Prepared remarks
Good morning, and welcome to the Kimberly-Clark Second Quarter 2026 Earnings Call. I will now hand the floor over to Chris Jakubik, Vice President, Investor Relations. Please go ahead.
Good morning, everyone. This is Chris Jakubik, Head of Investor Relations at Kimberly-Clark, and thank you for joining us. I would like to remind everyone that during our comments today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures during these remarks. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. You can find the GAAP and the reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com. With that, I'll turn it over to Mike for a few opening comments.
Thank you, Chris, and thank you all for joining us today. As I mentioned in our prepared remarks, our second quarter results demonstrate the durability of the growth engine we've built through Powering Care. We delivered our 10th consecutive quarter of solid volume plus mix performance, held global weighted share, posted another quarter of industry-leading gross productivity and continued to invest for impact. We did this even as consumers remain pressured and category growth is moderating. At the same time, results were impacted by a few discrete but significant one-off items in the quarter that underpin our decision to adjust our full year outlook. Despite these headwinds, the fundamentals of our business remain strong, and we're confident in our momentum entering the second half and into 2027. Our teams are executing with speed, agility and great care to manage the business with discipline and navigate external dynamics. We're delivering superior science-backed innovation and value propositions around the world through our proven repeatable playbook that positions us to continue to win with consumers. We're advancing the next phase of Kimberly-Clark's transformation and sharpening our focus on proprietary right-to-win spaces. Yesterday, we unveiled a proprietary alternative natural fiber innovation program, which has the potential to reshape the future of our industry. This is the culmination of more than two decades of materials and plant science expertise brought to life through Powering Care. We believe the program will enhance product performance for consumers, strengthen our long-term growth trajectory, reduce exposure to natural forest fiber cost volatility and advance our natural forest fiber-free ambition. We also completed the successful launch of Arbex, our strategic joint venture with Suzano. We're making strong progress on our integration planning for Kenvue as well. We're excited and ready for what's next. We have a unique generational opportunity to create a new kind of health and wellness company, reimagine care for billions of people around the world and create lasting value for shareholders. With that, we'd like to open up the line for questions.
Questions and answers
Your first question is coming from Nik Modi from RBC Capital Markets.
So just maybe you can unpack what exactly is going on in China in terms of how this all started and then what the path forward is? And then I have one more question after that.
Yes, I'll take that one, Nik, it's Russ. I would say the main message is that we were very confident in our products. We make high-quality products that are safe and perform well. We believe that's going to lead the way to a recovery over time, but let me add a little more context in three points. First, there is no scientific evidence backing the claims. We did multiple independent tests conducted by certified third-party labs that confirmed our products are safe and they were non-detect tests. Second, in terms of how we're handling it: our team is doing an excellent job navigating the situation. We're continuing to cooperate with the Chinese authorities who are managing the issue. Our strategy is to continue to invest aggressively behind reinforcing the facts about our products, communicating quickly with transparency to consumers, and engaging stakeholders like retailers and government agencies. We've had excellent support from stakeholders, which we're really grateful for. Third, in terms of the outlook and what we expect going forward, we are not seeing any sequential deterioration in our sellout in China, but it also hasn't inflected positively yet. So we think we've been appropriate in the outlook for the balance of the year considering that uncertainty. While we are cautiously optimistic in some areas, these incidents have been occurring with greater frequency and consumers are getting savvy about these things. We are realistic that it's going to take a little time to work through this. Hopefully that gives you some sense.
Yes. Nik, it's Mike. I'll just add. Given the social media environment, this is not the first time that's occurred to us; it probably is the largest, though. Our purpose as a company is better care for a better world, and we take our responsibility to consumers as paramount. We would never trade that off. We're very confident in the quality of our products and believe we'll get this back to the right place. Brand foundations globally remain strong in the face of some of these discrete impacts, including the China issue we're working through. As I pointed out in my prepared remarks, we're still sustaining positive volume plus mix growth, our tenth consecutive quarter. Even in the quarter, we held overall weighted share, and on the old cohort approach, we were up or even in about 70% of sales across the world. We feel good about our brand fundamentals and are confident we'll navigate this issue.
Great. And then, Mike, it was a really noisy quarter, a lot of stuff going on. Maybe you could just give us some perspective on how you guys performed relative to your internal expectations, just so we can kind of ground ourselves?
Yes, I'll make a comment, but maybe I'll have Nelson give you that because I think he's a little prepared for that line of thinking. I do agree with you, it's a choppy environment, so I'll come back to that after Nelson.
So Nik, to unpack the quarter: yes, the second quarter organic growth came in below our expectations. However, strong execution on the tariff refund that we received in the second quarter drove better-than-expected and solid operating profit growth and EPS performance in the quarter. If we look at organic sales in Q2, we were about 100 basis points or so below our expectations. This was driven primarily by the disruption in our China diaper business in the back half of June—keep in mind that was only about two weeks—as well as the trade inventory reduction in North America, which was largely concentrated in adult care and in one particular channel, and that was not something we contemplated when we gave our outlook back in April. Lastly, the softer category growth also contributed. As you remember, we had talked about 2.5% category growth trailing 12 months back in April, and now we're seeing about 2%. As it relates to adjusted operating profit and EPS, both came in ahead of expectations. This is primarily due to the tariff refund benefit and the strong productivity we delivered in the quarter, which was 6.4%, which more than offset higher levels of brand investment year-over-year. Overall, despite the challenging operating environment that Mike referred to—which included maneuvering through the L.A. distribution center fire, the Middle East incremental costs we are managing and the China diaper disruption—we still had strong execution across our markets and delivered solid bottom line and EPS, which were ahead of expectations.
Yes. Nik, just to add, I think it is a very choppy environment globally. The category remains resilient. On a trailing 12-month basis over the past few years, our categories have averaged about 2% to 2.5% growth. That reflects the essential nature of our categories, which yield more resilient, stable demand. Consumers are under increased pressure. We're seeing sentiment among lower income consumers weakening and greater variability in consumption. Weighted growth across our categories in North America moderated sequentially from 3.7% last quarter to 1.9%; in Q4 it was around 0.4%. Some of the choppiness may be exacerbated by promotional timing effects. Our categories are concentrated in a smaller number of large retailers, so large promotional events can swing results. We expect promotional variation to normalize over time.
Your next question is coming from Chris Carey from Wells Fargo Securities.
The first question is a clarification question. What was the tariff refund in the quarter? And do you expect any more? I'm trying to understand the full year guidance, tariff refund versus inflation and the mitigation efforts that you're doing. It will help isolate some of those key buckets. I have a follow-up as well.
Sure, Chris. A few things. The refund we received in the quarter in North America, the U.S., was $45 million. That represents roughly about half of what we paid in North America as a whole. Keep in mind that's not just the U.S. because there were some retaliatory tariffs we paid earlier last year in Canada as well. This is reflected in our second quarter results and our updated outlook. For the balance of the year, we don't have anything much more material factored in. Beyond that refund, we're continuing to monitor the policy environment.
Great. And then going into 2027, there had been an expectation for mid-single-digit dilution from deal activity and then an underlying assumption for base Kimberly-Clark, given what we're seeing in the backdrop for categories in North America and the competitive activity, the volatility in China and your latest expectations for Kenvue, which sounds like it's closing in Q4 with good line of sight on synergies. Do you continue to view the 2027 construct as you laid out as still tangible or firm as you had done before? How may your thought process be evolving as you get more information about both your legacy Kimberly-Clark business and Kenvue as you go into next year?
Chris, let me unpack that. First, we remain very confident in our ability to create generational value through the Kenvue acquisition and joining the two companies. Based on what we know today, we do not believe the factors driving our lower stand-alone 2026 earnings outlook materially changed the underlying earnings potential of either our stand-alone businesses or the combined company going forward. The exact timing and pace of the recovery in China following the diaper disruption will influence how quickly results normalize. There's also uncertainty around commodities and the broader macro environment given the ongoing Middle East crisis and potential impacts on inflation and consumers, as well as the exact timing of further mitigating actions we may need to take. Some mitigating actions are already well underway, which is why you see the outlook we put forth. Given all those moving pieces, it's early to provide a specific view on 2027 because we still have many items that need to land in the back half of the year, including the exact timing of the closing of the transaction. We remain very confident in the underlying earnings power and growth potential of the new company. As we get closer to close and have further clarity over the next few months, we will provide an update on the overall view for 2027 and beyond. Rest assured we remain very confident in the logic and generational value of the transaction.
Your next question is coming from Bonnie Herzog from Goldman Sachs.
I have a question on North America, which came in a bit below expectations. First, could you unpack the drivers of this softness, including underlying consumption trends versus retailer destocking? And ultimately, how your business in North America performed relative to your internal expectations? Second, you sound like you're expecting a stronger second half. Could you talk through the drivers of that and what gives you confidence and visibility in this expected improvement?
Let me unpack the quarter and the half in terms of the drivers, and then Russ will chime in on our conviction for acceleration in Q3 and Q4 and confidence in North America. As we discussed in April, underlying consumption was expected to be ahead of shipments for Q2, in line with Q1. In the quarter, shipments in North America consumer categories lagged consumption by about 170 basis points. Shipments were down about 1.4% in consumer versus consumption growth at 0.3%. Two factors drove this. First, the L.A. distribution center fire represented a headwind of around 80 basis points to top line in the quarter for North America, which came in as expected—about $22 million. Second, retailer inventory movements impacted shipment growth by roughly 100 basis points year-over-year, about half of which we did not anticipate when we gave our April outlook; this was largely in the adult category and one particular channel. Together, these two factors largely explain the gap between shipments and consumption. For the first half, three factors caused shipments to lag consumption by about 200 basis points for North American consumer business: the L.A. distribution fire (about 40 basis points headwind for the half), the retailer inventory movements (about 100 basis points year-over-year), and heightened activation programming across several channels, particularly club, which started early in Q1. Those club shipments were largely made at the end of 2025. Russ will add color on why we see second-half gains.
Bonnie, we're very confident in the health of our North America business. Looking at the bigger picture, we've driven volume plus mix-led growth in eight of the last ten quarters. Trailing 12-month share shows we gained share in 70% of our sales base in North America. In the quarter, the majority of the weighted average share decline was driven by that club distribution loss we've discussed for a while. We have a strong innovation pipeline and brand investments. Our tissue business is performing extremely well and our e-commerce business continues to perform well. In the second half, we'll scale innovations and execute activation planning and revenue growth management actions. We feel confident the second half will see growth in line with our categories considering the elements Nelson covered. Also, comps get easier: Q2 in North America had 5% volume growth in the prior year, so comps get easier into the second half.
Your next question is coming from Michael Lavery from Piper Sandler.
I want to touch on innovation. You've laid out a robust pipeline this year and touched on examples in the prepared remarks. Maybe help us understand how it's running against expectations and timing. Specifically, how much rolls into 2027? Also, help us understand the new fiber platform: how quickly could it drive new end products and are there any upfront costs we should keep in mind about how you launch that?
Overall, on innovation, we feel great about what we're launching. This year is probably the most commercial activation of innovation I've seen here at Kimberly-Clark. The pipeline ahead looks even stronger; what we have coming in the next few years will be bigger and better. I'm excited about our development, reflecting discipline and an agile matrix that pulls markets and functions together. One of our core metrics is future pipeline development, and we're feeling good about the trajectory. Russ can comment on in-year specifics.
I'll add a bit. Our Chief R&D Officer Craig Slavtcheff has talked about pipeline development, and that's one reason we're confident looking three years out. The quality of our consumer insights has improved and the Powering Care matrix enables scaling innovations globally much faster. We've done this in femcare and you're seeing impact in IPC where organic growth is accelerating and we're gaining share in categories like diapers. That's driven significantly by innovation. This is broad-based rather than any one product. We're confident in the portfolio we're building with visibility through a three-year funnel process we've been building with teams worldwide. On the fiber innovation, Mike can add more.
We're very excited about our alternative natural fiber program. We believe it can positively impact the category, the planet and the economics of the business. Material invention has been core to Kimberly-Clark. Two weeks ago I was in Neenah and met the family of a former CEO, F.J. Sensenbrenner; under his watch they launched a product called CelluCotton, an invention that ultimately led to Kotex and Kleenex and bath tissue. This is similar and the culmination of over two decades of material and plant science investment. We believe this could become our next great material platform. It has three main benefits. One, it's better for consumers: the fiber has unique properties that push softness versus strength frontiers, enabling superior softness for a given strength and allowing us to make superior tissue. Two, it's better for the planet: it is a farm crop that can replace natural forest fiber in our production mix. It is land efficient; our pulp requirements are currently harvested across millions of acres annually, and this product would be very dense and grown on a fraction of the acreage. Three, it is a water-miser: it grows in arid conditions and uses much less water. Being a farm crop, it can be a cash crop for farming communities. Economically, we believe it can enhance margins and reduce volatility. We are breaking ground on a pilot facility and have already acquired thousands of acres for growing this. We prefer to turn it into a cash crop for the farming community rather than own a lot of land ourselves.
On investments, this program has been factored into our investment profile for the last years. Anything we've invested or expensed has been part of the reported results, and we've included the capital requirements to continue this initiative in our outlook and strategic plans for the next few years.
One reason we're talking about this now is because we're breaking ground on a pilot facility and we've already secured land to grow this fiber. Being transparent about our plans will help us be more capital efficient as we engage farming communities and stakeholders.
Your next question is coming from Steve Powers from Deutsche Bank.
Mike, I was hoping we could go back to North America and specifically the competitive and promotional environment. I want perspective on how those conditions have evolved over the past six months, to what extent it's exacerbated choppiness and lower category growth, and how you think it plays out over the balance of the year.
Let me start and ask Russ to add more. If you look at the facts, promotion intensity is increasing slightly. We're seeing it from big branded competitors and some smaller brands. That comes and goes in this category. I've been here 14 years and recall periods of high promotion intensity and other periods of moderation post COVID. These categories are very stable: promotion typically does not change consumption significantly. Having a stable business allows you to run it efficiently and bring innovations that can expand the category over time. We're not proponents of driving excessive promotion in our categories. Russ will add more color.
Steve, we're focused on developing compelling value propositions at every tier while maintaining pricing and PNOC discipline. In 2025 our promo activity was below both pre-COVID levels and the category. Through the first half of 2026 our promotional levels were down versus the prior year and the category in the majority of our categories. We did see a tick up in competitive activity and we increased promotional support in some categories, especially diapers, to drive trial on key innovation launches and to help transition from the club distribution change. We expect that to normalize and will remain focused on delivering compelling value propositions and PNOC discipline. Look for our promo activity to normalize over the balance of the year; we'll continue focusing on winning with innovation and brand building. Over time, we expect the market to return to the idea that promotion does not grow the category.
Great. When you talk about Kenvue synergy planning running ahead of expectations, should we interpret that as greater confidence or faster realization of the existing $1.9 billion cost synergy target? Or are you beginning to identify incremental synergy opportunities beyond the original assumptions?
I think it reflects greater confidence in the path to achieve the outlined synergies. It's still early, but the bottom-up pipeline we're building is based on specific initiatives with bottoms-up analytics. We have about 50 teams and 600 people working on this. We're building execution-ready actions that we feel confident converting into a plan we can forecast delivery on. It's early to see how it shakes out over three years, but we're moving quickly to fill that in and feel confident we're moving in the right direction at pace.
We're not unpacking cadence at this stage. Kenvue has already announced some actions that we are factoring into our plans. To the extent that delivers savings we would have contemplated, that's beneficial. A lot of moving pieces are being worked through. Our overall confidence goes back to the total number of synergies. We'll provide more details when we get to closing on cadence and exact numbers, factoring in Kenvue actions occurring this year.
I'll add a top-line comment. The closer we look at this deal, the better it gets. We're focused on operationalizing the synergy commitment. We had our future leadership team together for a week last month and conducted detailed assessments. The facilitator noted an extraordinary attribute of the combined team: a deep focus on execution. That's a calling card for us—excellent execution. We're gaining confidence in operationalization. We're not signing up for more than the committed synergies at this point, but the closer you look, there is more growth in these categories than originally thought when we did the deal. Especially on the Kenvue side, many categories are underdeveloped because there's a gap between incidence and treatment, which is less common in our categories. That is an opportunity to expand through the right category building programming.
Your next question is coming from Lauren Lieberman from Barclays.
Just wanted to go back to pricing and the promotional environment in the U.S. Nielsen data suggests that what appears as promotion may be showing up as relatively lower price not captured as promotion. As you think about pricing from here, with comments on PNOC, I wanted to understand how much of future price mix is less promotional activity versus real list price increases as you manage through cost inflation.
Lauren, you're right to call that out. Our focus has been growing volume and mix and maintaining PNOC discipline. We have seen some temporary dynamics: temporary promotions in the marketplace, and we've made targeted revenue growth management actions to sharpen value surgically. Channel mix changes, as consumers look for value in different channels, also impact pricing. This is part of why total company pricing was down about 50 basis points in the first half. Over time, innovation and brand activation will continue to drive positive mix, but we will be taking pricing actions to cover inflation in the second half. The magnitude across the overall portfolio will be low single digits in North America. Those actions are in the marketplace now and you'll see them come through. We're balancing PNOC discipline using the full toolkit and in some cases attaching innovation to price actions; in others we target specific revenue growth management based on commodity movement.
Great. To clarify, the low single-digit pricing statement is that a North America number or a global number?
It's primarily a North America number. Globally that will vary by geography; we've taken actions around the world too.
Okay.
We've taken actions across many countries. The overall principle is pricing net of cost neutral over time. But it's not just revenue growth management: we're delivering the highest productivity we've ever delivered, managing negotiations and contracts with vendors and suppliers. It's the full toolkit, not just pricing.
Let me underscore the point: innovation is the key element that creates premiumization and positive mix that carries pricing over the long run.
Related to Russ's point, our guiding principle is to offer a superior value proposition, especially in this environment. Even with some PNOC actions, we will ensure great value. Over the past couple of years we've paid particular attention to the value consumer or middle-income consumer who has been under more stress. Sharpening that offering through product quality has worked well for us.
Your next question is coming from Robert Moskow from TD Cowen.
It may be too early to ask this about 2027, but with all the noise this year from incidents that could be considered transitory, would you consider 2027 to have an easy comparison at this point? Or are these volatile times with not much visibility?
Rob, volatility exists and answers can vary depending on facts at the time. We're focused on running the business for the long term, but there is market volatility and we're working to make sense of it.
Rob, we've been around for 154 years and have gone through many cycles. This has become more common in recent years. The underlying strength of the business, the power of our innovation pipeline and our execution are what carry the day. Where we land in 2027 is early to tell. The speed of the recovery in China will matter and we've factored significant amounts for the back half. We're also managing inflationary impacts in the Middle East and taking clear actions. The strength of our categories is there—trailing 12-month growth is about 2%. We've been putting up volume plus mix growth in nine or ten consecutive quarters. The business is strong, our plans are solid, and we'll navigate the choppy waters over the next few quarters. We'll come back toward the end of the year with a view for 2027.
Quick follow-up: will it be easy to tell whether competition follows you on price increases in North America? If they don't follow, would you have to promote back some of the price increases?
It's always possible competitors won't follow, but we'll run our play: bring great innovation, show how our innovation solves consumers' problems, drive productivity on costs, and remain affordable. We pay close attention to the promotional environment and won't put our head in the sand, but we've seen the other approach and it doesn't work in these categories.
No one is immune to the inflationary environment in the mid to long term; the key is managing the entire toolkit. We're focused on productivity. We still have room in North America because of the $2 billion investment in supply chain restructuring coming over the next few months, carrying through 2027 and 2028. There's a lot of firepower to manage costs, but we need to see how things play out over the next few quarters.
You may recall my work in the snack category where promotions drove incremental consumption. If promotions are profitable, it's a viable strategy. In our categories, it's the opposite—promotion generally does not grow the category.
Your next question is coming from Peter Grom from UBS.
I was hoping to get perspective on the input cost environment. You noted in the prepared remarks $150 million of inflation in the back half of the year, consistent with the range provided in April. Can you unpack what's embedded in that assumption and whether the headwind is evenly weighted across the third and fourth quarters?
Let me unpack the second half and update since April. First, shout out to our teams who have worked diligently to ensure product availability and manage higher costs. Back in April we said for Q2 we expected inflationary headwinds of around $50 million, primarily related to higher oil-linked input costs and some L.A. distribution center impacts; those came through as expected and are reflected in first-half results. For the second half, in April we said if oil prices remained around $100 per barrel, we could face gross incremental input cost headwinds of around $150 million to $170 million, and we had not included mitigating actions in our back half outlook. Based on where oil prices are now and actions underway, our estimate for the second half is right around $150 million of gross input cost headwinds. These impacts are fully incorporated into our outlook. Through a combination of mitigating actions already underway and the tariff refund benefit from Q2, we expect to fully offset these incremental costs and maintain pricing net of cost inflation at roughly neutral levels for the full year.
Thanks. On China, I think it was a 50 basis point headwind in Q2 and guidance assumed a 100 basis point headwind for the year. How should we think about phasing in the back half? Is it more pronounced in Q3 or do you assume improvement in Q4? Russ mentioned no sequential deterioration but no inflection yet. How should we think about the 100 basis point headwind?
The 100 basis points for the second half becomes about 200 basis points on an annualized view, and that's more or less evenly distributed across Q3 and Q4. From an operating profit standpoint, we expect roughly $70 million of headwind in the back half, again roughly half in Q3 and half in Q4. That translates to about $0.16 of EPS impact, evenly split across Q3 and Q4. We've assumed a modest improvement in trend but no inflection at this stage, given prudent conservatism since these things can take time to resolve.
Our last question comes from Javier Escalante from Evercore.
I have a question for Russ and one for Mike. On diapers in the U.S., imports—particularly private-label or retailer-backed imports—seem to be peaking. Is that true? Also, any commentary on the overlap with the relaunch by your main competitor in the U.S.? And on tissue, we see an improvement in July and a shift to club and online. What's driving that? I have a question for Mike after.
Javier, on the diaper question, there's a long history of new players entering and sometimes peaking and then abating. Many are entering now and that's a dynamic we're contending with. Our approach is to stay focused on executing our strategy: bring innovation and strong value propositions at every tier—good, better, best. That approach has been working in North America: we've gained share two years in a row despite competition and have a good innovation agenda. We're now #1 in social engagement in 2026 and have actions on premiumization. We'll stay focused on that and let consumers decide. On tissue, the improvement is driven by sharpening our value propositions by tier and improving innovation. You've seen that in Viva where we've activated better packaging, communication and brand building; that gained about 80 basis points of share in Q2. Kleenex innovations on format and new insights are performing well. In dry bath, we've sharpened value for many consumers and done extremely well in the good tier year-to-date. It's all of these actions together—brand building, activation and innovation—and we have more good things coming next year and beyond in tissue, including the fiber initiative.
Javier, to tag on, we understand the environment with more competitors entering categories in North America. We've dealt with similar dynamics, for example in China where there are hundreds of diaper brands, and we became #1 because we have the best product in that market. Our playbook remains the same: superior value proposition anchored by differentiated product technologies. We're confident about the innovations in personal care and believe the innovation you'll see in the next three years in personal care will be better than what we've launched over the last ten years. That's why we're also investing in tissue alternatives like the alternative natural fiber—the aim is to change the category and reinforce our competitive advantage. We are technologists and engineers at heart and we invent and commercialize at scale.
Thanks, Mike. With the completion of the Suzano deal and the Arbex joint venture, what does operating without the international tissue business mean in terms of capacity and resources to invest in international personal care and preparing for the integration of Kenvue?
We're excited about the additional focus it brings. Setting up Arbex wasn't about moving away from a problem; the premise was to create a world-class global competitor in hygiene and tissue. Combining Suzano's scale and capabilities with our commercial capability and tissue-making knowledge creates a powerful combination. The Arbex team is excited about their future. Within Kimberly-Clark, the clear focus on personal care globally helps drive execution there. We also have the alternative natural fiber initiative, which complements these moves.
Just to add one last point on diapers: we respect competitors, but what gives us confidence beyond the U.S. is how the playbook is working globally. Despite the China issue, we've seen strong performance in other markets from deploying this playbook, including share gains in diapers—390 basis points in Indonesia and 70 basis points in Brazil. That gives us confidence the playbook translates across geographies and will be effective in North America as well.
We'll end it there for today. For analysts who have follow-up questions, the IR team will be around to take them throughout the day. Thanks very much, and have a great day.
Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.