As US birthrates drop, Huggies maker lays of 5,500 staff

Americans are having fewer babies, and diaper makers are feeling the pinch.

Kimberly-Clark said Tuesday it will cut as many as 5,500 jobs, or 13 percent of its workforce, in an attempt to lower costs.

The job cuts come as the maker of Huggies and Kleenex – like other consumer-products companies – is seeing a decline in demand for some core products as US birthrates fall.

According to the National Center for Health Statistics, the general fertility rate fell 11 percent between 2007 and 2016.

Kimberly-Clark is cutting 5,000 to 5,500 jobs, or 12 percent to 13 percent of its workforce, as the consumer products company tries to lower costs and the US birth rate drops

The CDC’s latest estimates, published in November 2017, found that the birth rate had fallen to 59.2 per 1,000 women, from 61.3 in November 2016.

Birth rates peaked in 1990, and rose back again to around 70 per every 1,000 women in the US in 2007. But they have fallen steadily ever since.

The declining birth rates are likely driven by a significant reduction in teen pregnancies. In 2016, the teen birth rate fell to a record low, falling nine percent from 2015.

While birth control is aiding in the prevention of unwanted pregnancies, many experts have expressed concern that over the growing number of men and women that are infertile, or choosing to wait to try to get pregnant until later in life when the odds of conception are lower.

All in all, it means women under 30 are having fewer children and aren’t in the market for diapers, tissue and other products that new parents buy in bulk.

‘You can’t encourage moms to use more diapers in developed markets when the babies aren’t being born in those markets,’ Kimberly-Clark CEO Tom Falk said in a conference call.

The Dallas-based company also said that it plans to close or sell about 10 manufacturing plants while expanding production elsewhere. It’s also looking to exit or sell some low-margin businesses that make up about 1 percent of company sales.

The company did not say where the job cuts would take place.

Makers of consumer products are also getting squeezed between higher commodity prices and lower retail prices as shoppers scour the internet for the best deals.

While competitor Procter & Gamble also reported earnings that met expectations, analysts showed some concern about the first quarterly price decline since 2011, as well poor diaper sales.

Kimberly-Clark Corp. anticipates pre-tax savings of $500 million to $550 million by the end of 2021 from the cost-cutting moves. It foresees total pre-tax restructuring charges in a range of $1.7 billion to $1.9 billion.

The company also reported mixed fourth-quarter results on Tuesday. Its adjusted profit of $1.57 per share was 3 cents better than what analysts polled by Zacks Investment Research forecast. But revenue of $4.58 billion was slightly below Wall Street’s expectations.

Kimberly-Clark’s annual sales declined for the three-year period between 2013 and 2016, according to FactSet. But annual sales rose slightly in 2017 from the prior-year period.

The company is looking to save more than $1.5 billion between 2018 and 2021 as part of its ongoing cost-savings program.

Shares in Kimberly-Clark ticked up less than 1 percent in afternoon trading.