Kimberly-Clark's Solid Growth and Raised Outlook: Strategies to Regain Market Share
2023-08-01
Kimberly-Clark, a consumer goods company, held its second-quarter 2023 earnings call to discuss the company's performance, strategic priorities, and outlook. The meeting revealed solid growth and a raised full-year 2023 outlook.
During the meeting, the company's performance for the second quarter of 2023 was a key topic of discussion. The focus was on organic growth, margin recovery, and an increased outlook for the full year.
One of the most interesting points raised in the meeting was the company's volume trends and market share. Chairman and CEO, Mike Hsu, expressed satisfaction with the volume trends, noting overall sequential improvement. However, he acknowledged that the company's market share is currently below their desired level of over 50%.
Hsu attributed the lower market share to a couple of factors. Firstly, the company's quick pricing decisions allowed competitors to take advantage of the share momentum. Secondly, they faced supply challenges and the impact of the Texas storm, which affected their numbers.
To address these challenges and improve performance, Hsu emphasized the company's commitment to investing more in their brands. This indicates a willingness to allocate resources to regain market share and drive better volume performance.
The company's market outlook summary indicated a successful first half with strong demand and a solid lineup of innovative products. While there are ongoing challenges and volatility in the cost environment, the company remains optimistic about its business and overall outlook. They have made progress in margin recovery and aim to restore gross margins to 2019 levels. Additionally, they plan to expand margins over time through revenue and cost management.
During the meeting, several key performance indicators (KPIs) were discussed, highlighting the company's financial performance and growth. The company reported a 5% increase in organic growth for the quarter, demonstrating the ability to generate revenue from core operations. Adjusted gross margin showed a significant improvement, with a 380 basis points increase, indicating better cost control and operational efficiency. Adjusted operating profit increased by 17%, reflecting improved profitability, and adjusted earnings per share (EPS) grew by 23%, generating higher profits on a per-share basis.
The company's outlook for the quarter and year is positive, with raised guidance for organic growth and adjusted EPS growth. They anticipate improved input costs and project operating profit growth and an increase in operating margin. The company is confident in its ability to create long-term value for stakeholders.
Strategic initiatives discussed during the meeting included increased advertising spending, driving revenue, volume mix, and innovation. The company is committed to disciplined investment in their brands to drive category growth and better serve consumers. They also emphasized the importance of return on investment and efficiency in spending across different segments.
Participants in the call included Mike Hsu (Chairman and CEO), Christina Cheng (VP, Investor Relations), Nelson Urdaneta (CFO), and various analysts from Barclays, Evercore ISI, Wells Fargo Securities, Morgan Stanley, RBC Capital Markets, Bank of America Merrill Lynch, JPMorgan Chase and Company, Goldman Sachs, and UBS.
Based on the meeting outcome, the company appears confident in its plan and has seen strong demand and innovation. While there may be some volatility in the cost environment, the company is in a positive position. They are focused on growing market share and improving performance through strategies such as innovation, technology incorporation, and pricing adjustments. The company has taken steps to mitigate inflation and is seeing improvement in key cohorts, particularly in North America. They expect volume trends to continue improving as they execute their strategy and commercial programs. Successful product launches, including campaigns for Huggies and Kotex, have contributed to their performance.
Overall, the meeting provided valuable insights into Kimberly-Clark's performance, strategic priorities, and outlook. The company's commitment to investing in their brands and addressing market share challenges demonstrates their determination to drive growth and deliver value to stakeholders.