Key Takeaways:
Kimberly-Clark cut its 2026 sales and profit forecasts Tuesday after false viral claims about formamide in Huggies diapers hit Q2 China sales.
"We're disappointed but remain confident in the underlying quality of our global innovation and commercial plans," CEO Mike Hsu said in a statement.
Net sales rose 0.6% to $4.19 billion for the three months ended June 30, missing the $4.22 billion average analyst estimate compiled by LSEG. Adjusted operating profit increased 6.2% to $757 million, helped by tariff refunds, productivity savings and favorable currency effects.
The company now expects 2026 organic sales growth to trail the weighted average growth of its categories and markets by about 100 basis points. Those categories grew about 2% over the last 12 months. Adjusted EPS growth is expected at a high-single-digit rate on a constant-currency basis, compared with an earlier forecast for double-digit growth.
Claims circulating on Chinese social media that Huggies diapers contained formamide, a substance banned in multiple countries, weighed on demand despite independent testing by a government-certified third party confirming their quality and safety. Beijing-based Economic Times Daily reported in June that Huggies and Chinese brands Babycare Bibabebe tested positive for the substance, which can irritate the skin, eyes and breathing if inhaled.
The allegations emerged just ahead of China's annual "618" shopping festival, one of the country's biggest e-commerce events. On June 22, China's market regulator established a joint investigation team to look into "formamide issues in infant diapers" without naming any company or brand. Authorities have not provided an update on the probe's status.
Kimberly-Clark labeled the disruption a "one-time external impact." COO Russ Torres said it will temper organic growth in the International Personal Care segment this year by three to four percentage points and hold back operating profit growth by 10 to 12 percentage points, "as we invest aggressively to defend our franchise."
The setback in a key international market overshadowed cost-saving efforts and reset expectations for investors who had been guided for stronger growth. Kimberly-Clark remains on track to complete its roughly $40 billion acquisition of Kenvue by year-end. Last month, the company finalized the sale of a 51% stake in its international tissue business to Suzano, creating the $3.4 billion Arbex joint venture to compete with Procter & Gamble and Essity.
Shares were flat in premarket trading. The guidance cut indicates management expects the China disruption to persist through the near term. Investors will watch for updates from China's market regulator on the formamide probe and any recovery in Huggies sales during the second half.
This article is for informational purposes only and does not constitute investment advice.
