P&G Quarterly Sales Fell Short of Wall Street Estimates

Procter & Gamble Co. ( PG ) experienced a decline in its shares on Friday after the company reported quarterly sales that fell short of the expectations of Wall Street. The sales overshadowed an improved profit outlook for the company. The organic sales, which exclude the impact of acquisitions, divestitures, and foreign-exchange impacts, increased by 3% in the quarter that ended on March 31. This figure was lower than the 3.7% projected by analysts, and the shipment volumes were little changed from the previous year.

The Chief Financial Officer, Andre Schulten, stated that the company has headwinds, which include challenges such as currency volatility, ongoing weakness in China, and the company's SK-II beauty brand. On Friday, P&G shares fell 0.8% at 10:39 a.m. in New York trading. The stock had advanced 7.3% this year through Thursday's close, outpacing the 5.1% gain of the S&P 500 Index.

P&G's results for the fiscal third quarter show that shoppers are still spending more on essential goods. The company is set to boost its prices for the sixth consecutive year, helping the bottom line. The company now sees earnings, excluding some items, in the range of $6.49 to $6.55 a share in the current fiscal year. This is an increase of 12 cents from the previous forecast and above analysts' average estimate.

However, this has come at the cost of lower volume growth. In North America, where P&G gets half of its revenue, third-quarter volume rose by 3%, slightly below the prior quarter's 4%. Organic sales are expected to be up 4% to 5% in the current quarter, according to Schulten, who spoke during a conference call.

The gross margin, a measure of profitability, came in above estimates for the quarter. The company said its costs have fallen due to curtailed overtime at production lines and shifts to lower-cost ingredients. However, higher oil and diesel costs, along with pulp prices, may hurt results in the current quarter, Schulten said.

Schulten said that consumer behavior is "really stable," and "the supply situation on the commodity side has eased after Covid." Still, geopolitical conflict has led to softer demand in certain regions. He said that the impact is limited to a few markets where the tensions are leading retailers to be hesitant to promote and merchandise heavily. He named Turkey, the Middle East, and Indonesia as seeing weaker demand.

P&G posted higher-than-expected sales growth in its grooming division, which includes Gillette razors, citing higher prices in Europe and Latin America. Schulten said that business has been bolstered by total body shaving and intimate hair removal products, which P&G has targeted with shaving gels and Braun electric shavers for both men and women.

The company's fabric-care business, which sells Tide detergent, also outperformed last quarter. Its health care and baby products divisions, however, came under pressure, with volumes dropping in both categories, the maker of Puffs said.

P&G has struggled to expand sales in China, where it sells SK-II beauty products, amid weak consumer confidence. "The consumer is still a little bit shaken," Schulten said of China. "I think the market is coming back slowly. Will it be bumpy in the future? Yes, it won't be a straight line."