Consumer products company Kimberly-Clark (NYSE:KMB), known for Kleenex, Huggies, and Cottonelle, among other brands, reported third-quarter results today.
Slim year-over-year sales growth wasn't particularly impressive, especially as prices fell due to competitive pressures and promotions. Investors likely noted the impact that foreign currencies had on nearly all segments -- which is particularly disappointing given the modest sales growth, and that some of this was attributable to the consolidation of a now wholly owned joint venture.
Assessing currency effects can be a tricky business. They are commonly blamed for bad earnings and conveniently ignored when good ones are reported. I happen to agree with those who say investors shouldn't "over think" currency effects -- they're simply a cost of doing business internationally and will both help and hurt results over time.
At any rate, the "slimming" worked its way down the income statement, as operating and net income (before unusual items) fell from last year's quarter. This, the company said, is more or less expected as Kimberly-Clark fights to keep customers in the face of competition, while chasing sales volume rather than maintaining profit levels.
This has been the company's strategy all year. (For context, we looked at another hyphenated consumer-products company, Colgate-Palmolive (NYSE:CL), earlier this week.)
When a company is a cash flow producer like Kimberly-Clark, this tactic shouldn't worry investors. We would, however, have appreciated full balance sheet and cash flow information in the release, though the detailed income statement was cool.
Clearly, this business isn't going anywhere because of a few points decline in gross margins from quarter to quarter. With the shares steady in morning trading, investors seem to agree.
Dave Marino-Nachison is hyphenated, but isn't a consumer projects company. He can be reached at [email protected].
