Kimberly-Clark Corporation KMB touched a 52-week high of $122.89, before closing the session a tad lower at $122.05 on Mar 22. Notably, the company has been gaining from its robust cost-saving efforts. Further, the company is on track with e-commerce growth and expansion in the developing markets.
Backed by these tailwinds, shares of this Dallas, TX-based company have gained approximately 14% in the past three months, outperforming the industry’s 9.2% growth.
Let’s take a closer look at the aspects driving the company’s performance.
Factors Narrating Kimberly-Clark’s Growth Story
Kimberly-Clark has been taking significant steps to curtail costs. This is quite evident from the company’s 2018 Global Restructuring Program and the FORCE Program. In fact, the 2018 Global Restructuring Program marks the company’s major restructuring initiative in a long time now.
This plan is likely to boost Kimberly-Clark’s underlying profitability by simplifying supply chain and manufacturing structures, thereby helping it compete better and providing greater flexibility to undertake growth-oriented investments. During the fourth quarter of 2018, Kimberly-Clark generated savings of roughly $55 million from its restructuring program.
These apart, Kimberly-Clark is aggressively cutting costs and enhancing supply chain productivity through its Focus on Reducing Costs Everywhere or FORCE Program. The program has been helping the company to realize solid cost savings for quite a while. During the fourth quarter of 2018, Kimberly-Clark generated savings of $75 million from this program. For 2019, the company expects savings in the range of $300-$325 million from the FORCE Program.
Furthermore, this Zacks Rank #3 (Hold) company strives to improve brand positions and market share. In a bid to drive growth, the company continues to stay focused on innovation, particularly in the training pant category. Kimberly-Clark also plans to innovate products under categories like tissues, Huggies baby wipes, Poise pads and Depend underwear.
Additionally, the company focuses on improving its core business in the developed markets, accelerating growth in the Personal Care segment in developing and emerging markets as well as enhancing digital and e-commerce capacities.
However, we note that the company has been struggling with high input costs for a while now. Evidently, commodity cost inflation of $215 million due to increased costs of pulp and other raw materials weighed on Kimberly-Clark’s results in the fourth quarter of 2018. Moreover, management expects input cost inflation in the range of $300-$400 million for 2019.
Nevertheless, we expect the company’s strategic endeavors to address the aforementioned challenges and help sustain momentum.
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