Focus on three key strategic growth pillars along with the K-C Strategy 2022 has been working favorably for
Kimberly-Clark Corporation ( KMB Quick Quote KMB - Free Report) . The consumer products company is benefiting from essential steps to cut costs and enhance supply-chain productivity amid an inflationary environment. Let’s discuss further. Image Source: Zacks Investment Research What’s Working Well for Kimberly-Clark?
Kimberly-Clark is committed to its three key strategic growth pillars. These include improving its core business in the developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. The company expects to meet these objectives through product development across different categories and leveraging capabilities in marketing and sales. The company has been progressing well with these objectives, which have been aiding its portfolio and expanding global business. In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. The investment in Thinx is in tandem with Kimberly-Clark’s intentions to create a portfolio of period and light bladder leakage solutions. The move will allow Kimberly-Clark to accelerate category growth with its retail partners.In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market.
Kimberly-Clark's K-C Strategy 2022, introduced in January 2019, bodes well. The strategy is focused on generating balanced and sustainable growth to return value to shareholders in a tough environment. The program also concentrates on strengthening the company’s brand portfolio, undertaking efficient capital allocation and executing robust cost discipline. Will Cost Hurdles be Countered?
Kimberly-Clark has been battling high input costs for the past few quarters. The trend persisted in the first quarter of 2022, with a gross margin of 29.8%, which contracted 420 basis points compared with the year-ago quarter’s adjusted gross margin. The metric was hurt by more-than-anticipated input cost inflation. Adjusted operating profit amounted to $629 million, down from $804 million in the year-ago quarter. The upside can be attributed to a rise in input costs to the tune of $470 million. An increase in pulp and polymer-based materials, distribution and energy costs led to a rise in input costs. Escalated marketing, research and general expenses and unfavorable foreign currency also affected operating profit.
Management expects adjusted operating profit to be down low to mid-single digits percent in 2022. Key input costs are estimated to escalate by $1.1-$1.3 billion in 2022, up from the initial expectation of $750-$900 million. Management expects costs to rise or remain escalated for most inputs like polymer-based materials and pulp and distribution and energy. While input costs are expected to flare up in 2022, management is focused on undertaking relevant pricing actions to counter inflation and efficiently manage costs. Kimberly-Clark aggressively cuts costs and enhances supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. The program has been generating solid cost savings for a while, which is driving performance. During the first quarter of 2022, the company generated savings of $50 million from the FORCE program. The Zacks Rank #3 (Hold) company’s shares have gained 7.2% in the past three months against the industry’s decline of 5.9%. 3 Solid Staple Stocks
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