Price of Kleenex, Huggies to rise
Kimberly-Clark announced a price increase just last month. Now the company says it must raise prices again as costs skyrocket. With video.
Kimberly-Clark (KMB) said its costs for the year could be twice as high as it expected just a few months ago. Pulp, oil and other materials are getting much more expensive. The company will cut overhead costs more dramatically in response, but it's also going to raise prices again.
Post continues after this video about the company's earnings report:
Just last month, the company said it would raise prices 3% to 7% for Huggies and 7% for Cottonelle and Scott 1000 bathroom tissue this summer. Those increases apparently weren't enough, so another round of price increases is on the way. This time, the company said most of its North American consumer products will see a price hike.
Kimberly-Clark's share price dropped more than 3% in morning trading to just under $64.
The company's costs are so uncertain that Kimberly-Clark lowered the low end of its expectations for full-year profit. The company's outlook dropped to $4.80 to $5.05 a share from the previous forecast of $4.90 to $5.05 a share.
But sales momentum is just fine, and the company raised its sales forecast to an increase of 4% to 6%, from 3% to 4%. The weaker U.S. dollar is expected to be responsible for 2% of that sales increase.
For the first quarter, Kimberly-Clark said it earned $350 million, or 86 cents a share, down from $384 million, or 92 cents a share, a year ago. Excluding restructuring expenses and other costs, earnings came to $1.09 a share. Analysts were expecting $1.17 a share.
The company's revenue rose 4% to $5 billion, slightly more than the $4.98 billion analysts expected. But gross margin dropped to 30% from 34%.
Chief executive Thomas Falk described the company's business environment as difficult. "The rapid run-up in commodity costs has influenced our near-term profitability, so we are taking aggressive actions in response to the cost environment," he added.
"The rapid run-up in commodity costs has influenced our near-term profitability, so we are taking aggressive actions in response to the cost environment." added Chief Executive Thomas Falk.
Really, Mr. Falk? Aggressive actions means passing off these costs to the consumer. Thank you, but no thanks. I will make sure to not purchase any Kimberly-Clark products from now on. Do you really want to make up for lost revenue? Start by not putting an extra burden on those who pay most of your salary....the consumer, that is.
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