Kimberly-Clark: Consumer Cutback Hurt Q1 Sales

Kimberly-Clark saw first quarter income drop 9.5 percent, but the packaged goods maker said it’s hopeful that value messaging and marketing efforts behind new products—such as Huggies Pure & Natural—will help drive future sales.

In reporting Q1 fiscal 2009 results today (Wednesday), K-C said net sales dropped 6.6 percent to $4.49 billion. Its professional segment was hit the hardest, with net sales down 14.5 percent. The recession also bit into K-C’s personal care and consumer tissue segments, with net sales down 3.4 percent and 7.8 percent, respectively.

Consumer cutback additionally hurt child care and baby wipes sales, with volume on Huggies diapers down “slightly,” per Dallas-based K-C. (The brand, meanwhile, gained an additional market share point.) Consumer demand for discretionary products, such as household towels and facial tissue, was also down.

With retailers like Wal-Mart aggressively pushing their own private label brands, K-C CEO Thomas Falk said he’s keeping a close eye on store-branded competition. Falk acknowledged that much of Wal-Mart’s push was on the food front, but nonetheless, “It’s something we’re watching on a month-by-month basis.”

K-C maintains it hasn’t necessarily lost to private label, as store brand gains in competing categories were “flat or down slightly, compared to the fourth quarter of 2008,” Falk said. “The encouraging thing for us is private label shares were flat in most of our categories.” The one exception was in adult care, as K-C cut back in promotional activity in anticipation of last month’s launch of new Depend undergarments for men and women.

Falk said K-C’s strong point is new, sustainable products (like Huggies Pure & Natural), which are getting a good response from retailers. K-C has ramped up direct mail couponing to moms to “make sure consumers see the value equation.” Falk added that Huggies Pure & Natural, while commanding a 15 percent price premium, satisfies mom’s desire to “pay more for a truly better product for her baby.” The new diaper sub-brand had gotten 200,000 site hits since its launch.

K-C spent $160 million in U.S. measured media last year, excluding online, per Nielsen.