Kimberly-Clark Progresses Toward Its Gross Margin Goal of 40%

Kimberly-Clark Corporation's KMB third-quarter 2025 performance highlights meaningful progress toward its long-term profitability targets, raising the likelihood for the company to reach its 40% gross margin objective earlier than initially expected. During the earnings call, management reaffirmed its commitment to achieving at least a 40% gross margin and an 18-20% operating margin before the end of the decade, noting that the company is tracking well against these goals.

Gross margin improvement is expected to accelerate in the fourth quarter of 2025, supported by productivity initiatives, timing of investments and the continued realization of supply-chain efficiencies. The company expects the gross margin to expand in the fourth quarter, even as operating investment increases to support brand activity. 

A major contributor to the improving profit structure is the rapid reduction in tariff-related expenses. Gross tariff costs have been reduced from $170 million to approximately $100 million, with around $50 million already mitigated, and further progress expected as the year closes. Efforts to structurally reduce volatility in fiber and other inputs were highlighted as key enablers of longer-term margin stability. 

Margin expansion is also being supported by strong volume-plus-mix momentum, which has now been delivered for seven consecutive quarters, reflecting premiumization and innovation-driven growth across categories. Elevated mix from premium products, combined with targeted value offerings for price-sensitive consumers, is strengthening pricing power and reinforcing category leadership. The company emphasized that the premium mix has increased substantially over time and remains a core profitability driver.

Overall, KMB’s progress in cost mitigation, mix enhancement and margin productivity suggests that the company is structurally positioned to reach its gross margin milestone ahead of its previously expected timeline.

PG & ACI’s Margin Picture While KMB Focuses on Long-Term Targets

Procter & Gamble PG delivered resilient margin performance in the first quarter of fiscal 2026, with the company managing cost pressures through strong productivity savings.

Procter & Gamble reported a 70-basis-point decline in the gross margin and a 50-basis-point decrease in the core gross margin as unfavorable mix, reinvestments and higher tariff and commodity costs outweighed pricing gains. Still, Procter & Gamble sustained stable core operating margins supported by 230 basis points of productivity benefits.

Albertsons Companies ACI reported a gross profit of $5.12 billion, essentially flat year over year, while its gross margin declined 60 bps to 27% from 27.6% in second-quarter fiscal 2025. Excluding fuel and LIFO impacts, the margin fell 63 bps, driven by stronger pharmacy sales, higher delivery costs from digital expansion, and investments in the customer value proposition funded by productivity savings.

Despite growth in identical sales and strong pharmacy and digital performance, Albertsons Companies’ adjusted EBITDA declined 5.8% to $848.4 million, with an adjusted margin of 4.5%, down 40 bps, showing top-line gains are not fully translating into bottom-line growth.

Kimberly-Clark’s Price Performance, Valuation & Estimates

The KMB stock has lost 22.4% in the past six months compared with the industry’s fall of 13.1%.

Kimberly-Clark’s forward 12-month price-to-sales ratio of 2.02 reflects a lower valuation than the industry’s average of 2.08. KMB has a Value Score of D.

The Zacks Consensus Estimate for KMB’s 2025 earnings implies a year-over-year decline of 12.6%, while the same for 2026 indicates growth of 11.3%. Earnings estimates for 2025 and 2026 have been southbound by five cents and upbound by five cents per share, respectively, in the past 30 days.

Kimberly-Clark currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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