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Can Kimberly-Clark’s Focus on Product Launches Drive Sales?

Zacks

Kimberly-Clark Corporation KMB recently launched Kleenex Reveal Countertop System under the Kimberly-Clark Professional (KCP) segment that partners with businesses to offer improved and exceptional hygiene products. The new countertop system provides superior quality hand towels and requires fewer refills owing to its greater inbuilt capacity. The system aids maintaining a clean restroom area by providing hand towels at the sink itself, thereby reducing water spillage on the countertop and the floor.

In addition to Kleenex, other brands in this category include Scott, Kimtech, WypAll and Jackson Safety. The company’s products are one of the most preferred amongst its peers in the United States, when it comes to restroom cleanliness and consumer health.

Product Innovation to Boost Sales

The company has been involved in regular innovations and product launches to improve its market share. Of late, the company has been focusing on upgrading personal care portfolio, especially feminine hygiene and diaper products. Innovations related to the Huggies brand has been initiated in several regions such as in Russia and China.


Unfavorable Industry Conditions Weigh on Performance

Despite efforts to improve market share, Kimberly-Clark has been witnessing decelerated organic sales growth from the developing markets for a while now. The sluggish growth can be attributed to unfavorable economic environment laden with increased competition and promotional activities. Sales in Latin America, especially in Brazil and Argentina have been displaying such a trend. Though the company has strong long-term growth prospects in these markets, it expects only modest improvement in the second half of 2017. Further, the company’s organic sales in the North American region have been soft due to the effects of competition and less promotional shipments.

Competition has particularly hurt the company’s diaper segment volumes. It is observed that more parent shoppers are shifting away from Huggies and buying either less expensive or premium diaper offerings. Additionally, Kimberly-Clark’s performance is also plagued with higher input cost owing to the ongoing inflationary trend.

Amid such headwinds lurking in the industry, it would be quite a challenging task for Kimberly-Clark to pull off positive yields from its ongoing innovation and product launch efforts. Moreover, shares of the company have also been losing investor confidence and have decreased 9.7% over the past six months, almost in line with the industry’s decline of 9.3%. The Consumer Staples sector, to which it belongs, increased 5% in the same time frame. The stock currently carries a Zacks Rank #4 (Sell).

Done With Kimberly-Clark? Guard Your Portfolio With These Stocks

Investors may consider better-ranked stocks such as Nu Skin Enterprises, Inc. NUS, Ingredion Incorporated INGR and Constellation Brands, Inc. STZ, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Nu Skin delivered an average positive earnings surprise of 10.8% in the trailing four quarters. It has a long-term earnings growth rate of 8.7%.

Ingredion Incorporated delivered an average positive earnings surprise of 5.1 in the trailing four quarters. It has a long-term earnings growth rate of 11%.

Constellation Brands delivered an average positive earnings surprise of 11.7% in the trailing four quarters. It has a long-term earnings growth rate of 18.2%.

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