The consumer goods price wars are taking a toll on Kimberly-Clark (KB), the maker of Huggies.
The company said on Tuesday it would eliminate between 5,000 and 5,500 jobs amid weak sales for its household basics, which include diapers, toilet paper and paper tissues. It is closing 10 of its 91 factories amid challenges to its business that are likely to persist as it looks to return to growth. According to the Wall Street Journal, about half the job cuts will be in North America, where sales have declined, in stark contrast to a booming business in developing markets.
“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.” Chief Executive Tom Falk said in statement.
Like other consumer products makers, notably Procter & Gamble (PG), Kimberly-Clark is dealing with a price war in key categories and weak demand for some products such as diapers amid a declining birth rate. P&G among others has also been slashing prices on key items such as diapers.
Organic sales for the company, a measure the strips out the impact of currency fluctuations, was flat for the year even though the company was more optimistic about 2017 at the year’s outset. Kimberly-Clark expects organic sales to be 1% this new fiscal year, helped by higher volumes that are helping it contend with lower prices.
The job cuts and factory closings are part of a plan to cut costs by $2 billion in cost cuts by 2021. At the same time, amid the pressures on its business, the company said it would raise its dividend by 3%, something that lifted Kimberly-Clark’s stagnating stock price on Tuesday morning. News of the reductions stands in stark contrast to the many hiring and bonuses announcements by large U.S. corporations in recent weeks in the wake of the recent tax reform bill.
Kimberly-Clark said the restructuring should generate annual cost savings of $500 million to $550 million by the end of 2021. Its fourth-quarter profit excluding some items came to $1.57 a share, above analysts’ average estimate of $1.55. Its quarterly revenue rose 1% $4.6 billion