Bear of the Day: The Clorox Company (CLX)

Clorox (CLX) stock has significantly declined, down approximately 45% over five years and 20% in 2025, trading near 10-year lows after its COVID-19 sales surge proved unsustainable. The company recently missed its Q3 FY25 earnings estimate by 8% and provided a downbeat outlook, with CEO Linda Rendle citing macroeconomic uncertainties impacting sales. While FY25 adjusted earnings are projected to climb 15%, the forecast for FY26 is negative, with Q1 EPS expected to dive 19% and full-year earnings projected to fall over 8%, warranting a cautious stance until further guidance.

Analysis

The Clorox Company (CLX) is facing a significant fundamental and valuation reset following its unsustainable sales surge during the COVID-19 pandemic. The stock is trading near 10-year lows, having declined approximately 45% over the last five years and 20% in 2025. This performance is rooted in deteriorating fundamentals, including revenue slippage in two of the last three years and projections for further dips in FY25 and FY26. The company's recent Q3 FY25 results exacerbated concerns, with an 8% miss on earnings estimates and downbeat guidance from CEO Linda Rendle, who attributed slowing sales to macroeconomic uncertainties impacting consumer shopping behavior. While adjusted earnings are forecast to climb 15% in FY25, the outlook for FY26 is sharply negative, with projections for a 19% year-over-year drop in Q1 EPS and an over 8% decline for the full year. This negative trajectory is reflected in its Zacks Rank #5 (Strong Sell) rating and is compounded by the broader Consumer Staples sector's long-term underperformance against the S&P 500.

Key Decisions for Investors

• Considering the negative FY26 earnings forecast, recent guidance cut, and stock trading near 10-year lows, investors should avoid initiating new long positions and may consider reducing existing exposure.
• The upcoming Q4 FY25 earnings report on July 31 is a critical catalyst; any re-evaluation of the stock should be deferred until the company provides updated guidance on sales trends and the FY26 outlook.
• The projected 15% adjusted EPS growth for FY25 should be viewed with significant skepticism, as the subsequent negative forecast for FY26 suggests this may be a temporary improvement before a more substantial downturn rather than a sustained recovery.