Even Amid Cost Angst, Kimberly-Clark Steps Up Brand Spending to Shore Up Its Narrow Economic Moat

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 in 2023, with Kimberly forecasting an incremental headwind of $100 million-$200 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.