the areas of the supply chain, digital commerce, innovation and brand building over the long term.

The streamlined operating model is expected to enhance the company's ability to respond more quickly to changing consumer behaviors, innovate faster and increase cash flow as a result of cost savings that will be generated primarily in the areas of selling and administration, supply chain, marketing and research and development.

However, CLX is reeling under the adverse impacts of inflation and higher manufacturing, logistics and commodity costs. The company has been accelerating investments to enhance digital capabilities. For the fiscal 2024, management anticipates selling and administrative expenses to come between 16% and 17% of net sales, including 2.5 points of impacts of investments to enrich its digital capabilities. Additionally, its results have also been somewhat hurt by lower volumes resulting from the cyberattack and supply-chain inflation.

The company is on track with the IGNITE strategy. This strategy encompasses long-term financial targets of achieving net sales growth of 3-5%, EBIT margin expansion of 25-50 bps and free cash flow generation of 11-13% of sales. CLX announced plans to invest $500 million in the next few years in transformative technologies and processes. The investments began in the first quarter of fiscal 2022 and include the replacement of the company's enterprise resource planning system, its transition to a cloud-based platform and the implementation of a suite of other digital technologies.

Shares of this producer, marketer and seller of consumer products have gained 5.6% in the past three months compared with the industry’s 2.1% increase. A Growth Score of B further adds strength to this current Zacks Rank #3 (Hold) company.

Stocks to Consider in Consumer Staples Space

Freshpet FRPT, a pet food company, flaunts a Zacks Rank #1 (Strong Buy). FRPT has a trailing four-quarter earnings surprise of 118.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS suggests growth of 24.8% and 177.1%, respectively, from year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It sports carries a Zacks Rank of 1. VITL has a trailing four-quarter average earnings surprise of 102.1%.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and EPS suggests growth of 22.6% and 62.7%, respectively, from the year-ago reported numbers.

Utz Brands Inc. UTZ, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2 (Buy). UTZ has a trailing four-quarter earnings surprise of 2%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year EPS suggests growth of 26.3% from the year-ago reported numbers.

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