Head & Shoulders and Olay boost sales at Procter & Gamble

Procter & Gamble’s more optimistic forecast for the current year was offset by a revenue miss, a sign that analysts are setting a high bar for quarterly earnings with stocks at record highs.

Procter & Gamble’s more optimistic forecast for the current year was offset by a revenue miss, a sign that analysts are setting a high bar for quarterly earnings with stocks at record highs.

Organic sales, which exclude items like acquisitions and currency fluctuations, rose 5% in the company’s fiscal second quarter, short of the average of analysts’ projections for growth of 5.6%, according to estimates.

Baby, feminine, and family care, in particular, fell short of expectations, with organic sales rising just 1%. That is the weakest growth among the company’s business units.

P&G’s beauty business, which includes Head & Shoulders shampoo and Olay skincare products, once again outperformed other segments, with organic sales growth of 8%, matching estimates.

Steps to boost growth while limiting costs appear to be broadly paying off.

The grooming business, which is largely driven by the Gillette brand, posted growth of 4%, slightly outpacing expectations.

Meanwhile, the company sees the measure rising 4% to 5% for the full year, compared with the previous range of 3% to 5%. P&G also raised its profit outlook.

After P&G shares rose 36% during a strong 2019, US investors may be expecting nearly flawless results.

That is emerging as a recurring theme this earnings season: P&G joins US companies including Netflix and health-care giant Johnson & Johnson in seeing shares fall after posting mixed results.

P&G is also running up on concerns that economic activity is slowing.

While the US-based company posted broad strength in most of its businesses, including beauty, healthcare, and grooming, it continued to raise prices. That strategy could backfire if US consumers pull back.

There has already been some evidence that is starting to happen.

US retailer Target slashed its quarterly sales outlook after it missed its own expectations in the Christmas holiday season.

Data tracker NPD Group, meanwhile, said retailers didn’t have “their typical robust peak season”.

On a call with analysts, chief financial officer Jon Moeller said P&G is not immune from broader economic conditions but is in a “better position” than previously. That is because the company has shifted away from discretionary brands to focus more on essential products, he said. Mr Moeller said delivering growth in the segment could “take some time”.

Bloomberg

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