P&G Posts Strongest Sales Growth in Five Years -- 3rd Update
October 19 2018 - 10:04AM
Dow Jones News
By Aisha Al-Muslim
Procter & Gamble Co. booked its strongest quarterly sales
growth in five years, driven by gains in the beauty segment, as the
consumer-products giant snapped a stretch of lackluster growth.
The maker of Tide detergent and Gillette razors said organic
sales, a closely watched metric that strips out currency moves,
acquisitions and divestitures, rose 4% in the fiscal first quarter.
Beauty products fueled the gains, rising 7%, but the company
reported growth across a number of categories including shaving
razors, health care and laundry detergent.
P&G executives said Friday the growth came from increased
demand, not the company's recent decision to increase prices on
some items. Jon Moeller, P&G's finance chief, said the company
raised prices in some emerging markets to offset currency swings
but that overall prices were neutral in the September quarter.
Shipment volumes rose 3% from a year ago.
Despite the strong start to its fiscal year, P&G executives
sought to tamp down expectations and stuck with their full-year
forecast for organic sales to rise 2% to 3%. Mr. Moeller said he
would refrain from calling it a "breakout quarter."
The company now estimates overall sales to be down 2% for the
full year due to foreign-exchange headwinds, compared with the
previous outlook of flat to up 1%.
Shares rose 5% to $84.24 in premarket trading Friday. Shares are
down 12.4% in the past year.
The Cincinnati-based company has struggled to boost sales in an
industry facing more competition and higher costs of raw materials
and transportation. In recent quarters, the company's organic sales
have generally risen 2% or less. They rose 1% in the fiscal year
ended June 30, below the company's goal of 2% to 3%.
After more than a year of trying to combat weak demand by
lowering prices, P&G recently changed course, saying it would
charge more for its Pampers, Bounty, Charmin and Puffs brands. The
increases, which the company said would go into effect later this
year or in early 2019, have the potential to more broadly influence
pricing and demand given P&G's size and clout. P&G said
pricing, overall, was neutral during the quarter.
P&G posted a 4% gain in organic sales in its long troubled
grooming business, where Gillette has lost market share to online
upstarts like Dollar Shave Club. The only P&G segment that
reported a decline in organic sales was the baby business, which
includes Pampers and Luvs diapers.
Consumer-products makers got a boost this week when Unilever PLC
and Nestlé SA said inflation in many markets allowed them to charge
more for their products, fueling stronger sales for those companies
in the latest quarter. Many consumer-goods makers in recent
quarters have struggled to raise prices amid weak inflation, but
commodity-price increases and a stronger U.S. dollar have changed
that.
P&G said profit rose 12% to $3.2 billion, or $1.22 cents a
share, in the first quarter, which ended Sept. 30. Core earnings
were $1.12 a share, beating the $1.09 a share analysts polled by
Refinitiv were looking for.
Net sales rose 0.2% to $16.69 billion from $16.65 billion, but
unfavorable foreign exchange fluctuations hurt sales by 3%.
The company's earnings results were impacted by unfavorable
foreign-exchange fluctuations due to the strengthening of the U.S.
dollar, which hurt sales by 3%.
P&G also maintained its expectation for core
earnings-per-share growth of 3% to 8% for fiscal 2019. The outlook
includes an estimated $1.3 billion headwind from foreign exchange
and higher commodity costs.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
October 19, 2018 09:49 ET (13:49 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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