Financial Performance

Kimberly-Clark Misses on Sales, Profit Beats

Continued weakness in North America hurt Q3 sales but the company's cost-cutting helped drive a 3% gain in net income.
Matthew HellerOctober 23, 2017

Kimberly-Clark reported lower-than-expected quarterly sales on Tuesday amid continued weakness in the North American market but the personal care company’s cost-cutting helped drive a 3% increase in profit.

For the third quarter, Kimberly-Clark’s net revenue totaled $4.64 billion, up 1% from $4.59 billion a year ago but below the $4.66 billion FactSet estimate.

North America sales from the company’s personal care segment, which includes Huggie’s diapers and baby wipes, fell 3% as net selling prices declined 2% due in part to higher promotion spending in adult and feminine care.

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But net income rose to $579 million from $563 million and earnings increased to $1.60 per share from $1.52 per share. Analysts had expected EPS of $1.54.

“We delivered bottom-line growth in the third quarter in a challenging environment,” CEO Thomas Falk said in a news release. “We also achieved $125 million of cost savings and reduced discretionary spending to help offset inflationary cost headwinds.”

The company has been planning to save as much as $450 million through its FORCE (Focused on Reducing Costs Everywhere) initiative over the full year.

Kimberly-Clark’s tissue, diaper, and cleaning brands are sold in 175 countries around the world. But as The Motley Fool reports, “it generates most of its revenue, and more than two-thirds of profits, from the U.S. market. That geographic focus has produced a bigger sales slump for the company than rivals as the U.S industry slows to a halt. “

Net sales for the second quarter had fallen 1% after being flat in the first quarter.

After lowering its 2017 outlook in late July for the second straight time, Kimberly-Clark said Monday it continues to expect full-year net and organic sales will be similar, or up slightly, year-on-year. It also continues to anticipate that full-year 2017 earnings per share will be at the low end of its target range of $6.20 to $6.35.

In trading Monday, the company’s shares fell 0.8% to $112.53. They are down 9.5% for the past three months.