P&G Raises Outlook After Another Quarter of Strong Sales--2nd Update
January 23 2019 - 8:18AM
Dow Jones News
By Aisha Al-Muslim
Procter & Gamble Co. reported strong quarterly sales growth,
continuing a streak of robust gains and prompting the
consumer-products giant to raise its outlook for the year even as
one of its closest rivals reported weaker results.
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 second
quarter. Organic sales were boosted by 1% due to higher
pricing.
Beauty products fueled the gains, with organic sales rising 8%,
but the company reported growth across a number of categories. Only
the Gillette razor business posted a decline in organic sales in
the latest quarter.
Rival Kimberly-Clark Corp., which makes Huggies diapers and
Kleenex tissues, reported falling profits in the same quarter as it
was squeezed by rising commodity costs and currency swings. The
smaller company said organic sales rose 3% from a year before.
Shares of P&G jumped 4% in premarket trading, while
Kimberly-Clark slipped 2%.
Despite a robust U.S. economy and strong consumer spending, the
companies have encountered increased competition, a consumer shift
toward smaller brands, and higher costs of raw materials and
transportation.
After trying to combat weak demand by lowering prices, P&G
changed course late last year, saying it would increase prices in
late 2018 and early 2019 for several products, including its
Pampers, Bounty, Charmin and Puffs brands. Kimberly-Clark and other
consumer-goods makers have followed P&G's lead on raising
prices.
So far, price increases on various products have been announced
but not fully implemented, P&G's finance chief, Jon Moeller,
said in conference call with reporters.
The organic growth in P&G's fiscal second quarter matched
the first quarter, which was the best growth rate in several years.
For a long stretch, P&G's quarterly organic sales had generally
risen 2% or less -- lackluster growth that attracted a proxy fight
from activist investor Trian Fund Management, whose co-founder
Nelson Peltz now holds a seat on the P&G board.
While sales rose for Tide detergent and Pampers diapers, organic
sales fell 3% in the grooming business, which includes the Gillette
brand. The established brand has faced competition from upstarts
and has resorted to lowering prices to maintain its leading market
share.
Last week, Gillette released a controversial ad campaign
invoking the #MeToo movement. The nearly two-minute ad posted
online after the second quarter ended. The ad received mixed
reactions from customers.
In the conference call, Mr. Moeller described the grooming
business as a "long-purchase cycle business" with some people going
as much as a year without buying shaving products. However, he
said, Gillette continues to grow sales and users.
Overall, P&G said profit rose 28% to $3.19 billion in the
second quarter, which ended Dec. 31.
Core earnings were $1.25 a share, beating the $1.21 a share
analysts polled by Refinitiv were looking for. Core earnings strip
out currency moves, acquisitions and divestitures.
Net sales were $17.44 billion, unchanged from the previous year,
but unfavorable foreign-exchange fluctuations hurt sales by 4%.
P&G increased the high end of its full-year forecast for
organic sales to rise 2% to 4%, compared with its prior estimates
of 2% to 3%.
Meanwhile, Kimberly-Clark reported quarterly earnings of $411
million, down 33% from a year earlier. Total sales fell 1% to $4.57
billion, hurt by currency swings.
In October, Kimberly-Clark said it was switching chief
executives in the midst of a restructuring program intended to
boost profits as the company struggled with weak sales.
Michael Hsu, the former president and chief operating officer,
who became chief executive earlier this month, said Wednesday that
the company expects 2019 to be challenging but "somewhat better
than in 2018."
--Robert Barba contributed to this article.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
January 23, 2019 09:03 ET (14:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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