Dive Brief:
- Clorox continues to claw its way back to normalized operations after an August cyberattack sparked weeks of manufacturing disruptions and supply shortages.
- The cleaning product manufacturer spent Q3 working to fully rebuild inventories and restore normal service levels, regaining nearly 90% of the market share lost during the cyberattack, CEO Linda Rendle said during an earnings call last week.
- Given the progress made, Clorox is poised to fully restore distribution capacity and return to normalized merchandising levels in Q4, the CEO noted.
Dive Insight:
The August cyberattack has impacted Clorox across its operations for months, with net sales down 5% year over year. The company is hoping that the return to full distribution capacity in Q4 will improve that performance.
"Given the magnitude of disruption from the cyberattack, we knew our plans to restore the fundamentals of our business would be complex, and a recovery path would not be linear," Rendle said. "We have made tremendous progress and are laser-focused on finishing the job."
Clorox has lost $57 million so far this year due to the cyberattack. Costs were primarily related to outside consulting services such as IT recovery and forensic experts, as well as "incremental operating costs" incurred from the disruption, according to a securities filing.
Looking to Q4, Clorox has rebuilt the inventory needed to supply distribution it lost from the cyberattack. The company's volumes were down 4% in Q3, an improvement from 7% in the first half of the year, EVP and CFO Kevin Jacobsen said on the call.
Certain brands, including Glad trash bags and Fresh Step cat litter, have struggled more to regain normal inventories. Rendle noted those outliers are also back to normal service levels, though doing so took until the end of Q3 rather than mid-quarter as planned.
"As we head into Q4, we have the right inventory and we have the right production plans and plans with our retailers to be able to get back all of those distribution points that we lost temporarily and, again, restore merchandising," the CEO said.
The company is now focused on fully restocking shelves in Q4, the time when retailers typically reset shelves.
"We're very confident in distribution, very confident in the merchandising, and now we're just watching as the consumer comes back to a fully-stocked shelf," Rendle said. "What is their behavior, and do we need to make any tweaks as we head into the beginning of fiscal year ‘25.
