Consumer-products giant Kimberly-Clark
Earnings before unusual items are now projected to be between $0.72 and $0.76 a share. Kimberly-Clark's own estimate back in October was $0.82 to $0.86. In last year's Q4, the Kleenex king made $0.82 a share.
The culprits behind the stinky forecast are the company's Huggies diaper line and "I'm a big kid now" Pull-Ups training pants. Adding to the pressure, the company's sales in Latin America and Asia have been weaker than expected.
Its diaper war with rival Procter & Gamble
Kimberly-Clark recently began offering smaller, less expensive packages of diapers, hoping to attract price-sensitive customers. It hoped to eventually increase the price per individual diaper in the smaller bags, but axed those plans because of the intense competition.
The whole "smaller bags" bit might backfire, too. P&G is now playing up the fact that it offers more diapers per bag, even introducing a bizarre contest on its website. It's all about perceived value, right?
Kimberly-Clark's not taking its troubles sitting down, however. In 2003, it will cut costs by $175 million to $200 million, or around $0.24 to $0.28 a share. The company also shrank its planned capital expenditures for the current fiscal year, shelling out only $850 million to $900 million of the original $1 billion forecast.
Next year will likely be another difficult one for Kimberly-Clark. The company sees sales rising only in the low- to mid-single digits. The cost savings should certainly help results, but real strength won't come until it wins back some of the turf it lost to P&G.
Expect the diaper war to get dirtier.