Business

Pampers and Tampax weakness sees P&G miss sales target

Consumer goods group raises full year forecast despite falling short of analyst expectations for quarter

A slowing global birthrate has hit Procter & Gamble sales of its Pampers nappy range

Thu Jan 23 2020 - 16:14

Procter & Gamble posted quarterly sales Thursday that missed analysts' expectations for the first time in five quarters, hurt by weakness in baby and feminine care products such as Pampers nappies and Tampax tampons.

A slowing global birthrate has hit P&G and competitors like Huggies nappy maker Kimberly-Clark, particularly in China and the United States. To boost sales, both companies have invested in higher-priced premium products.

Pemium baby-care sales in China are up 20-30 per cent so there are still opportunities despite the slow brithrate, chief operating officer Jon Moeller said on a post-earnings call.

US sales growth for nappies and baby care was about flat from a year ago and innovation in the market remains competitive, Mr Moeller said.

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The company said net sales rose 4.6 per cent to $18.24 billion, which missed the average analyst estimate of $18.37 billion, according to IBES data from Refinitiv.

Jefferies analyst Kevin Grundy said Wall Street expectations were built on the company's momentum in the past five quarters, but the modest second-quarter results are likely to be met with disappointment. "Good quarter, but high bar," he wrote in a note to clients.

In 2018, P&G launched Pampers Pure, plant-based diapers made with zero chlorine bleaching, fragrance or parabens. It has recently teamed up with Google to make a smartphone app that alerts parents when a nappy needs changing. Similarly, Kimberly Clark in July launched a premium Huggies brand, Special Delivery, made from plant-based materials like sugarcane.

Sales of P&G’s baby and feminine products rose just 1 per cent to $4.58 billion, while sales of fabric and home care products rose 4 per cent to $5.79 billion, both missing estimates.

Sales at the grooming business, which makes Gillette razors, rose 2 per cent to $1.65 billion, also below estimates. The company took an $8 billion charge last year related to the unit, which faces competition from smaller rivals Harry's and Dollar Shave Club.

P&G has been investing heavily to develop new products across all categories, improve packaging and marketing as it tries to appeal to younger consumers and fights competition from Unilever, Reckitt-Benckiser and local upstarts.

The company raised its fiscal 2020 forecast for core earnings per share growth to between 8 per cent and 11 per cent from a prior range of a rise of 5-10 per cent.

Net earnings attributable to P&G rose 16.4 per cent to $3.72 billion in the quarter to end-December. Excluding one-time items, profit of $1.42 per share beat the average estimate of $1.37. – Reuters

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