In the opening of the Kimberly-Clark First Quarter 2025 Earnings Call, Chris Jakubik, Vice President of Investor Relations, introduces the session, emphasizing the presence of forward-looking statements and non-GAAP financial measures that complement GAAP results. Mike Hsu, CEO, comments on the first quarter's progress under the Powering Care strategy, noting that while sales were slightly below expectations, the outcomes align with their annual plan. The company maintained its global market share, achieved solid volume and mix, and made significant strides in optimizing margins and enhancing productivity through their integrated margin management approach.

The paragraph discusses Kimberly-Clark's strategic initiatives to enhance its organizational structure and performance by 2025. It highlights the company's efforts to generate $200 million in SG&A savings and emphasizes a focus on differentiation, productivity, and agility to drive profitable growth and address external challenges. The company is committed to transforming and reshaping its portfolio for long-term success while adhering to its purpose and values. After these remarks, the floor is opened for questions, starting with Lauren Lieberman from Barclays, who inquires about organic growth and mentions relatively strong North American performance despite not seeing the deceleration that affected other companies and categories.

The paragraph discusses the factors that led to the gap in North America's performance, highlighting a slight underperformance in organic sales in the first quarter despite expectations. Nelson Urdaneta explains that organic sales growth for the first quarter was impacted by several factors, including expectations of around 2% weighted average category growth versus actual growth of 1.5% to 2%. Additionally, there was one less day of shipments in the first quarter compared to last year, contributing to a 100 basis point impact on organic sales. Despite these challenges, profitability met expectations due to strong productivity in cost and overhead management. Looking forward, there's an expected acceleration in volume and mix, particularly in the second quarter, with initiatives underway globally to support this growth.

The paragraph outlines several challenges and strategies for a company's growth in North America. The company is experiencing a reduction in private label shipments, impacting organic sales by 40 basis points overall and 80 basis points in North America. Strategic pricing adjustments across various markets began in late 2024. For 2025, the company aims for growth that surpasses market categories, supported by new product launches and marketing efforts initiated in March, expected to boost Q2 and Q3 results. They anticipate a 40 basis point tailwind in 2025 due to reduced retail destocking compared to the previous year, with Q2 offering favorable comparison due to prior significant destocking.

In the paragraph, Mike Hsu discusses the company's strategy to drive growth primarily in North America and internationally. They aim to accelerate volume and mix through improved consumer value propositions, despite facing external challenges. Their approach involves launching a slate of innovations, such as the Huggies Snug & Dry in North America, which targets mainstream value shoppers and has received positive reviews comparable to premium products. Hsu also mentions plans to improve product quality internationally, including in Latin America. The strategy focuses on creating better products at lower costs and innovating to bring these improvements to global markets. The operator then introduces Nik Modi from RBC Capital Markets for the next question.

In this paragraph, Mike Hsu responds to Nik Modi's inquiry about managing innovation, price mix, and margin amidst value-seeking consumer pressures. Hsu explains that the outlook revision is primarily due to cost headwinds, but their strategies already account for mix differences. Despite decelerated growth, demand in their product categories remains resilient, with healthy growth rates between 1.5% to 2%. He acknowledges reduced pricing and economic softness in regions like Latin America. Hsu highlights the importance of affordability, noting its rising significance over his tenure at KC, and emphasizes their strategy to extend innovation from premium to more affordable tiers to address the financial challenges faced by middle to lower-income households.

The paragraph discusses a conversation between analysts and company executives, including Mike Hsu and Nelson Urdaneta, regarding the company's strategy and challenges. The company is focusing on prioritizing consumer preference and expanding market share by delivering superior products across their brands like Huggies, Kotex, and Depend. Additionally, they are addressing mix and margin management issues. During a Q&A, Dara Mohsenian from Morgan Stanley inquires about a newly identified $300 million impact due to tariffs, questioning why this is more significant than previously expected. Dara seeks clarity on the tariff source, whether from costs related to pulp or China, and how the company plans to counterbalance this impact through pricing and productivity adjustments, both in the short and long term.

The paragraph discusses an organization's efforts to improve agility and flexibility in response to changing tariff impacts. Mike Hsu mentions that the company's strategy is to enhance agility in revenue and cost management, allowing them to adapt more quickly than the previous year. He notes significant changes in the scope and countries affected by tariffs, which have made the environment more volatile. Nelson Urdaneta adds that a majority of their products for the U.S. market are sourced locally, with less than 10% of their cost of goods exposed to China, Mexico, and Canada, as discussed at a previous conference.

The paragraph discusses the impact of tariffs on a company's US business costs, noting that 80% of the costs are US-based and only 20% are exposed to tariffs. The primary cost impact comes from US tariffs on China, accounting for about two-thirds of a $300 million impact. Additional impacts include US reciprocal tariffs on other countries (10%) and retaliatory tariffs by other countries on the US (25%). The company is taking actions to mitigate these costs, drawing on past experiences and a year into their Powering Care transformation. They aim to address a third of the impact within the year and plan to fully address the issue by 2026. The company emphasizes its commitment to keeping consumers central to its decisions.

The paragraph discusses the speaker's approach to handling current economic challenges and changes in the tariff environment. They treat the situation as a discrete, one-time event and aim to continue their strategy of driving innovation and productivity. They emphasize the importance of differentiating their brands through superior innovation and execution, optimizing their global network to adapt to new cost structures, and maintaining a commitment to their longstanding strategy. The speaker highlights the organization's ability to deliver better products at lower costs, using Huggies Snug & Dry as an example of successful collaboration across different regions.

The paragraph discusses the company's focus on providing value-oriented products in response to consumer demand. Mike Hsu acknowledges that there's been a shift towards more affordable options, with lower-income households choosing products with lower entry-level prices and higher-income households looking for larger quantities at lower per-unit prices. Given the expected cost increases impacting average consumers in the U.S., the company emphasizes affordability as a core strategy, particularly highlighted by their Snug & Dry diaper line. This strategy is being applied both in the U.S. and globally across various product categories.

The paragraph discusses a company's strategy regarding costs, product offerings, and innovation amidst a challenging cost environment. The company aims to maintain a strong premium product line while extending innovations across different product tiers to let consumers choose. The cost environment, influenced by tariffs and inflation, is pressuring marketing investments, with a notable $300 million in additional costs due to tariffs. Despite these challenges, the company had anticipated these costs to align with previous years, excluding tariffs. The company continues to focus on innovation and maintaining its premium portfolio, while considering consumer value consciousness in its long-term strategy.

The company plans to address one-third of its challenges this year and the rest next year, maintaining flat operating profit and EPS. They will continue investing in innovation, marketing, and supply chain improvements despite current headwinds, with a capital expenditure of $1 billion to $1.2 billion focused on supply chain transformation as part of their Powering Care strategy. The goal is sustainable, profitable growth by meeting consumer needs. Mike Hsu adds that supply chain adjustments are the key strategy to offset cost headwinds over time.

In the paragraph, the discussion centers around strategic decisions related to pricing and product mix in different markets. Mike Hsu articulates the company's focus on maintaining product quality and disciplined pricing, particularly through the concept of "pricing net of commodity" (PNOC). This involves driving volume and mix growth without compromising on price structures. The discussion also highlights the differences in approach between emerging markets, where currency headwinds are a factor, and North America. In emerging markets, strategic price investments are emphasized, while in North America, the focus is on enhancing promotions for high-end offerings. The overarching strategy aims to improve products at every level, allowing consumers to determine the ideal mix based on their preferences.

The paragraph discusses a company's strategic approach to managing product mix and pricing. The focus is on ensuring consumer-approved product mixes while maintaining pricing discipline despite recent significant pricing increases linked to an inflation cycle. The strategy emphasizes improving product quality and promoting premium products, with innovation gradually introduced across various value tiers. The company doesn't significantly vary its strategy across countries or categories and maintains pricing discipline accounting for commodity impacts. Javier Escalante seeks clarity on the North American market, specifically concerning the promotional environment and innovation impact relative to tariffs. Mike Hsu explains that the company does not view promotions as a sustainable growth driver but rather as a tool for introducing innovations to consumers.

The paragraph discusses the strategy of promoting daily essential products with low substitution rates, such as Kleenex and Huggies, to support product trials rather than to directly increase consumption. Despite the challenges in growing category demand through promotions alone, merchandising has significantly contributed to Kleenex's market share growth. The focus is not solely on promotion but also on driving consumer trials, especially for new products like Huggies Snug & Dry and Huggies Skin Essentials. The strategy is consistent globally, aiming to cascade innovations across premium and other tiers. Additionally, the company adjusts its channel strategies to align with market growth without relying mainly on promotions.

In the paragraph, Bonnie Herzog from Goldman Sachs asks about the company's revised earnings per share (EPS) guidance, specifically the changes between the new guidance and the previous one. She highlights the $300 million negative impact from tariffs and seeks clarification on other factors influencing the new EPS growth guidance. Nelson Urdaneta responds, explaining that the significant change in guidance results from $300 million in gross costs, which translates to a $200 million net impact. This adjustment leads to a nearly flat projection for both operating profit and EPS for the year, with minor currency fluctuations also playing a role.

The paragraph discusses the financial impact of a $200 million net headwind for the year, primarily due to tariffs, which will significantly affect Q2 with a 200 basis point impact on gross margin compared to the previous year. Despite these challenges, the company remains committed to investing in innovation, marketing, and supply chain improvements to mitigate the impact. Mike Hsu also mentions the strategy to address consumer financial strain by enhancing the value of mainstream products like Snug & Dry, which has received positive online reviews.

The paragraph discusses a company's strategy for their tier-four product in comparison to tier-five competitors, emphasizing a focus on creating a strong product and allowing competitors to find ways to surpass it. It mentions a slight increase in promotional activities for personal care in North America, aimed at encouraging trials of new products. Nelson Urdaneta highlights that significant savings in SG&A (selling, general, and administrative expenses) are providing financial flexibility and enabling reinvestment despite industry challenges. Bonnie Herzog concurs, indicating that these savings offer the capability to remain competitive if economic conditions worsen.

The paragraph features a discussion during an earnings call between Mike Hsu, Bonnie Herzog, Nelson Urdaneta, and Christopher Carey regarding company strategies and financial outlook. Christopher Carey from Wells Fargo Securities poses questions about the company's cost of goods sold (COGS) and savings program. He notes that the company is achieving higher productivity savings than anticipated, questioning whether future savings are being pulled forward and if the program will exceed prior expectations. Additionally, he observes the analysts' focus on managing through inflation and strategic pricing, considering the company's ability to handle cost environments with greater agility as discussed during an Analyst Day.

In the paragraph, Mike Hsu discusses the complexity of tariff impacts on business strategy. He explains that the company has decided not to immediately pass on higher tariff costs to consumers in order to stay competitive. Instead, the company plans to switch its sourcing strategies to mitigate costs over time, acknowledging that these changes take time to implement. Competitors who source locally do not face the same challenges, so the company aims to adjust sourcing methods to manage costs and remain competitive in the long term.

The paragraph discusses the company's progress and future plans regarding a savings program aimed at achieving $3 billion in savings over five years. In 2024, the first year of the program, they achieved 5.9% gross productivity, resulting in $745 million in savings. In Q1 of the following year, productivity was 5.2%, with a goal to stay at the upper end of a 5%-6% range. Their approach involves integrated margin management to enhance margins across their businesses, targeting at least 40% gross margin and 18%-20% operating profit margin by the end of the decade. They are not immediately increasing the five-year $3 billion target, preferring to let current plans unfold, but they are optimistic about future opportunities.

The paragraph is a closing statement from a call or event, where the speaker thanks the participants for joining and mentions that analysts with follow-up questions can reach out after the call. The operator then ends the event, inviting participants to disconnect and wishing them a good day.

This summary was generated with AI and may contain some inaccuracies.