P&G, Colgate Results Signal Better Outlook For Branded Goods

Consumer product giants Procter & Gamble Co. (PG) and Colgate-Palmolive Co. (CL) saw broad sales growth in their most recent quarters, signalling at least some pickup in consumer spending on branded household goods after subdued demand during the recession.

For P&G, in particular, the improved sales were seen as increased evidence of a turnaround in its business since sales of its higher priced goods tumbled. The maker of Tide detergent and Pampers diapers reported that its organic sales, a closely watched measure that excludes the effect of acquisitions and exchange rates, grew 5% in the latest quarter, at the high end of the company's guidance. Some of those sales gains came in response to price cuts that the company made. But P&G has continued to launch new products, some at the higher end of the price spectrum, hoping to draw new consumers and shore up margins.

Chief Executive Bob McDonald on a conference call with analysts and investors said the idea that people everywhere are trading down in response to the economic environment "is a little overly general."

New products like Tide Stain Release are doing well, the company said. Meanwhile, in developing markets like India, mothers continue to trade up from homemade cloth diapers to P&G's disposable ones despite the global economic slowdown.

Shares of P&G were recently up 2.9% to 62.56 and Colgate gained 1.2% to 81.33.

For the second quarter ended Dec. 31, Procter & Gamble posted earnings of $4.7 billion, or $1.49 a share, compared with $5 billion, or $1.58 a share, a year earlier. Excluding charges related to legal matters and gains from selling its prescription drug business, earnings from continuing operations were $1.10 a share in the latest quarter. Sales grew more than 6% to $21.03 billion from $19.8 billion. Analysts polled by Thomson Reuters had expected earnings of $1.42 a share on revenue of $21.07 billion.

Colgate sales have been reasonably steady during the recession as it sells mainly necessities like soap and toothpaste. But the latest quarter saw sales grow further, rising by more than 11% to $4.08 billion from $3.7 billion. In the U.S. brands like Colgate Total Enamel Strength, Colgate Sensitive Enamel Protect and Colgate Max White with Mini Bright Strips toothpastes helped in the latest quarter.

Colgate reported a profit of $631 million, or $1.21 a share, up from $497 million, or 94 cents a share, a year earlier. Analysts polled by Thomson Reuters most recently forecast earnings of $1.18 on revenue of $4.08 billion.

Another consumer company, Estee Lauder Co's (EL), maker of high-end fragrances, said it is seeing an improvement in sales in duty-free stores and other travel-related purchases, another indicator that is closely watched as a gauge of discretionary consumer spending.

-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200; anjali.cordeiro@dowjones.com

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