Kimberly-Clark Corp. reported growth in its business-to-business sales segment for the fourth quarter and fiscal year, and overall e-commerce sales grew 30%. Still, the maker of such consumer paper staples as Kleenex tissues and Huggies diapers announced layoffs and factory closures as part of a restructuring plan aiming to save up to $2 billion in the next four years.
“Although we expect market conditions will remain challenging in the near-term, we plan to deliver better results in 2018 while we begin to implement our new restructuring,” says CEO Thomas Falk. “We expect organic sales to return to growth while improving our margins and delivering double-digit growth in adjusted earnings per share. In addition, we will increase investments in our brands, our growth initiatives and the capabilities we need for long-term success.”
President and chief operating officer Michael Hsu told analysts on today’s earnings call “We are already well-positioned and making good progress in e-commerce.” He added that “Online sales in 2017 were a high single-digit percentage of company sales and increased more than 30% year-on-year. We expect to make more progress in 2018,” according to a transcript of the call from Seeking Alpha.
Based on that metric, 9% of total sales were about $1.64 billion for the year.
Restructuring is expected to generate annual savings of $500 million to $550 million by the end of 2021. Revenue-increasing investment priorities include building digital and e-commerce capabilities, growing core businesses and increasing personal care sales in developing and emerging markets, the company said in a presentation to analysts today.
Cost-cutting moves by the producer of Kleenex tissues and Huggies diapers include 5,000 to 5,500 workers–or 12-13% of its headcount–as part of a drive to boost margins amid uneven revenue growth and higher material costs. Kimberly-Clark also will close or sell about 10 factories while expanding production at other sites, according to a company statement.
The cutbacks threaten American factory jobs at a time when the Trump administration is trying to reinvigorate the manufacturing economy. The company didn’t lay out where the jobs would be eliminated, other than saying they would hit every major region where it does business.
Falk says the changes will make the company “leaner, stronger and faster.”
Kimberly-Clark predicts the job cuts and restructuring will create annual cost savings of $500 million to $550 million by the end of 2021. The company reported fourth-quarter profit excluding some items of $1.57 a share, exceeding analysts’ average estimate of $1.55.
The shares fell as much as 1.5% to $115.18 in New York today. They had dropped 3.1% this year through Monday’s close.
For the fiscal year ended Dec. 31, 2017, Kimberly-Clark, No. 70 in the 2018 B2B E-Commerce 300, reported:
- Sales to distributors through its K-C Professional segment were $3.208 billion, up 1.9% from $3.150 billion in fiscal 2016. The company did not break out B2B sales conducted through its KCP Customer Portal at com.
- Net sales of $18.259 billion, flat compared with sales of $18.202 billion.
- Gross profit of $6.553 billion, down 1.5% from $6.651 billion.
- Net income of $2.319 billion, up 4.5% from net income of $2.219 billion in fiscal 2016.
For the fourth quarter ended Dec. 31, 2017, Kimberly-Clark reported:
- K-C Professional segment sales of $803 million, up 3.1% from $779 million in the prior year quarter. The company did not break out e-commerce sales.
- Net sales of $4.582 billion, up 0.8% from $4.544 billion.
- Gross profit of $1.598 billion, down 4.8% from $1.678 billion.
- Net income of $625 million, up 21% from net income of $518 million in the same period last year.
Bloomberg News contributed to this report.
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