Retail Inventory Pressures Hit Kimberly-Clark's Annual Outlook, Stock Slides

Kimberly-Clark Corporation KMB shares are trading lower on Tuesday.

The company reported third quarter adjusted earnings per share of $1.83, beating the street view of $1.70. Quarterly revenues of $4.952 billion missed the analyst consensus of $5.048 billion.

Quarterly sales were down 4%, with organic sales growth of 1% versus the prior year.

Kimberly-Clark’s quarterly adjusted gross margin was 36.7%, up 90 basis points versus the prior year, driven by strong gross productivity gains.

The company’s volume and mix were positive in Developed Markets (representing Australia, South Korea, and Western/Central Europe), offset by a decline in North America, while volumes in Developing and Emerging (D&E) markets were in line with the year-ago period.

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Quarterly adjusted operating profit increased by 5% despite an unfavorable impact of 4 percentage points from currency translation that was primarily driven by hyperinflationary economies.

Excluding currency impacts, growth in adjusted operating profit reflected gross productivity gains, relatively neutral pricing net of cost inflation, supply chain related investments, as well as planned increases in marketing, research and general expenses.

Personal Care sales were $2.6 billion, down 2%, but organic sales in the segment grew 3% due to pricing actions in inflationary markets and better product mix, with volume steady across all markets.

Consumer Tissue sales were $1.5 billion, also down 2%, with segmental organic sales declining by 1%.

KCP sales fell 10% to $767 million due to divestitures and unfavorable currency effects.

The company exited the quarter with cash and equivalents worth $1.11 billion. Inventories as of quarter-end was $1.937 billion.

FY24 Outlook: The company expects organic net sales to grow by 3%-4%, down from a mid-single-digit rate, mainly due to changes in retail inventory levels. Reported net sales will still be negatively affected by 400 basis points from currency translation and 120 basis points from divestitures.

Adjusted operating profit and adjusted earnings per share are expected to grow at a mid-to-high teens percentage rate in constant currency.

Reported operating profit and reported earnings per share are now projected to be negatively impacted by about 650 basis points from currency translation, an improvement from the previous expectation of 700 basis points.

Price Action: KMB shares are trading lower by 5.12% to $136.83 premarket at last check Tuesday.

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