Business Standard

Procter & Gamble sales disappoint after prices get a shave


By Richa Naidu and Nivedita Balu
(Reuters) - Procter & Gamble Co's fiscal fourth-quarter sales fell below Wall Street estimates on Tuesday, hurt by lower pricing and weak demand at its units that make Pampers diapers and Gillette shaving products.
Big consumer goods makers are struggling to grow sales as consumer habits evolve, with many shoppers choosing fresher brands or changing the way they groom themselves. P&G and its rivals have also been dogged by surging transportation and commodities costs, particularly for pulp used in diapers and tissue products.
Net sales rose 2.6 percent to $16.50 billion. Analysts had forecast sales of $16.54 billion.
The company, whose board members include activist investor Nelson Peltz, said cost cuts and higher prices would help it report stronger organic sales and core earnings in the second half of fiscal 2019 than in the first half.
Shares of Procter & Gamble, the world's second-largest packaged goods company after Nestle SA, were down 0.5 percent at $79.82.
P&G is rolling out an average 4-percent increase in Pampers prices in North America, and has begun notifying retailers of an average 5-percent price rise for Bounty, Charmin and Puffs tissue products.
Higher prices may not sit well with U.S. retailers that have been aggressively cutting prices and tightening inventory levels to keep pace with Inc.
"While P&G announced 4-5 percent price increases for key U.S. businesses, questions remain whether pricing will stick in the current environment," Wells Fargo analyst Bonnie Herzog wrote in a note.
For fiscal 2019, P&G said it sees core earnings per share growth of 3 percent to 8 percent, or $4.45 at the mid-point. Analysts were expecting $4.39 a share, according to Thomson Reuters I/B/E/S.
In order to claw back market share lost to upstarts such as Dollar Shave Club, P&G cut prices on products in its grooming business by 3 percent during the quarter. Sales in the unit fell 1 percent to $1.65 billion, while volumes dropped 1 percent.
P&G Chief Financial Officer Jon Moeller blamed the unit's lower sales on consumers shaving less frequently, saying the company's price cuts had helped it take back some market share.
Revenue fell 2 percent at P&G's Baby, Feminine & Family Care business - its second-biggest contributor to revenue - amid lower demand in the Middle East, Africa and Latin America.
Net income attributable to the company fell to $1.89 billion, or 72 cents per share, in the fourth quarter ended June 30. Excluding items, P&G earned 94 cents per share, ahead of analysts' estimates of 90 cents.
(Reporting by Nivedita Balu in Bengaluru; Editing by Bernard Orr and Nick Zieminski)

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First Published: Jul 31 2018 | 7:37 PM IST

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