Kimberly-Clark Corporation ( KMB Quick Quote KMB - Free Report) is focused on three key strategic growth pillars and the K-C Strategy 2022. The consumer products company is on track to undertake essential steps to cut costs and enhance supply-chain productivity amid inflationary pressure. Impressively, the Zacks Rank #3 (Hold) company expects net sales to grow 2-4% from the year-ago reported figure in 2022. Organic sales are anticipated to increase 5-7% for the full year. Let’s delve deeper. Growth Efforts on Track
Kimberly-Clark is committed to its three key strategic growth pillars. These include its focus on 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 with these objectives, aiding its portfolio and expanding its global business.
In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. The net impact of the Softex buyout and business exits in conjunction with the 2018 Global Restructuring Program increased sales by almost 1% in 2021. Image Source: Zacks Investment Research
Kimberly-Clark's K-C 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.
Kimberly-Clark is battling high input costs for the past few quarters. In the second quarter, gross margin came in at 30.2%, down 170 basis points compared with the adjusted gross margin in the year-ago quarter. Gross margin was affected by major input cost inflation. The company’s operating profit declined due to a rise in input costs to the tune of $405 million in the quarter. Escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit.
Management expects adjusted operating profit to be down mid-single digit percent in 2022. Key input costs are estimated to escalate by $1.4-$1.6 billion during the year. It expects costs to rise or remain escalated for most inputs like pulp and other raw materials and distribution and energy. Kimberly-Clark envisions 2022 earnings per share (EPS) in the lower end of the $5.60-$6.00 range, owing to significantly higher input cost projections for the year. Saving Efforts on Track
While input costs are expected to flare up in 2022, Kimberly-Clark is focused on undertaking relevant cost-cutting initiatives and pricing actions to counter inflation. Management aggressively cuts costs and enhances supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. During the second quarter of 2022, it generated savings of $45 million from the FORCE program. Management expects cost savings from the FORCE program in the range of $300-$350 million in 2022.
KMB’s shares have dropped 1.7% in the past six months compared with the industry’s 21.6% decline. Consumer Staple Stocks Worth a Look
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