Cost-Saving Move Comes After Deflating Price Wars With Rivals

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CINCINNATI ( -- A promotion battle with Procter & Gamble Co. hurt Kimberly-Clark Corp.'s fourth-quarter financial results, and management said today it's time for a change. So far, one of the biggest changes is a cut in ad spending.

Marketing decreases
The maker of Huggies diapers, Kleenex facial tissue and Cottonelle toilet paper reported a 10.8% increase in fourth-quarter earnings per share to 72 cents despite sales that were flat at $3.3 billion. The reported earnings growth came entirely from a $35 million decrease in marketing, research and general expense, as the company spent less on advertising and consumer promotions not linked to its price-cut strategies.

Those price promotions with retailers and consumers hit Kimberly-Clark's top line and contributed to the drain in "non-price" marketing expenses, Chief Financial Officer Mike Buthman said.

Cutting up to $200 million
With prospects for prices

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and top-line growth murky due to competition with P&G and others in 2003, Kimberly-Clark is looking to carve $175 million to $200 million in expenses. President-CEO Thomas J. Falk said the focus would be on savings in the supply-chain and capital outlays, but didn't rule out cuts in advertising expenses going forward. But he also said Kimberly-Clark doesn't plan to let up on product improvements.

"We're really trying to make sure we don't take our foot off the gas on product innovation," Mr. Falk said. "That's the worst thing we could do in this environment."

Low trading price
A series of earnings disappointments fed in part by increased competition from P&G's Pampers brand has had Kimberly-Clark's stock trading at multiyear lows under $50 since December. The stock was trading at $45.02, up 0.5%, in late-afternoon trading today.

Kimberly-Clark's unit volumes were up 2% in the quarter, offset by price declines of the same amount, with about half of the price decline coming from competition in the North American diaper business with P&G, and the rest in the tissue-towel segment against P&G and Georgia-Pacific Corp. The promotion-fueled diaper price decline was roughly equivalent to the cuts in the marketing budget.

WPP Group's Ogilvy & Mather, New York and Chicago, handles Kimberly-Clark's Huggies and Kotex brands, and WPP's J. Walter Thompson, New York, handles Kleenex, Scott and Cottonelle.

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