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 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.