Procter & Gamble On Friday, it reported weaker-than-expected sales as lower demand in China weighed on sales again.
Organic sales in Greater China, the company’s second-largest market, fell 15% in the fiscal first quarter. As domestic home prices fell and unemployment rose, shoppers cut back on spending, hurting sales of P&G’s shampoo, diapers and other consumer staples.
Management remains confident in China over the long term, but demand is not expected to recover for at least several quarters.
“The market continues to be weak and we believe it will remain weak for several quarters to come,” CFO Andre Schulten said on a call with media.
P&G’s China outlook does not take into account the Chinese government’s recently announced economic stimulus plan.
The company’s shares were down about 1% in morning trading.
Here’s how the company reported compared to what Wall Street expected, based on LSEG’s analyst survey.
- Earnings per share: $1.93 adjustment vs. $1.90 expected
- revenue: $21.74 billion vs. Expected $21.91 billion
P&G net sales It decreased 1% to $21.74 billion. Organic revenue, excluding foreign exchange, acquisitions and divestitures, increased 2%, driven by higher prices.
The company reported flat volume for the quarter. This metric excludes price and more accurately reflects demand than sales. Like many consumer goods companies, P&G has seen demand for its products decline after years of price increases. Last quarter, trading volume increased for the first time in more than two years.
In the U.S., P&G’s sales are up in eight of 10 categories, and the company is not seeing any transactions from its own-brand products, Schulten said.
But in Greater China, the story is different. Organic sales deteriorated compared to the previous quarter. The company noted declining sales in China for both its hair care and oral care segments. Still, Greater China accounts for less than 10% of P&G’s sales.
“The Asia and execution-related issues are very minor compared to other difficult situations the company has encountered in the past,” said Charles Rinehart, a longtime Procter & Gamble shareholder and chief investment officer at Johnson Investment Counsel.
P&G’s beauty business, which includes brands like Pantene and Olay, saw sales fall 2% in the quarter. In particular, the skin care division suffered, with organic sales plummeting by more than 20%. P&G has seen sharp declines due to falling sales and lower sales of its expensive SK-II brand, which has been struggling since pandemic lockdowns. Anti-Japanese sentiment in China has been a recent challenge for the brand. SK-II sales took a hit last year when Chinese consumers boycotted the brand, fearing the products would be contaminated by Japan’s discharge of processed radioactive waste.
P&G’s Healthcare and Infant, Women’s and Family Care segments both reported a 1% decline in sales in the quarter. But its baby products division, which includes Pampers diapers, had a much worse quarter, with organic sales down mid-single digits. As global birth rates continue to fall, P&G is trying to boost sales by encouraging consumers to buy more expensive baby products, such as Pampers Premium diapers. However, these strategies cannot always compensate for declining volume.
P&G’s grooming division, which includes Gillette and Venus, reported a 4% increase in sales. The company attributed its strong performance to innovation.
The company’s textiles and home care business increased sales by 1% in the quarter. This segment includes Swiffer, Febreze and Tide products.
P&G reported fiscal first-quarter net income of $3.96 billion, or $1.61 per share, down from $4.52 billion, or $1.83 per share, in the year-ago quarter.
Excluding restructuring costs and other items, the company earned $1.93 per share.
P&G reiterated its outlook for fiscal 2025. Core earnings per share are expected to be between $6.91 and $7.05 and revenue growth is expected to be between 2% and 4%.
