Kimberly-Clark Corp. reported a sharp drop in toilet paper sales and warned the coronavirus pandemic-fueled surge in demand for its products was slowing.
The Dallas-based consumer goods maker said tissue sales in the three months through March declined 12% year over year to $1.5 billion. They fell 14% in North America, the company’s biggest market. Overall, organic sales were down 8% from a year ago.
Kimberly-Clark’s consumer tissue unit, which includes the Scott, Cottonelle and Viva brands, accounted for 32% of all revenue.
"We expected a consumer destocking to occur, but "didn't expect that it would happen as quickly as it appears to be happening," said CEO Michael Hsu said on the company’s first-quarter earnings call on Friday.
Demand for toilet paper and other consumer goods boomed last year as households stocked up while riding out the pandemic from lockdown. The company's tissue segment saw a 14% sales spike in the first quarter of last year.
Hsu attributed the destocking to the fast pace at which Americans have been vaccinated and the increased mobility that has occurred as a result of those vaccinations from the likes of Pfizer, BioNTech and Moderna.
Kimberly-Clark now forecasts organic sales will be flat to up 1% this fiscal year after previously seeing growth of as much as 2%.
The company also trimmed its outlook for adjusted earnings per share to a range between $7.30 and $7.55, down from $7.75 to $8.
The new outlook comes with the assumption that volumes will be lower and net selling prices rise.
KIMBERLY CLARK TO RAISE PRICES
Kimberly-Clark said earlier this month that it would raise prices "across a majority of its North America consumer products business" to help offset "significant commodity cost inflation."
The price increases are expected to be in the mid-to-high single digits and will take place before the end of June.
Kimberly-Clark shares were up 4.1% this year through Thursday compared with the S&P 500’s 10% gain.