KMB Kimberly Clark Corp

By Sharon Terlep 

The battle for the Chinese shopper has created a price war among companies that sell consumer staples from paper towels to diapers, making it even harder for businesses to wring a profit out of the critical market.

Kimberly-Clark Corp., the maker of Huggies diapers and Kleenex tissues, on Friday reported lower first-quarter sales around the globe despite higher volumes in many regions and categories. Currency volatility due to the strong dollar was the biggest drag in most regions outside the U.S.

In China, the Dallas-based company lowered prices to combat competition from local firms as well as rivals from Japan and other nations.

"More and more people are coming into the middle class and parents really invest in their children," Kimberly-Clark Chief Executive Thomas Falk said in an interview. "At the same time, it's a competitive market. Everyone in the world sees that billion-plus population and is moving in."

China helped fuel a 2% increase in sales volume of personal-care goods, such as baby wipes and feminine hygiene products, in emerging markets. But while prices for those products rose in Latin America and Eastern Europe, Kimberly-Clark relied on profit-eroding promotions in China to hang on to market share.

"It got a little more expensive there," Mr. Falk said.

Shares of Kimberly-Clark fell 4.4% in morning trading Friday. Rival Procter & Gamble Co. is slated to report its latest results Tuesday, and analysts expect the company to report lower profit and sales.

Competition in China was particularly evident in the lucrative diaper market where Kimberly-Clark's organic sales, which strips out the effects of currency moves and acquisitions, rose 5% for the period compared with a 35% increase a year ago.

Elsewhere around the world, Kimberly-Clark benefited from an improving U.S. economy, noting that American consumers have been willing to shell out more for items like improved diapers. Strength in U.S. has helped offset weakness abroad, where the stronger dollar makes U.S. goods more expensive and where economies have been softer.

In the first quarter, U.S. sales increased 3%, driven by higher volumes across the company's product lines. Total sales slipped 4.6% from a year earlier to $4.48 billion, falling short of the $4.54 billion analysts projected.

Despite the sales decline, profit rose as the company took down expenses and benefited from lower commodity prices and a lower tax rate. Kimberly-Clark reported a profit of $545 million, or $1.50 a share, up from $468 million, or $1.27 a share, a year earlier.

Mr. Falk said he sees more opportunities to cut costs, particularly through increasing the efficiency of its manufacturing operations. "There is still a big difference in the productivity of our weakest performing plants and the best performing plants," he said.

The company brought overhead expenses down by 2.8% to $825 million and lifted its gross margin to 36.6% from 35.4%. Kimberly-Clark's tax rate was 28.3% during the quarter, down from 33.8% a year earlier.

For the year, the company backed its previously-issued forecast.

Lisa Beilfuss contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

April 22, 2016 11:55 ET (15:55 GMT)

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