Kimberly-Clark: Owing a Debt of Earnings Gratitude to Spend Management

Kimberly-Clark is not alone in facing the commodity price pressure plaguing many household and consumer goods products companies in 2011. Yet they're doing better than most at weathering the overall volatility storm as a result of better Spend Management execution in general. According to their latest quarterly report, the firm reported "adjusted earnings of $1.18 per share in the second quarter 2011, exceeding the Zacks Consensus Estimate by 3 cents." The above-linked Zacks report further notes that "these results were benefited from sales growth and $45 million in cost savings from the Kimberly-Clark's FORCE (Focused On Reducing Costs Everywhere) program."

Specifically, FORCE savings are expected to total "$300 to $350 million in 2011, up from the prior target range of $250 to $300 million" and "the company continues to aggressively identify and implement incremental savings opportunities, particularly in sourcing and supply chain activities." Of course all of this provides further proof that its possible to materially -- and I do mean material in the sense of double-digit impact -- swing quarterly earnings deeper into the black based on Spend Management policy and practice even in industries facing what might seem like a perfect storm of consumer spending uncertainty and commodity volatility concerns.

Yet Kimberly-Clark has been in a solid place for sometime when it comes to procurement and supply chain. In 2009, we conducted a study of procurement and IT sophistication in household and consumer products companies and found that only Gillette and P&G bested Kimberly-Clark in overall sophistication (these organizations ranked as "Innovators" on the Geoffrey Moore Chasm scale we like to deploy). In comparison, Kimberly-Clark ranked as an early adopter, sitting alongside other sophisticated bellwethers in the household and consumer goods market including Avon, Colgate-Palmolive and SC Johnson. Dozens of other companies ranked lower in overall sophistication in our analysis including Blyth, JohnsonDiversey, Mary Kay, Solo Coup, Clorox and Estee Lauder. Shareholders of these organizations should ask themselves what the FORCE program at Kimberly-Clark is delivering that they, too, could be experiencing by taking their Spend Management initiatives up a notch.

Jason Busch

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