Kimberly Clark Corp (KMB) Q3 2026 Earnings Call

Good morning, and welcome to the Kimberly-Clark Third Quarter 2026 Earnings Call. Participants have been placed on a listen-only mode. I will now hand the floor over to Chris Jakubik, Vice President, Investor Relations at Kimberly-Clark. Chris, please go ahead.

Thank you, and good morning, everyone. I would like to remind everyone that during our comments today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures during these remarks. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results.

And you can find the gap-to-non-gap reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com.

With that, I'll turn it over to Mike for a few opening comments.

All right. Thank you, Chris, and thank you, everyone, for joining us. Well, this week marks a new chapter for Kimberly Clark. We officially completed our acquisition of Kenview, a defining moment in our 154-year history. We're delighted to welcome the talented Kenview team.

The closure of this transaction marks a major milestone in our Powering Care transformation, a year of rigorous integration planning, and the starting point for an exciting future defined by extraordinary care. We have created a portfolio and set of capabilities uniquely positioned at the intersection of fast-moving consumer goods and healthcare. Our companies share a rich heritage. We've pioneered entire categories, provided

We're providing everyday essentials that serve billions of people around the world.

Consumers have been loyal to our brands for generations because they trust us to provide better care for them and their loved ones. We form deep, lifelong bonds with consumers and translate that intimate relationship into significant lifetime value. And now, we have a generational opportunity to do even more. Everyday health is becoming more personal, more proactive, and more essential.

With the addition of the Kenview brands, we will be there for more people, in more places, and across more everyday health needs. That is the aspiration that guides our new company. Better care in more hands to enable smarter health. From baby care to women's health to active aging, consumers require and deserve a higher standard of care. And we will meet that moment with exceptional science-backed

innovation and best-in-class execution that continues to raise the standard. We're energized and we're ready. We work to strengthen our base business, enhance our capabilities, and build our combined team. And now our team is heads down, focused on execution. Near term, we will enhance performance, efficiency, and effectiveness by applying our proven operating model. We'll reinvest in our brands to ensure we're delivering superior brand

propositions across the value spectrum. Medium term, we will benefit from category and geographic expansion. And longer term, we will capture secular growth tailwinds. Our teams have worked hard to map out our integration, and we've implemented the leadership team and operating model for the new company, executed critical day one priorities, and sequenced multi-year systems and process integration roadmaps. We've got a running start in our

start, and our priorities are clear. We will execute with excellence, deliver against our synergy commitments, strengthen our core brands and businesses, and seed growth. Now, to deliver the value of the combination, we have a clear three-phase plan. Ready, set, and grow. Ready covers the first hundred days when we will set the tone for the new company, and in this first phase, we'll ensure seamless operations and deliver quick wins on synergies.

I'm confident that our shared commitment to care and strong execution will enable us to deliver generational value for consumers, customers, and shareholders.

Now, looking at the third quarter, we delivered solid results driven by our durable operating model, which overcame challenging one-off headwinds. The underlying health of our base business remains strong, and we have sustained momentum. North America continue to show strength in tissue and share gains in KC Professional, and we are driving performance in personal care.

We also delivered across our international personal care focus markets, including South Korea, Brazil, and Indonesia.

And as we move into the fourth quarter, we're focused on applying our playbook across the combined company, and our durable power and care growth engine will continue to power and strengthen our performance. We're confident in our ability to drive sustainable growth in 2027 and beyond.

I want to thank the teams who have made our transformation possible and executed this acquisition with such dedication and focus. We're excited for this new beginning and the future we're building. Kimberly-Clark is a new kind of health and wellness company, and extraordinary starts today. So with that, I'd like to open the line for questions.

Certainly. Everyone, at this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone keypad at this time. We do ask, while posing your question, to please pick up your handset if listening on speakerphone to provide optimal sound quality. Once again, please press star 1 on your telephone keypad at this time. If you wish to join the queue to ask a question, please hold a moment while we poll for questions.

And your first question today is from Morgan Stanley. Dara, your line is live. Please go ahead.

Let's go ahead. All right. Hello, Dara. Hey, good morning. How are you?

So we've had some pressure points that have cropped up more recently, cost pressures,

even with oil coming back down in the last couple of days here. You've been dealing with the China issue.

Just the maintain fiscal 26 guidance. Just wanted to get a sense of what drives confidence there

and maybe some of the key assumptions driving the underlying Q4 delivery.

And then for 27, the opposite question, which is, you know, you've laid out adjusted earnings

solution, not expected to be more than mid-single-digit dilutive versus standalone KC,

but you've got potential synergies that could be pretty robust. There's a couple of one-time

items from 26, like the fire, the China issue that could get better. So, one could be more

optimistic. So, it'd just be helpful to hear some of the puts and takes for 27 now that the deal is

officially closed, particularly synergies and reinvestment needs and any of the other key

factors you would call out for next year. Okay. Hey, Dara, maybe I'll start and I'll ask Nelson to

chime in, but I just kind of want to give you some overall perspective on how we're thinking about

The balance of this year and then a little bit into 27, but I will tell you the overall

is we feel great about where we are and what our plans are shaping up to be. In the near

term, we're very focused on executing and building sustainable momentum. Part one, for me, the priority is we're going to focus on executing the integration seamlessly. As I told the organization in multiple town halls, my perspective is I want the integration to be boring for the organization and also for our customers. That means in a pragmatic way, it's exciting that we're coming together, but we want to be able to

operate. And our euphemisms internally, we say, hey, we want to be able to ship product, pay suppliers, and pay people, right? And so that's kind of the paradigm that we're operating in. We're very focused on the fundamentals. I will tell you, as of Monday, we implemented the new organization structure and the new operating model, and that's off to a great start.

There's definitely lots of work ahead, you know, because obviously, you know, as we come through the coming weeks, especially into 2027, you know, we'll be making some staffing changes, system and reporting changes, but that's all going to be very, very well sequenced, and we feel great about that.

And so I mentioned this, like, three stages of how we're thinking about integration. Ready, that's really about flawless execution through the first 100 days. Set is really about 2027, which is making sure we're establishing a sound foundation, you know, for growth, and then grow is unlocking the full potential of the company, right?

And so I think that's kind of how we're thinking about the integration. I think part two is, you know, the second big priority for me and my leadership team is we're focused on improving the momentum of Kenview and KC brands, right? I will tell you, self-care and essential care performance was solid in the quarter. You guys probably already saw that. You know, it was up three organically.

And, you know, we take a look at a detailed by category, by time period scorecard of the Kenview brands every month in our monthly trading updates up until we closed.

And I would say, you know, for a scorecard that looked 100% red this time last year, you know, Nelson, I think you would agree.

I think when we had our review last Thursday, it was 70% green.

And so I think the Kenview business is turning and turning pretty well.

But the other areas where we've got to get improvement is some on the KC brands.

And as you're well aware, Dara, that we had this social media crisis that was proven to be false based on false information, but it did impact our business pretty significantly.

And so I think it's going to take us time to work it back.

We're very confident we'll bring the business back and ultimately regain our market leadership position, but it's going to take a little time to rebuild that.

And then the last area is, you know, we're looking for improved performance in North America skin care, North American oral care, and then a little bit on the Casey side, the personal care, we'd like to improve our execution in pockets, including in North America.

So, again, I think that's kind of the overall where the first couple priorities are. Maybe the thing I'll click on underlying all that is we're going to stay very balanced and focused on creating shareholder value over the long term, and that means, as you might expect from us, you know, we're not really going to sacrifice long-term value to manage to a short-term number. We want to make sure we can invest in the brands. The China diapers is a case in point.

We, you know, we're, you know, the businesses has, you know, taken a hit, but we're going

to continue to invest through the cycle to make sure that we rebuild that business back

to it. And so ultimately, you know, we're a flywheel growth company, and that means we want to be able to invest in our brands to drive growth, and that will create a virtuous cycle of growth. And so that's kind of where our focus is. But I think, Nelson, maybe we'll give you maybe some of the additional details.

Yeah, just to back a little bit, Dara, I mean, a few things. As Mike said, we feel pretty good about where we stand today. And, you know, more importantly, we're taking a very disciplined approach to the first year of the combined company to ensure that we have sustainable, profitable growth in the mid-long term.

As a starting point, I mean, we're on track or ahead across the key deal metrics that we laid out a year ago, including closing of the transaction, the synergy pacing, the cost of capital, and the operating momentum across our legacy stand-alone company car business, Kenview, our new categories, and Arbex, which went live July 1st of this year with our joint venture partner, Susana.

I think it's a perspective as we head into the balance of the year and 2027, our first full year as a combined company.

For a transformation of this magnitude, I mean, we remain on track on both earnings accretion and, importantly, approximately getting to about a two-times leverage by the end of the second year of the transaction.

Now, going into your question on 2026 and then next year. First, our outlook, and that's, again, standalone Kimberly-Clark, reflects stronger underlying business momentum that the headline third quarter results suggest, along with a strong global commercial agenda for the fourth quarter that's underway.

We also expect to benefit from incremental cost-mitigating actions that were taken in the third quarter.

And this includes all the elements within our integrated margin management toolkit, revenue growth management, productivity, and other measures that the team has already activated.

And the other bit to take into account is that we have an easier comp in the fourth quarter, particularly for our North America business, which, as you might remember, had a lower growth in the fourth quarter of last year.

And then the other bit, as Mike mentioned, is we will remain pretty disciplined in the balance of the year, that is, in the next two months, and we're reserving the flexibility to pursue value-creating investments that can accelerate our longer-term agenda if attractive opportunities are made.

opportunities emerge between now and the end of the year. Now, looking at the next year, three things that we're focused on. First, delivering the deal synergies. Second, strengthening the core of the two businesses. And then third, seeding future growth. As it relates to deal synergies, we are on track with our synergy plans, and the actions that Kenview took at the beginning of this year actually position as well to have a strong start as we

We get the two companies operating on a combined basis now.

The other bid is on strengthening the core of the businesses.

We continue to expect a gradual return towards a category-level growth, particularly in the

new categories that have come into the business, and this will be supported by increased investments in marketing, innovation, and R&D. At the same time, we'll be sharpening the portfolio and improving execution, and this will include SKU rationalization, increased service levels, improvements, all of which can create some near-term impacts as we position the business for healthier mid- and long-term growth.

And then lastly, on seeding our future growth, we are also making targeted upfront investments behind our biggest categories and the opportunities we see, recognizing that the financial contribution will build over time.

So overall, Dara, we feel pretty good about where we stand today, and we remain on track against the assumptions we established a year ago, and we'll preserve flexibility to invest appropriately behind the business over the next few months and in 2027.

Thank you. Thank you, guys. I feel like we hit you with a fire hose.

Very comprehensive. Thanks. Thank you. Your next question is coming from Peter Grom from UBS. Peter, your line is live. Please go ahead.

Great. Thank you. Good morning, everyone. Hope you're doing well. So I wanted to just ask about North America. I know there are a lot of moving pieces here, but we'd love to get your perspective just on the health of the business.

You know, given weaker share performance in the last couple of quarters and pricing lower.

So just, you know, any perspective there on how you see that evolving as we move forward?

Thanks.

Yeah, thanks, Peter.

Peter, I will tell you, you know, I'm confident in the underlying health of the North America business on the KC side.

Well, actually, both sides, you know, I think, you know, but, you know, I think that question was more directed on the KC side.

The underlying health of the KC side of the business is solid.

It was a soft quarter. You know, definitely, Peter, impacted by a few key discrete impacts.

The largest, I think, which is, you know, again, retailer inventory changes, which for us in the quarter was about 130 basis point headwind.

You know, we did postpone a major new product launch, and again, that's maybe an executional issue within the house.

You know, we had a new manufacturing asset to produce the new product out, and it wasn't putting out the quality that we wanted, and so we pulled it back, and we'll be launching it likely early next year, and so that was probably the second big one, and then there is some share softness primarily due to club distribution changes in baby care, which I think you guys are all well aware of, and so, you know, so those were a few of the big impacts.

I do expect overall in North America our execution to improve. I'm really confident in the innovation pipeline. I think the brand investments that we have and the commercial capabilities, as you guys all are well aware, you know, we have a great customer organization. Our e-commerce business is growing double digits, I think north of 20%. And then, you know, the other area, Peter, is, you know, tissue is performing very strongly, both on the consumer side,

And on the professional side, and we feel great about, you know, the performance there.

So overall for the year, you know, I know you probably want to talk a little bit about promotions,

but, you know, I think we expect our pricing overall for the year to be about relatively flat.

And so, again, while I think it's maybe two quarters or a little softer than what we're used to,

you know, we do expect to improve our performance in North America.

And just to add a couple of numbers for you.

I mean, one, keep in mind that the club distribution in diapers and training pens, it's about a point of headwind in the quarter for North America.

And then also to reiterate what Mike was saying, in tissue, you know, we gained overall 20 basis points share on a weighted basis in the quarter,

and that's on the heels of two straight quarters of continued strong performance.

The underlying health of the business in North America is

is strong, and again, we've got strong activations and innovations in the pipeline, which will continue into next year.

Great. Thank you so much. I'll pass it on.

Just add one point there. I think as you're tracking it, Peter, I think you mentioned the patterns on pricing. As you look at it, year-to-date, total company pricing is down about 70 basis points, 80 basis points in North America, and that's having lapped our least intense quarter of programming last year.

If you recall, we shifted some programming from Q3 to Q4 last year.

So Q3, least intense period, and we're about to lap our most intense, you know, prior year period of programming in Q4.

So as Mike said, when you think about the year, we'll probably land with pricing, you know, relatively flat.

So you kind of get on a sequential basis a little bit, you know, of a pickup in terms of, you know, what that pricing profile looks like.

That's super helpful, guys. Thanks so much.

All right.

Thank you. Your next question is coming from Michael Lavery from Piper Sandler.

Michael, your line is live. Please go ahead. Thank you. Good morning. I just want to come back to Ken, your excitement over the deal is clear, and just want to see if you can help us understand a little bit better how to think about some of the brand's health momentum. They've obviously been a little quieter since the deal was announced, but you guys have been working with them closely.

Can you just maybe give us a sense of maybe, first of all, some of if or how their brand building framework that they used, how it compares to yours, what similarities or differences there might be, and just how to think about the opportunity for the organic growth because I think some of the cost savings potential feels a bit more straightforward, but I know there's also a real focus on just building that top line momentum.

Can you help us understand how you see those building blocks there and maybe some of your, you know, kind of your take on the recent color from their side?

Yeah, okay, Michael, great question. I will tell you, I will give you a little color. Just recognize it's day three for me officially, so I'm going to try to give you a little more context for how the brands are doing. I will tell you, your overall question, and I think I said this a little bit earlier, a lot of the challenges that they've had over the past few years have been, in my mind, 100% executional, and I don't think I've found any that I perceive as being structural.

And so, but I do, what I will say is, I think Kirk and the leadership team at Kenview did a phenomenal job pivoting when Kirk got in that chair, and I think this goes back to it, and this is where Kirk and I bonded, because we were kind of trained by the same people, and so we have a similar philosophy on how you support brands.

And so I think Kirk made a lot of big moves to strengthen the execution. One of the most important was at the beginning of January, he flipped the operating model, which matches almost exactly with ours, which is why we've been able to so seamlessly move to the new org structure on Monday, first thing, and we're operating in the new model.

I will tell you, I'm encouraged with Kenview's Q3 performance, as you guys probably saw, Organic was up about three, and we're seeing some positive momentum. I think there is plenty moving in the right direction, and maybe I'll note a few things, Michael.

You know, OTC overall, you know, I think is performing well in my book.

Tylenol for the year, I think up somewhere between low to mid-single digit, I think, which is a great rebound.

I think in the quarter, it was up about 70 bps of share. Also, when OTC, Nick Ritt is up about 7% year-to-date.

Zyrtec up 5% year-to-date. Love the advertising they're doing to drive kind of category expansion with Sanjay Patia.

And then I would say overall hair, very good. Rogaine, surprisingly, I didn't know this, Michael, but, you know, it may be driven by some GLP adoption, GLP-1 adoption, so Rogaine's up 30% year-to-date. OGX, the shampoo is also performing very well.

And then in essential care, you know, the baby brands are up about 5% year-to-date. Band-Aid, which is a great Halloween giveaway, is up 4% year-to-date.

And so I think there is plenty moving in the right direction. Again, what's driving it, and this kind of reflects maybe a personnel choice I made more recently.

You know, North America, it's clear, Carlos and I also have very similar training, and he's very focused on the core aspects of execution, which, you know, DPSM is the shorthand, which is distribution pricing, shelving, and merchandising, and focusing on execution, which I think, Michael, have been, you know, a little bit off of the focus area for Kenview in the past.

And I think we are seeing really, you know, that kind of performance is really driven by, you know, better fundamental execution across all those levers.

I think we're not out of the woods yet, and so the areas that we've got to improve, you know, I would say they're stabilizing, but there's plenty of work left to be done.

Skin care was down just a little bit under a point year-to-date, you know, and that's versus a category that's up about four.

And, again, I think the team has taken steps to improve execution there.

I think medium term, and this is my perspective and still needs to be worked through the team,

I think it's about resetting the assortment.

I do think, you know, there's some extensions that we've done with some of the brands that, you know, will require a reset over time.

And, you know, the other area for me, and John Halverson knows this, and he's totally up to the task, and I was just with him and the agencies a couple weeks ago and improved the creative execution.

And I'm looking, you know, while, you know, in skin care, the marketing investment is fine and it's competitive with the category, I think there's room to increase our investment there.

And then the other area is oral care. Listerine, you're a date down about two points. You know, for me, and this is my opinion, which is I think we need to simplify and clarify the offering and the key benefits for the consumer. Given the leadership share position that we have, I mean, you know, you know, very, very strong leadership position in the category. You know, for me, it should be similar to what we've been doing with Kleenex and Depend.

And then POISE, which is focus advertising on expanding penetration frequency of the category.

And so that's kind of the, you know, the focus area for us. You know, beyond that, Michael, I would say longer term, there's a lot more headroom in these categories than I originally thought when we made the initial announcement. You know, it's going to take some time to get there. We're not going to take shortcuts. You know, we will build through the fundamentals.

And so what you'll probably see in 27 is a little bit of a conservative approach that we reflected in our 2027-28 outlook.

You know, we want to create the room to accelerate investments and get the brands in a better position to grow.

Really helpful. Thanks for that, Cor.

Okay, and Chris tells me to tell you that we're going to share more at Cagney.

Okay, sounds good. Thank you. Your next question is coming from Chris Carey from Wells Fargo. Chris, your line is live. Please go ahead.

Hi, Chris.

You may know that, you know, I may have mentioned this before, but we did detail assessments on every leadership team member for both Kenview and KC kind of going in as I selected the staff. I think Nelson told me he spent seven hours being assessed, and so we took a very detailed approach, and we used outside experts to kind of help us do that.

So I feel very good about the talent that we have in the room and the selections.

You know, certainly, you know, I guess I will say, first and foremost, I'm excited for Russ and his new adventure.

And I think not knowing that much about that business, but I think they found a good one, right?

And so I'm excited for him.

I would tell you his departure probably reflects a change in timing for both of us.

You know, it should be clear to all of you that within KC, we were on a path of transition.

And, but when we had the opportunity to create this, I would say, you know, combination that would create generational value, I think the timing for me changed and the timing for Russ changed. And so, and, you know, you're only going to have this time of your life once, right? And so I'm excited for him.

And I will tell you, parenthetically, I love being more directly involved in all aspects of the business.