KIMBERLY CLARK CORP (KMB)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered resilient profitability but softer top line: net sales $4.84B (-6.0% YoY; -1.8% QoQ) as FX and divestitures weighed; adjusted EPS $1.93 (-4.0% YoY; +28.7% QoQ) and reported gross margin 35.8% (up vs Q4) on strong productivity momentum .
• Versus S&P Global consensus, adjusted EPS beat ($1.93 vs $1.89) while revenue missed ($4.84B vs $4.89B); 15 EPS and 10 revenue estimates anchored consensus; management cited pricing investments and tariffs for near-term pressure. Bold beats/misses: EPS beat; Revenue miss.*
• 2025 outlook lowered: Adjusted Operating Profit and Adjusted EPS now flat to positive (constant currency) vs prior high single-digit and mid-to-high single-digit growth; Adjusted FCF now ~$2B vs >$2B prior; FX drag reduced modestly vs January guide .
• Key narrative catalysts: $300M gross tariff headwind being mitigated via network re-optimization, maintained brand support and innovation cascade (e.g., Huggies Snug & Dry) to defend share and affordability; expected organic acceleration in Q2 on easier comps and activations .

What Went Well and What Went Wrong

What Went Well

• Productivity and margin execution: reported GM 35.8% and adjusted GM 36.9% (down 20 bps YoY but up vs Q4), with SG&A savings beginning to flow; adjusted operating profit $844M (down 6% YoY) despite FX headwind .
• North America operating profit +1.3% YoY to $676M despite divestiture and pricing investments, driven by productivity and M&S/R&G optimization .
• Management commitment to innovation across “good-better-best” tiers and preserving marketing support; Huggies Snug & Dry upgrades positioned to win value-conscious consumers (“we want to put the best product in front of the consumer”) .

What Went Wrong

• Top-line softness: consolidated organic sales -1.6% YoY driven by -1.5% price; IPC organic -2.8% and IFP organic -2.3% as price investments and FX weighed; consolidated net sales -6.0% YoY .
• Tariffs/macro cost shock: ~$300M gross tariff impact (net ~$200M) driving guide cut; Q2 flagged as the largest tariff headwind quarter (~200 bps GM headwind vs PY) before mitigation ramps .
• Equity income and FX: equity companies net income fell to $44M (from $61M) primarily on currency; adjusted EPS down 4% YoY despite lower adjusted tax rate, reflecting lower adjusted Op Profit and equity income .

Financial Results

Summary vs Prior Periods and Consensus

Notes: consensus metrics marked with an asterisk are S&P Global values; Values retrieved from S&P Global.

Segment Breakdown

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Building on the strong foundation we established in 2024, we made further progress across the three pillars of our Powering Care strategy…our first quarter was consistent with our full-year plan.” – Mike Hsu, CEO .
• “The current environment will now mean greater costs across our global supply chain…we remain confident in our ability to offset these costs over time…Our innovation across the good-better-best value spectrum is winning with consumers and enabling us to gain share.” – Mike Hsu .
• “We intend to keep investing behind the innovation and the marketing plans…we are maintaining [capex] $1.0–$1.2 billion…despite the headwinds.” – Nelson Urdaneta, CFO .
• “We don’t really see promotion as a sustainable driver of growth…we do see it as a useful trial vehicle for innovation.” – Mike Hsu .
• “We intend to already be able to address about 1/3 of the [tariff] impact this year…It will take us through 2026 to pretty much be able to address the whole element.” – Nelson Urdaneta .

Q&A Highlights

• Organic growth bridge and acceleration: management cited fewer shipping days (~100 bps), lower private label shipments (~40 bps total; ~80 bps NA), and strategic pricing investments; expects Q2 acceleration on easier comps and activations .
• Tariff impact and mitigation: ~$300M gross tariff headwind (2/3 from US-China finished goods tariffs; remainder reciprocal/retaliatory), ~net $200M; Q2 biggest impact; mitigation through network re-optimization over 2025–2026 .
• Affordability strategy: cascade premium innovations down tiers (e.g., Huggies Snug & Dry) to win value-seeking consumers while maintaining PNOC discipline; promotions used for trial, not volume growth .
• Savings trajectory: gross productivity 5.2% in Q1; aiming upper end of 5–6% range for 2025; SG&A savings contributing leverage while preserving brand support .

Estimates Context

• EPS vs consensus: Adjusted EPS $1.93 vs $1.891 consensus – beat.*
• Revenue vs consensus: Net sales $4.84B vs $4.894B consensus – miss.*
• Implications: Expect near-term estimate revisions reflecting tariff costs, pricing investments, FX, and lower equity income; management’s maintained brand support suggests EPS back-half mitigation contingent on supply chain actions .

Values retrieved from S&P Global.

Key Takeaways for Investors

• Near-term tariff headwinds (~$200M net) drive 2025 guide reset; Q2 likely the trough on gross margin before mitigation ramps in 2H and into 2026 .
• Productivity and SG&A savings continue to provide offset, enabling maintained brand support and innovation cadence—supportive of share defense in value tiers .
• Organic acceleration expected in Q2 on easier comps and activation slate; watch IPC/IFP price investments and Latin America softness as top-line swing factors .
• Segment mix resilient: NA operating profit up YoY despite divestiture/exits; international segments pressured by currency and price investments—FX remains a key variable .
• Capital deployment intact: dividend maintained at $1.26/share; $2B NA manufacturing/distribution investments (AI-enabled DC) signal confidence in multi-year growth and margin roadmap .
• Trading setup: EPS beat vs miss on revenue and lowered FY guide suggests debate on durability of margin offsets; catalysts include visibility on tariff mitigation, Q2 organic inflection, and supply chain investment milestones .