Clorox Faces Quarterly Loss and Revenue Slashes Following Cyber Attack
Shares in Clorox took a nosedive on Thursday, plunging 8.1% to their lowest level since May 2018. The cleaning supplies company warned investors that a cyber attack in August would result in a quarterly loss and a significant reduction in revenue of up to 28%.
At its lowest point, Clorox shares traded at $119.56, and it closed at $121.16 afterward. This marked one of the largest single-day percentage losses since February 2022.
In a late Wednesday announcement, Clorox projected a loss per share for its fiscal first quarter, which ended on September 30. The projected loss ranged from $0.35 to $0.75, a significant downturn from the $0.68 profit reported during the same period last year. Additionally, the company anticipated a year-over-year decrease in net sales between 23% and 28%.
Following this announcement, several financial institutions adjusted their price targets for Clorox downward. Evercore ISI lowered its Clorox price target from $160 to $120, while Raymond James downgraded the company from “outperform” to “market perform.” Bank of America and Deutsche Bank also revised their price targets to $120 and $136, respectively.
BoFA analyst Anna Lizzul, who rates Clorox as “underperform,” highlighted the notable aspect of the company’s forecasted first-quarter gross margin decline. This was unexpected, as Lizzul had predicted the quarter to experience significant gross margin expansion, making it the highest of the fiscal year 2024.
Lizzul identified factors beyond the cyber attack as potential contributors to Clorox’s situation, such as a challenging consumer environment and rising shipment costs due to higher oil prices. These factors may force the company to minimize promotional activities in fiscal year 2024 to protect its margins. Lizzul also noted that Clorox had already implemented four rounds of price increases in the past two years, leaving little room for further increases.
Clorox first reported the unauthorized activity that disrupted its operations on August 14. As a result, the company temporarily took some systems offline. On September 18, it revealed that the first-quarter results would likely experience a “material impact.” Finally, on September 29, Clorox announced that all manufacturing facilities had resumed operations and that production was ramping up to replenish inventories following the cyber attack.
However, Evercore ISI analyst Javier Escalante, who rates Clorox as “underperform,” expressed concern over the company’s delayed assessment of the financial impact of the attack. He also pointed out Clorox’s warning of “ongoing, but lessening operational impacts in the second quarter.” Escalante described this as a “disconcerting” disconnect between operations, financial planning, and reporting.
Clorox’s recent struggles highlight the vulnerabilities companies face in an increasingly digital world. Cyber attacks pose significant threats not only to data integrity but also to overall business operations and financial performance. As Clorox works to recover from this setback, it remains to be seen how successful the company will be in restoring investor confidence and mitigating the long-term effects of the cyber attack.
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