Kimberly-Clark to Cut as Many as 5,500 Jobs


The price war shows no signs of letting up, as European grocery discounters like Lidl make a big push in the United States, driving down the costs of staples like diapers and milk in certain cities.

But the restructuring at Kimberly-Clark is a reminder that while declining prices may benefit consumers, they are sometimes hurting workers.

“It is marginally better for consumers but lousy for workers,” said Peter Cappelli, a professor at management at University of Pennsylvania’s Wharton School. “That is the story of modern society.”

Restructurings typically come with upfront costs for the companies, as they pay workers severance or renegotiate leases. In a conference call with analysts on Tuesday, Kimberly-Clark’s chief financial officer, Maria Henry, said “cash flow benefits” from the Republican tax cut would help fund “the restructuring program over the next few years.” She said the tax savings would also be used to make capital investments and to “allocate significant capital to shareholders.”

The consumer product industry’s lackluster financial performance has made it a target of Wall Street activists. Procter & Gamble, a major competitor to Kimberly-Clark for consumer goods, spent last year engaged in a fight with the activist investor Nelson Peltz, who had called on the company to cut costs and restructure. After an expensive battle, Mr. Peltz gained a board seat in December.

Procter & Gamble still faces pressure. On Tuesday, the company said that its total net sales for the second quarter of its fiscal year had increased 3 percent from a year earlier, to $17.4 billion, but that its gross margins across its brands were down.

In addition to announcing job cuts on Tuesday, Kimberly-Clark said it would raise its quarterly dividend by 3.1 percent this year. Last year, the company spent about $900 million repurchasing its own shares.

But investors have been unimpressed. While the stock market has been roaring, Kimberly Clark’s shares have barely budged, climbing less than 1 percent over the past year.

Although Mr. Falk said the restructuring plan would improve the company’s results in 2018, he conceded that “market conditions will remain challenging in the near term.”

In the conference call with analysts on Tuesday, executives said that even in the current slow-growth environment, the company needed to find ways to increase profits. The company projected sales growth of between 1 and 2 percent for this year.

Kimberly-Clark said the job cuts were expected to affect all parts of the business around the world. The company also said it would close or sell about 10 factories.

One particular area of weakness are diaper sales in the United States — a slowdown that Kimberly Clark executives attributed to lower birthrates.

That development may be partly driven by millennials who are putting off or skipping parenthood. Whatever the reason, analysts at JPMorgan Chase attributed their negative view of the company in part to that demographic trend. In October, when the bank downgraded Kimberly-Clark to “underweight,” it wrote: “Looking ahead, we see potential for an incremental downtick in the birthrate.”

Kimberly-Clark said its 2017 sales were stronger in emerging markets — many of which tend to have higher birthrates. But chasing growth in the developing world can be risky because economic conditions can be volatile and logistics more challenging.

The job and factory cuts — which are expected to save up to $550 million by the end of 2021 — are part of the biggest restructuring move at Kimberly-Clark in over a decade.

The company is also aiming to save more than $1.5 billion from its so-called Force program through efforts like improved productivity at its factories and more efficient distribution.

Professor Cappelli said that while these measures might help improve profitability in the short term, they did not solve the fundamental challenge of competing in an increasingly commoditized business, where price is the overwhelming driver.

“A lot of these announcements are done for the benefit of the stock market,” Mr. Cappelli said. “But it doesn’t always work, and then you have to ask, ‘What is their next move?’”

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