* Q3 EPS $1.40; analysts' forecast $1.13
* Sales down 1.7 pct to $4.91 bln
* Raises FY EPS view, sees smaller sales drop
* Assumes relatively stable economy for rest of 2009
* Shares up 5.1 percent after hitting year-high
(Adds CEO and analyst comments, byline; updates stock move)
By Jessica Wohl
CHICAGO, Oct 22 Kimberly-Clark Corp (KMB.N)
raised its forecast for the year after blowing past
third-quarter earnings expectations on cost-cuts and increased
demand for face masks to protect against the H1N1 flu virus.
The maker of Kleenex tissues and Huggies diapers expects to
cut costs even more, feel less of a hit from foreign currency
and see sales improve this year. Its shares rose 5.1 percent to
$62.74 in afternoon trading.
The company is "assuming the economic environment will
remain relatively stable for the balance of 2009," said
Chairman and Chief Executive Thomas Falk.
Consumers are buying household and personal products, but
they continue to feel some pressure, he noted.
"I wouldn't say it's getting a lot worse, but it's not
getting a lot better, either," Falk said in an interview.
Kimberly-Clark, which also makes Depend undergarments for
incontinence, still sees shoppers timing purchases to their
"Certainly, in categories like incontinence, you're seeing
the senior that's on a fixed income is tending to load up at
the beginning of month," Falk said.
Also, parents continue to keep children in diapers longer,
rather than moving to the company's more expensive Pull-Ups
training pants, he said. "But for most part you're not seeing
huge shifts in consumer behavior."
PROFIT UP MORE THAN 40 PERCENT
Kimberly-Clark said on Thursday it earned $582 million, or
$1.40 per share, in the third quarter, up sharply from $413
million, or 99 cents per share, a year earlier.
Analysts, on average, expected $1.13 per share, according
to Thomson Reuters I/B/E/S.
Analysts said the results were strong overall, even though
some categories saw pressure, and were pleased with the
company's improved margins.
"If Kimberly-Clark is any indication, this bodes well for
(third-quarter) performance across the group," especially for
Procter & Gamble, Sanford Bernstein analyst Ali Dibadj said.
Shares of P&G, which reports on Oct. 29, rose 0.8 percent.
Kimberly-Clark's sales fell 1.7 percent to $4.91 billion.
Analysts had expected $4.87 billion. The volume of goods sold
was little changed from a year earlier.
One bright spot was healthcare, where sales rose 15.8
percent and volume jumped 18 percent. About 40 percent of the
volume growth stemmed from face mask demand. [ID:nN22177970]
Sales fell in other units. The consumer tissue unit, whose
brands include Kleenex, Cottonelle and Scott, posted the
biggest drop with a 5 percent decline.
Kimberly-Clark has seen distribution change as retailers
sharpen their focus on product selection. For example, its
Scott paper towels are no longer sold at Target (TGT.N), which
has focused on more premium products such as Kimberly-Clark's
Viva brand and P&G's (PG.N) Bounty. But Scott towels were added
to the lineup at Wal-Mart's (WMT.N) Sam's Club warehouse
"Our overall distribution is pretty similar, but it's more
concentrated in individual outlets than it used to be," Falk
Kimberly-Clark said it now expects to earn $4.50 to $4.60
per share this year, up from a July forecast of $4.10 to $4.25.
Analysts' average forecast was $4.26.
The company now expects sales to fall about 2 percent this
year. In July it forecast sales would fall 4 percent to 6
percent, versus a prior view of a 6 percent to 8 percent drop.
Kimberly-Clark said it has found additional savings in
sourcing and supply chain and now expects to save about $250
million this year, versus prior guidance for savings of at
least $200 million.
In June, the company set plans to cut about 1,600 salaried
jobs, or roughly 3 percent of its workforce. Under an earlier
cost-cutting plan, it eliminated some 6,000 jobs and closed
about 20 manufacturing plants.
(Reporting by Jessica Wohl; editing by John Wallace and Steve