Gillette and Ariel-owner P&G sees drop in sales as consumers switch

Surprise drop in quarterly sales comes as price-conscious consumers in the US and China switch to cheaper brands

P&G operates a manufacturing plant in Kildare that employs about 400 people. 

Ariel and Gillette-owner Procter & Gamble (P&G) reported a surprise drop in quarterly sales for the second time in a row, as price-conscious consumers in its major markets, the United States and China, switched to cheaper brands.

P&G, which has a manufacturing plant in Kildare that employs about 400 people, said organic sales in North America grew 4% in the first quarter, compared with a 7% rise seen a year earlier.

Additionally, a prolonged property crisis and rising youth unemployment have resulted in a grim demand environment in China that impacted sales and volumes of P&G in the country.

"China, as we had expected, continues to be softer from a consumption standpoint... the market continues to be weak and will be weak... for a number of quarters to come," the company’s chief financial officer Andre Schulten said.

However, he added P&G had a renewed plan for product launches and category expansions in the country.

P&G, which has been reeling in years of steep price hikes with some promotions, reported a 1% rise in average prices across its product categories, and a 1% gain in overall organic volumes in the reported quarter.

Higher prices helped P&G report adjusted profit per share of $1.93, above analysts' average estimate of $1.90, according to data compiled by LSEG.

Shares of P&G were down nearly 1% in volatile premarket trading after the company reported a 0.6% fall in first-quarter net sales to $21.74bn, compared with analysts' estimates of a 0.2% rise to $21.91bn.

P&G maintained its annual organic sales growth forecast of a 3% to 5% rise and core earnings per share expectation of $6.91 to $7.05.

Rival packaged food manufacturer Nestle on Thursday cut its annual sales forecast, noting the demand environment would continue to remain weak and flagged pressure from weaker economies such as Latin America.

Analysts also expect P&G to see a drag to its volumes from slowing demand in Latin America, China and the Middle East.

In some Muslim majority countries, people have called for boycotting P&G products because of its connections to Israel.

Reuters