The maker of Huggies and Kleenex is cutting thousands of jobs

The maker of Huggies and Kleenex is cutting thousands of jobs
Posted at 11:07 AM, Jan 26, 2018

The company that makes Huggies and Kleenex is cutting up to 5,500 jobs and closing factories.

Kimberly-Clark, which also makes Pull-Ups diapers and Depend undergarments, is having a hard time selling personal care products, which account for about half its revenue, explained April Scee, an analyst with Renaissance Macro Research.

Until recently, personal care products had been a growth engine. But traditional rivals like Procter & Gamble started selling premium diapers in China and stole some of Kimberly-Clark's customers. And currency pressure forced the company to raise prices more than local competitors, Scee said.

On top of that, lower birth rates in the United States and South Korea mean fewer people have been buying diapers in those countries. Kimberly-Clark's consumer product sales fell 2% in North America last year.

The job cuts amount to as much as 13% of the workforce. Kimberly-Clark will close or sell about 10 factories.

CEO Thomas J. Falk called it the company's biggest restructuring since 2003. He said it will leave Kimberly-Clark "leaner, stronger and faster."

Overall, the company expects the changes to save $500 million to $550 million per year before taxes by the end of 2021.

The company plans to ditch lower-performing brands in its tissue division, but it didn't say which. Kimberly-Clark also makes Cottonelle toilet paper and Scott tissue, in addition to some lesser-known brands.

The company has already announced plans to expand the Kleenex line by introducing wet wipes. Kimberly-Clark's overall tissue sales in North America were down 4% in the most recent quarter.

Amazon and other competitors could be a factor, Scee said. Consumers may have been won over by cheaper, private-label alternatives to Kimberly-Clark brands. The company noted that it has always competed with private-label items.

Analysts weren't sold on the turnaround plan. Bonnie Herzog, an analyst for Wells Fargo, wrote in a note that the company "continues to disappoint." But she said the company is still well-positioned for the long term because of a diverse product lineup and where it sells.

Kimberly-Clark stock rose slightly.