Kimberly-Clark (NYSE:KMB) this week announced fourth-quarter earnings that closed out a tough year for the consumer products giant. Sales were flat and profits only inched higher thanks to aggressive cost-cutting.

Here's a look at how the headline results stacked up against the prior-year period:

 Metric

Q4 2017 

Q4 2016

Change (YOY)

Revenue

$4.58 billion

$4.54 billion

1%

Net income 

$625 million

$518 million

21%

Earnings per share

$1.75

$1.40

22%

Data source: Kimberly-Clark's financial filings. YOY = year over year.

What happened this quarter?

Sales met management's reduced target but reflected a difficult operating environment. On the bottom line, Kimberly-Clark benefited from lower expenses that protected net income from the negative impact of rising commodity costs and reduced selling prices.

A tissue box on a table.

Image source: Getty Images.

Highlights of the quarter included:

  • Organic sales fell 1% to match the stubborn pace of decline that shareholders have seen through most of 2017. That result trailed Kimberly-Clark's largest competitors. Procter & Gamble, for example, posted a 2% organic sales uptick for the same period. 
  • Sales trends were much stronger in emerging and developing markets that, as a group, grew 4%. The U.S. segment, responsible for a most of Kimberly-Clark's profits, declined 3%.
  • Gross profit margin dipped slightly as the company lowered prices to stay competitive, particularly in its Kleenex tissue franchise.
  • Savings from Kimberly-Clark's cost-cutting program topped $125 million and allowed adjusted earnings to inch higher by 3% for the full 2017 fiscal year despite lower gross margin and flat revenue. The quarter's 22% spike in reported earnings was due to a one-time tax benefit.

Management's comments

CEO Thomas Falk said the management team was pleased with their financial wins, given the tough selling conditions. "We delivered bottom-line growth in a challenging environment," Falk said in a press release. "We also achieved all-time record ... cost savings of $450 million and reduced discretionary spending to help offset inflationary cost headwinds," he continued. 

Management highlighted the fact that this financial strength helped lift direct capital returns, as cash sent to shareholders through dividends and stock repurchases totaled $2.3 billion, up from $2.1 billion in 2016.

Looking ahead

Falk and his team announced a major new restructuring plan that will reduce payrolls by 5,000-5,500 people in 2018. Executives believe the move will deliver annual savings of as much as $550 million by 2021. That's in addition to efficiency initiatives that should remove $1.5 billion from the cost infrastructure over the next three years. Furthermore, the company is scaling back slightly in its capital return plans. It raised the dividend by a modest 3% and is forecasting lower spending on stock repurchases. 

All these savings shifts aim to put Kimberly-Clark in position to invest aggressively in the business and, ideally, turn the tide on sales growth. To that end, they are pouring cash into prime growth opportunities including e-commerce and high-growth developing markets like China and India.

The hope is that these moves will spark a rebound back toward the 5% sales growth Kimberly-Clark managed as recently as 2015. That will be a tall order, though, given that its expansion pace slowed to 2% in the following year and fell further to 0% in the year that just closed. It's likely that any recovery will take years, and executives project just a tiny improvement in growth for 2018 as organic sales inch higher by 1%.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.