IRVING, Texas -- Kimberly-Clark Corp. said it will cut about 13% of its global workforce, or at least 5,000 jobs, as the company grapples with sluggish sales of household staples ranging from diapers to toilet paper.
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The maker of Huggies diapers and Kleenex tissues said it faces a plethora of challenges that aren't letting up soon, despite a healthy U.S. economy and lower corporate tax rate.
Rivals are slashing prices, forcing down prices industrywide. Women are having fewer babies, denting demand for diapers and other products. Retailers like Wal-Mart Stores Inc. are pushing steeper discounts as they struggle to compete with Amazon.com Inc. And costs for pulp, oil and other materials have risen more than expected.
The Irving, Texas-based company, which announced the job cuts as it reported fourth-quarter results, had entered 2017 predicting 2% organic sales growth but ended the year with flat sales. It expects just 1% growth for 2018.
"It wasn't that long ago I had investors asking us when we are going to take our long-term growth rates up," Chief Executive Tom Falk said in an interview. "Now we've flipped to the low end of the spectrum."
Mr. Falk, who became CEO in 2002, said the moves weren't spurred by concerns that an activist investor might turn up at Kimberly-Clark's door. Rival Procter & Gamble Co. last year came under attack from investor Nelson Peltz, who argued the company needed to streamline operations. Mr. Peltz eventually won a seat on P&G's board.
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Mr. Falk did, however, say that investors let the company know they'd like faster growth and better returns. "They own the company," he said. "Management teams who forget that tend to get in trouble."
The restructuring will set up the company to better compete as market dynamics continue to shift, Mr. Falk said. Plans call for $2 billion in cost cuts by 2021, including shuttering 10 of 91 global facilities and selling off some low-margin businesses, mainly in consumer tissue.
Roughly half the reductions will be in North America, which accounts for about half the company's sales, he said. The company will incur as much as $1.9 billion in restructuring charges over several years.
"You have a pool of funds you are creating. That will allow us to stay on course and not make too many trade-offs along the way," Mr. Falk said. "We're already developing plans on where we're going to invest it back."
Along with the job cuts and factory closings, the company plans to increase its quarterly dividend payment by 3% to $1 a share. Shares of the company are flat over the past year, missing out on a broader stock market surge.
North America is the biggest trouble spot. Organic sales, which strips out currency moves, fell last quarter in personal care and consumer tissue, the company's two biggest segments.
Mr. Falk said the company lost market share in its home market and is being squeezed by falling prices, particularly as P&G, which makes Pampers diapers and Bounty paper towels, cuts prices in the U.S. to jump-start its own lagging sales.
U.S. pricing on Kimberly-Clark's disposable diapers dropped 0.8% last year, while P&G's diaper prices fell 0.4%, according to Nielsen figures provided by Wells Fargo. Paper towel prices dropped 2.7% last year for Kimberly-Clark, while P&G's paper towel prices rose 1.8% for the year. Neilsen's figures exclude online sales, some retailers and promotional activity, such as coupons.
More perplexing, Mr. Falk said, is an unexpected decline in the U.S. birthrate. The rate hit a record low in 2016 and continued to fall through the first half of 2017, according to the Centers for Disease Control and Prevention.
Underemployment and career dissatisfaction among younger people may play into decisions to hold off having children, said Alison Miller, a University of Michigan associate professor of health behavior and health education.
"Emerging adulthood is becoming more delayed," she said. "People in the millennial generation feel they are operating in an uncertain world and are delaying the official roles of adulthood."
Not only do fewer births hurt the sales of diapers, one of Kimberly-Clark's top-selling products, it also leads to fewer purchases of other baby-related products and items like Kleenex tissues, a staple for parents.
Mr. Falk said he envisions an eventual return to long-term organic sales growth in the range of 3% to 5%. Amid the challenges, Mr. Falk said, the company has an opportunity to grow in foreign markets and in some U.S. segments, such as adult incontinence, where there is untapped demand.
For the fourth quarter, the company Tuesday reported net income of $1.75 a share, compared with $1.40 a year ago. Operating income fell and net sales were little changed at $4.6 billion. Net income was $617 million, up 22% from a year ago, while revenue rose 1% to $4.6 billion.
Write to Sharon Terlep at email@example.com
Corrections & Amplifications
This article was corrected at 11:54 a.m. ET because it incorrectly stated in the sixth paragraph 2003 as the year Tom Falk became chief executive of the company. He became CEO in 2002.
"Kimberly-Clark to Cut 5,000 Jobs, Close 10 Factories," at 7:44 a.m. ET, incorrectly stated in the sixth paragraph that Tom Falk became chief executive of the company in 2003. He became CEO in 2002. (Jan. 23)
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January 23, 2018 12:08 ET (17:08 GMT)