Toilet paper sales send profits soaringToilet paper sales send profits soaring

Toilet paper lifted Kimberly-Clark’s worldwide sales by 8 percent and by 12 percent in North America, where pantry loading has become the new shopping mode during the initial weeks of the coronavirus pandemic.

Profit was up 45 percent in the first three months ending in March for the Irving, Texas-based company, which operates in 175 countries, making Scott and Cottonelle toilet paper and Kleenex facial tissue.

With people at home instead of at work, more toilet paper and Kleenex tissues are being used at home, which is just one new consumer behavior that Kimberly-Clark is trying to gauge. Does hoarding mean people won’t buy as much toilet paper later this year?

“Demand would be easy to predict if all households bought 30 percent more, but it’s not like that. It’s lumpy,” said CEO Mike Hsu. Plus, more households may routinely keep a bigger stock at home in the future, he said.

Kimberly-Clark, which usually has a mix of results from its worldwide operations, said first-quarter demand and shipments were up everywhere as consumers stocked up for the COVID-19 outbreak.

And even though it had a strong quarter where it was able to refinance long-term debt and generated “very strong cash flow,” Hsu said too much uncertainty about the future means it will not forecast results for a while. It’s also temporarily suspending share repurchases through at least June.

So far in April, retailers are restocking their warehouses, Hsu said on a conference call with analysts last week. There’s also uncertainty in Kimberly-Clark’s operations that sell to other businesses until people go back to work. Some of the company’s capacity that supplies offices and hotels may be shifted to meet consumer demand, he said.

Office use of bathroom products is down 80 percent, travel and leisure is down with hotel capacity at only 21 percent, and seated restaurant business is down 100 percent globally, Hsu said.

Hsu told analysts that the company is coming up with plans for various scenarios.

Chief financial officer Maria Henry said factors the company is considering include the depth and length of the recession, the length of time that social distancing is in place and the volatility of currency and commodities.

“We are prudently managing the company over this period,” she said.

First-quarter profit was $660 million, or $1.92 a share, on sales of $5 billion, compared with a profit of $454 million, or $1.31 a share, on sales of $4.6 billion the prior year.

Tissue sales in North America increased 12 percent and prices increased 3 percent. Sales of developed markets outside North America increased 17 percent while sales in developing and emerging markets was up 10 percent.

Kimberly-Clark doesn’t separate out Scott and Cottonelle toilet paper sales from Kleenex tissue within its tissue category.

The personal care category, which includes Huggies, Pull-Ups, Depend and women’s feminine care brands Kotex and Poise, posted a sales increase of 10 percent in North America. Volumes increased in the double digits in adult care, in the high single digits in feminine care and in the mid-single digits in baby and child care.

“A combination of increased consumer demand for our products and strong execution by our teams in reflective in our first-quarter results,” Hsu said. The company “proactively managed our global supply chain to endure a steady supply of our essential products.”

TNS