Cost Pressures Persist, but Kimberly-Clark Squarely Focused on Investing for the Long Term

Like peers, narrow-moat Kimberly-Clark faces a slew of challenges, including a weak economic environment and elevated cost pressures. While we didn't anticipate the pronounced pandemic level volumes would persist (particularly as mobility restrictions ease), commodity cost inflation has outpaced our expectations (serving as a 750-basis-point drag to gross margins in fiscal 2022), and these pressures are unlikely to abate soon, with Kimberly forecasting an incremental headwind of $200 million-$300 million this year, on top of a $3.0 billion step up over the past two years. In addition, Kimberly is battling unfavorable foreign currency movements, which stand to eat into fiscal 2023 operating income to the tune of $300 million-$400 million.