Kimberly Clark Corp (NYSE:KMB) is one of those few stocks that doesn’t need any buzz to outperform the market. The stock has gained about 50% and 33% in the last two years and one year, respectively. Besides, this stock has a quality of consistently distributing dividends to shareholders. All in all, it is a solid stock operating in a niche business, and I have good feelings about this.
In this article, I am going to do a fundamental and operational analysis of the company to discuss three major reasons why the company is able to outperform the market in the long run.
Leadership position in its Niche business
Kimberly Clark Corp (NYSE:KMB) operates in the personal care industry and faces competition from the big names like The Procter & Gamble Company (NYSE:PG) and Johnson & Johnson (NYSE:JNJ). However, because of the niche segment which Kimberly Clark Corp (NYSE:KMB) caters to, it has established itself as a market leader, under some of its products’ categories.
Products offered – facial and bathroom tissue, paper towels. Napkins
Brand name – Cottonelle, Viva, Andrex, Scottex, Hakle
Products offered- apparel, wipers, soaps , sanitizers, tissues and towels
Brand name- Kleenex, Scott, WypAll, Kimtech and Jackson Safety
Products offered- under pain management and respiratory and digestive health category
Brand names- Kimberly-Clark and ON-Q
Kimberly-Clark Health Care holds leadership position in categories like infection control solutions, surgical solutions, pain management, hygiene solutions and digestive. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds the No. 1 or No. 2 share position in more than 80 countries
Continual Expansion and Overhauling of operations
In this section, I will discuss some of the company’s expanding and restructuring activities and how these activities are going to help the company in the long run.
Acquisition: Kimberly Clark Corp (NYSE:KMB) is expanding into emerging markets. It acquired the anesthesia business of Life-Tech, a Texas-based medical device manufacturer. This acquisition will enable Kimberly-Clark to capitalize on its leading position in the ON-Q category.
Supply chain restructuring: Kimberly Clark Corp (NYSE:KMB) has been trying to connect its supply chain to the store shelf, for the past six years. The purpose is to create a demand-driven supply chain that would make and warehouse only the precise amount of inventory needed to replace. Main factor behind the demand-supply mismatch was that the company’s store shipments were based on historical sales forecasts, which were not very accurate predictors of future sales. To synchronize this process, the company is planning to use point-of-sale (POS) data from consumer purchase as the basis for replenishment to retailers.
Cost cutting measures in developing and non-performing markets
In developing markets, the company’s net sales increased by 8 percent. This growth came despite a five percent decrease from unfavorable currency translational effect. Sales volumes increased by nine percent in the regions like Brazil, China, Russia and South Korea. Operating profit for the personal care segment in the developing market increased due to higher net sales and cost savings strategy adopted by the company. Besides, the company took a major decision of restructuring in Europe region to maintain its profitability, amidst falling consumer-demand. The restructuring plan will involve the sale or closure of five manufacturing facilities and the reduction of workforce by approximately 1,300 to 1,500 positions.