Q1 2024 Earnings Summary
- Kimberly-Clark reported better-than-expected volume growth despite retail inventory reductions, indicating strong consumer demand and improving market share, especially in North America where they were up or even in 6 of 8 categories.
- The company's successful innovation and premiumization strategy is driving double-digit growth in China, gaining market share in a declining category, with volumes up double digits against a category down about 10%.
- Strong productivity gains and cost management initiatives are improving margins, with the company stating they have very good productivity plans and can operate well even in a stable but slightly inflationary input cost environment.
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Guidance and Cautious Outlook
Q: Why didn't you raise guidance after Q1 beat?
A: Despite a strong Q1, we're maintaining guidance due to ongoing geopolitical challenges and rising commodity costs like pulp increasing in single digits. We prefer a prudent approach given these uncertainties. -
Input Cost Inflation Management
Q: How will you manage rising input costs like pulp?
A: We see input cost inflation as manageable, expecting net input costs to be around $250 million inflationary for the full year. With our productivity initiatives and improved tools, we can navigate slight inflation and maintain margins. -
Productivity and Savings
Q: Explain the $120M savings and $3B target.
A: We realized $120 million in non-procurement productivity savings this quarter, part of our $3 billion target over five years. Savings will be roughly linear over this period. -
Exiting Private Label Business
Q: Details on exiting private label production?
A: We're reducing private label production, which is about 4% of sales, by half by end of 2025 to focus on proprietary innovations. This allows us to invest capital in strategic priorities. -
Market Share Gains
Q: How are market share trends progressing?
A: We've made solid progress, up in nearly 60% of market categories. In North America, we're up or even in 6 of 8 categories. For example, Kleenex share rose over 400 basis points. -
Retailer Destocking Impact
Q: Impact of retailer destocking on sales?
A: Retail inventory reductions in Q1 were expected, impacting global sales by about 80 basis points and North America by 170 basis points. Stronger volumes offset this impact. -
China Sales Performance
Q: Is China growth due to market or share gains?
A: Our China volumes grew double digits, driven by strong execution and share gains, despite the category being down about 10%. We see further opportunities in this fragmented market. -
SG&A Investments and Leverage
Q: Status of SG&A investments and leverage?
A: We're increasing advertising spend, up 50 basis points this quarter. While we have more to do, we're balancing investments with healthy top and bottom line growth. -
Consumer Health and Demand
Q: How is consumer health affecting demand?
A: Overall demand is robust, with categories up about 5% in North America. Premium segments are growing strongly, though lower-income consumers show signs of strain. -
Early Savings vs. Guidance
Q: Why not reflect early savings in guidance?
A: Despite early savings, we're cautious due to uncertainties like geopolitical issues and input costs. Productivity benefits are not linear, and we plan to reinvest in innovation.