Premium brands help lift P&G sales
Procter & Gamble’s (P&G’s) drive to sell more upscale skincare, grooming and housecleaning products is beginning to show up in its bottom line.
Sales of its premium brands helped lift earnings to $1.08 a share last quarter, excluding some items. Analysts had estimated $1.06, on average.
The results reflect a crusade by CEO David Taylor to get consumers to pay a bit more for the items in their bathroom cabinets and kitchen pantries.
P&G’s premium SK-II skincare brand helped sales in the beauty division last quarter, and scent beads and Tide pods for high-efficiency washers boosted the home-care unit, giving the company a leg up on sellers of bargain health and cleaning products.
“Over half of their product lineup is premium oriented, so with an improving domestic economy, those products are doing well,” said Jack Russo, an analyst at Edward Jones & Co.
P&G rose as much as 3.9% to $87.98 in New York, the most in almost three months. The stock gained 5.9% last year, trailing the 9.5% increase for the Standard & Poor’s 500 index.
While total revenue slipped 0.3% to $16.9bn, that topped analysts’ $16.8bn average estimate. Organic sales — which excluded the effects of acquisitions, divestitures and currency exchange-rate fluctuations — rose 2%, P&G said.
BEAUTY SALES
Sales by that measure rose 3% in the beauty division. Organic sales gained 7% in healthcare, driven by innovation in oralcare products. Organic sales increased 1% in the grooming, fabric and home-care, and baby, feminine and family care units.
The company reiterated its forecast that earnings per share would gain at a mid-single-digit percentage this year. Organic sales may increase as much as 3%, up from a previous projection of 2%.
Taylor, who took over as CEO in November 2015 after 35 years with the company, pledged to make the owner of Tide, Pampers and Olay a more nimble and innovative competitor. Once known for churning out hit products such as Swiffer mops, P&G has struggled to invent new blockbusters.
P&G’s challenges are not unique. New brands, particularly those with natural or organic ingredients, have attracted younger shoppers, a trend that prompted Unilever’s acquisition of Seventh Generation last year.
Large consumer companies were also coping with higher ingredient costs, sluggish demand and a stronger US dollar, Goldman Sachs Group analyst Jason English said.