- Adjusted earnings exceed expectations despite revenue miss
- Weak consumer spending affects core categories such as detergent, toilet paper
- Beauty products see growth amid overall sales volume decline
Jan 22 (Reuters) - Procter & Gamble's second-quarter revenue fell slightly short of Wall Street expectations on Thursday, as weak spending by U.S. consumers and the hit from a government shutdown offset stronger growth globally.
Adjusted earnings topped targets, helped by strong demand for P&G's pricey haircare and beauty products, in a mixed performance for the bellwether U.S. consumer goods maker, whose results are seen as an indicator of the industry's health.
A government shutdown in the U.S. — P&G's biggest market — delayed payments for food assistance in October and November and hurt lower-income households that were already struggling to make ends meet amid high prices and a tepid labor market.
P&G finance chief Andre Schulten said in early December that sales were down across categories in the U.S. due to the shutdown.
Sales volumes dropped in three of the company's five reported categories, and rose only for the beauty business, which has been an outlier over the past year as consumers continue to buy self-care products.
Total volumes were well below the typical growth rate of about 3% to 4% across categories in the U.S., Schulten said.
"The consumer is making choices driven by cost when it comes to items like laundry detergent or bleach, but they are not so desperate that they will revert to a generic alternative for the things that make them look and feel better," said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.
For the three months ended December 31, P&G's net sales rose about 1% to $22.21 billion, just shy of analysts' average estimate of $22.28 billion, according to data compiled by LSEG.
Its core gross margin fell for the fifth straight quarter, partly due to tariffs, and the company's investments in different pack sizes to appeal to consumers looking to save money.
Still, P&G maintained its annual core profit and sales forecasts, and was on track to finish the year within its target ranges in a challenging consumer and geopolitical environment, said new CEO Shailesh Jejurikar, who took the role on January 1, in a statement.
Shares of the world's biggest consumer goods company by market capitalization were up 2%.
"I think the market can look past the organic sales miss, as sentiment was quite poor heading into the report with management talking down the results during the quarter," said David Wagner, head of equities and portfolio manager, Aptus Capital Advisors.
"We need to get the U.S. growing," Schulten said on a call with analysts.
There's growth in the company's second-biggest market too. P&G executives said baby care in China is growing in double digits percentage, helped by new high-end "silk enhanced diapers."
The company has raised prices, about 1% across categories during the quarter, for some of its products to offset the impact from U.S. President Donald Trump's import tariffs.
P&G lowered its expectation for a tariff-related jump in its costs from about $1 billion to $1.5 billion early last year to about $400 million in October, and stuck to that figure on Thursday.
"We need to get the U.S. growing," Schulten said on a call with analysts.
There's growth in the company's second-biggest market too. P&G executives said baby care in China is growing in double digits percentage, helped by new high-end "silk enhanced diapers."
The company has raised prices, about 1% across categories during the quarter, for some of its products to offset the impact from U.S. President Donald Trump's import tariffs.
P&G lowered its expectation for a tariff-related jump in its costs from about $1 billion to $1.5 billion early last year to about $400 million in October, and stuck to that figure on Thursday.
Excluding one-off items, P&G reported earnings per share of $1.88, beating analysts' estimates of $1.86. Quarterly net earnings attributable to P&G shareholders fell about 7% to $4.32 billion.
Reporting by Angela Christy and Juveria Tabassum in Bengaluru and Jessica DiNapoli in New York; Editing by Peter Henderson, Matthew Lewis and Shinjini Ganguli
Source: Reuters