Kimberly-Clark Streamlines Operations with $1.5 Billion in Costs: The Journey to a Simplified Business Model

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

Kimberly-Clark, a Kleenex tissue manufacturer based in Irving, Texas, announced on Wednesday that it will be restructuring into three business units to simplify operations and reduce costs. The company expects to incur approximately $1.5 billion in related expenses over the next three years, with cash costs accounting for about half of that amount. These costs will primarily be associated with workforce reductions, although the specific number of jobs to be cut was not disclosed.

Kimberly-Clark’s restructuring comes as the company is facing challenges such as decreasing sales due to inflation-stricken customers opting for more affordable alternatives and losing shelf space at retailers to cheaper private-label products. The company’s supply chain modernization plans aim to increase gross productivity by over $3 billion and save $500 million in working capital, which will be used for growth investments.

The new organizational structure will consist of three segments: North America business, international personal care segment, and international family care and professional businesses. Previously, Kimberly-Clark had three business segments each with three geographic sub-divisions. The transition to the new organizational structure is expected to be completed by the end of 2024 and is projected to deliver approximately $200 million in selling, general, and administrative savings over the next few years.

Kimberly-Clark also reaffirmed its annual organic net sales and adjusted profit targets provided in January. In January, the company 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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