PG, CL, KMB, CLX: Why They Continue to Fall



Lower pricing and higher costs

Household and personal care product manufacturers have started the year on a weaker note as lower pricing amid increased competition and increased manufacturing and transportation costs are hurting their margins and their stocks.

Companies including Procter & Gamble (PG), Colgate-Palmolive (CL), and Kimberly-Clark (KMB) have been investing in price to accelerate volume growth, which is weighing on their margins. Plus, inflation in input product costs and higher packaging and logistics costs have further pressured margins.

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Clorox (CLX) managed to improve pricing thanks to its balanced portfolio of industry-leading brands. However, a tough YoY (year-over-year) comparison and the divestiture of the Aplicare business continues to weigh on its top line. Moreover, inflation in commodities and transportation costs are denting its margins.

However, amid challenges, these household and personal care product makers have been benefiting from innovation-based new product launches and favorable currency rates. Moreover, a focus on productivity and cost-savings supports profitability.

YTD stock performance

The graph above shows that stocks of household and personal care product manufacturers are trading in the red on a YTD (year-to-date) basis as of March 26, 2018. Investors remain wary of the fact that near-term margin headwinds and investments in price and brand building are likely to affect the margins of these companies.

Stocks of Procter & Gamble, Clorox, Kimberly-Clark, and Colgate-Palmolive have registered YTD declines of 16.8%, 16.5%, 12.5%, and 9.6%, respectively. In comparison, the S&P 500 Index (SPX-INDEX) is down about 1% on a YTD basis.


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