By Neil J Kanatt and Alexander Marrow
Aug 4 (Reuters) – Kimberly-Clark cut annual sales and profit forecasts on Tuesday and said false claims about its diaper quality in China will continue to be a problem after hurting second-quarter sales.
The Kleenex maker, whose shares were volatile in early trading, cited independent testing by a government-certified third party to refute Chinese social media claims that its Huggies diapers contained formamide.
Chinese media reported in June, just before the crucial “618” shopping festival, that Huggies and two Chinese brands Babycare and Bibabebe tested positive for the toxic substance that can irritate the skin, eyes and breathing if inhaled.
China’s market regulator launched an inquiry, without naming any company or brand, but has not provided an update on its status.
“While we are cautiously optimistic in some areas, I think these incidents have been occurring with greater frequency, and consumers are pretty smart and getting savvy,” CEO Mike Hsu said. “We’re also realistic that it’s going to take a little time to kind of work through this.”
Kimberly-Clark, on track to complete its roughly $40 billion acquisition of Kenvue by the year-end, now expects 2026 organic sales growth to trail the weighted average growth of its categories and markets by about 100 basis points — down from its previous expectation of in-line growth. Those categories grew about 2% over the past year.
The company expects annual adjusted earnings per share growth in a high-single-digit rate on a constant-currency basis, down from earlier forecast double-digit growth. The outlook includes a roughly $150 million hit from higher oil prices, at the low end of the range it outlined in April.
Kimberly-Clark COO Russ Torres labeled the China disruption a “one-time external impact,” expected to reduce organic growth in its International Personal Care segment by three to four percentage points and hold back operating profit growth by 10 to 12 percentage points this year, as the company “aggressively” invests to defend its franchise.
The China hit overshadowed broader progress in Kimberly-Clark’s cost-saving and transformation efforts, adding another challenge to the company, which, like its peers, is grappling with meeting the needs of financially stretched consumers.
“A prolonged reputational issue could delay market share recovery even after regulators close their investigation,” said Brian Mulberry, chief market strategist at Zacks Investment Management.
Last month, Kimberly-Clark finalized a 51% stake sale in its international tissue business to Suzano, creating the $3.4 billion Arbex joint venture to compete with rivals Procter & Gamble and Essity.
Net sales rose 0.6% to $4.19 billion in the quarter, below analysts’ $4.22 billion estimate, while adjusted operating profit increased 6.2% to $757 million, helped by tariff refunds of about $45 million.
(Reporting by Neil J Kanatt in Bengaluru and Alexander Marrow in London; Editing by Joyjeet Das)
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