Skyrocketing Costs Eat Away at Kimberly-Clark's Near-term Profits, But Competitive Edge Unwavering

From our vantage point, narrow-moat Kimberly-Clark continues to struggle navigating a volatile demand environment and pronounced cost pressures. While we didn't anticipate the significant level of consumer stock-ups realized since the onset of coronavirus would persist (particularly as mobility restrictions ease), commodity cost inflation has outpaced our expectations (serving as an 800-basis-point drag to gross margins in the second quarter), and these pressures are unlikely to abate. In this context, Kimberly expects inflation in the range of $1.4 billion to $1.6 billion in fiscal 2022, on top of the $1.5 billion in incremental costs incurred in fiscal 2021.