P&G Continues to Ride Shift to Premium Products -- Update
January 23 2020 - 9:37AM
Dow Jones News
By Sharon Terlep and Micah Maidenberg
Procter & Gamble Co. reported another quarter of rising
sales and profits as the marketing giant convinced people to
upgrade to premium versions of Tide and Crest products, but the
growth slowed from the previous quarter.
The Cincinnati company said organic sales, a measure that
excludes currency moves and deals, increased 5% from a year ago in
the quarter ended Dec. 31. On that basis, sales rose 7% in the
previous quarter, and Wall Street was expecting even stronger
growth.
P&G finance chief Jon Moeller said the company is pleased
with the growth and the results are evidence that P&G's
turnaround plan is working. "We're looking, as we innovate, to be
able to modestly [increase] price and still build value," he
said.
Shares of P&G slipped 2% in premarket trading Thursday. The
stock surged about 30% in the past year and was trading near-all
time highs, as the company recorded a streak of growth that
outpaced rivals like Kimberly-Clark Corp. and Unilever PLC.
Kimberly-Clark, which makes Huggies diapers and Kleenex tissues,
on Thursday reported a 3% gain in organic sales in the same period.
The smaller company, which has also been raising prices, forecast
growth for the current year that was below P&G's
projections.
P&G's turnaround has been driven by higher prices, new
products and a leaner portfolio of brands. The company has shed
mass market beauty brands and led the industry in a move to raise
prices to offset commodity costs and fatten profit margins.
In the December quarter, the company was able to push through
price increases in its struggling Gillette razor business. Until
recently, brand sales were falling despite aggressive price cuts in
prior years. Gillette, "is strengthening quite nicely," Mr. Moeller
said in a call with reporters. "There is still work to do but we
are making significant progress."
P&G's beauty business, covering brands like Olay and
Pantene, delivered the strongest growth in the quarter, with
organic sales rising 8%. The health unit, which includes products
such as Vicks cough drops and Crest toothpaste, recorded a 7%
gain.
The one weak spot was the company's baby care business, which
includes its Pampers diapers, where organic sales declined from a
year ago. Mr. Moeller said the division is fighting tough
competition, as birthrates are falling in China and the U.S. Both
P&G and Kimberly-Clark have sought to offset the impact of
those declines with higher-end offerings and by focusing on other
categories, such as adult diapers and feminine care products.
P&G has benefited of late in part because consumers have
proved willing to pay up for the more-expensive products it has
developed, like specialty toothpaste and Tide Pod detergent
packets. Prices were up 1% across its portfolio in the quarter,
P&G said.
A healthier consumer environment in the U.S. has helped the
company as well. Sales at retail shops, restaurants and online rose
0.3% on a seasonally adjusted basis in December from a month
earlier, according to the Commerce Department, a solid showing for
the month including the holiday shopping season.
P&G said Thursday it now expects organic sales to increase
4% to 5% for the fiscal year that ends in June, up from a prior
forecast that anticipated a 3% to 5% gain on that measure.
Profit for the fiscal second quarter rose to $3.72 billion, from
$3.19 billion the year earlier. Overall, P&G reported $18.24
billion in quarterly sales, short of the $18.42 billion consensus
compiled by FactSet. The company's adjusted profit of $1.42 a share
was higher than forecasts from analysts by 5 cents.
Kimberly-Clark, which has been cutting thousands of jobs and
closing factories, reported profit of $547 million on flat sales of
$4.58 billion. It forecast organic sales growth of 2% for 2020.
Write to Sharon Terlep at sharon.terlep@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
January 23, 2020 09:22 ET (14:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Kimberly Clark (NYSE:KMB)
Historical Stock Chart
From Aug 2024 to Sep 2024
Kimberly Clark (NYSE:KMB)
Historical Stock Chart
From Sep 2023 to Sep 2024