• Key measure of organic sales falls short of estimates
  • Slow rebound in China is hurting P&G’s beauty business

Procter & Gamble Co., the maker of Bounty paper towels and Downy fabric softener, reported quarterly sales that fell short of estimates as consumers continue to buy fewer items amid higher prices.

Organic sales, a closely watched metric that excludes the impact of currency shifts and acquisitions, rose 4% in the latest quarter, falling short of analysts’ average estimate. Organic volume, which fell for the seventh straight quarter, trailed projections for an increase as shoppers bought lower quantities of baby, health and beauty products than a year earlier.

Higher prices for core goods such as used cars and apparel are weighing on US spending, while a slower-than-expected recovery in China is hurting P&G’s sales expansion. As consumers make do with less, it’s unclear when P&G will post volume growth — although the company said it’s seeing improvement. Sales gains have been fueled by higher prices.

“What we saw this quarter is very weak volumes in China driven by what we said all along — a bumpy recovery,” Chief Financial Officer Andre Schulten said in an interview. “We expect volumes will continue to accelerate across the second half. We’re making progress.”

Schulten said P&G has been trying to get shoppers to buy more expensive name-brand products amid lower birthrates in the US and China, two of its largest markets. The company is focusing on products such as Pampers Swaddlers diapers, which P&G says offer its best protection against leaks. Shoppers will warm to better products, Schulten said.

What Bloomberg Intelligence Says

“The quality of Procter & Gamble’s 2Q profit beat and stable fiscal 2024 outlook, combined with easing commodity costs, offer improved volume support into the year ahead, underpinning our confidence on the company achieving guidance. A 4% yield on dividends and buybacks adds to the positives, and could prove unmatched among household-goods peers.”

 Deborah Aitken, consumer analyst

Click here to read the research.

Prices that were 4% higher than a year earlier bolstered revenue in the fiscal second quarter ended Dec. 31. P&G reiterated its organic sales and revenue guidance for the current year, and raised the lower end of its forecast for adjusted earnings.

The more-optimistic profit outlook, along with adjusted earnings per share that outpaced expectations, are being fueled by favorable commodity costs along with productivity savings. Schulten said P&G is seeing efficiency gains amid higher production of certain items as it adds more manufacturing lines. Less expensive raw materials are also helping to boost profit.

Written by:  @Bloomberg

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