Kimberly Clark ((KMB)) has held its Q1 earnings call. Read on for the main highlights of the call.
Kimberly-Clark’s recent earnings call highlighted a challenging environment, with significant tariff and cost headwinds impacting profitability. Despite these hurdles, the company is making strides with its Powering Care strategy and product innovations. While SG&A savings and successful product launches are positive developments, the significant impact of tariffs and less-than-expected sales growth remain notable concerns.
Strong Progress in Powering Care Strategy
Kimberly-Clark reported solid progress across the three pillars of their Powering Care strategy, building on a strong foundation established in 2024. The company is optimizing margins and delivering world-class gross productivity enabled by their integrated margin management approach.
SG&A Savings on Track
Kimberly-Clark is on track to generate approximately $200 million of SG&A savings over the next few years, with some savings already realized in the first quarter. This initiative is a crucial component of their strategy to enhance profitability amidst challenging market conditions.
Successful Product Innovations
The company is launching a slate of innovations, such as Huggies Snug & Dry in North America, which has received positive reviews from consumers and is expected to drive growth. These innovations are part of Kimberly-Clark’s efforts to strengthen its market position and cater to evolving consumer needs.
Organic Sales Growth Below Expectations
Organic sales in North America were slightly below expectations due to factors such as one less day of shipments, lower year-on-year North America private label shipments, and strategic pricing investments. This shortfall highlights the challenges Kimberly-Clark faces in achieving its sales targets.
Significant Tariff Impact
Kimberly-Clark faces an incremental $300 million in tariffs, with two-thirds coming from US tariffs on China and the rest from US reciprocal tariffs and retaliatory tariffs from other countries. This significant tariff impact poses a substantial challenge to the company’s profitability.
Challenging Cost Environment
The cost environment remains challenging with an additional $300 million gross impact from tariffs and an unchanged $200 million cost from inflation. These cost pressures are critical factors that Kimberly-Clark must navigate to maintain its financial health.
Forward-Looking Guidance
During Kimberly-Clark’s first quarter 2025 earnings call, the company provided guidance reflecting a nuanced balance of challenges and strategic initiatives. Despite a slightly softer-than-expected top line, the company’s performance aligned with its yearly plan, emphasizing its Powering Care strategy. Kimberly-Clark anticipates generating approximately $200 million in SG&A savings over the next few years and is targeting 1.5% to 2% organic sales growth by year-end, signaling a significant ramp-up from the first quarter. The company also faces a noteworthy $300 million gross impact from tariffs and aims to offset one-third of this in 2025, with full mitigation by 2026. To support its strategy, Kimberly-Clark is investing heavily in innovation and marketing, maintaining a 6% advertising level consistent with the prior year, and focusing on providing stronger consumer value propositions globally. As part of its long-term vision, the company seeks to deliver industry-leading productivity and aims to sustain its gross margin target of at least 40% by the decade’s end.
In conclusion, Kimberly-Clark’s earnings call painted a picture of resilience amidst a challenging environment. The company’s commitment to its Powering Care strategy and product innovations provides a positive outlook, although significant tariff impacts and cost pressures remain concerns. Investors will be keenly watching how Kimberly-Clark navigates these challenges while striving to achieve its financial targets.