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Tickers in this Article: KMB, CL, ACV, AVP, REV
Tissue and personal care products maker Kimberly-Clark (NYSE:KMB) reported lower first quarter earnings, and lowered its revenue outlook for the first year. Net income dropped 9.5%, from $476-431 million, on $4.49 billion in sales revenue. The company expects sales to be off 6-8%, instead of the original forecast of 4-5% for 2009. Investors might want to scrutinize not only Kimberly-Clark, but see what this might mean for the rest of the personal care product industry.

IN PICTURES: Eight Ways To Survive A Market Downturn

The Recession-Proof Factor Vanishes

As we have seen throughout this recession in a number of industries with a wide range of stocks, even some of the so-called recession-proof industries and companies have been hit hard. Investors who thought it was a safe haven were living a dream. When commodity prices rose, causing price increases on these items, it further pushed consumers into their caves. When they emerged, we are told, they only shopped for generic label tissue and diapers, rather than name brands. (Find out which catalysts can turn struggling stocks around to create a tidy profit in our related article Turnaround Stocks: U-Turn To High Returns.)

Not Everybody's Profits Were Down
Colgate-Palmolive (NYSE:CL), another consumer products giant, was able to raise prices and still sell enough products to rack up profits, so why not Kimberly-Clark? Some of the baby products Kimberly-Clark sells are much different than toothpaste, so it's suspicious as to why management didn't do a better job of exploiting the tremendous diversity of distribution channels the company has. Alberto Culver Products (NYSE:ACV), though almost tiny by comparison at about $2 billion market cap, seems to be able to sell its goods, despite the discretionary turn down. Meanwhile, the Kimberly-Clark stock hovers around $49 (as of April 24, 2009), trading at the lower end of 52-week range ($43.05-66.66).

It could still be a good pickup as a defensive play with its attractive dividend yield , which is just under 5%, but warrants caution. Kimberly-Clark reported improved gross margin of 32.4% from 30.2%, which may allow the company some flexibility in cutting prices to improve sales in the coming quarters. In addition, Kimberly-Clark announced plans for more employee layoffs in the second and third quarter, plus cut backs in spending, which will make their cost structure leaner. Some companies, on the other hand, are just plain getting slammed: Revlon (NYSE:REV) had a 72% fall off in profit last quarter.

Others Doing Better
Colgate is continuing to press ahead and continuing to report better than expected profits. Also, Avon Products (NYSE:AVP) is a company that seems to have a lot of cash, a willing (or even needy) workforce, a low stock price, and products that should be salable even amidst the economic gloom. Yet, for every bright note on this stock, there are some concerns: despite lots of cash, its got even more debt; despite access to credit, it is still working through a multi-year restructuring. So, undervalued or unworthy, its earnings have had a falloff too, like Kimberly-Clark.

Don't Overthink this Industry
What is at stake here is sales of things people use so routinely that we may describe them as needs, more than discretionary. People don't cut back on shampoo or tissue in the same way they do on houses, cars or even clothing. So, when you see the spotty performances of these companies and you read of the weakness of the whole personal care product industry, you know the economy has a longer way to go, in order for it to get well, than it may have seemed. Before it becomes a true long-term buy, the stock has to have the company performing much better.

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