Kimberly-Clark 3Q Profit Rises 41 Percent

Kimberly-Clark products are seen on a shelf, Monday, Oct. 19, 2009 at a grocery store in Danvers,...

Kimberly-Clark products are seen on a shelf, Monday, Oct. 19, 2009 at a grocery store in Danvers, Mass. The maker of Huggies diapers and Kleenex tissues is reporting that its profit jumped 41 percent in the second quarter because of higher prices on its products and lower commodity and energy costs.(AP Photo/Lisa Poole)

(AP)

Price hikes on Huggies diapers and Kleenex tissues helped push Kimberly-Clark Corp. to a 41 percent profit increase, and the company said it will hold tight to the increases even as many retailers push discounts and store brands.

The maker of Huggies diapers and Kleenex tissues said Thursday its third-quarter profit jumped 41 percent because of higher prices on its products and lower commodity and energy costs. The company raised prices last year to compensate for high commodity costs.

Kimberly-Clark also raised its outlook because of cost-cutting, sales growth and favorable exchange rates, which lifted shares $3.61, or 6.1 percent, to $63.32 in midday trading.

On a conference call Thursday, Chief Executive Thomas J. Falk said that retailers, facing stagnant sales, are cutting prices to stimulate customer traffic. Wal-Mart, the world's biggest retailer, has plans to cut prices each week on thousands of items.

"You're seeing it not just with them," Falk said. "Safeway is running ads with the same kind of program. ... Our focus is more on trying to drive innovation and differentiation and not compete on price."

Edward Jones analyst Jack Russo estimated that Wal-Mart accounts for between 15 percent and 20 percent of sales for consumer products companies. "Wal-Mart is taking a strong stance on pricing to come out a winner, and it's not just Kimberly-Clark that's going to be affected. It's everybody," he said.

Falk said store brands are picking up market share "a little bit" in paper towels, along with facial tissue and bath tissue, but to a lesser extent. In North America, Kimberly-Clark's volume declined in double digits for paper towels and in the mid-single digits for Kleenex tissues during the quarter.

Meanwhile, Kimberly-Clark is expanding its health care business, an area less exposed to consumers trading down to cheaper products. Earlier this month, Kimberly-Clark bought two health care companies to boost its presence in the market.