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I would think that all of the diapers the latest FightBaby goes through may have helped Kimberly-Clark (NYSE: KMB) a bit, but that was not the case.
The home of Kleenex and Huggies announced yesterday that it will cut 1,600 jobs, roughly 3% of its total workforce. A majority of the cuts will come from salaried and nonproduction workers; the company does not plan to close any plants. The company believes that these cuts will save roughly $150 million a year, or 25 cents per share. These results will be reflected the most in the second quarter, when the company will record $110 million of the costs.
Kimberly-Clark has reported a loss in each of the past six quarters, thanks mainly to the economic downturn and unemployment. The value of the dollar has done the company no favors either. This combination led to the cuts. Kimberly-Clark's CEO Tom Falk stated, "These actions, while difficult, are necessary to help us emerge form this demanding economic environment as a stronger company."
I think the problem for the company can be boiled down to competition, and I am speaking as the father of a six-week-old and the one who does the shopping. Diapers are expensive, and they are a staple -- so people will cut where they can and will purchase generic diapers. Store-brand diapers work and are dollars cheaper. When you have a child this age, the diapers aren't on them long enough to leak anyway, so why not pay a bit less? Kimberly-Clark and the like will argue that their products are better in quality, which I am sure they are, but $41 for a large box of diapers (which is roughly 200 for my son's size)? That is a lot of cash in a cash-strapped world. Unfortunately, it isn't as easy as simply lowering the prices -- or is it?
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Reader Comments (Page 1 of 1)
6-28-2009 @ 3:42PM
The Nanny said...
All this is, of course, largely the fault of economists everywhere, so few of whom appear to have had any clue whatsoever of the approaching economic maelstrom. Here at Exclusively Nannies http://www.exclusivelynannies.com we like to think it's really them and the politicians should be wearing diapers, not the innocents now forced to wear cheaper unnamed brand alternatives.
BB