Kimberly-Clark cuts lower end of sales guidance on stiff competition

The battle for the bottoms of North American babies continued to take its toll on US consumer goods maker Kimberly-Clark during the first quarter.

Shares in the company behind Huggies nappies and Kleenex tissue fell 1.8 per cent in pre-market trading on Monday after it lowered the bottom end of its full year organic and net sales forecasts.

With the headwinds caused by rising input costs and falling demand for its core products in North America showing little sign of abating, the company said it now expects organic and net sales to grow between 1 to 2 per cent this year, compared to its previous assumption of about 2 per cent growth.

“The update reflects modestly higher assumptions on average for several raw materials, including pulp, recycled fibre and polypropylene resin,” it said in a statement.

The revision comes as Kimberly-Clark reported first quarter net sales that were little changed from the prior year period at $4.48bn. Within this, organic sales fell 1 per cent during the period.

Huggies – which widely positions itself as a mid-tier brand – has seen its sales in North America squeezed as parents choose to either spend more on more upmarket brand Pampers or go downmarket with Luvs, both of which are owned by rival Procter & Gamble.

Kimberly-Clark said Huggies nappies volumes in North America fell by mid-single digits during the first quarter quarter, “reflecting category softness, competitive activity and less promotion shipments.”

Fierce price wars also weighed on sales of its other core business – consumer tissue products. Sales at the unit – whose brands include Kleenex and Cottonelle and Scott toilet paper – fell 3 per cent to $1.5bn during the quarter amid a 7 per cent slump in North American sales volume.

“The decline was mostly in bathroom tissue, including impacts from competitive activity and lower promotion shipments,” the company said.

Net income came in ahead of expectations however, rising 3 per cent to $563m, or $1.57 per share during the quarter, thanks to better cost control.