Huggies maker Kimberly-Clark is extending its cost-cutting efforts, including reducing its workforce by 12-13% over the next four years, as it seeks profitable growth amid weak sales in its key North American market.
The personal care company on Tuesday not only set a cost savings target of more than $1.5 billion over the 2018 to 2021 time period for its ongoing FORCE (Focused On Reducing Costs Everywhere) initiative, but also announced a new global restructuring program that is expected to generate annual savings of $500 to $550 million by the end of 2021.
The restructuring savings will be driven by cutting from 5,000 to 5,500 jobs, along with manufacturing supply chain efficiencies. About half the cuts will be in North America.
The future cost cuts come on top of the $450 million slashed by Kimberly-Clark as part of the FORCE program in 2017.
“This is the biggest restructuring we have undertaken since the introduction of our Global Business Plan in 2003, and it will make our company leaner, stronger and faster,” CEO Thomas Falk said in a news release.
“Combined, our restructuring and FORCE programs will generate more than $2 billion of total cost savings over the next four years, giving us substantial funds to drive profitable growth,” he added.
As CNBC reports, Kimberly-Clark is one of many consumer companies that, after enjoying “what has been widely considered to be overly optimistic stock prices,” are now trying “to find growth to match up with investors’ expectations, [while] faced with changing shopping habits and competitive pressures.”
Adding to the pressure, Amazon has launched a private-label diaper business and, according to Falk, the U.S. diaper market is being impacted by an unexpected decline in the birthrate as millennials delay starting families.
Kimberly-Clark also reported Tuesday that it earned a profit of $617 million, or $1.75 a share, for the fourth quarter as sales rose 1% to $4.58 billion. Net selling prices in the personal care segment declined 4% in North America, reflecting higher promotion spending in most categories.