Toilet paper demand fueled by the coronavirus pandemic has finally slowed, with Kimberly-Clark, one of the nation’s largest manufacturers, reporting declines in tissue sales because of continued business closures, supply-chain disruptions, and coronavirus hoarding.
Kimberly-Clark, which makes Cottonelle toilet paper, Scott paper towels, and Kleenex tissue, marked its worst sales performance in at least 10 years in the quarter ending March 31, reports The Wall Street Journal.
The company reported an 8% decline in organic sales and a 14% decline in its consumer-tissue segment in North America.
In 2020, the company’s organic sales grew by 6% and consumer-tissue sales rose by 14%.
“I am not pleased with the results,” Kimberly-Clark CEO Michael Hsu told analysts. He said the company expected slower consumer-tissue sales, but not such a big drop.
Meanwhile, Kimberly-Clark’s shares dropped by more than 5% Friday morning.
In the early weeks of the pandemic, toilet paper demand skyrocketed. It doubled in the second week of March and remained high through the rest of the year. In a typical year, Americans spend around $9 billion on toilet paper, but in 2020, they spent more than $11 billion, according to NielsenIQ. However, if the current trend continues, sales in 2021 will be less than $9 billion.
Kimberly-Clark is also losing money because of issues with supply chains, including the severe weather conditions in the south and the growing costs of raw materials and transportation.
The company’s professional unit also dropped by 13%, with offices, schools, and restaurants still closed or only partially opened.
Hsu said the company plans to cut costs, overhaul marketing efforts, and raise prices to recover sales while improving its profits. Price increases for items such as diapers and adult-care items have already happened.
Meanwhile, Kimberly-Clark’s first-quarter earnings were $1.72 a share, down from $1.92 a share for the same period last year. Further, the company’s net income in the first quarter was $584 million, down from $660 million in the first quarter of last year.
Adjusted earnings were reported at $1.80 a share, with revenue down by 5% at $4.74 billion. Last year’s revenue was $5.01 billion.
Kimberly-Clark is also lowering its forecasts for 2021, expecting flat to 1% organic sales growth, down from 1% to 2%. It is also predicting net sales growth of 3% to 5%, down from 4% to 6%, and adjusted earnings per share of $7.30 to $7.55, down from $7.75 to $8.00.
Meanwhile, rivals company Procter & Gamble, which has also said it plans to raise prices because of higher commodity costs, saw a 4% growth in organic sales for the quarter. While the company makes paper items like Pampers diapers and Bounty paper towels, it also features a larger line of products, including beauty and grooming, household cleaners, and oral care.
Source: Newmax
