Monday, July 27, 2020

Well here’s news to ponder next time you’re sitting on the throne at home: Kimberly-Clark Corp. ($KMB) reports that its sales of toilet paper spiked in the second quarter.

Revenue from “consumer tissue” (because that’s what we call it in polite circles) rose 12 percent compared to the year-ago quarter, to $1.645 billion. Meanwhile, revenue from its K-C Professional segment, which targets corporate buyers stocking office bathrooms, fell 12 percent to $724 million.

The numbers arrived last week in the firm’s Q2 filing. See Figure 1, below.

Also notable is that operating profit from the Consumer Tissue segment nearly doubled to $428 million. We have to say it: the toilet paper segment is really cleaning up.

This should be no surprise. As coronavirus forced untold millions of people to spend less time at work and more time at home, that had profound implications for the, um, personal sanitation business.

First, everyone stocked up on more toilet paper than usual, leading to a demand spike estimated as high as 845 percent. Second, toilet paper used in the home is different from what we all use in the office, school, or shopping mall; it comes from different paper pulp, and uses different manufacturing processes.

Hence we all saw bare shelves in the tissue aisles of our local stores earlier this spring. That shortage seems to have receded as toilet paper manufacturers retooled their processes (“I feel confident to eat a Burrito Supreme,” our intern said, when we dispatched him to the local supermarket for a spot-check), although even now some stores still impose caps on how much tissue a customer can buy at one time.

Anyway, back to Kimberly-Clark. It’s one of the few toilet paper manufacturers that discloses such sales as an operating segment. Technically the Consumer Tissue segment also includes other types of tissue such as napkins and paper towels; plus “a wide variety of innovative solutions,” which makes us wonder how R&D works in this field — but regardless, the segment is a reliable barometer for revenue derived from this most basic function.

Another Approach

Another firm that sells toilet paper and discloses financials is consumer giant Procter & Gamble ($PG). Procter & Gamble hasn’t filed numbers for its second quarter 2020 yet (they are likely to arrive this week), but we can glean a few clues from its first-quarter filing.

First, P&G rolls up its TP numbers into a segment called Baby, Feminine, and Family Care. That segment includes many other products such as baby wipes, baby diapers, adult diapers, and more, although we do know that all P&G revenue in the first quarter totaled $17.214 billion.

In the Segments disclosures, however, the firm splits out the percentage contribution that each segment contributed to the total — so we can see that Family Care specifically contributed 9 percent of Q1 sales, up from 8 percent in the year-earlier period.

Nine percent of $17.214 billion is $1.55 billion, so that’s a rough estimate of P&G tissue paper sales. See Figure 2, below.

First-quarter 2019 sales were $16.462 billion. So if Family Care accounted for 8 percent of that number, that’s $1.317 billion — which means that product line’s sales rose $233 million for first-quarter 2020, a jump of 17.7 percent.

The details are always in the data.

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