Procter & Gamble Tops Wall Street Forecasts on Profit, but Disappoints on Sales in Q3
Updated on April 19 at 11:12 a.m.
Procter & Gamble’s third-quarter results were another mixed bag, with consumer demand for its brands remaining strong in the U.S. despite higher prices, while it struggled with SK-II sales in China.
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The Cincinnati, Ohio-based consumer goods giant’s net sales came in at $20.2 billion, below Wall Street estimates. But diluted net earnings per share were $1.52, up 11 percent year-over-year and beating analysts’ estimates of $1.42.
Organic sales in North America grew 3 percent year-over-year, Europe 7 percent, and Latin America 17 percent, but Greater China organic sales were down 10 percent.
In terms of categories, beauty segment organic sales increased 3 percent versus a year ago. Skin and personal care organic sales declined low-single digits due to lower sales of the SK-II brand, partially offset by volume growth from innovation in personal care.
The SK-II brand has been hit by Chinese consumers’ boycott of Japanese beauty products due to Japan’s controversial discharge of treated wastewater from the disabled Fukushima Daiichi Nuclear Power Station, but the company is confident it can return to growth.
“SK-II sales in Greater China were down around 30 percent for the quarter. We have seen some month-to-month improvement in overall Greater China sales trends though we expect it will be another quarter or two until we return to growth,” said P&G chief financial officer Andre Schulten during a call with analysts.
Hair care organic sales increased high-single digits, driven by increased pricing in Latin America, Europe and North America.
Grooming segment organic sales, meanwhile rose 10 percent, on the back of higher pricing in Latin America and Europe.
Elsewhere, baby, feminine and family care segment organic sales were unchanged versus year ago; fabric and home care segment organic sales increased 3 percent, and health care rose 2 percent.
“We delivered solid sales and strong earnings growth in the third quarter despite multiple headwinds, enabling us to raise our EPS growth guidance and maintain our top-line outlook for the fiscal year,” said Jon Moeller, chairman of the board, president and chief executive officer. “We remain committed to our integrated strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization.”
P&G raised its fiscal 2024 diluted net earnings per share growth from a range of -1 percent to inline to a range of 1 to 2 percent versus fiscal 2023 EPS of $5.90. It also lifted its core net earnings per share growth from a range of 8 to 9 percent to a range of 10 to 11 percent.
Mark Astrachan, an analyst at Stifel, said: “From a stock standpoint, we view the result as mixed, with slowing sales likely reflecting weakening in underlying category growth, most notably in China. Relatedly, we think the company continues to gain modest market share globally and in the U.S. due in part to its ongoing strategy of irresistible superiority, including expanding category usage through innovation.”
Its share price was down 1 percent to $155.71.
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