October 31, 2008 / 7:20 PM / in 9 years

UPDATE 3-Clorox Q1 profit tops Wall St, forex to hit sales

* Q1 EPS 91 cents vs Wall Street view 84 cents

* Confirms FY profit forecast

* Lowers FY sales outlook due to forex

* Shares up as much as 6.4 percent (Adds details, analyst comments; updates stock price)

By Jessica Wohl

CHICAGO, Oct 31 (Reuters) - Clorox Co (CLX.N) said on Friday that quarterly profit rose 15 percent, topping expectations, with higher prices, a lower tax rate and strong sales of products like its Green Works cleaners outweighing the impact of increased commodity costs.

The household products maker stood by its full-year profit forecast but lowered its sales outlook due to falling foreign currencies. Still, commodity and diesel costs will not rise as much as it had expected, the company said.

Clorox is closely watching consumer spending habits and expects shoppers to turn to brands they trust, such as its own, during the tough economic times.

“We will not give consumers a reason to choose another brand,” Chairman and Chief Executive Don Knauss said during a conference call.

In North America, by far the company’s largest market, sales rose 11 percent, and volume was up 4 percent. High-end items such as Burt’s Bees personal care products, Green Works environmentally friendly cleaners and Glad ForceFlex trash bags were among the best-sellers.

“We are particularly encouraged by the strong top line given the difficult macro environment and the increased likelihood of trade-down,” JP Morgan analyst John Faucher said in a note to clients. He rates the shares “overweight.”

Clorox’s namesake bleach and basic Glad trash bags were pressured as consumers bought less-expensive store-branded products. Clorox is starting to promote other cleaning uses for bleach beyond laundry as a way to reignite sales.

The company said it saw a boost from consumers choosing to eat more meals at home as they try to curb spending, since they bought more of its Hidden Valley Ranch salad dressing, K C Masterpiece barbecue sauce and Kingsford charcoal.

Clorox, like its rivals, raised prices on a variety of items to help offset higher commodity costs. Now that costs are easing, Clorox said it decided not to raise prices on two more products as it had planned. It did not name those products.

Shares of Clorox were up 4.5 percent at $61.88 in afternoon trading after rising as high as $62.99 on the New York Stock Exchange.

TAX RATE HELPS PROFIT

Profit rose to $128 million, or 91 cents a share, in the fiscal first quarter ended Sept. 30, from $111 million, or 76 cents a share, a year earlier. Analysts’ average expectation was 84 cents per share, according to Reuters Estimates.

The company said its effective tax rate for the quarter was about 31 percent versus 36 percent a year earlier, which added about 4 to 5 cents to earnings per share.

Sales jumped 11.7 percent to $1.38 billion, topping Wall Street’s average target of nearly $1.35 billion.

Volume increased 4 percent. Sales and volume both got a boost from the acquisition of the Burt’s Bees product line.

Clorox now expects $150 million to $170 million in higher commodity and diesel costs this year, versus its prior forecast of $180 million to $200 million.

The company stood by its August forecast calling for fiscal-year earnings per share of $3.60 to $3.75, while analysts, on average, have expected $3.68 per share.

It now looks for fiscal 2009 sales to rise 4 percent to 6 percent, down from a prior forecast of 6 percent to 8 percent, due to currency changes. About 10 percent of Clorox’s sales come from Canada, Australia, New Zealand, Mexico and Chile, which have experienced currency devaluation of more than 20 percent over the last two months, the company said.

Clorox expects the biggest impact from foreign currencies on second-quarter sales, while the anticipated benefits from lower commodity costs and cost-cutting should be felt in the second half of the fiscal year. (See here for "Shop Talk" -- Reuters' retail and consumer blog) (Reporting by Jessica Wohl; editing by Jeffrey Benkoe and Gerald E. McCormick)

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