P&G tops forecasts as company cuts costs, steps up marketing

CINCINNATI – Procter & Gamble reported a quarterly profit Tuesday that topped Wall Street expectations as the world’s biggest consumer products company worked on slashing costs and pruning its product lineup to offset slow growth.

The maker of Tide detergent, Charmin toilet paper and Pantene shampoo said its sales declined for its fiscal fourth quarter, hurt by unfavourable currency exchange rates. But when excluding such factors, organic sales rose 2 per cent, boosted by higher volume.

P&G has been trying to transform its struggling business to better focus on bigger brands with growth potential. The company has already shed more than half the 105 smaller brands it says collectively contribute little to its operating profit.

For its flagship brands, P&G is trying to drive sales with new products that bring in more money. In laundry detergents, for example, the company introduced a “Tide and Downy Odor Defence Collection” this year that it says is specifically designed to fight smells from workout clothes.

During the company’s earnings call, P&G CEO David Taylor said more people are wearing workout clothes and that the rollout was intended to address “a very specific need the customer has.”

While organic sales volume was up in the U.S., it was flat in China. The company noted that the performance in China was still better than the previous declines it reported.

Stepped-up marketing hurt core earnings during the quarter. The Cincinnati-based company has said it plans to reinvest a significant portion of its savings from cost-cutting back into programs like product sampling that help drive sales. Globally, organic volume edged up in all segments, including beauty, health care and grooming, it said.

For the three months ended June 30, the company earned $1.95 billion, or 69 cents per share. Excluding one-time items and discontinued brands, it said it earned 79 cents per share. That was more than the 74 cents per share Wall Street expected, according to Zacks Investment Research.

Total revenue was $16.1 billion in the period, also exceeding the $15.84 billion analysts expected.

For its fiscal 2017, P&G said it expects organic sales to climb about 2 per cent. Core earnings are expected to grow “mid-single digits” from this fiscal year’s $3.67 per share.

Its shares fell 12 cents to $86.29 in morning trading. P&G shares have risen roughly 9 per cent since the beginning of the year, while the Standard & Poor’s 500 index has risen 6 per cent. The stock has increased 12 per cent in the last 12 months.


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