Kimberly-Clark lowers sales forecast amid consumers opting for cheaper alternatives
Company misses Wall Street expectations in the third quarter as changing consumer behavior and rising competition from private labels intensify
Kimberly-Clark, the maker of Kleenex tissues and Huggies diapers, has revised its annual organic sales growth forecast downward after missing Wall Street’s third-quarter expectations. The slowdown in sales is linked to consumers opting for cheaper personal care products, moving away from the company’s more well-known and expensive brands.
Despite maintaining its annual profit forecast, Kimberly-Clark’s shares fell about 4% in early trading on Tuesday. Inflation in the United States, while lower than previous peaks, continues to weigh on consumer purchasing power. As input costs rose, the company increased its prices, leading to a growing shift toward more affordable private label brands.
During the quarter ended September 30, Kimberly-Clark’s prices rose by 1%, but total sales volume remained flat compared to the same period last year. Even so, the company managed to report adjusted earnings of US$ 1.83 per share, beating analysts’ expectations of US$ 1.70, according to LSEG data.
This scenario reflects a broader trend in the consumer goods market, with other major companies facing similar challenges. Procter & Gamble, for example, reported an unexpected drop in quarterly sales, due to lower demand from consumers in both China and the United States.
In addition to shifting consumer behavior, Kimberly-Clark also faced operational challenges, such as lower shipments in North America caused by lost shipping days due to Hurricane Helene, which affected its facilities in the southeastern U.S.
The company’s CFO, Nelson Urdaneta, stated that the fourth-quarter sales profile is expected to be similar to the third quarter, indicating that challenges in the consumer environment and potential retail inventory cuts will continue to impact results.
Industry analysts, such as Rachel Wolff from eMarketer, note that the current landscape is putting pressure on consumer packaged goods (CPG) companies like Kimberly-Clark. With price sensitivity outweighing brand loyalty, CPGs face the challenge of winning back consumers who now prioritize value over brand.
As a result, the company expects net organic sales growth to be between 3% and 4% in 2024, down from its previous forecast of mid-single-digit growth. From July to September, total sales in the consumer tissue paper segment dropped by 2%.
Recently, Bloomberg reported that Kimberly-Clark may sell its international tissue paper business for about US$ 4 billion, aiming to focus on more profitable areas.
Another negative highlight was the performance of the Huggies brand, which recorded a 4% drop in quarterly sales, totaling US$ 4.95 billion, below analysts’ expectations of US$ 5.05 billion.
