Packages of Kleenex tissues, a Kimberly Clark brand, are seen at a store in San Francisco in 2011. (AP Photo/Jeff Chiu)

Packages of Kleenex tissues, a Kimberly Clark brand, are seen at a store in San Francisco in 2011. (AP Photo/Jeff Chiu)

Tax bill will help fund 5,000 layoffs, Kimberly-Clark says

Executives declined to say which factories the company would be closing.

By Aaron Gregg / The Washington Post

In the weeks since the GOP tax bill went into effect, numerous U.S. companies promised to pass their savings on to workers through bonuses and salary increases.

But Kimberly-Clark, the Dallas-based maker of Kleenex, Huggies, Kotex and other consumer products, plans to use some of its windfall to cover the costs of shrinking its workforce by as much as 13 percent as it shutters factories and reorganizes operations.

The company said Tuesday it plans to dismiss between 5,000 and 5,500 people and sell or close about 10 manufacturing facilities in what chief executive Thomas Falk described in a Tuesday call with analysts as “difficult but necessary actions to make the Kimberly-Clark an even stronger company going forward.”

Executives declined to say which factories the company would be closing, citing the need to consult with unions, work councils and other stakeholders. They said some of the savings would be used to expand production at other facilities.

Chief financial officer Maria Henry said the company’s gains from tax reform would help offset the cost of the restructuring plan. The company had an effective tax rate of 28.6 percent in 2017, and the rate would drop to between 23 and 26 percent in 2018 as a result of congressional action, boosting year-over-year earnings growth by 6 points, she told analysts during a conference call to discuss recent financial results.

“We also anticipate ongoing annual cash flow benefits from tax reform,” Henry said. “That provides us flexibility to continue to allocate significant capital to shareholders while we also fund increased capital spending and our restructuring program over the next few years.”

Along with many of its peers in the retail industry Kimberly-Clark has been buffeted for years by falling commodity prices. The company’s revenue rose by 1 percent in the fourth quarter of 2017, compared to the same period a year earlier, but the numbers are down significantly from 2014. Profits rose by 21 percent, or $1.75 a share for the quarter.

Executives cited declining fertility rates in the United States and South Korea as factors that have contributed to a decline in diaper sales, long considered one of Kimberly-Clark’s bedrock lines of business. Competition is also heating up. Amazon.com, for instance, launched its own private label brand of diapers late last year. (Amazon chief executive Jeff Bezos owns The Washington Post.)

Executives have tried to fill the gap through a cost-cutting program it calls FORCE, or “Focused On Reducing Prices Everywhere,” which is meant to make its factories and distribution lines more efficient. Executives told analysts that the company has saved about $450 million in the past year as part of that program program, as part of a planned $1.5 billion cost-reduction over the next four years.

Part of that has come from eliminating certain full-time service positions while hiring elsewhere.

“We are moving to a global business services platform for our more transactional and standard work,” Henry said Tuesday. “And when you do that, when you think about it, we are removing a role that is in country, so we are paying the full severance on that position that we are taking out, and we are hiring that role in a different location in our shared services center.”

The company has seen some initial success expanding to new markets, with sales in its personal care segment up by wide margins in Latin America, China and Eastern Europe.

Kimberly-Clark’s stock price dropped slightly on Tuesday morning following its earnings announcement but recovered throughout the day, finishing up nearly 0.8 percent to $117.84.

Talk to us

More in Herald Business Journal

Darren Redick is the new CEO of Providence’s Northwest Washington service area. (Providence Health and Services) 20210514
Providence stays local in selecting a new regional CEO

Based in Everett, Darren Redick will lead the health care provider’s Northwest Washington area.

Views of the Riverfront development on Tuesday, Jan. 15, 2019 in Everett, Wa. The Riverfront Redevelopment consists of three different large sections all owned by Polygon Homes. All three sections run North to South along the Snohomish river (just East of 41st street), and range from around 40-70 acres each. (Andy Bronson / The Herald)
Riverfront construction could start soon — without a cinema

The pandemic’s effects on movie theaters have delayed some work at the 70-acre Everett development.

A Boeing 737 Max lands during a test flight in Seattle on Sept. 30, 2020. MUST CREDIT: Bloomberg photo by Chona Kasinger.
Boeing Max nears return with repair plan cleared by FAA

The company faces extra scrutiny as it works to convince regulators globally that the Max is safe.

FILE - In this Monday, March 1, 2021 file photo, The first Alaska Airlines passenger flight on a Boeing 737-9 Max airplane takes off on a flight to San Diego from Seattle-Tacoma International Airport in Seattle. Many new Boeing 737 Max jetliners are still grounded by an electrical problem in a backup power-control unit. The Federal Aviation Administration said Thursday, April 22, 2021 that 106 planes worldwide are grounded, including 71 in the United States. Airlines are waiting for Boeing to come up with a plan for repairing the planes, and that plan would need FAA approval. (AP Photo/Ted S. Warren, File)
Halt to 737 Max deliveries stymies Boeing’s recovery effort

So far in 2021, the company has delivered 94 jets and won 84 net new orders.

Man who runs Everett business charged in U.S. Capitol case

Joseph Elliott Zlab, 51, of Lake Forest Park, was arrested in Everett on Thursday, the FBI said.

Indian drink condiments cartoon vector illustration. Traditional beverage flavourings in wooden bowls flat color object. Tea additives, hot drink ingredients isolated on white background
You voted: The best Indian food in Snohomish County

Even during a pandemic, people still have their favorites.

FILE - In this Feb. 14, 2019, file photo, people stand in the lobby for Amazon offices in New York. Amazon, which has been under pressure from shoppers, brands and lawmakers to crack down on counterfeits on its site, said Monday, May 10, 2021, that it blocked more than 10 billion suspected phony listings last year before any of their offerings could be sold. (AP Photo/Mark Lennihan, File)
Amazon blocked 10 billion listings in counterfeit crackdown

Scammers tried to take advantage of shoppers who were buying more online during the pandemic.

A Mexican tacos food truck, people ordering and waiting their takeaway food
You voted: The best food truck in Snohomish County

Even during a pandemic, people still have their favorites.

One of the Jetty Island ferry captains waits for boarders as the ferry begins operations for the summer on Wednesday, Jul. 6, 2016 in Everett, Wa. (Andy Bronson / The Herald)
Port, county to pay Everett for Jetty Island ferry this year

The Port of Everett and Snohomish County plan to make an online system for $3 reservations.

Boeing crash victims’ families push for changes at FAA

Hundreds are demanding the ouster of the agency’s administrator, Stephen Dickson, and others.

fish and chips cartoon
You voted: The best fish and chips in Snohomish County

Even during a pandemic, people still have their favorites.

Students use a modular skills trainer during class Thursday morning at Edmonds Community College on April 29, 2021.
(Kevin Clark / The Herald)
Nurses Week, from May 6- 12, honors the nation’s caregivers

Local nursing students and faculty say they couldn’t let the pandemic get in the way of their goals.