Kimberly-Clark Simplifies Operations, Reveals $1.5 Billion Costs for Job Cuts and Supply Chain Modernization

Kimberly-Clark announces business reorganization, expects $1.5 billion in costs

Kimberly-Clark, the Kleenex tissue maker, announced on Wednesday that it will be reorganizing into three business units in an effort to simplify operations and reduce costs. The Irving, Texas-based consumer goods maker expects to incur about $1.5 billion in related costs over the next three years, with cash costs making up approximately half of that amount. These costs will primarily be related to workforce reductions, although the specific number of jobs to be cut was not disclosed.

The company’s restructuring comes as Kimberly-Clark is experiencing diminishing returns from consistent price hikes and a decrease in sales due to inflation-stricken customers opting for more affordable alternatives. Like its competitors Procter & Gamble and Unilever, Kimberly-Clark is also facing challenges from losing shelf-space at retailers to cheaper private-label products.

Kimberly-Clark’s new organizational structure will consist of its business in North America, the international personal care segment, and the international family care and professional businesses. Previously, the company had three business segments, each with three geographic sub-divisions. The company’s supply chain modernization plans aim to generate over $3 billion in gross productivity and $500 million in working capital savings that will be used for growth investments.

These actions are projected to deliver approximately $200 million in selling, general, and administrative savings over the next few years. The company has also reaffirmed its annual organic net sales and adjusted profit targets provided in January. In January, Kimberly-Clark fell short of fourth-quarter sales and profit estimates and cautioned that weak retail inventories could result in flat volumes in the first quarter. As a result of the announcement, Kimberly-Clark’s shares were up 1.5% before the market opened.

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