Procter & Gamble Co.'s (PG) fiscal fourth-quarter profit exceeded expectations, but the consumer products giant continued to see sales declines across most of its businesses as consumers cut back purchases of its higher-priced products.

P&G projected further sales declines, saying sales excluding acquisitions and divestitures would be flat to down 3% in the first quarter. On a conference call, company executives said results would improve sequentially after the first quarter.

In the latest fourth quarter, P&G was hurt by weaker sales in its beauty and grooming businesses. Sales of the higher-end, more discretionary line of Braun shavers fell sharply. But some of P&G's everyday brands also continued to see declines as consumers traded down to cheaper brands and private label goods in grocery stores. Shipments of its key Tide brand, which is priced much higher than competing detergents, fell during the fiscal year. P&G shares were recently down 3.5% to $53.55.

In recent years, Procter & Gamble has put more focus on higher-priced products, seeking to drive growth by getting consumers to trade up to pricier products and brands. That strategy has hurt the company during the recession as consumers cut discretionary spending in areas like beauty and traded down to cheaper pantry staples.

Rival Colgate Palmolive Co. (CL), for instance, is perceived as having held up better during the recession because its portfolio is focused on low-price staples like toothpaste and soap. Colgate shares are up 4.7% for the year, compared with a 13% drop for P&G.

P&G's results reflect the dilemma that consumer product companies must now face after years of pushing consumers toward higher margin offerings. Although there have been some signs of an improving outlook for the economy, many consumer industry experts worry that U.S. consumers will stay frugal even after the economy bounces back.

The fourth quarter was the first time the company reported earnings under newly appointed Chief Executive Robert McDonald.

On a conference call on Wednesday, McDonald said the company will grow long term by pushing more of its products in areas where it is under-represented. P&G will aim to sell more beauty products in drug stores. It is also aiming to increase its overall presence online. The company will put more focus on lower priced products, but will continue to grow its higher margin businesses through internal growth and acquisitions, he said.

McDonald took over from A.G. Lafley, who engineered the giant Gillette acquisition and drove the push toward faster growing higher margin businesses. But McDonald also inherits a hosts of challenges as consumer trends shift and as the economic outlook stays uncertain.

"Congratulations are premature," McDonald said to one analyst, who wished him luck on the new position.

Fourth-quarter results were of "lackluster quality," Goldman Sachs analyst Andrew Sawyer wrote in a research brief to investors. P&G is diversified globally, but emerging markets have seen some slowdown as well and the company's international presence has meant that it has been pressured by fluctuations in foreign currencies.

For the first quarter, P&G projected results slightly more downbeat than analysts - earnings of 95 cents a share to $1 and a net sales drop of 7% to 10%. Analysts are looking for earnings of $1 a share and a sales decline of 7% to $20.57 billion, according to analysts surveyed by Thomson Reuters. In the fourth quarter, earnings fell 18% on last year's Folger's sale and the company saw volumes drop as it raised prices. For the quarter ended June 30, the maker of brands such as Tide and Pampers reported a profit of $2.47 billion, or 80 cents a share, down from $3.02 billion, or 92 cents a share, a year earlier. Excluding items such as divestitures and tax adjustments, earnings rose to 83 cents a share from 78 cents.

Net sales decreased 11% to $18.7 billion on the stronger U.S. dollar, while organic sales - which exclude currency changes, acquisitions and divestitures - fell 1%. Analysts polled by Thomson Reuters most recently were looking for earnings of 79 cents on sales of $19.32 billion.

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

(Tess Stynes contributed to this article)