Sales versus estimate
Consumer product companies are struggling to accelerate sales growth in developed markets, including North America and Western and Central Europe. A category slowdown and increased competition are negatively impacting sales. As for Kimberly-Clark (KMB), its 2Q17 sales of $4.6 billion missed analysts’ estimate marginally and fell 0.70% YoY (year-over-year). Lower sales in developed markets are to blame.
North America plays spoilsport
Kimberly-Clark’s top line continues to suffer from a weakness in the North American market, mainly the United States. In 2Q17, the company’s organic sales at its consumer businesses in North America fell 2.0%, reflecting lower shipments, increased competition, and moderating demand. Volumes in its Personal Care segment fell 1.0% due to lower category demand and heightened competitive activity. The company plans to increase its marketing and promotional spending to drive category demand in the coming quarters. However, softness in category growth and higher marketing spending could result in lower margins for the region.
In comparison, its peers Procter & Gamble (PG) and Colgate-Palmolive (CL) are also struggling in North America, which is a major reason behind their sluggish top-line performances. In contrast, Clorox (CLX) and Church & Dwight (CHD) are generating industry-leading sales and volumes growth on the home turf through their strong portfolios of innovative brands.
Other developed markets also struggling
Kimberly-Clark’s organic sales fell 3.0% in other developed markets such as South Korea, Australia, and Western and Central Europe. In South Korea, sales for its Personal Care segment suffered from a decline in the diaper category since a significantly low birth rate resulted in tepid demand. Persisting challenges in Western and Central Europe also dragged volumes down. Management expects South Korean sales to improve in the second half of the year due to product upgrades and the relaunch of baby wipes.
Emerging markets drove growth
Kimberly-Clark’s organic sales in developing and emerging markets rose 2.0% due to an increase in volumes. However, lower pricing continues to remain a drag. In China (FXI), the company’s organic sales in diapers remained flat since improved volumes were offset by a reduction in selling prices. In Brazil, organic sales for the company’s personal care segment fell in the high single digits. In Argentina, organic sales in the personal care segment were driven by higher pricing. Notably, in Russia, volumes remained strong.