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Something new at Procter & Gamble: Sales growth

'A very satisfying quarter'
Something new at Procter & Gamble: Sales growth
Posted at 8:25 AM, Oct 19, 2018
and last updated 2018-10-19 11:05:24-04

CINCINNATI -- Is it a breakout quarter for Procter & Gamble?

The Cincinnati-based maker of Tide detergent, Gillette razors and Pampers diapers posted 4 percent organic-sales growth in its first quarter which ended Sept. 30. Organic sales are a key metric for P&G because it measures the growth of the business excluding one-time events like acquisitions, divestitures and foreign-currency fluctuations.

P&G enjoyed much faster growth than analysts were expecting. In fact, it's the highest organic-sales growth P&G has achieved in about five years. But is it a game changer?

"It's clearly a very satisfying quarter," Chief Financial Officer Jon Moeller told WCPO. "It's difficult to take conclusions from one quarter, so I would refrain from calling it a breakout quarter. I would call it a very solid quarter on which we need to build."

Another indicator: The company did not increase its outlook for the year, which calls for organic sales growth of up to 3 percent.

"We generated strong consumption, organic volume and organic sales in the first quarter. This keeps us on track to deliver our top- and bottom-line targets for the fiscal year," CEO David Taylor said in a press release. "Our focus on superiority, productivity and improving P&G’s organization and culture is driving improved results."

P&G earned a $3.2 billion profit on revenue of $16.7 billion. Its core earnings per share of $1.15 was 3 cents better than expected by Wall Street analysts. Sales were $220 million higher than analyst expectations.

P&G enjoyed the strongest sales growth in its beauty segment, driven by double-digit grow in premium skin-care products by Olay and SK-II. Profits among P&G’s beauty brands increased 20 percent to $759 million in the quarter.

That’s a positive sign for the company’s quest to grow revenue by investing in research, resulting in superior products that command higher prices. Beauty and grooming were two segments in which critics questioned P&G’s ability to grow.

P&G reported 4 percent organic sales growth in grooming, which also grew profits by 3 percent to $340 million.

Investors are responding to the performance. P&G shares were up more than 4 percent to $83.77 in early pre-market trades Friday.

P&G has been under fire from investors who questioned whether the company had lost its historic ability to grow sales and profits with innovative new products. Those questions led to a proxy fight last summer in which activist investor Nelson Peltz gained a seat on P&G’s board.

Asked about Peltz’s influence on the results by CNBC this morning, P&G Chief Financial Officer Jon Moeller said credit should first be assigned to the company’s 92,000 employees.  But Moeller added some compliments for its newest board member.

"You know, there are two things that Nelson often says that I agree with completely," Moeller said. "One is very simply, ‘Sales up, cost down.’ Couldn’t agree more. Another is, ‘I’d rather be rich than right.’ As long as we both hold onto that objective for our share owners we’re all going to be in very good shape."