GuruFocus - Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kimberly-Clark Corp (NYSE:KMB) has made significant progress in advancing its power and care strategy, which is expected to deliver above long-term growth targets.
- The company has successfully completed a new organizational structure aimed at making it a better, faster, and stronger organization.
- Kimberly-Clark Corp (NYSE:KMB) is experiencing strong consumer offtake in North America, with personal care and consumer tissue growing by 3.2%, ahead of the category.
- The company is seeing positive market share trends, particularly in the U.S., where it is up or even in seven of eight categories.
- Kimberly-Clark Corp (NYSE:KMB) has achieved meaningful gross margin expansion, tracking ahead of pre-COVID levels, supported by strong productivity and cost management strategies.
- Kimberly-Clark Corp (NYSE:KMB) is facing discrete headwinds, including retail inventory reductions and weaker-than-anticipated demand in North American professional channels.
- The company is experiencing lower demand in private label businesses that it is exiting, which has impacted sales.
- There is some underlying demand weakness in professional and international markets, particularly in Latin America and Southeast Asia.
- Kimberly-Clark Corp (NYSE:KMB) anticipates a potential 2% headwind in 2025 due to the cessation of a large club private label diaper business in the U.S.
- The company is navigating a dynamic consumer and retail environment, which could lead to further retail inventory reductions through the fiscal year ends.
A: Michael Hsu, CEO: The retail inventory reductions are localized and reflect supply challenges from last year. We had a packaging supplier issue that impacted our personal care brands, leading to a spike in inventories last year. This year, we're seeing about an 80 basis point headwind to global net sales, primarily in North America. Retail inventories are now consistent with historical levels, but further reductions could affect our organic growth for the full year.
Q: How is Kimberly-Clark performing in terms of market share and innovation?
A: Michael Hsu, CEO: We're focused on growing market shares and expanding categories. Globally, we're about flat on a weighted basis, with strong progress in the US. Our strategy involves investing in better products and pioneering innovation. While some innovations like skin essentials have high cannibalization rates, we're focused on delivering value across all tiers.
Q: Can you provide more details on the exit from private label businesses and its impact?
A: Michael Hsu, CEO: We're focusing on proprietary innovation and brands, moving out of private label businesses over the past 18 months. This has allowed us to grow our branded business, like Kleenex, which saw a significant share increase. In 2025, we'll cease production for a large club private label diaper business in the US, creating a 2% headwind next year. Our private label mix will shrink from 4% in 2023 to 2% next year.
Q: How sustainable are the current gross margin levels, and what factors are influencing them?
A: Nelson Urdaneta, CFO: We're pleased with our gross margin trajectory, averaging 37% for the year. Key drivers include meaningful innovation, proactive cost management, and strong productivity. While margin progression isn't linear, we expect continued year-over-year gains. Our focus is on volume and mix-driven organic growth, with pricing to offset cost inflation receding as planned.
Q: How is the new organizational structure impacting category growth and future projections?
A: Michael Hsu, CEO: The new structure is operational as of October 1, and we're seeing benefits. While category growth is resilient, we're mindful of affordability and brand value propositions. Full-year weighted category growth is likely closer to 2%. We're focused on leading category growth and maintaining share globally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.