Huggies' owner Kimberly-Clark to slash 5,000 jobs, close 10 factories

Key Points
  • Kimberly-Clark to cut 5,000 jobs, or about 13 percent of its workforce globally.
  • The company will shutter or sell 10 of its 91 production factories worldwide.
  • The company is targeting more than $2 billion in cost cuts by 2021.
Kimberly-Clark just announced plans to slash about 13% of its workforce
Kimberly-Clark just announced plans to slash about 13% of its workforce

Kimberly-Clark, the maker of Huggies diapers and Kleenex tissues, announced Tuesday it will cut about 13 percent of its workforce globally, or at least 5,000 jobs, in a bid to reduce costs as sales wane.

The company plans to shutter or sell 10 of its 91 production factories worldwide.

In all, it is anticipating more than $2 billion in cost cuts by 2021. About $1.5 billion will come from reducing costs within its business. An added $500 million to $550 million will come from the efforts to streamline its manufacturing supply chain and overhead.

For years, consumer companies have enjoyed what has been widely considered to be overly optimistic stock prices. Now, the names are grappling with the reality of a new landscape.

These companies must find growth to match up with investors' expectations, but are faced with changing shopping habits and competitive pressures.

Making matters worse, retailers are cutting prices in a fight for market share. Retailers like Target and Costco need to attract shoppers to their stores rather than having consumers buy their staples online. Meantime, retailers like Walmart, Aldi and Lidl — all known for low prices — continue to open new stores and increase their influence.

Procter & Gamble on Tuesday acknowledged that discounting aimed at boosting its Gillette razor business had eaten into its sales. As one of the biggest consumer products companies, P&G's prices often set a bar for its competitors.

P&G, with its Pampers brand, and Kimberly-Clark, with its Huggies, are fierce competitors in the diaper aisle.

Adding to the pressure, Amazon has launched a private-label diaper business. Diapers are a good example of a product shoppers tend to refill on a routine basis. Increasingly, shoppers see this as a category that is more convenient to buy online.

Kimberly-Clark is also considering exiting or divesting some of its low-margin businesses concentrated in the consumer tissue segment, which comprise roughly 1 percent of its net sales.

Kimberly-Clark would join a number of its consumer peers like Unilever and Nestle that have looked to shed underperforming businesses as scrutiny intensifies.

"The changes we are making will improve our underlying profitability, provide more flexibility to invest in growth opportunities and help us compete even more effectively," Chief Executive Officer Thomas Falk said in prepared remarks.

Shares of Kimberly-Clark were up less than 1 percent midmorning Tuesday.

For the fourth quarter of fiscal 2017, Kimberly-Clark reported net income of $1.75 per share, compared with $1.40 one year ago. After excluding items, the company earned $1.57 per share.

Net sales climbed 1 percent, to $4.6 billion, while North American sales dropped 2 percent.

Analysts expected the company to earn $1.54 per share, on revenue of $4.6 billion, according to Thomson Reuters.

Selling prices fell 4 percent in the latest period, Kimberly-Clark said, which consisted of greater promotional activity in most categories.

Net sales in fiscal 2018 are expected to increase 1 to 2 percent.