Kimberly-Clark reported solid second-quarter and first-half 2026 results, with strong productivity and margin expansion helping offset challenges in China and North America.

The company also continued to advance its planned Kenvue acquisition, while updating its full-year outlook to reflect softer category growth and the ongoing China diaper disruption.

“Kimberly-Clark delivered strong second-quarter results, with adjusted EPS growth ahead of expectations driven by industry-leading productivity and cost management,” said Mike Hsu, Chairman and Chief Executive Officer. He added that the company's teams continued to execute its strategic transformation while managing discrete challenges in China and North America.

Kenvue Integration Advances

Kimberly-Clark continues to advance integration planning for its planned Kenvue acquisition, with the transaction tracking toward a second-half 2026 close.

Approximately 50 teams involving 600 employees are working on integration plans, while the company's three-year, bottom-up pipeline toward its $1.9 billion cost-synergy goal is tracking ahead of plan. Kimberly-Clark also said its four-year revenue-synergy opportunity pipeline has already exceeded $1 billion, compared with a $1.4 billion target.

Second-Quarter 2026 Results

Kimberly-Clark's Q2 net sales reached $4.189 billion, up 0.6% year over year (YoY), while organic sales declined 0.1%.

Adjusted gross margin increased 190 basis points to 38.8%, while adjusted operating profit rose 6.2% to $757 million. Adjusted EPS from continuing operations increased 10.4% to $1.80, while adjusted EPS attributable to Kimberly-Clark also rose 10.4% to $2.12. Reported EPS was $1.04, compared with $1.53 in Q2 2025, reflecting transformation-related charges, Kenvue acquisition costs and discontinued operations.

North America

North American net sales declined 1.2% to $2.698 billion, with organic sales down 0.7%. The exit of the U.S. private-label diaper business reduced organic sales by approximately 0.5 percentage points, while retailer inventory reductions and channel shifts, particularly in adult care, also weighed on performance.

A fire at Kimberly-Clark's Los Angeles distribution center created an estimated $22 million, or roughly 80-basis-point, headwind to North American net sales during the quarter. Overall, shipments lagged underlying consumption by approximately 170 basis points, with the fire accounting for roughly 80 basis points of the gap.

Despite the sales pressure, North American operating profit increased 10.7% to $725 million, supported by productivity gains and the tariff refund. Year-to-date organic sales increased 0.5%, with volume growth of 0.8%.

Underlying North American consumption was modestly positive at approximately 0.3% in Q2. Promotional activity increased modestly in selected areas to support new diaper innovations and manage the club-channel transition, although promotional levels remained below pre-pandemic levels.

International Personal Care

International Personal Care net sales increased 4.0% to $1.491 billion, with organic sales growth of 1.0%. Volume and mix contributed 1.2 percentage points, while favorable currency impacts contributed 3.1 percentage points.

However, a social media-driven disruption affecting the company's China diaper business reduced IPC organic sales by approximately 140 basis points. IPC operating profit increased 2.2% to $186 million, supported by productivity and currency benefits. Year-to-date IPC organic sales increased 2.5%.

Productivity Supports Margin Expansion

Kimberly-Clark delivered 6.4% gross productivity in Q2, which management described as industry-leading and a key driver of operating profit and EPS growth.

The company also recognized a $45 million tariff refund benefit in North America, representing approximately half of the retaliatory tariffs previously paid in the U.S. and Canada. Kimberly-Clark does not expect further material tariff refunds in 2026.

In Brazil, the company recognized a $39 million benefit from a favorable legal ruling related to prior-year business taxes. Together with productivity gains, these benefits more than offset increased brand and marketing investments, supply-chain restructuring costs and inflationary pressures, including incremental costs linked to Middle East-related disruptions.

China Diaper Business Disruption

In mid-to-late June 2026, false allegations regarding the quality and safety of Kimberly-Clark's diaper products began circulating on social media in China. The allegations significantly affected consumer sell-out of the company's diaper brands in the market.

Kimberly-Clark said the claims were false and that independent, government-certified third-party testing had subsequently confirmed the safety and quality of its products. The company is cooperating with Chinese regulatory authorities and has launched consumer communications to address the allegations and reassure customers.

The disruption had a material impact on the quarter.

Management estimated that it reduced consolidated organic sales growth by approximately 50 basis points in Q2 and expects it to represent an approximately 100-basis-point headwind to full-year 2026 organic sales growth. The company also expects an approximately $70 million impact on second-half 2026 operating profit, equivalent to roughly $0.16 per share.

While Kimberly-Clark said there has been no further sequential deterioration in sell-out, management noted that a clear recovery inflection point has not yet emerged, leaving the timing of a return to previous growth trajectories uncertain.

Innovation and Strategic Transformation

Kimberly-Clark reported 10 consecutive quarters of volume-plus-mix growth and stable global weighted share, highlighting continued underlying momentum despite a challenging consumer environment.

The company also highlighted its Alternative Natural Fiber Innovation Program, a proprietary platform based on more than 20 years of materials and plant-science research. The technology aims to improve the softness-strength trade-off in tissue products, reduce reliance on natural forest fiber and lower exposure to fiber-cost volatility.

A pilot plant is breaking ground in the Southwest U.S., while Kimberly-Clark has already acquired thousands of acres for cultivation.

Separately, the company successfully launched Arbex, its joint venture with Suzano, as part of the International Family Care and Professional transaction. The IFP business is now reported as discontinued operations.

First-Half 2026 Performance

For the first half of 2026, net sales reached $8.352 billion, up 1.6% YoY, while organic sales increased 1.2%. Operating cash flow rose to $1.653 billion, compared with $1.097 billion a year earlier.

Capital expenditures increased to $776 million from $401 million, reflecting investments in supply-chain restructuring and innovation platforms, including the alternative fiber program.

Adjusted free cash flow reached approximately $1.1 billion through the first six months, putting Kimberly-Clark on track to generate approximately $2 billion for the full year. The company expects full-year capital investments of approximately $1.3 billion as it accelerates investments in growth and transformation.

Total debt from continuing operations declined to $6.5 billion on June 30, 2026, from $7.2 billion at the end of 2025.

Updated 2026 Outlook

Kimberly-Clark now expects weighted-average category growth of approximately 2%, down from about 2.5% at the time of its April guidance. The company expects full-year organic sales growth to be approximately 100 basis points below category growth.

The company now expects:

• Adjusted operating profit: mid-single-digit growth on a constant-currency basis.
• Adjusted EPS from continuing operations: high-single-digit growth on a constant-currency basis, including approximately 30% growth in income from equity companies.
• Adjusted EPS attributable to Kimberly-Clark: low-single-digit decline on a constant-currency basis.
• Adjusted free cash flow: approximately $2 billion for the full year.

The updated outlook incorporates an anticipated $150 million of incremental second-half gross input-cost headwinds. Kimberly-Clark expects mitigating actions and the tariff refund benefit to offset these pressures, while it remains approximately 90% covered across its total input-cost basket for the year.

Overall, Kimberly-Clark's Q2 performance demonstrated continued productivity and margin momentum, while the China diaper disruption, retailer inventory movements and a softer category environment prompted a more cautious full-year outlook. At the same time, progress on the Kenvue integration, the Suzano joint venture and the alternative natural fiber platform reinforces the company's longer-term transformation strategy.