Clorox Faces Tariff Headwinds, but Its Brand Lineup and Multiyear Investments Set the Stage for a Sustained Recovery
The consumer staples sector has been outperforming the S&P 500 year to date with a near 5% gain at the time of this writing. However, Clorox’s stock is down 19% year to date and hovering around a 52-week low. Despite the challenges, Clorox is much better positioned to handle this wave of economic challenges than in past years.
Clorox’s Weak Guidance Spooked Investors
Clorox’s latest guidance and commentary on its earnings call point to new tariff-related headwinds that could really throw a wrench in the company’s turnaround. Its third-quarter results missed Wall Street expectations, and the company lowered its full-year fiscal guidance. Clorox cited macro and geopolitical factors and tariffs as reasons for the lower guidance. However, another factor was the anticipated rollout of its enterprise resource planning (ERP) transition, as Clorox’s retailer partners are building inventory before the transition occurs.
A Strong Brand Lineup and Multiyear Investments Set the Stage for a Sustained Recovery
Despite all the challenges, Clorox is still guiding for strong full-year fiscal 2025 earnings of $5.73 to $6.13 and $6.95 to $7.35 on an adjusted basis. Based on the low end of its adjusted range, Clorox would have a price-to-earnings (P/E) ratio of just 19 — which shows how much the stock has fallen and how earnings have recovered as the company progresses on its efficiency improvements. The glass-half-full outlook on Clorox is that the worst of its struggles are in the rearview mirror, and that the company will be better positioned to capitalize on growth in the years to come.
The IGNITE Strategy: A Clear Game Plan for Long-Term Growth
Clorox also has a clear game plan for long-term growth — known as its IGNITE strategy. The strategy, which includes ERP and divestments, is a way to improve Clorox’s product portfolio, how it is presented in front of consumers to boost engagement, and create a better internal operating and workplace environment — all while keeping environmental, social, and governance factors in mind. Clorox already has an impressive lineup of category-leading brands across staple cleaning products, cat litter, food and charcoal, personal care, and more.
Clorox’s Dividend Yield Has Gone Up
On top of its low valuation, Clorox also has an impeccable dividend. The company is on track to deliver its 48th year of higher annualized dividends in 2025 — which showcases Clorox’s ability to boost its payout no matter what the economy is doing. Clorox’s yield of 3.7% is significantly higher than the broader consumer staples sector, as measured by the Vanguard Consumer Staples ETF, which yields 2.4%. This makes Clorox a good value for passive income relative to the sector.
Clorox: A High-Conviction Buy This Summer
Clorox is a great buy in June for risk-averse investors looking for a reliable dividend stock to boost their passive income stream. Clorox isn’t immune to tariffs, but it has a fairly recession-resistant portfolio of brands. With the bulk of ERP costs accounted for and the program launching soon, Clorox is well positioned to generate sustained higher margins even if macro conditions remain shaky.
Should You Invest $1,000 in Clorox Right Now?
Before you buy stock in Clorox, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now — and Clorox wasn’t one of them. However, with its low valuation, impeccable dividend, and clear game plan for long-term growth, Clorox is definitely worth a closer look in June.
Conclusion
Clorox’s stock may be under pressure, but the company has made significant progress in recent years to improve its internal processes and product portfolio. With its strong brand lineup, multiyear investments, and clear game plan for long-term growth, Clorox is well positioned to capitalize on growth in the years to come. Its high dividend yield and low valuation make it an attractive option for risk-averse investors looking for a reliable dividend stock. While there are challenges ahead, including tariff-related headwinds, Clorox’s turnaround story has only just begun.
