P&G’s Lafley Makes Progress on Cost Cuts as Sales Falter

Procter & Gamble Co. (PG) Chief Executive Officer A.G. Lafley is making progress on trimming costs from the world’s largest consumer-products company. Reviving sales growth has been harder.

The maker of Tide detergent and Pampers diapers today posted third-quarter profit that topped analysts’ estimates, helped by a 5.1 percent drop in selling, general and administrative costs. Yet sales fell 0.2 percent, missing expectations because of declines in its beauty and grooming businesses as well as a strong dollar that reduced the value of its revenue abroad.

Since returning to P&G last year, Lafley has sought to increase productivity by reducing expenses while at the same time creating new products that will boost revenue and win market share. He’s also re-evaluating P&G’s portfolio of businesses and earlier this month agreed to sell most of its pet-food operations.

“We’re operating in a slow-growth, highly competitive environment, which places even greater importance on strong innovation and productivity improvement,” Lafley said today in a statement.

Net income in the three months ended March 31 climbed 1.7 percent to $2.61 billion, or 90 cents a share, from $2.57 billion, or 88 cents, a year earlier, Cincinnati-based P&G said in the statement. Excluding certain items, profit was $1.04 a share. Analysts estimated $1.02, the average of 24 projections compiled by Bloomberg.

P&G fell 0.3 percent to $80.36 at the close in New York. The shares have slid 1.3 percent this year, while the Standard & Poor’s 500 Index advanced 1.5 percent.

Sales Fall

Sales fell 0.2 percent to $20.6 billion. Analysts estimated $20.7 billion, on average. Net sales were down in the company’s beauty, grooming, health care and baby, feminine and family-care business units.

Revenue in its home-care unit rose 2 percent in the quarter, driven by a 6 percent increase in sales volume. Selling, general and administrative costs fell 5.1 percent in the quarter.

The company reiterated its forecast for profit growth, excluding certain items, of much as 5 percent in fiscal 2014.

Lafley, who first led the company from 2000 to 2009, replaced Bob McDonald last year after P&G lost market share in some important categories and trailed competitors in sales growth.

Earlier this month, P&G agreed to sell the Iams, Eukanuba and Natura pet-food lines in some markets to Mars Inc. for about $2.9 billion. The sale, which would include the brands’ businesses mainly in Europe, may help P&G as the stronger dollar weighs on international revenue.

Sales growth for the year will be hurt by foreign-currency exchange by as much as 3 percent, P&G said today.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, Niamh Ring

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.