Kimberly-Clark Corp. is planning to raise prices for the second time this year in order to mitigate headwinds caused by "significant inflation," the company said Monday.
Management expects key input costs to rise by $1.4 billion to $1.5 billion in the current fiscal year, above the previous estimate calling for an increase of up to $1.3 billion.
"We expect to fully offset inflation with both pricing and cost reductions," said CEO Michael Hsu on the company’s third-quarter earnings call on Monday. "Margin improvement is a fundamental pillar of what we need to do for the company."
The Irving, Texas-based consumer products maker has over the past year dealt with higher input, freight and labor costs which have squeezed margins. Kimberly-Clark’s profit margin fell to 29.6% in the quarter, down from 33% the year prior.
Inflation concerns caused the company on Monday to lower its full-year outlook for the second time in three months.
Management forecasts organic sales will decline 1% to 2% this year and adjusted earnings per share will be in the range of $6.05 to $6.25 per share. In July, Kimberly-Clark cut its outlook for organic sales to decline 0% to 2% and adjusted earnings per share of $6.65 to $6.90.
The company had expected commodity prices to ease in the second half of 2021, but instead, they were "far in excess" of what the company had expected, according to CFO Maria Henry.
The company now expects costs to continue to rise and to stabilize at higher levels. This is as a tight labor market and supply chain disruptions have made it more difficult to get products on the shelves and as energy prices have risen sharply.
In June, management raised prices by mid-to-high single digits across the majority of its consumer products business in North America. Baby and child care, adult care and Scott bathroom tissue were among the products impacted by the price increases.
Higher costs weighed on Kimberly-Clark’s net income, which fell 1% from a year ago to $469 million, or an adjusted $1.62 per share. Revenue jumped 7% year over year $5.01 billion.
Analysts surveyed by Refinitiv were expecting an adjusted profit of $1.65 per share and revenue of $4.99 billion.
Shares were down 1.3% this year through Friday, compared with the S&P 500’s 21% gain.
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