Why Investors Aren’t Generous on PG, KMB, CL, and CLX

PG, KMB, CL, and CLX are underperforming

Shares of household and personal care product manufacturers Procter & Gamble (PG), Clorox (CLX), Colgate-Palmolive (CL), and Kimberly-Clark (KMB) are underperforming the broader markets. Despite the fact that these companies have reported improvements in their volumes and earnings growth rates, investors don’t seem interested in giving them the benefit of the doubt.

On closer inspection, the recent improvements in the volumes of these companies have mostly been driven by increased promotional spending and advertising, not by any breakthrough innovations. Moreover, aggressive pricing by competitors, private label products gaining shelf space, and tight inventory management by retailers have posed further challenges.

Why Investors Aren’t Generous on PG, KMB, CL, and CLX

The margins of consumer packaged goods makers have also been disappointing investors given their increased promotional spending to drive volumes. Meanwhile, significant cost pressures from inflation in commodities and logistics have further dented margins.

YTD stock performance

Stocks of consumer packaged goods makers are trading in the red and have marked a double-digit fall on a YTD (year-to-date) basis as of May 15. Procter & Gamble, Clorox, Kimberly-Clark, and Colgate-Palmolive have fallen ~20.6%, 21.1%, 13.8%, and 18.3%, respectively, YTD.

Given the slump in the stock prices of these companies, the Consumer Staples Select Sector SPDR ETF (XLP) has fallen 13.3% YTD. XLP invests a significant portion of its holdings in these stocks. In comparison, the S&P 500 Index (SPX) has risen ~1.4%.