Q4 2024 Kimberly-Clark Corp Earnings Call
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Christian <unk>, Vice President Investor Relations you may begin.
Speaker Change: Good morning, everyone and thank you for joining us.
Speaker Change: Just want to remind everyone that during our comments today, we will make some forward looking statements that are based on how we see things today actual results may differ due to risks and uncertainties and these are discussed in our earnings release and our filings with the SEC we.
Speaker Change: We will also discuss some non-GAAP financial measures. During these remarks. These non-GAAP financial measures should not be considered a replacement for this should be read together with GAAP results and you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at Investor Dot Kimberly Clark Dot com with that I'm going to turn it.
Mike: Over to Mike for a few opening comments.
Mike: Thank you, Chris 2024 was an outstanding year for our team and the future of Kimberly Clark as we launched our multiyear powering care transformation strategy.
Mike: Last year, we built the foundation to accelerate our growth in the years to come.
Mike: We reward our organization into three powerhouse segments to become a better faster and stronger organization.
Mike: We pivoted to volume plus mixed driven growth and establish strong market share momentum.
Mike: And we made the successful transition from margin recovery in 2023 to establishing a new phase of margin expansion in 2024.
Mike: Our progress enabled us to deliver full year results that exceeded our long term algorithm, even as we absorbed discrete headwinds.
Mike: Now we enter 2025 with good visibility on the key drivers of our growth and profit potential.
Mike: We're confident in our plans to deliver innovation led growth ahead of the categories in which we compete.
We're continuing to invest in product quality brand support and capability building.
Mike: And we're bullish on our ability to continue powering investment and Bottomline growth.
Mike: With industry, leading productivity and SG&A savings through wiring for growth.
Mike: This year, we will continue to transform wall performing scaling our playbook and capabilities across the globe and shaping our portfolio for stronger more profitable growth over the long term.
Mike: Through powering care, we're taking actions that are enabling us to navigate a dynamic environment and provide better care for a better world.
Mike: Now with that we'd like to open the lines for your questions.
Mike: Certainly at this time, we will be conducting a question and answer session.
Our progress enabled us to deliver full-year results that exceeded our long-term algorithm even as we absorbed discrete headwinds.
Mike: I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll.
Now we enter 2025 with good visibility on the key drivers of our growth and profit potential.
We're confident in our plans to deliver innovation like growth ahead of the categories in which we compete.
We're continuing to invest in product quality, brand support, and capability building. And we're bullish on our ability to continue powering investment and bottom-line growth with industry-leading productivity and SG&A savings through Wiring for Growth.
Mike: For questions.
Speaker Change: Your first question for today is from Dara <unk> with Morgan Stanley.
Mike: Hey, Dara.
Speaker Change: Hi, good morning.
Speaker Change: Just hoping to spend some time on the top line, maybe we can put it into the long term versus the short term maybe Mike you can just take a step back yes, there were a year and give US a review of where you think you stand on the organizational front with the Rewiring plans you announced at analyst day.
This year, we'll continue to transform while performing, scaling our playbook and capabilities across the globe, and shaping our portfolio for stronger, more profitable growth over the long term.
Through Powering Care, we're taking actions that are enabling us to navigate a dynamic environment and provide better care for a better world. Now with that, we'd like to open the lines for your questions.
Speaker Change: Both in terms of reorganizing the way you approach the business, but also some of the tangible benefits from that you talked about greater more impactful innovation more effective marketing et cetera. So.
Speaker Change: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Are you pleased with where you stand today, maybe give us an update and as you think about 2025.
A confirmation tone will indicate your line is in the question queue.
Speaker Change: Is it more of a step function in yielding some of those benefits from all of those changes do you see those benefits building more overtime.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Speaker Change: Okay Alright. Thanks for the question, there's a lot in that I'll try to get to all of it and also made and Chris May keep me honest here.
Speaker Change: <unk> are I'd say I feel very good about our setup for 2025 and also for the long term.
Host: Your first question for today is from Dara Mohsenian with Morgan Stanley. Morning, Dara. Hey, Dara.
Speaker Change: Maybe the.
Speaker Change: External piece I'd say is our categories continue to exhibit very durable growth.
Hi, good morning.
Host: So, just hoping to spend some time on the top line, maybe we can split it into the long-term versus the short-term. Maybe, Mike, you can just take a step back, now that we're at year-end.
Speaker Change: Underlying demand is healthy our categories continue to expand in both dollars and units or value add units.
Speaker Change: And Thats because I think we've talked about this before Dara, we see really three durable drivers of growth over the long term.
Host: Give us a review of where you think you stand on the organizational front with the rewiring plans you announced at Analyst Day.
Speaker Change: Number one is penetration which remains an opportunity.
Speaker Change: I'd say the good news is birth rate declines are leveling off and in some markets.
Host: both in terms of reorganizing the way you approach the business, but also some of the tangible benefits from that. You talked about greater, more impactful innovation, more effective marketing, etc. So are you pleased with where you stand today? Maybe give us an update. And as you think about 2025,
Speaker Change: Notably Korea, we saw positive growth rate in the third quarter, which continued into the fourth and that was the first time in eight years and then China was positive in birth rate as well. So I'd say one on penetration broke rate declines kind of inflicting a bit at least early signs.
Host: Is it more of a step function in yielding some of those benefits from all those changes, or do you see those benefits building more over time?
Speaker Change: Aging population for our adult care categories remains a big tailwind, especially in developed markets like South Korea, and China U S.
Speaker Change: Okay, all right. Thanks for the question. There's a lot in that. I'll try to get to all of it and Nelson may and Chris may keep me honest here, you know, overall, I feel very good about our setup for 2025 and also for the long term, you know, the maybe the, you know,
Speaker Change: And then there remains in much of the developing world and expanding middle class that remains a big driver for US second Big thing frequency remains strong there is some some pockets of softness, notably I'd say in pockets of Latin America, and southeast Asia, but frequency remains robust for us.
Speaker Change: One external piece I'd say is, you know, our categories continue to exhibit very durable growth.
Speaker Change: You know, the underlying demands healthy, our categories continue to expand in both dollars and units or value and units.
Speaker Change: And then maybe one of our bigger opportunities remains trade up.
Speaker Change: Tumors remain very interested in better performing products and so we're seeing the premium end of our categories.
Speaker Change: and that's because, you know, I think we've talked about this before, Dara, we see really three durable drivers of growth over the long term. Number one is penetration, which remains an opportunity. I'd say the good news is birth rate decline
Speaker Change: <unk> to grow.
Speaker Change: With all that said I would say in the short term, we're seeing and I think it was in our prepared remarks, 2% category growth. This year, which is on the lower end of what we said but.
Speaker Change: I'd still say fairly robust durable for our categories. The big thing is our categories, our daily essentials and so they don't move around that much from from day to day and year to year. So I'd say, maybe that would be on the shorter term and then over the long term I think we're positioned well.
Speaker Change: Korea we saw a positive birth rate in the third quarter which continued in the fourth and that was the first time in eight years and in China was positive in birth rate as well so I'd say one you know on penetration birth rate declines kind of inflecting a bit at least you know early signs
Speaker Change: To deliver consistent volume and mix growth over the over the long term I think.
Speaker Change: We believe our growth profile will continue to improve over time and Thats as I just mentioned a function of demographics and income and all the investment we're doing to make our categories and our products and brands better.
Speaker Change: I think what we said last March at Investor Day, we expected weighted average category growth.
Speaker Change: To revert to our historical range of 2% to 3% and last year through the first half. We're a little ahead of that and then after lapping some price moves from the prior year I'd say, we've seen some lower frequency in some markets and a little bit of a slowdown in North America professional consumption, but overall.
Speaker Change: The categories globally performed pretty well.
Speaker Change: For this for the going forward or for this year I don't really expect a whole lot of new pricing that will drive that up and I think as I mentioned the category, we have it to around 2% this year and expect longer term, 2% to 3%.
Speaker Change: <unk> mixed driven I think is a reasonable.
Speaker Change: Aspiration for us or for the for what the category is going to do and then we want to grow faster than that.
Speaker Change: So I'll pause there I know there's a lot to your question I just gave you a lot other things that I missed.
Speaker Change: That was very comprehensive and I think you've got it all but maybe I'll just follow up on.
Speaker Change: 2025, specifically.
Speaker Change: It didn't sound like you expect a lot of pricing maybe just take me through your decision process on pricing, particularly given some FX pressure and how you think about the balance between price and volume as you look out to 2025.
Speaker Change: And just level of visibility you can do it two plus so better than category growth presuming it stays in that 2% range just given if we strip out hyperinflation, you've been a bit below that the last few quarters.
Speaker Change: That's probably inventory, but just how you think about the level of visibility also specifically.
Speaker Change: Great.
Speaker Change: Ill give you our thoughts on that.
Speaker Change: Yes, So let me give you on pack a little bit the topline expectations for 25, and also walk through the pricing trajectory that we've seen in 24, because it builds into what we're expecting for 25. So a few things as Mike said from 2025 overall we.
Speaker Change: Expect pricing to be pretty much muted on an enterprise level aggregate so largely flat.
Speaker Change: It didn't sound like you expect a lot of pricing maybe just take me through your decision process on pricing, particularly given some FX pressure.
Speaker Change: We're coming off a year as we put in our prepared remarks and as you would have seen in the earnings release, where the full year pricing realization was more around 200 basis points for the enterprise of which Hyperinflationary in Argentina, specifically contributed on the year about 300 basis points.
Speaker Change: And how you think about the balance between price and volume as you look out to 2025.
Speaker Change: And just level of visibility you can do it two plus so better than category growth presuming that it stays in that 2% range just given if we strip out hyperinflation, we've been a bit below that.
Speaker Change: Across 2024.
That number came down every quarter. So from a 450 basis point contribution in Q1 that came down to 160 basis point contribution in Q4.
Speaker Change: Quarters.
Speaker Change: That's probably inventory, but just how you think about the level of interim analysis.
Speaker Change: Typically all add up.
Speaker Change: That coincides with inflation tapering off in Argentina as the macroeconomic situation has been stabilizing driven by government actions that were taken about a year ago.
Speaker Change: Give you our thoughts on that.
Speaker Change: Yes, So let me give you unpack a little bit.
Speaker Change: Topline.
Speaker Change: In fact, as we go into this year.
Speaker Change: Whereas Argentina contributed on the full year about 300 basis points to top line growth and pricing in 2024, we only expect around 30 basis points tops in.
Speaker Change: Or less.
Speaker Change: In 2025.
Host: We're coming off a year as we put in our prepared remarks and as you would have seen in the earnings release, where the full year pricing realization was more around 200 basis points for the enterprise of which Hyperinflationary in Argentina, specifically contributed on the year about 300 basis points. Okay.
Speaker Change: So.
Speaker Change: In essence pricing is now going to be a driver of growth in 2025, it's really going to be a volume and mix led growth. It builds on the transition that occurred in 2020 for 2024.
Host: Across 2024.
Speaker Change: Was a year in which volume and mix contributed 1.2 points of growth volume being eight points or 80 bps.
Host: That number came down every quarter. So from a 450 basis point contribution in Q1 that came down to 160 basis point contribution in Q4.
Speaker Change: And as we had in Q4 that actually accelerated to one 5% of growth. So it'll be a volume mix led growth accompanied by continued gain in market share for 2024, our weighted average market share was gain was 10 basis points and we expect that to be at.
Host: That coincides with inflation tapering off in Argentina as the macroeconomic situation has been stabilizing driven by the government actions that were taken about a year ago.
Speaker Change: At least that or higher as we head into 2025.
Host: In fact, as we go into this year.
Speaker Change: Argentina contributed on the full year about 300 basis points to top line growth and pricing in 2024, we only expect around 30 basis points tops in or less in 2025.
Speaker Change: Great. That's very helpful. Thanks, guys Okay.
Your next question is from Robert Moscow with TD Cowen.
Rob: Hey, Rob.
Speaker Change: So in essence pricing is now going to be a driver of growth in 2025, it's really going to be a volume and mix led growth. It builds on the transition that occurred in 2020 for 2024.
Rob: Hi, good morning.
Rob: The productivity savings are really.
Rob: Outstanding at five 9% and it sounds like Youre guiding to that again in 2025 and I wanted to know in 2024 did any of that productivity savings help you on pulp costs.
Speaker Change: Was a year in which volume and mix contributed 1.2 points of growth volume being eight points or 80 bps.
Rob: Because it would appear that pulp costs are going higher in 'twenty five.
Speaker Change: And.
Speaker Change: As we had in Q4 that actually accelerated to one 5% of growth. So it'll be a volume mix led growth accompanied by continued gain in market share for 2024, our weighted average market share was gain was 10 basis points and we expect that to be at least that.
Rob: Do you have productivity baked in in your procurement estimates for that and any other commodities and then and then secondly.
Rob: You're confident in your <unk> outlook for 25%, maybe give a little more color on that and how it compares to how you did in 2004.
Speaker Change: That or higher as we head into 2025.
Rob: Yes, so a few things property yeah, we're very pleased with the first year of delivery towards our 3 billion a five year target of productivity a solid start.
Speaker Change: Great. That's very helpful. Thanks, guys Okay.
Rob: We stood up our global supply chain organization on July one of 2024 and last year comps due to the first year of our transformation of the global supply chain, we did deliver a historical high productivity and the lion's share of the productivity was on what we call our integrated margin management productivity.
Speaker Change: Your next question is from Robert Moscow with TD Cowen.
Rob Moscow: Hey, Rob.
Rob: Hi, good morning.
Rob: The productivity savings are really.
Rob: Outstanding at five 9% and it sounds like Youre guiding to that again in 2025 and I wanted to know in 2024 did any of that productivity savings help you on pulp costs.
Rob: Which is what we're doing on our manufacturing facilities largely network optimization.
Rob: Automation as well as value stream.
Rob: In terms of as it relates to.
Rob: Because it would appear that pulp costs are going higher in 'twenty five.
Rob: Pulp and any and any productivity related savings.
Rob: Do you have productivity baked in in your procurement estimates for that and any other commodities.
Rob: That's really not the case I mean, we we've been managing.
Rob: And then and then secondly.
Rob: The commodity basket in a much more proactive manner.
Rob: You're confident in your <unk> outlook for 25%, maybe give a little more color on that and how it compares to how you did in 'twenty four.
Rob: Not in a reactive manner as we've been explaining over the last couple of years, we've been engaging in strategic relationships with our suppliers that have allowed us to.
Rob: Yes, so a few things Robert Yeah, we're very pleased with the first year of delivery towards our 3 billion a five year target of productivity solid start we stood up our global supply chain organization on July one of 2024 and last year comps due to the <unk>.
Rob: Manage through the volatility that we would've seen in prior years. So on that end as we go into 2025, our expectation is to be in the 5% range of productivity, a tad lower than the $5 nine but solidly.
Rob: Within what we consider to be best in class levels for 2025.
Rob: First year of our transformation of the global supply chain, we did deliver a historical high productivity and the lion's share of the productivity was on what we call our integrated margin management productivity, which is what we're doing on our manufacturing facilities largely network optimization.
Rob: We have significant.
Rob: Significantly improved cost visibility.
Rob: In.
In the next couple of years or so and that's part of our integrated margin management approach and the strategies on risk management that we've deployed.
Rob: Automation as well as value stream.
Rob: In terms of as it relates to <unk>.
Rob: We are confident in our ability to continue to drive in the mid long term.
Rob: Pulp and any.
Rob: Pricing net of cost that it's at least neutral we've seen that play out in fact that was favorable in 2024 and as we go into 2025, we will continue to hone our skills for our teams to manage towards a pricing net of cost at least neutral strategy.
Rob: And any productivity related savings.
Rob: That's really not the case I mean, we we've been managing commodity the commodity basket in a much more proactive manner.
Rob: Not in a reactive manner as we've been explaining over the last couple of years, we've been engaging in strategic relationships with our suppliers that have allowed us to.
Rob: Yes, maybe I'll just add.
Rob: In my view.
Rob: I'd say, our powering care strategy is powering.
Rob: Manage through the volatility that we would have seen in prior years. So on that end as we go into 2025, our expectation is to be in the 5% range of productivity, a tad lower than the $5 nine but solidly.
Rob: What we want to be on algorithm performance and I think we feel very good about how our plans lineup for this year based on what we're seeing in the current environment and I think one of the most important thing is we know we're lapping some discrete factors like this big private label exit and the PPE exit and some of the other things, but we do.
Rob: Within what we consider to be best in class levels for 2025.
Rob: We have significant.
Rob: Do have very strong visibility into productivity and we feel great about that and that's been.
Rob: Significantly improved cost visibility.
Rob: In.
Rob: The next couple of years, or so and Thats part of our integrated margin management approach and the strategies on risk management that we've deployed.
Rob: The key driver for us to fuel our investment in the business and fuel our Bottomline growth and then commensurately in last year and this year in this plan, we will continue to invest in pioneering innovation strong commercial activation to drive volume and mix and then on top of that we're expect to see some of the SG&A.
Rob: We are confident in our ability to continue to drive in the mid long term.
Rob: Pricing net of cost that it's at least neutral we've seen that play out in fact that was favorable in 2024 and as we go into 2025, we will continue to hone in our skills for our teams to manage towards a pricing net of cost at least neutral strategy.
Rob: Leverage through our wine for growth initiative. This year. So again, we're feeling very good about overall the productivity on our visibility into it.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Rob: Yes, maybe I'll just add.
Speaker Change: Your next question for today is from Steve powers with Deutsche Bank.
Rob: From my view.
Rob: You know I'd say, our powering care strategy is powering what we want to be on algorithm performance and I think we feel very good about how our plans lineup for this year based on what we're seeing in the current environment.
Speaker Change: Hey, Steve.
Steve: Hey, guys, great. Thank you and good morning.
Speaker Change: Yes.
Speaker Change: Just to put it wherever.
Speaker Change: What do they want to ask about SG&A, but just to put a little finer point on what Rob was asking about so it sounds like the on peanuts specifically.
Rob: Okay.
Rob: Discrete factors like this big private label exit.
Speaker Change: Just given that.
It's going to be a volume driven year on the topline and I'm, assuming there's some cost inflation. It seems like youre going to have to overcome.
Rob: The PPE exit and some of the other things, but we do have very strong visibility into productivity and we feel great about that and that's been.
Net negative on the year, but.
Rob: The key driver for us to fuel our investment in the business and fuel our bottomline growth and then <unk>.
Speaker Change: Tell me if that's the wrong read from what you you said theyre not yet probably that's something probably not what we meant to convey but maybe yes.
Rob: Immense really in last year and this year in this plan, we will continue to invest in.
Speaker Change: Maybe just unpack on costs, because I think it's important to give kind of our view on costs for the year. So we.
Speaker Change: In December.
Speaker Change: We.
Speaker Change: We shared that for 2025, we expected cost to remain.
Speaker Change: Relatively muted and manageable and our expectation for 2025 is that cost will be still elevated.
Speaker Change: And on an aggregate basis, including currency.
Speaker Change: We expect to be at around $200 million level, which is largely in line with what we saw in 2024. So it is within the levels that we would consider manageable.
Speaker Change: What we've got in terms of pricing net of cost to your specific questions. We still expect our teams to manage pricing net of cost neutral at times, we will make strategic decisions around price pack architectures or competitive elements, where we will make some tactical investments, but it is our expectations that.
Teams will drive overtime lower total delivered costs. That's one of the key premises of powering care and why we've re segmented the company. The way we did it so that we can drive the lowest possible cost in each of our products globally, while we drive the best performing products in Egypt.
Maybe just unpack on costs, because I think it's important to give kind of our view on cost for the year. So we.
And December.
We.
Speaker Change: Categories.
Speaker Change: Just to clarify on the peanuts.
Speaker Change: And then maybe Steve just start I'll just pile on just to give you some context for how we're thinking about it I mean, I think we've kind of move through this period of <unk>.
Speaker Change: We internally call it inflation Super cycle, right, where the company took on record inflation over a couple of years I think we've moved past that and so.
Speaker Change: Starting last year.
Speaker Change: And definitely this year were very very focused on volume plus mixed driven growth.
Speaker Change: And then while maintaining peanut discipline, so thats kind of a thing which is hey, we definitely see that pricing to offset inflation or the inflation Super cycle has kind of receded as we all expected, but we think going forward and that's what and also try to communicate which is maintaining that discipline MP not going forward, it's going to remain important.
Speaker Change: Teams will drive overtime lower total delivered costs. That's one of the key premises of powering care and why we re segmented the company the way we did it so that we can drive the lowest possible cost in each of our products globally.
Speaker Change: Right now again as I, just said earlier, we feel like we have good visibility on our costs.
Speaker Change: We definitely believe that pricing.
Speaker Change: Net of commodity cost and it should be positive.
Speaker Change: While we drive the best performing products in each of our categories.
Speaker Change: And over the long term and then so I think we have good visibility and cost and then we have a very good commercial toolkit, we've invested a lot in the analytical tools to support our revenue growth management capability and so we feel confident that but really really the near term focus is on driving volume and <unk>.
Speaker Change: Just to clarify on the P&L.
Speaker Change: And then maybe I'll just.
Speaker Change: To start I'll just pile on just to give you some context for how we're thinking about it I mean I think.
Speaker Change: We kind of move through this period of <unk>.
Speaker Change: Internally call it inflation Super cycle, right, where the company took on record inflation over a couple of years I think we've moved past that and so.
Speaker Change: Mix.
Speaker Change: Through the pioneering innovation and great commercial activation and just to add there Steve.
Host: Starting last year.
Host: And definitely this year were very very focused on volume plus mixed driven growth.
Speaker Change: Keep in mind, the productivity plan that we've that we're running right now so we expect productivity to also be a.
Host: And then while maintaining peanut discipline. So that's kind of a thing which is we definitely see that pricing to offset inflation or the inflation Super cycle has kind of receded as we all expected, but we think going forward and what not to try and communicate which is maintaining that discipline and P. Not going forward, it's going to remain important.
Speaker Change: A contributor and an offset as an integrated part of integrated margin management for this year at least in the 5% range, which will be another strong year of productivity in 2025.
Speaker Change: Yes.
Speaker Change: That segways into my main question because it's it feels like.
Host: Right now again as I, just said earlier, we feel like we have good visibility on our costs, but we definitely believe that pricing.
Speaker Change: This year a lot of the the overall productivity savings that will enable underlying profit growth.
Speaker Change: To hit that high single digit run rate.
Host: Net of commodity cost trends to be positive.
Speaker Change: On a constant currency basis. It seems like a lot of that's going to come from SG&A. So could you give us a bit more detail on the sources and timing of that productivity.
Host: And over the long term and then so I think we have good visibility and cost and then we have a very good commercial toolkit, we've invested a lot in the analytical tools to support our revenue growth management capability and so we feel confident that but really really the near term focus is on driving volume and <unk>.
Speaker Change: Line of sight to achieving it cleanly and your confidence to be able to kind of.
Get there without having to walk back some of the the value add investments that you've made in 2024.
Speaker Change: Mix.
Speaker Change: Okay, So maybe I'll start.
Speaker Change: Through the pioneering innovation and great commercial activation and just to add there Steve.
Speaker Change: With it with an overall perspective on marketing and then ask Nelson to comment specifically on the SG&A program, but I'd say overall, we're very comfortable with our current investment level on marketing, we're comfortable investing more to support faster more profitable growth also right and they give you a little more perspective, our advertising spend is more than doubled.
Speaker Change: Keep in mind, the productivity plan that we've that we're running right now so we expect productivity to also be.
Speaker Change: A contributor and an offset as an integrated part of integrated margin management for this year at least in the 5% range.
Since 2018, and we feel like we've gotten very strong.
Speaker Change: <unk> will be another strong year of productivity in 2025, yes.
Speaker Change: Returns on those investments.
Speaker Change: Yes, and actually segways into my main question because it's it feels like.
Speaker Change: We closed last year of 2024, and what I would say is a healthy six 5% and.
Speaker Change: This year a lot of the the overall productivity savings that will enable underlying profit growth.
Speaker Change: And <unk>.
Speaker Change: Patricia <unk>, our new Chief growth officer, She's really really here focused on helping us become world class brand storytellers.
Speaker Change: To hit that high single digit run rate.
Speaker Change: On a constant currency basis. It seems like a lot of that is going to come from SG&A. So could you give us a bit more detail on the sources and timing of that productivity your line of sight to achieving it cleanly.
Speaker Change: And so under our direction, we're doing a lot of things to improve our creative one of unimportant. One is we're consolidating our agency partners, both behind creative and the media side and Thats going to both.
And your confidence to be able to kind of.
Speaker Change: Get there without having to walk back some of the value added investments.
Speaker Change: Improve the content that we have and also the efficiency in spending so with that setup I'd say, we're expecting to spend at a similar level in 2025, and we feel good about that and.
Speaker Change: In 2024, Thank you yeah, Okay, so maybe I'll start off.
Speaker Change: With an overall perspective on marketing and then S. Nelson to comment specifically on the SG&A program, but I'd say overall, we're very comfortable with our current investment level on marketing, we're comfortable investing more to support faster more profitable growth also right and they'll give you a little more perspective, our advertising spend is more than doubled.
Speaker Change: As we drive additional productivity, we're going to continue to look for opportunities to spend more.
Speaker Change: Yeah, and as it relates to Ed.
Speaker Change: The overhead savings in particular.
Speaker Change: When we were at our Investor Day on March 27th we said that our plan was to deliver.
Rob: 2018, and we feel like we've gotten very strong.
Speaker Change: As we went through our powering care program around $200 million of SG&A savings.
Rob: Turns on those investments.
Rob: We closed last year of 2024.
And.
Speaker Change: They would kick in.
Rob: What I would say is a healthy six 5% and.
Speaker Change: Once we were fully operational under our new segment structure and that happened in Q4 of 2024. So we went live with the three new segments on October one.
Patrick: And Patrick.
Speaker Change: Patricia <unk>, our new Chief growth officer, She's really really here focused on helping us become world class brand storytellers.
Speaker Change: And our organizational changes are pretty much in place as we speak.
Rob: And so under her direction, we're doing a lot of things to improve our creative one of unimportant. One is we're consolidating our agency partners, both behind creative and the media side and Thats going to both.
Speaker Change: So.
We expect those SG&A savings to your point to begin to kick in.
Speaker Change: In a material manner in 2025, and that's built into our outlook. So we said it'll take us around two years for that to materialize. So this would be the first of the two years, where he would begin to see those savings flowing through and of course, we will make investments.
Rob: Improve the content that we have and also the efficiency in spending so with that setup I'd say, we're expecting to spend at a similar level in 2025, and we feel good about that.
Rob: As we drive additional productivity, we're going to continue to look for opportunities to spend more.
Speaker Change: As we create space on the P&L, but we expect that to be part of the rationale of why we expect operating margins in 2025 to grow at a faster pace than gross margins.
Speaker Change: Yeah, and as it relates to Ed.
Rob: The overhead savings in particular.
Rob: When we were at our Investor Day on March 27th we said that our plan was to deliver.
Speaker Change: Yes, Okay very clear very comprehensive thank you both I appreciate it thanks, Dave.
Rob: As we went through our powering care program around $200 million of SG&A savings.
Rob: Yeah.
Speaker Change: Your next question is from Lauren Lieberman with Barclays.
Rob: They would kick in.
Rob: Once we were fully operational under our new segment structure and that happened in Q4 of 2024. So we went live with the three new segments on October one.
Lauren Lieberman: Hello, how are you guys.
Speaker Change: Thanks for being long winded today so.
Lauren Lieberman: Could you like to say, it's all good.
Lauren Lieberman: So I wanted to just talk a little bit about sources of growth.
Rob: And our organizational changes are pretty much in place as we speak so we.
Lauren Lieberman: So a lot of talk so far on the call about pricing, but one thing that stood out to me this quarter was the volume growth.
Rob: We expect those SG&A savings to your point to begin to kick in.
Rob: In a material manner in 2025, and that's built into our outlook. So we said it'll take us around two years for that to materialize. So this would be the first of the two years, where he would begin to see those savings flowing through and of course, we will make investments.
Lauren Lieberman: And China numbers on.
Lauren Lieberman: Personal care specifically cited in the release you also had good volume growth in North America and in personal care in particular.
Lauren Lieberman: But I was curious sort of when we can expect to start to see volume growth coming through from other markets because were very U S and China weighted at the moment.
Rob: As we create space on the P&L, but we expect that to be part of the rationale of why we expect operating margins in 2025 to grow at a faster pace than gross margins.
Lauren Lieberman: Share gains have continued versus proctor seemingly in those categories just based on what they've had to say about those businesses.
Rob: Yes, Okay very clear very comprehensive thank you both I appreciate it thanks, Steve.
Lauren Lieberman: So I was just curious if.
Lauren Lieberman: If you could talk a little bit about.
Lauren Lieberman: Broadening out sources of volume growth in terms of other geographies.
Speaker Change: Your next question is from Lauren Lieberman with Barclays.
Lauren Lieberman: And just any kind of signs of changes in competitive dynamics that you may or may not be seeing thanks, okay. Yeah. Thanks for pointing that out and I'll try to answer it I would say it goes back to maybe a board meeting we had probably about five years ago, where our discussion internally in the board meeting was hey, if there are markets, we have to win it as the U S and it's China and those are our largest market.
Speaker Change: Laurent Hey, how are you guys.
Rob: For being long winded today, so [laughter].
Rob: Could you a lot to say they'll get.
Rob: And so I wanted to just talk a little bit about <unk>.
Rob: Sources of growth.
Rob: So a lot of talk so far on the call about pricing, but one thing that stood out to me this quarter was the volume growth.
Lauren Lieberman: <unk> are the biggest categories in the world and so I'd say the good news is I think we've put our strategic focus there and it's working right and so we're really proud of that progress that the organization is making I.
Rob: And China numbers on.
Rob: Personal care specifically cited in the release you also had good volume growth in North America and in personal care in particular.
Lauren Lieberman: I'd say, though maybe I'll point out Laura I do think it's a little bit broader than what youre seeing.
Rob: But I was curious sort of when we can expect to start to see volume growth coming through from other markets because were very U S and China weighted at the moment.
Lauren Lieberman: The U S and China, maybe I'll just give you some facts.
Lauren Lieberman: On the share front, we're making progress and I am pleased with our progress, but not satisfied our focus.
Rob: Share gains have continued versus proctor seemingly in those categories.
Lauren Lieberman: Continues to be built to be building superior propositions at every rung of the good better best ladder and I think that's a unique kind of positioning for us that I think we're really happy to be in that space.
Rob: Little bit about <unk>.
Lauren Lieberman: As you may have seen our 2024 weighted share was up about 10 basis points and up and even in about half of our cohorts, but we had.
Lauren Lieberman: Very strong improvement in North America, with the trend improving as the year went on especially in diapers adult and facial tissue.
Lauren Lieberman: In North America personal care was up 80 basis points and weighted share.
Lauren Lieberman: Tumor overall was up about 10.
Lauren Lieberman: And so and importantly in North America, we were up in seven out of eight upper even in seven of eight categories.
Lauren Lieberman: And then in our focused markets.
Lauren Lieberman: We felt like there are some pretty solid gains beyond just China of course, leading off with China Huggies was up 200 basis points in the quarter.
Lauren Lieberman: But in the UK.
Lauren Lieberman: For a third consecutive year, <unk>, which is the big Bath tissue brand in the U K was up another another 100 basis points kleenex in the UK was up almost 400 basis points in share in the U S clinics was up almost 400 basis points as well.
Lauren Lieberman: And then we had share growth in Australia, and Indonesia feminine care and then.
Lauren Lieberman: And importantly in diapers in South Korea, which is a big business for US we were up almost 400 basis points as well. So I think we're seeing pockets of growth the thing that maybe youre pointing to.
Lauren Lieberman: Lauren is and it does kind of that's why we're doing the reorganization that we're doing I mean, the whole point of our new operating model is we want to move faster to implement our global growth playbook and.
In North America personal care was up 80 basis points and weighted share consumer overall was up about 10.
And so and importantly in North America, we were up in seven out of eight upper even in sub seven of eight categories.
Lauren Lieberman: So we think this rewiring is going to better leverage our scale brings the best of KC faster and better than any of the individual markets can do on their own.
And then in our focused markets.
We felt like there are some pretty solid gains beyond just China of course, leading off with China Huggies was up 200 basis points in the quarter.
Lauren Lieberman: As I mentioned in our Investor day, we have great technology in our portfolio that most of the world hasn't seen yet.
But in the U K.
Lauren Lieberman: And so that's kind of why we're doing this organization and from my chair and I can see what all the teams are doing around the world I am seeing the benefits of these focused segments and I'm seeing like us move kind of great ideas faster into different markets. It's also why we're seeing the productivity spike up because we're bringing.
For a third consecutive year and Rex, which is the big Bath tissue brand in the U K was up another another 100 basis points kleenex in the UK was up almost 400 basis points in share in the U S clinics was up almost 400 basis points as well.
Lauren Lieberman: And kind of the big supply chain ideas faster around different parts of the organization.
Lauren Lieberman: Okay, great. Thank you so much okay. Thanks Loren.
Unspecified Moderator: Your next question is from Bonnie Herzog with Goldman Sachs.
Lauren is and it does kind of it's why we're doing the reorganization that we're doing I mean, the whole point of our new operating model is we want to move faster to implement our global growth playbook and.
Bonnie Herzog: Thank you good morning, good morning, Bonnie.
Unspecified Moderator: Good morning, I was hoping to get some color on phasing this year.
Speaker Change: Several moving parts, including the impact from potential retailer Destocking affects your private label exit exam garage. So.
Speaker Change: We think this rewiring is going to better leverage our scale brings the best of KC faster and better than any of the individual markets can do on their own.
Speaker Change: We as I mentioned in our Investor day, we have great technology in our portfolio that most of the world hasn't seen yet.
Speaker Change: Okay.
Speaker Change: Why don't I think we just last year.
Speaker Change: I don't know if we just left.
Speaker Change: And and so that's kind of why we're doing this organization and from my chair and I can see what all the teams are doing around the world I'm seeing the benefits of these focused segments.
Speaker Change: Ali or are we still on yes.
Unspecified Moderator: Yes, Bonnie your line is live.
Speaker Change: Maybe you can also answer phasing in and we develop when she gets better.
Host: In like Us move kind of great ideas faster into different markets. It's also why we're seeing the productivity spike up because we're bringing kind of a big supply chain ideas faster around different parts of the organization.
Speaker Change: Okay. So let me let me unpack.
Speaker Change: 2024 and are facing that we saw because clearly in 2024, we did see a series of one time factors that led to sales not necessarily tracking what you would've seen on the consumer offtake, which by the way for the year in North America was higher than our sell in.
Loren: Okay, great. Thank you so much okay. Thanks Loren.
Bonnie Herzog: Your next question is from Bonnie Herzog with Goldman Sachs.
Speaker Change: Thank you good morning, everybody.
Speaker Change: And it also had an impact on the phasing of earnings across the year.
Host: Good morning, I was hoping to get some color on phasing. This year you know there are several moving parts, including the impact from potential target stocking effects your private label exit excel garage. So.
Speaker Change: I do think that it is.
Speaker Change: We need to recognize what our teams did across the year to manage through all of these.
Speaker Change: Factors and still managed to deliver a solid full year that was ahead of our algorithm that we had set out.
Speaker Change: Goodbye.
Speaker Change: I think we just last year.
Speaker Change: Back at the beginning of the year.
Speaker Change: I don't know.
Speaker Change: The by far the most notable item that we faced last year was the retail inventory reductions.
Speaker Change: Yes.
Speaker Change: Although we still on.
Speaker Change: Largely in the U S and as a reminder of the impact from changes in inventory on organic growth in any given period is really a change on change and it's a function of shipments versus consumption in the prior year versus whats transcended this year.
Speaker Change: 2024 and are facing that we saw because clearly in 2024, we did see a series of one time factors that led to sales not necessarily tracking what you would've seen on the consumer offtake, which by the way for the year in North America was higher than our sell in.
Speaker Change: 2024 <unk>.
Speaker Change: Between the restocking that we saw in 2023 and as a reminder, in Q3 of 2023 is when our supply chain largely normalized in the U S and got back to full supply and the trade destock that we saw throughout 2024 as our service levels came up.
Speaker Change: And it also had an impact on the phasing of earnings across the year.
Speaker Change: I do think that it is.
Speaker Change: The necessary levels, where we needed to be operated that led to a total enterprise impact on the year of around 60 basis points to full year sales and it was <unk>.
Speaker Change: We need to recognize what our teams did across the year to manage through all of these.
Speaker Change: Factors and still managed to deliver a solid full year that was ahead of our algorithm that we had set out.
Speaker Change: Largely concentrated in the first three quarters of the year, but it caused some hiccups at least on the reported organic growth that you would've seen not under consumption.
Speaker Change: Back at the beginning of the year.
Speaker Change: The by far the most notable item that we faced last year was the retail inventory reductions.
Bonnie Herzog: If we think about 2025, which is the phasing you you were asking Bonnie a few things to keep in mind.
Rob Moscow: Largely in the U S and as a reminder of the impact from changes in inventory on organic growth in any given period is really a change on change and it's a function of shipments versus consumption in the prior year versus whats transcended this year.
Bonnie Herzog: The assuming that shipments are in line with our consumption for the year, we should see less than a 40 basis point tailwind in 2025 versus 2024.
Bonnie Herzog: In light of the changes in the in the trade stocks that we lap. So so that would be built in into our outlook.
Rob: In 2024 <unk>.
Rob: Between the restocking that we saw in 2023 and as a reminder, in Q3 of 2023 is when our supply chain largely normalized in the U S and got back to full steam.
Bonnie Herzog: And the important thing to highlight is that our growth is going to be volume and mixed driven all across the year.
Bonnie Herzog: So thats one of the myths to keep in mind as you look at the phasing.
Speaker Change: The trade destock that we saw throughout 2024 as our service levels came up to the <unk>.
Bonnie Herzog: Our planning to bill on share momentum, which we saw in 2024.
Necessary levels, where we needed to be operated that led to a total enterprise impact on the year of around 60 basis points to full year sales and it was.
Bonnie Herzog: And again as a reminder, that was a 10 basis point share gain movement gain.
Bonnie Herzog: Gain that we saw in 2024, and we expect that to be at least at that level, if not to accelerate and in our outlook.
Rob: Largely concentrated in the first three quarters of the year, but it caused some hiccups at least on the reported organic growth that you would have seen not under consumption.
Bonnie Herzog: In terms of overall P&L, we expect revenue sales to be largely evenly distributed first half second half and our view on profit is more or less the same as well we expect that to be more evenly distributed in 2025, then what you would have.
Speaker Change: If we think about 2025, which is the phasing you you you were asking by a few things to keep in mind.
Speaker Change: The assuming that shipments are in line with our consumption for the year, we should see less than a 40 basis point tailwind in 2025 versus 2024.
Bonnie Herzog: Seen in 2024.
Bonnie Herzog: Okay.
Bonnie Herzog: Alright, I don't know if you can hear me, but thank you okay.
Rob: In light of the changes in D C and the trade stocks that we lap so so that would be built in into our outlook.
Bonnie Herzog: Thank you Brian Okay.
Bonnie Herzog: Anything else. So no I think that covers it I appreciate it thank you alright.
Rob: And the important thing to highlight is that our growth is going to be volume and mix driven all across the year.
Speaker Change: Your next question for today is from Anna <unk> with Bank of America.
Rob: So that's one of the best to keep in mind as you look at the phasing we are planning to bill on share momentum, which we saw in 2024.
Speaker Change: Good morning, good morning.
Speaker Change: Thank you so my question.
Speaker Change: In the prepared remarks, he mentioned that in international personal care you are going to continue to be a choice till about the markets where are you in that you had exited markets like Nigeria.
Rob: And you know again as a reminder, that was a 10 basis point share gain movement gain.
Rob: Gain that we saw in 2024, and we expect that to be at least at that level, if not to accelerate in our in our outlook.
Speaker Change: If you look at the business now are there any other markets or regions, where this might also be the case.
In terms of overall P&L, we expect our revenue sales to be largely evenly distributed first half second half and our view on profit is more or less the same as well we expect that to be more evenly distributed in 2025, then what you would have.
Speaker Change: And then separately and professional this picked up nicely in Q4, just wondering if you can talk more about the momentum that youre seeing there and any other color on volume expectations here for 2025. Thank you.
Speaker Change: Yes.
Speaker Change: I'd say overall we.
Rob: Seen in 2024.
Speaker Change: We did have a number of business exits some of our business lines like the private label contract that we've talked about somewhere.
Rob: Okay.
Rob: Yeah.
Speaker Change: Alright, I don't know if you can hear me, but thank you okay. Thank.
Speaker Change:
Rob: Thank you, Brian Okay, I'm, sorry, I can't see anything else. So no I think that covers it I appreciate it thank you alright.
Speaker Change: The PPE business that we've talked about.
Speaker Change: We had a couple of markets Nigeria.
Speaker Change: Was one of them Bolivia, another and so.
Speaker Change: Your next question for today is from Anna <unk> with Bank of America.
Speaker Change: I'd say overall, we feel very good about our portfolio, we feel good about all the categories. We're in but we are taking steps to make sure that all of our categories can continue to be robust and predictable contributors to growth and our returns. So that said you know.
Rob: Good morning, and good luck.
Rob: Thank you for my question.
Speaker Change: Am I in the prepared remarks, he mentioned that in international personal care you are going to continue to be at choice till about the markets, where you win that you.
Speaker Change: Well, we don't see a right to win I think youll see with our Brazilian tissue business, we did make a different kind of choices to optimize our participation will continue to be very disciplined about that overall, though we're going to be very disciplined and methodical about how we approach that.
Rob: You had exited markets like Nigeria.
Speaker Change: If you look at the business now are there any other markets or regions, where this might also be the case and then separately and professional just picked up nicely. In Q4, just wondering if you can talk more about the momentum that youre seeing there and any other color on volume expectations here for 2025. Thank you.
Speaker Change: And then with regard to professional yes, we felt we feel very good about the overall <unk>.
Speaker Change: Position that we're in on professional globally and.
Rob: Yes.
Speaker Change: I think I did mention there was a little bit of softness in the washroom business in North America I think our team is has put the right plans in place for this year and we expect that to continue to improve and then internationally I think we've we feel like we're making the right steps growing the volume growing the share and driving that business in the right direction.
Rob: I'd say overall you know we did have a number of business exits some of our business lines like the private label contract that we've talked about.
Rob: The PPE business that we've talked about.
Rob: We had a couple of markets Nigeria.
Rob: What was one of them Bolivia, another and so.
Speaker Change: Alright, thank you so much okay.
Speaker Change: Your next question is from Peter Grom with UBS.
Peter Grom: But Peter Peter Hey, guys. Good morning, how are you.
Speaker Change: I guess I was just.
Speaker Change: We're hoping to get some more color on just kind of something you outlined in the prepared remarks, just the lower frequency of product used in due to consumer pressures in Latin America and parts of Asia.
Speaker Change: Can you just unpack that a bit I mean is that like a broad based comment is that something youre.
Speaker Change: Seeing across all CPG category or is that a dynamic that's more specific to the categories, where you can be.
Speaker Change: Well I'm not looking at the category has been which we don't compete that closely anymore. So so.
Speaker Change: I'll confine my remarks to kind of what I am seeing within our walls, but I would say.
Speaker Change: It's an ongoing kind of I would say dynamic in our categories globally.
Speaker Change: It happens more in countries that have what we would characterize as informal economies, where where people, let's say in a market like Peru people are paid on.
Speaker Change: I think it's something like 19, 80% of the population is paid on a daily basis right and so when you have that so what happens and this happened during COVID-19 and we're seeing it now when economic conditions toughen and some people are working less right or earning less.
Speaker Change: The spending the spending moves in that direction, because there's no other choice and so what we what happens and the reason why it's probably a little bit more unique to our categories is because let's.
Speaker Change: Let's say on average people use 4% to five diapers a day.
Speaker Change: If they don't have the money they still want to be in the categories. So they don't just exit the category, but instead of using five they'll go to III something along those lines and so we see that.
Speaker Change: When an informal economies, where economic conditions toughing, it a little bit and notably that's been pockets of Latin America and pockets of Southeast Asia more recently, we see that type of behavior and it happens year to year, but.
Speaker Change: I kind of mentioned it because it is happening now and our teams are working through it.
Bonnie Herzog: No. That's really helpful. And then just maybe a follow up just on Bonnie's question on the phasing.
Bonnie Herzog: Italy here with just 50 50, just in terms of profitability earnings, but in terms of growth, it's a pretty different trajectory first half versus second half. So maybe just walk through that a little bit and I guess, maybe what's the degree of confidence or maybe said another way what's the cushion you have embedded in the back half outlook should some of these external very.
The spending there.
Spending moves in that direction, because it was and what the choice and so what we what happens and the reason why it's probably a little bit more unique to our categories is because.
<unk> like <unk>.
Bonnie Herzog: Inflation or demand move against you.
Let's say on average people use four to five diapers a day.
Speaker Change: Yes, Peter So let me provide a little bit more of color. So a few things.
If they don't have the money they still want to be in the categories. So they don't just exit the category, but instead of using five bulk they'll go to three or something along those lines and so we see that win win in <unk>.
Speaker Change: For as I said, and we put in our prepared remarks, we expect the year to be around 50, 51st half second half.
Speaker Change: In terms of growth year on year, I mean, it's really against the base and we will be lapping a stronger base, especially particularly in Q1, which is our strongest quarter.
Speaker Change: Informal economies, where economic conditions tougher in a little bit and notably that's been pockets of Latin America, and pockets of South East Asia more recently, we see that type of behavior and it happens year to year, but you know I I.
Speaker Change: Of the year last year, so that's something that again as you think about it.
Speaker Change:
Speaker Change: I kind of mentioned it because it is happening now and our teams are working through it.
Speaker Change: That will be having an impact on what you see as the growth so.
Speaker Change: No. That's really helpful. And then just maybe a follow up just on Bonnie's question on the phasing.
Speaker Change: That will play a factor into it in terms of the pricing as I stated before.
Speaker Change: Here you just you know 50 50, just in terms of profitability earnings but in terms of growth, it's a pretty different trajectory first half versus second half. So maybe just walk through that a little bit and I guess, maybe what's the degree of confidence or maybe said another way what's the cushion do you have embedded in the back out outlook should some of these external <unk>.
Speaker Change: Pricing has been subsided subsiding over the course of last year and this year is really going to be all about volume and mix pricing as a whole is largely expected to be flat. That's what we've projected as of late.
Speaker Change: <unk> only.
Speaker Change: Max at this moment modeled 30 basis point contribution from hyper inflationary economies to the enterprise. So that's what would play out in terms of what we're projecting at this stage.
Speaker Change: <unk> like inflation or demand move against you.
Speaker Change: Yeah, Peter So let me provide a little bit more of a color. So a few things.
Speaker Change: Or as I as I said and we put in our prepared remarks, we expect the year to be around 50, 51st half second half in terms of growth year on year, I mean, it's really against the base and.
Speaker Change: Great. Thanks, so much.
Unspecified Moderator: Okay. Thanks, Peter maybe we'll take one more question.
Unspecified Moderator: Your final question for today is from Karen <unk> with Piper Sandler.
Host: We will be lapping a stronger base, especially particularly in Q1, which was our strongest quarter.
Karen: Hey, good morning, good morning, Thanks for taking the question.
Host: Of the year last year, so that's something that again as you think about it.
Karen: Was wondering if you could maybe walk us through in a little bit more detail the nuances around the gross margin expectations for 2025, and how should we be thinking about the expansion over the course of the year and what are the different dynamics to be thinking about in 25 versus 2024, and then as we as that flows down to you.
Host: That's that'll be having an impact on what you see as the growth so.
Speaker Change: That will play a factor into it in terms of the pricing as I stated before.
Host: Pricing has been subsided subsiding over the course of last year and this year is really going to be all about volume and mix pricing as a whole is largely expected to be flat. That's what we've projected as of late.
Karen: On the operating margin line, how should we be thinking about the cadence of marketing spend up but of course there. Thanks.
Karen: Sure. So a few things on gross margin.
Karen: Over the last two years, we were very pleased with the job. Our teams have done in expanding margins. As a reminder, gross margin expanded in 2023 by roughly 300 310 basis points in last year 200 basis points on operating profit margin in each of the last two years.
Host: With only.
Host: Max at this moment modeled 30 basis point contribution from hyper inflationary economies to the enterprise. So that that's what would play out in terms of what we're projecting at this stage.
Steve: Great. Thanks, so much.
Karen: We expanded the margin by around 150 basis points.
Speaker Change: Thanks, Peter maybe we'll take one more question.
Okay.
Speaker Change: Your final question for today is from Corinne will smile with Piper Sandler.
Karen: Obviously at a lower pace than gross margin, because we accelerated investments, particularly behind the brands.
Speaker Change: Good morning, Kevin Hey, good morning, Good morning, Thanks for taking the question.
Karen: Between 2023, 2024, we stepped up investments by around $250 million in advertising in support of our brands.
Speaker Change: Wondering if you could maybe walk us through that a little bit more detail than nuances around the gross margin expectations for 2025, and how should we be thinking about the expansion over the course of the year and what are the different dynamics to be thinking about in 25 versus 2024, and then at least at that flows down to.
Karen: <unk> is what's supporting our innovation, that's helped us turn into a volume mix growth led.
Karen: Year end 2024, and what we expect for the year going into 2025, we still project gross margins to expand albeit at a slower pace than what we saw in 2023 and 202024.
Speaker Change: The operating margin line, how should we be thinking about the cadence of marketing spend up and of course there. Thanks.
Speaker Change: Sure. So a few things on gross margin over.
Speaker Change: Over the last two years, we were very pleased with the job. Our teams have done in expanding margins. As a reminder, gross margin expanded in 2023 by roughly 300 310 basis points in the last year or 200 basis points.
Karen: Driven by one we'd still expect to drive productivity as we said is the second year of our of our program and it will be in <unk>.
Karen: In the 5% range a bit lower than what we had in 2024, but still solid delivery of productivity the <unk>.
Speaker Change: On operating profit margin in each of the last two years, we expanded the margin by around 150 basis points.
Contribution from pricing is largely going to be muted because we stated so that's playing into it but still we expect gross margin to expand and then as we.
Rob: Obviously at a lower pace than gross margin, because we accelerated investments, particularly behind the brands in between 2023 2024, we stepped up investments by around $250 million in advertising and in support of our brands.
Karen: And we will be also making investments in our supply chain 2025 will mark an acceleration in the transformation of the supply chain with stepped up projects on network optimization and in automation in particular, so we will be reinvesting.
Rob: Is what's supporting our innovation, that's helped us turn into a volume mix.
Rob: Growth led.
Patrick: Year end 2024 number we expect for the year going into 2025, we still project gross margins to expand.
Karen: A significant amount of the productivity into our operations and hence why we expect the gross margins to still expand but not at the pace of what we saw in the prior two years then as we go into the operating margin, it's really about the leverage that we will have.
Rob: They are at a slower pace than what we saw in 2023 and 202024.
Karen: Because the SG&A savings the $200 million that we planned for as part of our powering care program will start to kick in in a meaningful manner in 2025 and 2026 as our new organizational structure is already in place as we exited the year.
Rob: Driven by one we'd still expect to drive productivity as we said, we it's the second year of our of our program and it will be.
Rob: And the 5% range a bit lower than what we had in 2024, but still solid delivery of productivity.
Rob: Contribution from pricing is largely going to be muted because we stated so that that's playing into it but still we expect gross margin to expand.
Karen: So that's why at this stage, we expect operating profit margins to grow ahead of <unk>.
Karen: Gross margins, which we still expect them to expand but at a slower space.
Rob: And then as we.
Rob: And we will be also making investments in our supply chain 2025 will mark an acceleration in the transformation of the supply chain with <unk>.
Speaker Change: Very helpful. Thank you.
Speaker Change: Alright, well thanks, everybody for joining us if you have any follow up questions we'll be available.
Rob: Stepped up projects on network optimization and in automation in particular, so we will be reinvesting.
Speaker Change: All day to take them. So thanks, again and have a great day.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Rob: A significant amount of the protocol.
Rob: There's still expand but not at the pace of what we saw in the prior two years then as we go into the operating margin.
Rob: It's really about the leverage that we will have because the SG&A savings the $200 million that we planned for as part of our powering care program will start to kick in in a meaningful manner in 2025.