The maker of Huggies diapers and Pull-Ups training pants said it expects fourth-quarter net income of 72 cents to 76 cents a share, down from previously estimated 82 cents to 86 cents and from last year’s 82 cents.
About half of the earnings shortfall
Kimberly-Clark in October rolled back a 5% price hike to be taken through a package count reduction in diapers and pants after P&G didn’t follow suit. P&G in February is also reducing package counts, but cutting prices accordingly.
And in anticipation of the Kimberly-Clark move and launches of improved products thoughout the Huggies and Pull-Ups lineups, P&G in the fall launched heavy trade promotions of 20% to 41% off the case cost of Pampers diapers and pants, according to promotion-tracking firm Promodata.
P&G said Tuesday it had increased promotion spending in anticipation of Kimberly-Clark's package count reduction so that Pampers wouldn't be undercut by Kimberly-Clark on the shelf.
Kimberly-Clark will cut costs $175 million to $200 million in 2003, though the company didn’t specify in what areas. But with a pension funding increase of $145 million, the company projected earnings still may be flat in 2003 on sales growth in the low to mid single digits.
In a conference call with analysts today, Mr. Falk said the cost cuts would come from purchasing and supply-chain efficiencies and that Kimberly-Clark will continue to spend on marketing to defend its market share in diapers against P&G.
He called P&G's recent promotional spending levels in diapers "unprecedented and unthinkable."