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Why Kimberly-Clark’s Sales Could Continue to Decline in Q1

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Factors to drag sales down

Kimberly-Clark (KMB) has exceeded analysts’ sales estimate in the past two consecutive quarters thanks to the improvement in pricing. However, its top line declined on a YoY basis in both these quarters. We believe that Kimberly-Clark’s sales will likely continue to fall in the first quarter and the rate of decline will likely increase sequentially.

Kimberly-Clark’s top line is expected to take a hit from adverse currency rates. Meanwhile, volumes in the consumer tissue segment could stay low, which in turn, could impact its net sales growth rate. Moreover, the birth rate declines in South Korea, heightened competition in the value segment, and lower pricing in China could further drag sales down. Also, Kimberly-Clark faces tough YoY comparisons. Kimberly-Clark’s top line increased by more than 5% during the prior-year quarter.

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Consensus estimate

Analysts expect Kimberly-Clark to post net sales of $4.5 billion in the first quarter of 2019, which implies a YoY decline of 4.2%. However, organic sales could improve on a YoY basis driven by an increase in pricing.

In comparison, Colgate-Palmolive’s (CL) net sales are also projected to decline in the near term, reflecting adverse currency rates and weak organic volumes. Procter & Gamble’s (PG) top line is likely to benefit from higher pricing. However, net sales could stay flat or increase marginally as currency headwinds could offset the benefits from higher pricing.

Meanwhile, Clorox (CLX) and Church & Dwight’s (CHD) top line is expected to gain from innovation-led products and price restructuring. However, currency volatility could hurt the company.

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