P&G Revenue Trails Estimates After Dollar Hurts Sales

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P&G Q3 Revenue Misses Estimates on Strong Dollar

Procter & Gamble Co., the world’s largest consumer-products maker, reported third-quarter revenue that missed analysts’ estimates after the strong dollar crimped overseas sales.

Revenue fell 7.6 percent to $18.1 billion, the Cincinnati-based company said in a statement Thursday. Analysts estimated $18.4 billion, according to data compiled by Bloomberg.

P&G gets the majority of its sales outside North America, making it especially vulnerable to currency fluctuations. Foreign exchange damped sales by 8 percentage points in the quarter and will reduce revenue for the year by as much as 7 percentage points, the company said. Chief Executive Officer A.G. Lafley said that P&G will keep working to cut costs to make up for the currency headwinds.

“As we have done before, we’ll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction,” Lafley said in the statement.

Profit excluding some items was 92 cents a share, P&G said. That matched the average of analysts’ estimates compiled by Bloomberg.

P&G shares fell 2.6 percent to $80.95 at the close in New York. The stock has slid 11 percent this year, compared with a 2.6 percent gain for the Standard & Poor’s 500 Index.

Beauty Struggles

The company’s beauty division, with products like Pantene shampoo and CoverGirl makeup, continued to struggle, with a 3 percent sales decline, excluding currency effects. The grooming division, which sells Gillette razors, posted a 9 percent currency-neutral gain, while laundry and fabric-care sales were unchanged on that basis. Overall sales growth excluding currency effects was the lowest in six years, according to Bloomberg Intelligence.

P&G held or increased market share in about half of its categories globally and about 60 percent in the U.S., Chief Financial Officer Jon Moeller said Thursday. That happened without a significant increase in spending to promote its brands, he said.

“It’s not something that we prioritize,” he said. “We would much rather spend a dollar on innovation or building the equity of our brands.”

Selling Brands

In addition to the cost cuts, Lafley is shedding 100 underperforming brands to streamline the maker of Tide and Pampers. Still, most large consumer-products makers are losing their grip on consumers.

In the four years through 2014, companies selling the top three products in 30 categories lost market share in 22 of them, with an average decline of 3 percentage points, according to Wells Fargo & Co. analyst Chris Ferrara.

On the call, Sanford C. Bernstein & Co.’s Ali Dibadj and other analysts questioned whether P&G’s moves to divest some of its businesses are enough. The company continues to promise growth without delivering, he said.

“How much longer would we have to wait for you guys to decide that maybe something even bigger has to happen?” Dibadj said. “Maybe you really have to break up the company even further.”

Lafley, who’s approaching the second anniversary of his second tenure as P&G’s CEO, is said to be preparing to step down this year. Since returning, he’s remade the company by reorganizing into fewer units and selling the pet-food and battery businesses.

Net income fell 17 percent to $2.15 billion, or 75 cents a share. P&G maintained its annual forecast of double-digit earnings-per-share growth, excluding currency impact.

One competitor, Kimberly-Clark Corp., posted results this week that exceeded estimates. Profit was $1.42 a share, excluding some items, beating the $1.33 predicted by analysts. The company benefited from strong sales of baby wipes and feminine and adult-care products, along with $100 million in cost cuts.

(Corrects analyst attribution in 11th paragraph of story that ran on April 23.)
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