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Kimberly-Clark (KMB) Looks Promising on Strategic Growth Pillars

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Kimberly-Clark Corporation (KMB - Free Report) appears well-placed due to its focus on innovation, consumer-centric approach and strategic investments in product development, which have been leading to successful launches and market expansion. These upsides, along with savings initiatives and a focus on revenue growth management, have been working well for the company.

This Zacks Rank #2 (Buy) company’s shares have risen 11.4% year to date against the industry’s decline of 3.1%. Let’s discuss in detail all the factors narrating KMB’s growth story. 

Strategic Growth Pillars

KMB is on track with its multi-year strategy aimed at achieving sustainable growth by leveraging its strengths and refining its strategic focus. As part of this, the company is accelerating pioneering innovation to address unmet consumer needs via groundbreaking technologies. In the past three years, its new product launches accounted for more than 50% of net sales in the Consumer businesses, playing a major role in driving almost 60% of incremental Consumer organic growth in first-quarter 2024.

Management is focused on optimizing its margin structure. In this regard, the company emphasizes a robust and continuous stream of cost savings to drive investments in innovation and capabilities. The company’s wiring organization for growth strategy is based on strengthening and streamlining the enterprise to enhance agility and efficiency.

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Management is refining its portfolio focus by concentrating on businesses that bolster market positions. This ensures that resources and investments are directed towards key competitive areas and core categories. Recently, it announced an agreement to divest our Personal Protective Equipment business, a strategic move aimed at streamlining the focus of the Kimberly-Clark Professional portfolio. It is in the process of evaluating the exit from certain private-label business ventures, with plans for implementation in 2025.

Solid Revenue Growth Management

Effective implementation of revenue growth management strategies (like pricing) and ongoing productivity initiatives have been aiding Kimberly-Clark’s organic sales and gross margin amid cost inflation. In first-quarter 2024, the company’s organic sales increased 6% on the back of a 4% rise in price stemming from pricing actions undertaken to tackle increased local costs in hyperinflationary economies, especially across Argentina. Product mix and volume were favorable by 1% each. Gross margin expanded 390 basis points (bps) to 37.1% on organic growth and gross productivity gains. Management anticipates pricing in hyperinflationary economies to contribute approximately 300 bps to organic growth for the year.

Saving Efforts on Track

Kimberly-Clark is taking robust steps to lower costs. In first-quarter 2024, management generated nearly $120 million in gross productivity through its integrated, end-to-end approach to margin management. The company realized incremental savings from enhanced procurement capabilities and deepened relationships with strategic suppliers, positioning the company to navigate future cost challenges better.

Despite elevated input costs and ongoing supply chain volatility, Kimberly-Clark’s early productivity gains bolster confidence in achieving its objectives.

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