P&G Sales Fall Short, Offsetting Higher Full-Year Outlook

(Bloomberg) -- Procter & Gamble Co.’s more optimistic forecast for the current year was offset by a revenue miss, a sign that Wall Street is 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 compiled by Bloomberg. 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, U.S. investors may be expecting nearly flawless results. That’s emerging as a recurring theme this earnings season: P&G joins companies including Netflix Inc. and health-care giant Johnson & Johnson in seeing shares fall after posting mixed results.

P&G shares alternated between gains and losses on Thursday in New York trading. The shares began trading Thursday without the right to receive a 75-cent quarterly dividend.

Economic Concerns

P&G is also running up on concerns that economic activity is slowing. While the Cincinnati-based company posted broad strength in most of its businesses, including beauty, health care and grooming, it continued to raise prices. That strategy could backfire if U.S. consumers pull back.

There’s already been some evidence that’s starting to happen. Target Corp. slashed its quarterly sales outlook after it missed its own expectations in the holiday season. Data tracker NPD Group, meanwhile, said that retailers didn’t have “their typical robust peak season.”

On a call with analysts, Chief Financial Officer Jon Moeller said P&G isn’t immune from broader economic conditions, but is in a “better position” than previously. That’s because the company has shifted away from discretionary brands to focus more on essential products, he said.

Baby, feminine and family care in particular fell short of expectations, with organic sales rising just 1%. That’s the weakest growth among the company’s business units. Moeller said delivering growth in the segment could “take some time.”

The company posted broad gains in other categories, however, a sign that 2019’s strength is holding and the stagnation of previous years has faded away. Steps to boost growth while limiting costs appear to be broadly paying off.

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

--With assistance from Tiffany Kary.

To contact the reporter on this story: Gerald Porter Jr. in New York at gporter30@bloomberg.net

To contact the editors responsible for this story: Sally Bakewell at sbakewell1@bloomberg.net, Jonathan Roeder, Cécile Daurat

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