Cost Pressures Continue to Wreak Havoc on Clorox's Margins, but Path to Improvement Within Reach

Much consternation has been spurred by the retreat in Clorox’s gross margins—36% in its first fiscal quarter, down 110 basis points from last year, though quite depressed relative to the mid-40s the firm has historically boasted. However, we don’t think Clorox is sitting still and believe efforts to raise prices (a 530-basis-point benefit to gross margins in the quarter) and extract inefficiencies (a 180-basis-point benefit) should ultimately boost profits.