Clorox (CLX) Shows Signs of Recovery Amid Strategic Shifts and Margin Improvements

Clorox (CLX) has begun to show measurable momentum in its turnaround efforts, with third-quarter 2025 results indicating a rebound in core profitability. The company reported a 2.8% year-over-year increase in adjusted earnings per share, reaching $1.81, surpassing analyst expectations. This marks the second consecutive quarter of sequential improvement in earnings, signaling a potential shift from prolonged margin pressure. A key driver of the recovery is the company’s progress in sustaining gross margin expansion, which rose to 51.2% in the quarter—up 0.9 percentage points from the prior-year period. This improvement stems from strategic pricing actions, supply chain optimizations, and reduced input cost volatility, particularly in resin and packaging materials. Additionally, Clorox reported a 1.3% decline in net sales to $1.13 billion, but this was largely attributable to a one-time divestiture of a non-core brand, which masks underlying volume stability in key segments like household cleaners and disinfectants. The company’s focus on innovation and brand portfolio refinement has also contributed to stronger performance. Revenue from its premium and sustainable product lines grew by 6.4% year-over-year, driven by consumer demand for eco-conscious alternatives. Clorox reinvested a portion of its improved cash flow into digital marketing and e-commerce platform enhancements, which are beginning to show traction, particularly in the U.S. and Canada. Market sentiment has responded positively, with CLX shares gaining 8.4% in the month following the earnings release. Investors are reassessing the company's long-term prospects, especially as it continues to execute on its capital return program, including a $1.2 billion share repurchase authorization announced in late 2024. Analysts are now adjusting their earnings forecasts upward, with the average 12-month price target rising to $89.50 from $82.30 in December 2024.