Procter & Gamble reported a 1 percent decline in sales for its third fiscal quarter.
P&G posted $2.6 billion in net earnings, down 8 percent year-over-year from almost $2.8 million. Net sales were $15.6 billion, down 1 percent from $15.7 billion in the prior-year period. Net beauty and grooming sales were both down — 2 percent and 6 percent, respectively, from the prior-year period.
Diluted net earnings per share were 93 cents, down 4 percent year-over-yet. P&G’s shares dipped slightly in morning trading to $88.35.
In beauty, P&G highlighted continued strong sales of luxury skin-care brand SK-II, which offsets lower volume in retail skin care. On its earnings call, executives said that Head & Shoulders is still doing well, and that the relaunch of Herbal Essences is going “extremely well” and sales are up 6 percent year-over-year. The company sold most of its beauty portfolio — 41 brands — to Coty Inc. in a deal that closed in October (CoverGirl, Wella and fragrance licenses for Hugo Boss and Gucci were included in that transaction).
In grooming, sales dropped because of lower volume and reduced pricing in shave care, but appliances saw growth because of Braun male shavers and styling tools, the company said. P&G announced in February that it would cut prices at Gillette in order to compete in the category, but chief financial officer Jon Moeller said Wednesday morning those price shifts didn’t take effect until early April.
He added that if you look at the quarter, the grooming business was seeing improvements in the U.S., and was down 3 percent for January, less than a point in February and up a point in March. Moeller added that P&G was “reasonably comforted” that the upward trend combined with recent price reductions “could put [P&G] in a better place. He said the “continued societal trend towards more facial hair” has contributed to declines, and acknowledged increased competition.
“We estimate [third quarter] organic sales growth would have been slightly better normalizing for a 6 percent sales decline in grooming that was likely impacted by lower demand ahead of an average 12 percent price reduction in the U.S. effective April 1,” wrote Stifel analyst Mark Astrachan in a note.
“The third quarter macro environment was characterized by a slowdown in market growth, continued geopolitical disruptions and foreign exchange challenges,” said David Taylor, chairman, president and chief executive officer. “Against this backdrop, we delivered modest organic sales growth and double-digit core EPS growth, and we increased the quarterly dividend for the 61st consecutive year. Looking forward, we are maintaining our organic sales and core EPS guidance ranges for the year and increasing our outlook for adjusted free cash flow productivity.”
P&G is maintaining organic sales guidance of growth between 2-3 percent. The company said that fiscal year to date, it is at the low end of that range. P&G projects all-in sales will be down 1 percent. The business is projecting core earnings per share growth in the mid-single digits, with an EPS increase of 48 percent to 50 percent
Going forward, P&G’s plan is to focus on “irresistibly superior” products and packaging, Moeller told analysts Wednesday. For that plan, “value superiority” is the focus — affordability of products is important, but so is efficacy, he added.