By Aatrayee Chatterjee
(Reuters) -Kleenex tissue maker Kimberly-Clark (NYSE:) on Tuesday cut its annual organic net sales forecast after missing Wall Street estimates for third-quarter sales, as consumers swap its pricier personal care goods for cheaper alternatives.
Shares of the company, which maintained its annual profit forecast, were down about 4% in early trading.
Although U.S. inflation has eased from its peaks, consumer spending has slowed as rising input costs drove companies to raise prices, leading consumers to opt for cheaper private label brands.
The company’s overall volumes in the quarter to Sept. 30 was flat compared with a year ago, while its prices were up 1%.
The price hikes, however, helped KMB report a quarterly adjusted profit of $1.83 per share, above analysts’ estimates of $1.70 per share, according to data compiled by LSEG.
The results reflect broader market trends, with larger rival Procter & Gamble (NYSE:) reporting a surprise drop in quarterly sales last week as consumers in China shunned its products while those in the U.S. bought fewer name brand products.
The company experienced lower shipments in its North American branded consumer business due to lost shipping days at its southeastern U.S. facilities, caused by Hurricane Helene.
Fourth-quarter top line profile is expected to resemble the third quarter, reflecting a tough consumer environment and risks from further retail inventory cuts, CFO Nelson Urdaneta said in a statement.
Kimberly-Clark’s sales miss underscores the pressure consumer packaged good (CPG) companies are under as they struggle to win over shoppers whose primary concern is value, eMarketer analyst Rachel Wolff said.
With consumers’ price sensitivities outweighing brand loyalty and fueling private label sales, CPGs like Kimberly-Clark face an uphill battle to convince shoppers to trade back up to name brands, Wolff added.
Kimberly-Clark now expects organic net sales to grow by between 3% and 4% this year, down from the previously expected mid-single digit percentage rate.
Total sales fell 2% for its consumer tissue business during the July-to-September quarter.
Bloomberg News reported last month that Kimberly-Clark may sell its international tissue business for about $4 billion to focus on more profitable areas.
The Huggies diaper maker posted a 4% drop in quarterly sales to $4.95 billion, missing analysts’ estimates of $5.05 billion.
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