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Procter & Gamble missed revenue estimates for the first time in five quarters amid weak sales of baby and feminine care products but management remained confident in their turnaround efforts.
For the second quarter, P&G’s net sales rose 4.6% to $18.24 billion, missing the average analyst estimate of $18.37 billion as organic sales from the baby, feminine and family Care segment increased only 1% to $4.58 billion from a year ago.
But net earnings climbed 16.4% to $3.72 billion and, excluding one-time items, profit of $1.42 per share beat the average estimate of $1.37.
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CFO Jon Moeller said the company is pleased with the revenue growth, and the results are evidence that its turnaround plan is working. “We’re looking, as we innovate, to be able to modestly [increase] price and still build value,” he said.
P&G’s diaper sales have been hit by a declining birth rate. In the U.S., growth for diapers and baby care was about flat from a year ago and innovation in the market remains competitive, Moeller said.
As The Wall Street Journal reports, “P&G’s turnaround has been driven by higher prices, new products and a leaner portfolio of brands. The company has shed mass-market beauty brands and led the industry in a move to raise prices to offset commodity costs and fatten profit margins.”
In the second quarter, the beauty business, which includes brands such as Olay and Pantene, delivered the strongest growth, with organic sales rising 8%. The health unit, which includes products such as Vicks cough drops and Crest toothpaste, recorded a 7% gain.
Premium baby-care sales in China are up 20% to 30%, so there are still opportunities despite the slow birthrate, Moeller said on the earnings call.
The company now expects organic sales to increase 4% to 5% for the full year, up from the prior forecast of a 3% to 5% gain.
“The most pressing question now facing P&G is whether the company can maintain growth as rivals step up competition and consumers and retailers potentially begin to push back on price increases,” the Journal said.
