It's a new day, with new headlines detailing the ongoing decline in oil prices. The market continues toil under the view that lower oil means bad things lay ahead for the global economy. I think this logic is starting to spread into the volatile year-end for the market, and it is causing downdrafts in stocks that light up TV screens and trading terminals.
However, as I mentioned earlier in the week, the market may have forgotten that cheaper oil will be a huge benefit to corporate earnings over the coming months. Nowhere else is that view more on display than in consumer-products king Clorox (CLX).
On Wednesday, I had the opportunity the interview new Clorox CEO Benno Dorer for The Street. Sitting in a conference room with snow falling in New York, we discussed at length the company's plans for 2015, which will include a series of new products hitting the market in January. Although the piece was for reporting purposes, allow me to put on my analyst hat and explain what I learned.
1. Clorox, and other executives of consumer-product companies I talk to, are starting to highlight the benefit to their sales and earnings from cheaper gas prices. For Clorox particularly, this benefit is two-pronged.
For one, the company is looking at the dollar-store channel to release smaller package sizes. When a household brand such as Clorox reaches a dollar-store customer who suddenly has more disposable income, the move could lead to additional purchases. Second, the prominence of online buying has meant Clorox, and others, are shipping products to customers more frequently. Cheaper fuel will be running right on through those trucks.
Also, remember: Many companies have undergone vast restructuring plans over the past two years, so the drop in gas prices at the pump should feed through more quickly to profit margins.
2. I feel as though we'll learn of new rounds of corporate restructurings in the first half of 2015. But, unlike the ones we have become accustomed to since 2009, these will not necessarily be focused on mass layoffs. Rather, they should bring about mass hiring, fueled by the need to reimagine supply chains in an era of mobile buying. More skilled labor will be required, as will investments in giving these workers greater skills and the equipment to do their jobs.
When I hear a company such as Clorox detail the work it is doing to make its supply chain quicker, I can't help but to think names such as Snap-On (SNA) -- one I have loved in the past -- and Stanley Black & Decker (SWK) would be worthwhile industrial plays off the trend.
3. You should sit down this week and deconstruct one of your investments to figure out if it is winning in the online space. If it's not, determine why. If it is, estimate how much more they stand to win in the future.
I believe many investors are not properly valuing the online-sales opportunities for companies. Part of that the reason for this is that executives aren't providing in-depth guidance on the subject -- sales and profit numbers for online businesses at non-tech companies are rarely disclosed. That leaves it up to investors to assess things on their own. Clorox did about $100 million in online sales from all channels last year. Dorer is seeking to triple that by 2020, which I think is quite a realistic forecast due to new-product introductions and online efforts of partners such as Wal-Mart (WMT) and Target (TGT).
Oh, and I'll end with a word on lululemon (LULU), as I'm seeing an upgrade or two trickle in today.
I have been very anti-lululemon shares for the past year. The company has had too much competition, and too little "wow" in its product line. But I believe it is finally getting its product-development capabilities back up to snuff. The product is looking better, and interestingly, foot traffic has increased for two straight quarters, even despite declining mall traffic. Although the valuation on the company still bothers me, there may be some wind left in the stock's post-earnings related run.