A week after fending off Nelson Peltz’s bid for a board seat, Procter & Gamble (P&G) delivered another quarter of stagnant sales, possibly giving more ammunition to the activist investor.
For the first quarter, P&G’s net sales rose just 1% to $16.65 billion, missing analysts’ expectations of $16.69 billion amid continued weakness in its grooming business, which includes Gillette razors and Braun epilators.
Net income attributable to the company rose 5% to $2.85 billion or $1.06 per share in the quarter ended Sept. 30. Excluding items, the company earned $1.09 per share, beating analysts’ average estimates by 1 cent.
“The quarter was a little bit more challenging ..than we would have expected going in with the run up of commodity cost and the impact of the natural disasters,” P&G CFO Jon Moeller said on an earnings call, citing higher shipping costs in many geographies.
He blamed the weakness in grooming to price cuts that have averaged about 12%. The segment’s organic sales declined 6%, its third straight quarter in negative territory.
“Grooming was especially weak,” said RBC Capital markets analyst Nik Modi, who had predicted a 2% decline.
As The Motley Fool reports, the Gillette franchise “is being challenged both by value-based store brands and by online subscription services like Unilever’s Dollar Shave Club.” P&G’s global market share in blades and razors has fallen to 65% in fiscal 2017 from 70% in 2017.
CEO David Taylor said the first-quarter results “were in line with our going-in expectations and keep us on track to deliver our targets for the fiscal year.” For 2018, P&G is forecasting organic sales growth in the range of 2% to 3% and core earnings per share growth of 5% to 7%.
But in trading Friday, P&G shares fell nearly 3.7% to $88.25. The stock had been up 9% so far this year.
“Stagnant sales are one of the issues Peltz had with P&G in his contentious and very public proxy fight for a seat on the company’s 11-member board,” Reuters noted.