Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kimberly-Clark Corp (KMB, Financial) reported strong organic sales growth with positive volume trends.
- The company made significant market share gains in key international markets, including China, the UK, South Korea, and Brazil.
- Kimberly-Clark Corp (KMB) is effectively navigating external dynamics and driving a consumer-centric culture.
- The company is on track to deliver its profit dollar objectives for the year, providing flexibility for further investments.
- Kimberly-Clark Corp (KMB) has a robust innovation pipeline and is making strategic investments in its brands and technology.
Negative Points
- The company faced unexpected headwinds from inventory destocking, particularly in North America.
- There are ongoing challenges with supply constraints in certain categories, such as Scott 1,000 bath tissue.
- Kimberly-Clark Corp (KMB) is exiting small markets like Nigeria and Bolivia, which may have short-term impacts on growth.
- The company expects lower absolute dollar productivity delivery in the second half of the year.
- There is increased consumer price sensitivity and promotional activity in the market, which may impact pricing and margins.
Q & A Highlights
Q: Can you provide an update on market share trends and how you are performing against competition and private labels?
A: Overall, we are making good progress on market share and expect further improvement throughout the year. Globally, we are even on a weighted basis and up or even in about half of our cohorts. North America has improved from last year, and we have seen solid gains in key markets like China, the UK, South Korea, and Brazil. However, there is still work to be done.
Q: How do you see market share gains translating into growth, especially outside the US and China?
A: We have a proven playbook that we are implementing more systematically. We are focusing on our key markets and leveraging our technology and commercial capabilities. Local conditions remain dynamic, and we are working to tighten our brand propositions on a market-specific basis. We expect to see growth as we continue to invest in our brands and innovation.
Q: Can you discuss the cadence of margins and EPS in the back half of the year, especially with increased investments?
A: We expect the second half to grow at a similar pace to Q2, with volume and mix as key drivers. Productivity delivery has been solid, and we expect lower absolute dollar productivity in the second half. Pricing net of costs will taper off, but we aim to be at least neutral for the year. We will also increase investments in our brands, with spend closer to 7% of sales in the second half.
Q: What is the current pricing environment in North America for personal care and consumer tissue?
A: The pricing environment remains stable, with promotional activity returning to pre-pandemic levels. We are focused on volume and mix-driven growth and maintaining pricing net of input cost discipline. Our strategy is to ensure strong value propositions across the value spectrum, supported by advertising and innovation.
Q: How are the organizational design changes progressing, and how do new hires fit into the strategy?
A: We have made interim moves to facilitate a smoother transition. The organization is making good progress with the new structure. New hires Patricia and Craig bring valuable expertise in consumer health and transformational leadership, which will advance our power and care strategy.
Q: Can you provide more color on the savings from supply chain transformation and overhead reductions?
A: The majority of savings will come from supply chain transformation, including value stream simplification, network optimization, and scalable automation. We are ahead of our productivity delivery plans, with $255 million in savings year-to-date. Overhead savings will kick in more significantly once the new organizational model is fully in place.
Q: How do you see retail inventory changes impacting North American volumes, and what are your expectations for the second half?
A: We focus on consumption trends, which remain healthy. There may be some inventory noise, but we expect overall volumes to be driven by volume and mix growth. We are encouraged by the progress and expect continued positive trends.
Q: Can you elaborate on the volume improvement in the quarter and the balance of pricing and investment to offset cost inflation?
A: Demand remains resilient across categories, with healthy underlying growth. We are sharpening our positioning across the value spectrum and closely monitoring consumer sensitivity. We expect volume and mix to drive growth in the second half, with pricing net of costs remaining neutral or positive for the year.
Q: What are your expectations for North American tissue volumes and promotional activity in the second half?
A: We expect volumes to improve as we focus on volume and mix-driven growth. The promotional environment is stable, and we are leveraging predictive modeling tools to make the right choices. Our focus is on profitable growth through advertising and innovation.
Q: Will volumes in North American tissue inflect in the second half?
A: Yes, we expect positive volume growth across all businesses, including North American tissue, as we continue to emphasize volume and mix-driven growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
