P&G Cleans Up on Pandemic-Driven Hygiene

By Sharon Terlep and Saabira Chaudhuri

Procter & Gamble Co. reported its biggest global sales increase in 15 years as the world's consumers spent more to keep their homes and themselves clean during the coronavirus pandemic.

Even as the economic picture grew bleaker around the world, the maker of Tide detergent and Gillette razors said demand grew for pricier products. It logged the strongest growth in the unit that sells Swiffer mops and Dawn dish soaps.

Earlier Tuesday, Lysol maker Reckitt Benckiser Group PLC reported its sharpest quarterly sales growth on record, driven by its hygiene unit.

Where sales gains early in the coronavirus pandemic were driven by consumers stocking up amid lockdowns and shortages of products such as paper towel and toilet paper, P&G said demand in recent months appears driven by an increased focus on home cleaning and personal hygiene as people remain home more.

"The dynamics associated with this period of economic difficulty are different than in the past," P&G finance chief Jon Moeller said in an interview. "Large portions of peoples' budgets are not being spent on travel, leisure and hospitality, which leaves them more money in the budget."

Reckitt Chief Executive Laxman Narasimhan said he thinks renewed interest in hygiene will outlast the pandemic: "Consumers are adopting better hygiene practices," he said in a call with journalists.

Lysol maker Reckitt Benckiser Group PLC and Clorox Co. have reported booming demand for their cleaning products, straining their abilities to keep stores stocked with their disinfectant sprays or wipes.

Reckitt said it had doubled capacity for Lysol and other major disinfectant products from a year ago -- through capital investment and by adding contract packers and raw material suppliers. It said it was "well positioned" to meet future demand.

P&G and its peers have cut back on deals and discounts as demand is so high that consumers buy whatever they can find.

P&G said organic sales, a measure that excludes currency moves, acquisitions and divestitures, rose 9% for the quarter ended Sept. 30 compared with a year earlier. Increased consumption drove most of that growth, but consumers also paid higher prices and shifted toward more premium products, such as Tide laundry pods and scented laundry beads, the company said.

Sales of private-label household and personal-care products fell 1% overall in the U.S. for the four-week period ended Oct. 3, according to Nielsen, a signal that consumers are leaning toward higher priced, name-brand products.

The biggest growth was in P&G's home-care unit, where sales jumped 30%. The unit's products include Swiffer, Febreze air freshener and Mr. Clean. An antibacterial surface cleaner, Microban 24, launched in February and initially planned as a niche product, is on track to reach $200 million in annual sales.

Overall, P&G said net sales for the quarter were $19.3 billion, up 9% versus the prior year. Net income was $4.31 billion, or $1.63 per diluted share, an increase of 20% from the prior year.

The results were ahead of Wall Street's expectations. Analysts polled by FactSet predicted sales of $18.35 billion and earnings of $1.41 per diluted share.

The company raised its guidance for sales and profit gains for the fiscal year ending in June 2021. It now expects organic sales to rise between 4% and 5% for the year, compared with its prior forecast of 2% to 4% growth.

Reckitt, which in addition to Lysol and Finish dishwasher tablets, sells big international brands like Dettol disinfectant and Harpic toilet cleaner, said its third-quarter comparable sales rose 13.3% compared with the year before, beating analysts' estimates.

Revenue rose to GBP3.51 billion ($4.55 billion) from GBP3.29 billion. Reckitt didn't report net income for the quarter.

Its hygiene unit logged a jump of 19.5% in sales, driven by sales of Lysol, Finish and Air Wick. Reckitt recently launched a new business selling its cleaning expertise to hotel operators, airlines and other companies and on Tuesday the company said it had added Amtrak and Airbnb Inc. to its list of clients.

Write to Sharon Terlep at sharon.terlep@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

October 20, 2020 07:14 ET (11:14 GMT)

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