TEXAS (From news reports) -- Irving-based Kimberly-Clark Corp., the owner of the Kleenex brand, reported quarterly sales that trailed estimates, partially driven by retailers lowering their stocks of the company's bath tissue and intensifying private-label competition.
Organic sales growth, which strips out factors such as currency volatility, was 4% in the second quarter, falling short of the average analyst estimate of 5%. Revenue dropped from the same period a year ago, mostly due to weaker results at the company's tissue segment, which includes toilet paper.
Shares of Kimberly-Clark fell 2.5% at 9:41 a.m. in New York trading Tuesday. The stock had advanced 19% so far this year through Monday's close, slightly above the gain of the S&P 500 Index over the same period.
Retailers' inventories have declined amid a shift back to a just-in-time stocking model, a strategy that was disrupted by the COVID pandemic when consumers stockpiled large volumes of goods. Chief Executive Officer Michael Hsu added on a call with analysts that supply of Scott 1000, one of the company's toilet paper brands, has been somewhat constrained this year, while private-label brands are offering more promotions.
Consumer goods makers such as Kimberly-Clark have also been hit by shoppers who are increasingly under pressure as they pay more for basic goods. This means that companies can no longer use higher prices to reliably boost sales as in past years. Kimberly-Clark's revenue missed Wall Street's expectations, despite prices in the quarter that were 2% higher than a year earlier.
Even so, the owner of Cottonelle toilet paper increased its outlook for adjusted earnings this year, a sign that productivity gains are helping profitability despite slower-than-expected sales growth. The measure is expected to grow by a mid-to-high teens percentage rate, compared with a previous view of growth in the low teens. The company maintained its earlier organic sales projection.
Kimberly-Clark has said it can generate more than $3 billion in gross productivity gains and $500 million in working capital savings over the next several years. It's achieving this, in part, with automation including robotics, and by simplifying manufacturing and distribution facilities.
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