Clorox Co. and Proctor & Gamble Co. have seen sales for their hygienic and cleaning products skyrocket during the COVID-19 pandemic, with both consumer goods giants struggling to keep up with demand.
Clorox Co. CLX, +2.48% reported fiscal fourth-quarter profit and sales that beat expectations, with cleaning products a highlight of the quarter. Cleaning, which includes the laundry and home care categories, accounted for 30% of fiscal year 2020 sales.
“The business had another quarter of double-digit sales growth behind continued elevated demand across the portfolio,” said Lisah Burhan, vice president of investor relations, on the earnings call, according to a FactSet transcript.
“While we’ve been able to add significant capacity, demand still far exceeds supply, leading to continued out-of-stocks for many products.”
According to reports, one of those products is Clorox Wipes, which might not be fully stocked on store shelves until next year.
MarketWatch reached out to Clorox for details about availability of Clorox Wipes and received a statement that reiterates Chief Executive Benno Dorer’s comments, from the earnings call.
“Since Q3, we were able to bring on more than 10 new suppliers to help us maximize our output, not just for disinfecting products, but for other parts of our portfolio too,” he said, according to FactSet. “For disinfecting products, we’re continuing to run our plants 24/7, and we’ll be bringing more disinfecting capacity online in the midterm. With all the levers we’re pulling to expand output, I am confident in our ability to do better for our customers and consumers.”
Clorox stock has soared 53.6% for the year to date, with the stock up 18% in the past three months.
“Clorox continues to chase demand for disinfecting products and is still prioritizing shipments to healthcare facilities, which has caused some stock-outs on retail shelves and therefore share losses,” wrote Linda Bolton Weiser, D.A. Davidson senior research analyst.
D.A. Davidson rates Clorox stock buy with a $269 price target.
P&G PG, +1.79% also beat on both profit and sales during its fiscal fourth quarter, with Chief Executive David Taylor saying on the earnings call last Thursday that many of the company’s facilities are “running around the clock to deliver P&G products during this period of increased demand.”
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Just in time for the pandemic, P&G launched Microban 24, a sanitizing spray that promises to prevent the growth and spread of bacteria for 24 hours.
“In terms of capacity, there are areas like our Microban launch that went out in February that we are capacity-constrained now because we launched right as [coronavirus] was hitting, unbeknownst to us, and the demand spiked,” said Taylor.
“Today, the run rate is now in the couple hundred million dollar range, which is more than we expected at the time we launched.”
The company is also working to get inventory for Swiffer and dish soap products, which includes Dawn, back up after a sharp rise in demand, Taylor said. The company hasn’t accomplished that just yet.
“And as of through this July, we have not seen the demand slow down very much yet in the home care area, which, to me, bodes well for the year.”
JPMorgan rates P&G stock overweight with a $143 price target.
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“With momentum behind both pricing and volumes, we believe P&G can still generate mid-single-digit-plus organic sales growth in 2020 despite the challenges presented by COVID-19,” analysts wrote.
“We expect P&G to leverage its improving top-line throughout its P&L, as we believe P&G will be able to drive operating leverage throughout the business (as it has done in the past) and unlock additional cost savings from its productivity programs.”
P&G stock has gained 6.7% for the year to date, and has rallied 15.1% over the past three months.
The Dow Jones Industrial Average DJIA, +0.34% is down 6.2% for 2020 so far.
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