Kimberly-Clark Plans Higher Prices Through Next Year
Company's results fall short of expectations due to higher costs and shrinking demand for toilet paper, other pandemic staples
The maker of Huggies diapers and Cottonelle toilet paper said it expects to charge higher prices through 2022 in an effort to offset rising costs.
Kimberly-Clark Corp. on Friday reported its second-straight quarterly sales decline as well-stocked Americans bought less toilet paper and paper towels in a largely reopened economy.
Organic sales, a measure that strips out currency effects and deals, fell again, down 3%. Rising materials costs sliced profit and margins for the second quarter. Earnings fell more than 40%, worse than Wall Street anticipated.
Americans are cutting back on pandemic staples, from paper towels to cleaning wipes, just as product makers face soaring costs.
"Clearly our results did not turn out as expected," Kimberly-Clark chief executive Mike Hsu said Friday in a call with analysts.
Mr. Hsu said he expects to fully offset cost increases with higher prices the rest of this year and the duration of 2022.
Consumer-goods makers Clorox Co. and Colgate Palmolive Co., which will report financial results in coming days, face similar troubles, according to analysts and sales data.
Of the major players, only Procter & Gamble Co. appears on track for a solid, albeit more modest, quarterly performance.
The company is aided by a broader lineup less reliant on cleaning and quarantine-driven demand, while also benefiting from a pre-pandemic restructuring.
P&G previously announced plans to raise prices on baby products, adult diapers and feminine-care brands starting in September.
Individuals and retailers stocked up on toilet paper and paper towels at the height of the coronavirus pandemic last year for fear of missing out.
Now, people are using less toilet paper and paper towels at home and are still working through their stockpiles -- as are retailers. Demand also is falling for cleaning products and other household-care items that were in hot demand as people stayed home and focused intensely on hygiene.
Kimberly-Clark's home-care unit saw organic sales fall 17% compared with last year's second quarter when Americans were loading up on paper towels and toilet paper. Organic sales rose 6% for the company's personal-care unit and 2% in its commercial business.
Net income, hit by rising materials costs, fell to $410 million from $692 million. In prepared remarks, finance chief Maria Henry said this year is expected to deliver the biggest increase in materials costs in the company's history.
The company lowered its forecast for the year. Organic sales are pegged between flat and down 2%, compared with the prior prediction of flat to a 1% increase. Operating profit is expected to fall by 11% to 14%, worse than the 3% to 6% decline previously projected.
Dave Sebastian contributed to this article