Key financial results

  • The company reported gross productivity of 6.1% year-to-date, with 5.8% achieved in the third quarter.we're at 6.1%, gross productivity, 5.8% for the third quarter.
  • Total company pricing year-to-date is down approximately 70 to 80 basis points.year-to-date, total company pricing is down about 70 basis points, 80 basis points in North America
  • Full-year gross inflationary impacts are projected at $250 million, with $200 million expected in the second half of the year.We now project the total full year gross inflationary impacts of around $250 million of which $50 million was an impact in the second quarter.

Business segment results

  • North America: North America experienced a soft quarter, with a 130 basis point headwind attributed to retailer inventory changes.It was a soft quarter. Definitely, Peter impacted by a few key discrete impacts, the largest, I think, which is again, retailer inventory changes
  • Tissue: The tissue business performed strongly, gaining 20 basis points of share on a weighted basis during the quarter.in tissue, we gained overall 20 basis points share on a weighted basis in the quarter.
  • Baby Care: Baby care share was impacted by club distribution changes, which represented a 1 point headwind in the quarter.the club distribution and diapers and training pants, it's about 1 point of headwind in the quarter for North America.
  • Kenvue Brands: Kenvue's OTC business showed positive momentum, with TENA up 70 basis points in share for the quarter and other categories showing year-to-date growth.OTC overall, I think, is performing well in my book. [ TENA ] for the year, I think up somewhere between low to mid-single digit
  • China: The China diaper business saw demand stabilize and improve slightly after authorities confirmed the safety of the products.At this point, Javier, demand has stabilized, I'd say it's improved slightly.

Capital allocation

  • The company is targeting a leverage ratio of approximately 2x by the end of the second year following the transaction.we remain on track on both earnings accretion and importantly, approximately getting to about a 2x leverage by the end of the second year of the transaction.
  • Management noted the impact of a K-shaped economy on consumer behavior and is focusing on value-oriented offerings.we're really, I would say, steeled or focused to be able to operate effectively in that kind of environment.
  • Retailer inventory levels have compressed, with some customers changing inventory strategies and technology.I do think with a couple of big customers, there have been some changes in inventory strategy, inventory technology that's driven by that.

Competitive landscape

  • The company competes against approximately 200 diaper brands in China and maintains confidence in its ability to compete in the U.S. market.while we've been -- we compete with 200 diaper brands in China, we've been beating them there. And so we feel confident we can beat them here.
  • The Kenvue brand scorecard has improved significantly, moving from 100% red last year to 70% green.I think when we had our view last Thursday, it was 70% green.

Macroeconomic environment

  • The company faced a spike in spot freight rates in North America, which contributed to an increase in projected inflationary costs.

Growth opportunities and strategies

  • The company is implementing a 3-phase integration plan: Ready, Set, and Grow.We will execute with excellence deliver against our synergy commitments, strengthen our core brands and businesses and see growth.
  • The company launched the Big Dreams diaper brand in partnership with Amazon to target value-oriented consumers.we've launched with Amazon in partnership with Amazon I think the team at Amazon is very, very excited about the product.
  • Management sees geographic expansion opportunities for K-C personal care brands in markets like India and Europe using Kenvue's distribution capabilities.I think Kenvue brings I think, a lot stronger distribution and capability in Europe than we ever had.

Financial guidance and outlook

  • For 2027, the company expects mid-single-digit earnings dilution compared to stand-alone Kimberly-Clark.For 2027, that's what we would expect, but that is against a stand-alone Kimberly-Clark EPS.
  • For 2028, the company expects mid- to high-single-digit EPS growth on a 2-year compounded basis compared to the 2026 stand-alone baseline.As we step into 2028, what's going to happen is we expect to have a year that's on algorithm on a 2-year compounded basis

Kenvue Acquisition Integration

  • The company has a cost synergy target of approximately $1.9 billion.the overall cost synergies for the deal are about $1.9 billion, and there's 3 sources that very clear to us.
  • Synergies are expected to come from overhead optimization, cost of goods sold, and sales and marketing efficiencies.The second bucket is in cost of goods sold, and that's going to be closer to 40% of the overall give or take
  • Staffing changes are expected to occur throughout 2027 as part of the integration process.there are going to be significant staffing changes, and this is the unfortunate work of kind of combining companies, but there are going to be staffing changes throughout 2027.
  • Systems integration will be phased, with Kenvue businesses eventually moving onto K-C's SAP S4 ERP platforms.we'll, over time, in a phased way, bringing the Kenvue businesses onto those platforms as we bring the K-C businesses forward on those.

Q3 2026 results

MetricResultChange
Organic growth (Kenvue)3%Not stated
Gross productivity (Q3)5.8%Not stated
North America pricing (YTD)Down 70-80 basis pointsNot stated
Retailer inventory impact (North America)130 basis point headwindNot stated
Full year gross inflationary impact$250 millionNot stated

How management sounded

Balanced (+25 on our -100 to +100 scale). Management expressed strong conviction in the new combined company's strategy and synergy targets while acknowledging the need for disciplined execution during the integration. Management sounded more upbeat than on 6% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.

Read the analyst Q&A summary and guidance and outlook for this call.

What to watch before the next call

  • Execution of the first 100-day integration plan.
  • Recovery of the China diaper business and consumer trust.
  • Progress on the $1.9 billion cost synergy target.
  • Market share recovery in North American baby care.

Earlier calls

  • Q2 2026 (Aug 4, 2026), tone Balanced: Kimberly-Clark delivered solid operating profit and EPS growth despite organic sales missing expectations due to China diaper disruptions and North American retailer destocking. Management remains confident in their long-term growth strategy and innovation pipeline.