Category: Philosophy
An investment philosophy is a coherent way of thinking about markets, how they work to put into practice. It’s a set of core beliefs that you can go back in order to generate new strategies to make it work. The investment philosophy of Investor Desk begins from the perspective that our clients are seeking a relationship which focuses on their short- and long-term goals via the provision of a strategic wealth management plan, coupled with a transparent, flexible and nimble investment solution. Investor Desk embraces a holistic view of a client’s business and personal circumstances and seeks to meet their goals and objectives through best of breed technology and financial products, delivered via a client centric relationshipand service. In the absence of a well-considered strategic wealth management plan, we believe there is less capacity to define an appropriate level of portfolio risk. We believe that asset allocation, and genuine portfolio diversifications are the key drivers of portfolio risk, and that high transparency and liquidity are important for navigating volatile market conditions.
The pronounced pullback in retailer and consumer inventories in its North American consumer tissue arm (where volumes collapsed 27% against extraordinary 22% growth last year) drove a significant portion of its underperformance in terms of sales and cost leverage. More specifically, excluding this business, sales were up 4% over the same period in fiscal 2020.
Kimberly’s management lowered its full-year forecast, now calling for organic sales to hold flat or decline by up to 2% (versus flat to 1% growth prior) and $6.65-$6.90 in adjusted EPS (versus $7.30-$7.55 prior). While we intend to trim our 2021 outlook (0.6% organic sales growth and $7.41 adjusted EPS pre-print), we’re holding the line on our long-term expectations of 2%-3% sales growth and high-teens operating margins.
Commodity Cost Inflation
While we never anticipated that the significant level of consumer stock-ups realized a year-ago would persist (particularly as consumers become more comfortable venturing outside the home), commodity cost inflation has outpaced our expectations (serving as a 750-basis-point drag to gross margins in the quarter). In this context, Kimberly now sees inflation costs amounting to $1.2 billion to $1.3 billion in fiscal 2021, up from an anticipated $900 million to $1.1 billion prior (primarily reflecting a 30% increase in the market price for pulp in North America and a more than 90% increase in resin). In an effort to offset the hit to profits over the next several quarters, Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set).
Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set). Kimberly’s price increases hit shelves a few weeks ago, making consumer acceptance difficult to ascertain thus far. However, we are encouraged by management rhetoric that suggests enhancing its value proposition and leveraging consumer insights across geographies and categories has been an area of focus for its product development.
Company Profile
Kimberly-Clark is a leading manufacturer of personal care (around half of sales) and tissue products (roughly one third of sales). Its brand mix includes Huggies, Pull-Ups, Kotex, Depend, Kleenex, and Cottonelle. The firm also operates K-C Professional, which partners with businesses to provide safety and sanitary products for the workplace. Kimberly-Clark generates just over of half its sales in North America and more than 10% in Europe, with the rest primarily concentrated in Asia and Latin America.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
