GuruFocus -
- Revenue: Not explicitly mentioned in the transcript.
- Gross Margin: Not explicitly mentioned in the transcript.
- Net Income: Not explicitly mentioned in the transcript.
- Productivity: Fueling investments in innovation to support growth initiatives.
- Organizational Structure: Successfully completed new structure on October 1.
- Headwinds: Retail inventory reductions, lower demand in private label, weaker demand in North American professional channels, deceleration in Asia and Latin America.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kimberly - Clark de Mexico SAB de CV (KCDMF) is making significant progress in advancing its power and care strategy, aiming to deliver above its long-term growth algorithm in 2024.
- The company is driving consumption and growing its market share across categories through innovation and enhanced commercial execution.
- Productivity improvements are fueling investments in innovation, supporting growth initiatives while delivering bottom-line growth.
- The new organizational structure, completed on October 1, is expected to make Kimberly - Clark de Mexico SAB de CV (KCDMF) a better, faster, and stronger organization.
- The company has successfully exited certain private label businesses, allowing it to focus on proprietary, science-based innovation and branded growth.
- Retail inventory reductions and lower demand in private label businesses are creating pressures on growth in the near term.
- Weaker than anticipated demand in North American professional channels and some deceleration in Asia and Latin America are noted as headwinds.
- The company faces a 2% headwind in 2025 due to the cessation of production for a large club private label diaper business in the US.
- There is some underlying demand weakness in professional and international markets, impacting overall growth.
- The quarter's results fell short of internal expectations and the Street's, partly due to transitory factors like inventory movements and hurricane impacts.
A: Michael Hsu, CEO, explained that retail inventory reductions are localized and reflect supply challenges from last year. The reductions have caused an 80 basis point headwind to global net sales year-to-date, primarily in North America. Retail inventories are now consistent with historical levels, but further reductions could impact organic growth to around 3% for the full year.
Q: How is the market share and competitive environment, particularly regarding innovation like Skin Essentials?
A: Michael Hsu, CEO, stated that the company is focused on growing market share and expanding categories. They are making progress, especially in the US, with strong consumption and market share gains. Innovation, such as Skin Essentials, aims to drive trade-up and premiumization across all product tiers.
Q: Could you elaborate on the exit from private label businesses and its impact on your long-term goals?
A: Michael Hsu, CEO, noted that the company is focusing on proprietary innovation and branded growth, leading to exits from private label businesses. This shift has allowed for capacity expansion in branded products like Kleenex. The private label mix will decrease from 4% in 2023 to 2% in 2025, supporting their gross margin goal of at least 40% by 2030.
Q: What is the outlook for gross margins given the current cost environment and promotional needs?
A: Nelson Urdaneta, CFO, highlighted that gross margins are averaging 37% year-to-date, with sustainable gains expected. The company is focusing on margin-accretive innovation, proactive cost management, and strong productivity. While input costs have slightly increased, the company remains confident in its long-term margin goals.
Q: How does the new organizational structure align with your growth expectations, particularly for 2025?
A: Michael Hsu, CEO, expressed confidence in the new structure, which has been informally in place for months. The organization is expected to drive category growth and respond quickly to market conditions. Despite some category softness, the company aims to lead growth and maintain share gains globally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.