Kimberly-Clark(KMB)2024-10-22 14:37Financial Data and Key Metrics Changes - The company has achieved a gross margin of approximately 37%, showing consistent gains over the last eight quarters and tracking ahead of pre-COVID levels [15][16] - The company expects to continue year-over-year gross margin gains as it aims for a long-term goal of at least 40% gross margin by 2030 [15][16] Business Line Data and Key Metrics Changes - In North America, consumer offtake in Personal Care and Consumer Tissue grew by 3.2%, indicating strong demand despite some shipment disconnects [8][9] - The exit from certain private label businesses has allowed the company to focus on branded products, with Kleenex seeing a share increase of nearly 500 basis points [13][29] Market Data and Key Metrics Changes - The company noted a disconnect between shipments and consumption, primarily due to retail inventory reductions and external factors like hurricanes [7][8] - The overall weighted category growth is expected to be closer to 2% for the full year, down from the previously anticipated 2% to 3% range [19][20] Company Strategy and Development Direction - The company is advancing its "Powering Care" strategy, focusing on innovation and commercial execution to drive growth [3][4] - A new organizational structure was implemented on October 1, aimed at enhancing operational efficiency and market responsiveness [18][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds such as retail inventory reductions and lower demand in private label businesses, but expressed confidence in navigating these challenges [4][24] - The company remains focused on volume and mix-driven organic growth, with expectations for a stronger top line in Q4 compared to Q3 [20][24] Other Important Information - The company is transitioning away from private label products, reducing their share from 4% in 2023 to an expected 2% in 2025 [13][29] - The implementation of S/4 HANA has improved operational visibility and efficiency, aiding in better management of market volatility [31][29] Q&A Session Summary Question: Retail inventory dynamics and shelf space - Management indicated that retail inventory reductions are localized and reflect previous supply challenges, with expectations of normalizing service levels [6][7] Question: Market shares and competitive environment - Management reported flat overall market shares globally, with strong progress in the US, particularly in seven out of eight categories [10][11] Question: Private label business exit impact - The exit from private label businesses is expected to create a headwind of about 2% in 2025, but is aimed at strengthening branded product growth [12][13] Question: Gross margin sustainability - Management expressed confidence in sustaining gross margins due to ongoing productivity savings and a focus on innovation [15][16] Question: Organizational structure and category growth - The new organizational structure is expected to enhance growth outcomes, with underlying category growth remaining healthy despite some market softness [18][19] Question: Visibility on results amid organizational changes - Management reassured that strong execution and visibility into market conditions remain intact despite recent organizational changes [24][25] Question: Strategic options for international tissue and professional businesses - Management stated that while they are evaluating options, they believe in the potential of their current categories and will optimize participation where necessary [31][32]