Now that companies are reporting their latest quarterly financial results. Investors are becoming increasingly concerned about inflation impacting the performance of companies. The latest example is from Kimberly-Clark Corporation, which missed analysts' forecasts as inflation and supply chain disruptions dented sales.
Kimberly-Clark shares slumped the most in six months after the maker of toilet paper, Huggies diapers, Kleenex tissues, and tampons, among other household items, slashed its annual forecast amid inflationary pressures and supply-chain woes.
Kimberly-Clark reported a Q3 net income of about $469 million, or $1.39 per share, compared with $472 million, or $1.38 per share, last year. Adjusted EPS of $1.62 missed consensus of $1.65. Sales of $5.01 billion were up from $4.68 billion last year and higher than the consensus of $4.99 billion.
"Our earnings were negatively impacted by significant inflation and supply-chain disruptions that increased our costs beyond what we anticipated," CEO Mike Hsu said in the statement.
The company is raising prices to offset soaring commodity prices sparked by supply chain issues that are not likely abating anytime soon.
"We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly," Hsu said.
"We will continue to invest in our brands and capabilities as we navigate through this volatile and difficult macro environment. Our strategy is working, and we remain confident in our future and our ability to create long-term shareholder value."
One of the most notable takeaways from the earnings reports, not just with Kimberly-Clark but also with other companies, is that higher inflation and labor shortages exert margin compression. At the same time, broad US major equity indexes tread around all-time highs.
As inflation becomes more persistent and the "transitory" narrative fades into the darkness, even White House economic adviser Jared Bernstein recently had to admit that inflation is likely to stay elevated longer than previously expected. The question remaining is if the monetary wonks at the Federal Reserve will embark on a tapering program of their balance sheet, which could eventually end the stock market party.