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Clorox (CLX -8%) is heading lower today following some weak guidance for Q1 (Sep) last night. The consumer products giant, whose brands extend well beyond bleach (Brita, Fresh Step, Glad, Liquid-Plumr, Pine-Sol etc.), had previously reported it suffered from a cyberattack. The company also previously disclosed it expected the impact would be material to its Q1 financial results. However, today we got the actual numerical guidance and it was pretty shocking.

• To recap, on August 14, Clorox first alerted investors that it identified unauthorized activity on some of its IT systems. In response, the company began taking certain systems offline and coordinated with law enforcement. Clorox implemented workarounds for certain offline operations. In mid-September, CLX provided an update and described how it began manual ordering and processing procedures at a reduced rate of operations, which led to an elevated level of consumer product availability issues.
• Turning to the Q1 guidance, Clorox expects revenue to decline 23-28%, which we compute as $1.25-1.34 bln, which is well below analyst expectations. Organic sales are now expected to decrease by 21-26%, well below prior guidance of mid-single-digit growth. And perhaps more glaring was CLX's adjusted EPS Q1 guidance of just $(0.40)-0.00, which was even further below analyst expectations.
• Last night, Clorox explained that the cyberattack caused wide-scale disruption of its operations, including order processing delays and significant product outages. Shipment and consumption trends prior to the cybersecurity attack were in line with expectations. Gross margin is expected to decline yr/yr as the cybersecurity attack more than offset the benefits of pricing, cost savings and supply chain optimization.

Where do we go from here? Well, the good news is that Clorox expects to experience ongoing, but lessening, operational impacts in Q2 (Dec) as it makes progress in returning to normalized operations. The company also expects to begin to benefit from the restocking of retailer inventories as it ramps up fulfillment in Q2. Clorox is still assessing the FY24 impact and will provide updated FY24 guidance on its earnings call next month.

In terms of the stock action today, we think investors were already bracing for weak SepQ guidance. We commend Clorox for being upfront about the situation and providing updates. Clorox had prepared investors with its "material impact" language last month. However, we think the numbers were even worse than expected.

Looking at this issue more broadly, situations like this can also present opportunities for investors. These are one-off situations where a stock sells off, but the issues are transitory and they get resolved. Chipotle (CMG) comes to mind, it sold off during the food safety issues a few years ago, but has recovered strongly. Boeing (BA) had its 737 MAX issues, which have since been resolved for the most part. We are not predicting where CLX will trade, but our point is that this issue will get resolved. And like CLX said, retailers are now restocking inventories, which could boost results soon. The stock has pulled back a lot since mid-August. The decline also means CLX is now paying a close to 4% dividend yield. CLX is probably worth keeping on the radar.