Sales drop at P&G eclipses profits surge
PROCTER & Gamble, the American consumer goods giant, yesterday posted a disappointing 11 per cent decline in quarterly sales, hurt by weak demand for some Gillette razors and Braun shavers.
The company, which also makes Tide laundry detergent and Pampers diapers, warned sales could fall as much as 10 per cent this quarter and profit may not meet Wall Street’s expectations. The weak sales and outlook overshadowed P&G’s better-than-expected profit.
Chairman AG Lafley said: “The truth of the matter is, while we performed well, head to head, in some of our categories, we frankly aren’t performing that well in some of our others.”
Still, pressure from foreign currency fluctuations will not be as great this year as previously anticipated, which allowed P&G to maintain its profit forecast for the year, its first under chief executive Bob McDonald, who took over in July.
P&G, which in recent months has touted itself as recession-resistant but not recession-proof, has lost some market share as consumers buy cheaper or private-label brands.
Sales fell in each of P&G’s categories, with the biggest percentage decline a 17 per cent drop in grooming products. Overall sales fell 11 per cent to $18.66bn (£10.9bn), missing analysts’ average forecast of $19.27bn, according to Reuters Estimates.
While P&G anticipated sales would fall in the quarter as consumers cut back and it felt the impact of the stronger US dollar, the drop was deeper than expected and outpaced the 5.5 per cent decline and 5.6 per cent decline posted by Colgate-Palmolive and Kimberly-Clark respectively.
P&G shares have fallen 13.6 per cent so far this year. The only component of the Dow Jones industrial average that has fared worse is General Electric, which is down 14 per cent.
P&G earned $2.47bn in its fiscal fourth quarter, down from $3.02bn a year earlier. On an organic basis, which excludes the impact of currency fluctuations, acquisitions and divestitures, sales fell one percent and volume fell four per cent. Volumes also lagged analysts’ projections.
Lafley cited products such as Pringles snacks, Duracell batteries, and disposable razors as businesses that did not do so well.