Kimberly-Clark Q3 Organic Sales Fall as Adjusted EPS Rises

Kimberly-Clark Corp. reported lower organic sales and adjusted operating profit for the third quarter of 2026, as disruption in China and retailer inventory movements weighed on revenue. Adjusted earnings from continuing operations nevertheless rose sharply, supported by productivity savings and cost discipline, while the company outlined its integration and deleveraging plans following the November 2 acquisition of Kenvue.

Third-quarter net sales declined 0.4% from a year earlier, while organic sales, which exclude currency translation and divestitures and business exits, fell 1.3%. Volume and mix decreased 0.2%.

Adjusted operating profit was $677 million, down 0.9%, or 1.1% on a constant-currency basis. GAAP operating profit declined to $516 million from $621 million, reflecting adjustments that included $106 million of Kenvue acquisition costs and $55 million related to the 2024 Transformation Initiative.

Adjusted earnings per share from continuing operations increased 17.2% to $1.70, or 16.3% in constant currency. GAAP diluted EPS from continuing operations was $1.19, compared with $1.01 a year earlier.

Adjusted EPS attributable to Kimberly-Clark declined 6.6% to $1.70, or 7.1% in constant currency, reflecting the contribution from discontinued operations in the prior-year comparison. GAAP diluted EPS attributable to Kimberly-Clark rose to $5.37 from $1.34, primarily reflecting the gain associated with the International Family Care and Professional transaction.

North America offsets pressure in international personal care

North America delivered 0.4% organic sales growth in the quarter, driven by a 2.1% increase in volume and mix. The company said year-over-year retailer inventory movements reduced growth by about 130 basis points. Kimberly-Clark was holding or gaining share in 68% of its key North American cells on a trailing 12-month basis.

North American operating profit increased 24% and operating margin expanded to 24.8%. For the first nine months, organic sales rose 0.5%, with continued momentum in Tissue and Professional supported by positive volume growth. Productivity savings and tariff refunds more than offset a 200-basis-point drag from business exits, according to the presentation.

International Personal Care organic sales fell 4.6% in the quarter, with volume and mix also down 4.6%. Kimberly-Clark said underlying volume and mix growth was more than offset by a 770-basis-point headwind from a social-media-related disruption in China.

The segment’s operating profit dropped 32.7%, while operating margin was 10.3%. Higher input costs and the China disruption pressured results, partly offset by productivity savings. The company reported share gains in several focus markets, including diapers and pants in Indonesia and Brazil, feminine care in Indonesia, and adult care in Australia.

Across the company, gross productivity savings equaled 5.8% of adjusted cost of goods sold in the quarter and 6.1% year to date. Kimberly-Clark continues to target gross productivity of 5% to 6% for 2026 through product and value-stream simplification, manufacturing and distribution network optimization, procurement and automation.

Standalone outlook maintained amid sales headwinds

For 2026 on a standalone basis, excluding effects from the Kenvue acquisition closing before year-end, Kimberly-Clark expects volume-and-mix-led organic sales growth to be about 100 basis points below weighted-average market growth, currently estimated at approximately 1.7%. The outlook incorporates North American distribution and retailer inventory pressures, as well as disruption risk in China.

Reported sales are expected to face an approximately 50-basis-point drag from the exit of the U.S. private-label diaper business, offset by an estimated 100-basis-point benefit from currency translation.

The company expects mid-single-digit constant-currency adjusted operating profit growth and high-single-digit constant-currency adjusted EPS growth from continuing operations. Its assumptions include an adjusted effective tax rate of about 23%, lower net interest expense than in 2025, essentially unchanged average shares outstanding and an approximately 30% increase in income from equity companies.

Adjusted EPS attributable to Kimberly-Clark is expected to decline by a low-single-digit percentage in constant currency, including the effect of an anticipated 50% reduction in the contribution from discontinued operations. Reported results are expected to receive an approximately 190-basis-point currency benefit.

Kimberly-Clark also expects about $2 billion of adjusted free cash flow for the full year, including accelerated capital expenditures of roughly $1.3 billion. Adjusted free cash flow totaled $1.40 billion through the first nine months, up from $1.26 billion a year earlier.

Kenvue integration shifts to execution

Following completion of the Kenvue acquisition on November 2, Kimberly-Clark said its initial priorities include maintaining operations, activating the combined organization and securing early synergy gains. Planning covers procurement negotiations involving more than $4 billion of direct cost-of-goods-sold spending and $1.2 billion of addressable selling, general and administrative spending, as well as a multiyear technology integration and shared-services roadmap.

The company expects 2027 adjusted EPS dilution from the transaction to be no more than a mid-single-digit percentage relative to Kimberly-Clark on a standalone basis, driven by incremental amortization and capital issued for the acquisition. Management expects adjusted EPS growth to return to its long-term algorithm by the second year of integration and projects a mid-to-high-single-digit adjusted EPS compound annual growth rate for 2026 through 2028.

Day-one gross leverage is expected to be about 2.9 times adjusted EBITDA. Kimberly-Clark is targeting net leverage of approximately 2.0 times by the end of 2028.

The transaction introduces significant execution and financial risks. The company cautioned that expected synergies and cost savings may be delayed or may not materialize, integration expenses could exceed estimates, and operational disruption or the loss of key employees, customers and suppliers could affect performance. Increased debt, refinancing conditions, legal proceedings and potential impairment of goodwill and intangible assets are additional uncertainties. Other disclosed risks include tariffs, foreign-exchange volatility, higher raw-material and energy costs, supply-chain disruption, competitive pricing pressure and continued disruption in China.