Clorox falls on guidance cut after cyber attack, Raymond James downgrades

Clorox (NYSE:) shares fell 4.5% in pre-open Thursday after the company said it suffered a cybersecurity attack.

As a result, Clorox anticipates a decrease in net sales by 28% to 23% compared to the year-ago quarter. Organic sales are expected to decrease by 26% to 21% for the quarter due to the impacts of the cybersecurity attack, which caused significant disruption, including order processing delays and product outages.

The company expects adjusted EPS to be a loss of $0.40 to $0.00. Clorox now expects the gross margin to be lower than the year-ago quarter, which contrasts with its previous expectations of an increase.

“Based on its current assessment of the situation, the Company expects to experience ongoing, but lessening, operational impacts in the second quarter as it makes progress in returning to normalized operations. The Company also expects to begin to benefit from the restocking of retailer inventories as it ramps up fulfillment in the second quarter,” Clorox said.

Goldman Sachs analysts estimate that FY24 EPS could be 25%+ below management guidance.

“While we expect some investors will argue that this has no bearing on FY25 EPS, we believe the issue not only reveals vulnerabilities in the companies IT systems (which we suspect requires incremental costs to rectify), but will also require a degree of price investment to recover share; investment that we do not believe will be easy to retract from retailers once made,” they said.

Raymond James analysts went a step further and cut the rating on CLX to Market Perform, citing a more challenged near-term visibility.

“While CLX noted that shipment and consumption were in line with their expectations prior to the attack, we expect that the company will need time to ramp and rebuild the pipeline, which could result in continued loss of sales at retail and eventually, a need to increase promotion to regain lost market share. Exacerbating the recovery, y/y comps are more challenging as the year progresses and input cost risks are increasing,” they explained in a note.