Price Rollback to Cut Into Marketing Increase for 2003

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CINCINNATI ( -- Kimberly-Clark Corp. today lowered its earnings outlook for full-year 2002, citing intense competitive activity in diapers and training pants in North America and Europe and devaluation of Latin American currencies.

For 2002, the marketer is lowering its outlook by 2% to 3% to between $3.42 and $3.46 a share. The news sent the stock down 11% to $50.45 in mid-day trading.

Kimberly-Clark President-CEO Thomas J. Falk said advertising and promotion expenditures for diapers and training pants are both running ahead of plan for 2002, as the company defends share of its Huggies and Pull-Ups training pants against Procter & Gamble Co.'s Pampers brand.

Price increase rolled back
But the marketer last week

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rolled back most of a 5% price increase after learning P&G wouldn't follow on pricing for its Pampers diapers. Dudley Lehman, group president of infant care, said the move won't allow for planned increases in marketing spending in 2003 despite across-the-board improvements to its diapers and training pants.

But Mr. Falk said Kimberly-Clark would continue current spending increases on promotion to defend its share. "It's cheaper to defend share than it is to buy it back," he said.

P&G coupons
While Kimberly-Clark's marketing support is up across most of its brands, which include Huggies, Depend, Kleenex and Scott tissue and towels, competitive activity has been especially keen in diapers and training pants. Mr. Falk said P&G has been distributing coupons through Catalina Marketing Corp.'s Checkout Coupon system for as much as $4 to $5 off packages of Pampers Easy-Ups training pants.

Kimberly-Clark's third-quarter net income was up 5.2% to $441.2 million, with earnings per share up 7.6% to 87 cents on a 3% sales increase to $3.5 billion. Promotional activity reduced sales by 2%.

WPP Group's Ogilvy & Mather Worldwide, New York, handles Kimberly-Clark's accounts.

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