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Clorox Updates on 2020 Strategy, Discloses Accelerators

The Clorox CompanyCLX recently provided an update on its 2020 Strategy. Senior leaders of the company disclosed highlights of its growth against its 2020 plan at the recently held Analyst Day event.

The company's 2020 Strategy is about achieving certain long-term aspirations, which include growing net sales by 3-5%, increasing EBIT margin by 25-50 basis points and generating free cash flow of 10-12% of sales, all on a yearly basis.

The company has indentified four high value opportunities, which it calls "strategy accelerators", and thinks that these can help it achieve long-term profitable growth through the year 2020.

The first strategy accelerator indentified by the company is its portfolio momentum. We note that Clorox has a diversified brand portfolio. The company feels that by optimizing investments between its "growth brands" and "fuel brands" it will be able to capitalize on its contribution to profitable long-term growth.

The second strategy is called the 3D innovation but this 3D strategy is not associated with the technological term. Here, 3D means desire, decide and delight. The word 'desire' is about the pre-purchase interactions that the company has with its customers. 'Decide' implies the point-of-purchase interaction and lastly 'delight' is about the after sales experience that the customer enjoys. These 3Ds make up the company's demand creation model. Clorox feels that innovation in this model may help it accomplish its 2020 Strategy.

The third strategy is about adopting 3D technology. The company feels that by making its e-commerce platform more robust, it will be able to tap significant opportunities in the online market. We note that the company is directing nearly 40% of its media expenses toward digital channels. Further, the company disclosed that it will continue to invest significantly for developing its e-commerce platform as it has hiked its 2020 goal for e-commerce sales from $300 million to $500 million.

Lastly, the fourth strategy is about imbibing growth culture. The company feels that this is the most important strategy as a strong growth culture will make the other strategies a success. Clorox feels that an innovative and enriched workforce will be able to drive its business forward.

We note that Clorox remains keen on smooth execution of its 2020 Strategy, as evident from its sturdy performance. Clorox emerged stronger in fiscal 2015 as its fourth-quarter top and bottom-line results (posted on Aug 3, 2015) improved year over year and exceeded expectations. Further, management's optimism about achieving growth via cost-saving plan and efficient pricing also instill confidence in the company's future prospects.

Zacks Rank

Clorox currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Swisher Hygiene Inc. SWSH with a Zacks Rank #2 (Buy). Some other well performing stocks is the broader retail sector are Castle Brands Inc. ROX and Truett-Hurst, Inc. THST , both holding a Zacks Rank #2.

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CLOROX CO (CLX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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