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Kimberly-Clark Stock Has Fallen ~16% YTD—What’s Happening?

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Stock underperforms

Like most of its peers, Kimberly-Clark (KMB) stock has underperformed the broader market so far this year. The company’s stock has fallen 15.8% on a YTD (year-to-date) basis as of June 20, reflecting a challenging business environment.

The company’s peers are doing no better. Shares of Procter & Gamble (PG), Colgate-Palmolive (CL), and the Clorox Company (CLX) have fallen 17.4%, 15.3%, and 14.7%, respectively, on a YTD basis.

The sluggishness in the stock prices of these companies has also weighed on the performance of the Consumer Staples Select Sector SPDR ETF (XLP), which has fallen 10.2% during the same period. XLP invests a significant portion of its holdings (~19.5%) in these stocks. In comparison, the S&P 500 Index (SPX) has risen 3.5% YTD.

What’s hurting Kimberly-Clark stock?

Kimberly-Clark stock has managed to improve its sales and earnings in the past three quarters. However, continued pressure on its margins has taken a toll on its stock. Significant inflation in both transportation and raw materials costs is pushing its margins down. The business’s reinvestment needs have also acted as a deterrent to its performance.

A heightened competitive environment, low birth rates, and trade spending to drive volumes are expected to restrict the company’s top line growth rate. Amid these challenges, a sharp decline in the effective tax rate, cost savings and restructuring measures, and innovation-led products are likely to support the company’s sales and earnings going forward.

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