Kimberly Clark’s Results Can Show Feminine Care Growth & Better Margins

Kimberly-Clark (NYSE:KMB), a personal care company that focuses on paper-based consumer products like tissues, diapers and feminine care products and owns popular brands like Huggies, Kotex, Kleenex and Scott, is due to announce its Q2 earnings this week. The company showed good performance last quarter with improved demand and sales volume in North America, which is its largest market. The gross margins also showed some recovery due to moderation in input commodity costs, higher pricing and savings. Kimberly-Clark competes with Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL).

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Margins Improve Despite Higher Spending

After a tough fiscal 2011, when high input costs and weak demand in the developed markets took a toll on the company’s earnings, Kimberly-Clark’s results showed a marked improvement last quarter eased by better demand, higher pricing, FORCE (Focused On Reducing Costs Everywhere) initiative and moderation of input commodity prices. While the personal care segment, which includes baby care (Huggies) and feminine care (Kotex), witnessed a 6% improvement in volumes, the tissues segment (consumer & professional) delivered significantly improved margins, benefiting from lower pulp costs, improved demand, higher pricing and pulp & tissue restructuring program.

The consumer demand has, however, been hurt by continued macro-economic weakness during the second quarter, leading to weaker forecasts, and we would watch out for its impact on Kimberly-Clark’s sales. ^[1]

Taps New Customers Through Expanded Feminine Wellness Line

Kimberly-Clark continued to roll-out new products last quarter, with the launch of Poise Feminine Wellness line, a first-of-its-kind line of consumer products designed specifically to cater to menopausal women in the U.S. and Canada. The comprehensive product line-up caters to the sparsely addressed health and hygiene needs of North America’s 50 million plus female population that is approaching or experiencing menopause. This would further push sales for Kimberly-Clark’s Poise brand that have grown steadily over the past five years, with sales up 56% to $475 million in 2011, according to Euromonitor International.

We have a $75.48 Trefis price estimate for Kimberly-Clark, at 10% discount to the current market price.

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1. Consumer Spending In U.S. Stalls As Hiring Weakens: Economy, Bloomberg, July 2012 [↩]