Narrow-Moat Kimberly-Clark Struggles to Overcome Inflationary Headwinds and Supply Chain Hurdles

From our vantage point, narrow-moat Kimberly-Clark continues to be challenged as it works to navigate a volatile demand environment and pronounced cost pressures. While we didn't anticipate the significant level of consumer stock-ups realized since the onset of coronavirus would persist (particularly as mobility restrictions ease), commodity cost inflation has outpaced our expectations (serving as a more than 700-basis-point drag to gross margins in the third quarter), and these pressures are unlikely to abate. In this context, Kimberly expects inflation in the range of $1.4 billion to $1.6 billion in fiscal 2022, on top of the $1.5 billion in incremental costs incurred in fiscal 2021.