P&G Grows Sales on Big Brands, Emerging Markets
Procter & Gamble Co. is slowly luring back budget-battered consumers to its big brands, while attracting new buyers around the globe by getting more products into emerging markets such as India and China.
The maker of Pantene shampoo and Pampers diapers said Wednesday that its first-quarter revenue grew nearly 2 percent on high volumes, and it forecast growing sales for the rest of the year.
More spending on advertising — stretched by social-media hits such as the Old Spice “Smell Like a Man” commercials — and innovation at high and low price ranges are helping P&G fight frugal shoppers’ trading down to cheaper store brands and reach more of the world’s newer consumers.
P&G said it earned $3.08 billion, or $1.02 per share, down from $3.3 billion, or $1.06 per share, a year earlier. Sales rose nearly 2 percent to $20.1 billion. Analysts surveyed by Thomson Reuters expected, on average, earnings of $1 per share on revenue of $20.2 billion for July through September.
“We aren’t going to make any excuses for a macro-environment like the one we’re in,” Bob McDonald, CEO and chairman, said on a conference call. “We see it as an opportunity to continue to invest and grow market share profitably.”
McDonald said sales of the new Gillette Fusion ProGlide razor, introduced in June, were strong despite a 15 percent price increase. They said it is handily outselling the previous Fusion and Energizer Holdings’ rival Schick brand. Sales of Olay skin cream and other beauty products oriented toward women buyers also rose, although higher-end brands lagged.
Meanwhile, the world’s largest consumer products maker is introducing low-income consumers to major brands with new products such as cheap Gillette shavers and versions of Tide detergent in India. Jon Moeller, chief financial officer, said the new Gillette Guard razor is designed to draw Indian users with a price of roughly 33 cents, and refill blades for 11 cents, while offering safety as well as value.
P&G is also expanding sales of Pampers in China and Brazil, has brought Swiffer dusters to Israel and said more people in emerging markets are snacking on Pringles chips.
P&G blamed the drop in net income on the loss of income from its pharmaceutical business, which it sold last October for $3.1 billion to Warner Chilcott PLC as part of a strategy to focus on products with the best growth and profit prospects.
Organic sales, a key measure that excludes the impacts of acquisitions, divestitures and currency changes, rose 4 percent in the quarter. The company expects them to rise 3 to 5 percent in the current quarter and 4 to 6 percent for the full year.
“Recent market share performance looks good,” Standard & Poor’s analyst Tom Graves said in a client note. “Ahead, we expect (P&G) to benefit from better pricing and innovation.”
He raised his the 12-month target price on P&G shares to $68 from $66.
P&G shares rose 22 cents to close Wednesday at $63.08. They have traded in a 52-week range of $39.37 to $64.58.
For the year, the company expects earnings per share of $3.91 to $4.01. It says the current quarter should produce earnings of $1.05 to $1.11. Analysts are expect earnings of $3.97 per share for the year and $1.11 per share for the quarter.