P&G’s 4Q profit rises 15 pct; readies for slowdown
CINCINNATI — Procter & Gamble Co. plans to seek out new consumers in emerging markets around the globe while giving U.S. and other developed-market households more choices in products and prices as their countries’ economies continue to sputter.
The maker of Gillette shavers, Tide detergent and Pamper diapers reported double-digit net income and revenue increases for its fourth quarter with sales gains in countries led by Brazil, India and China. But it gave a cautious forecast for the year ahead because of flat-looking prospects in the United States and other developed countries. P&G’s guidance indicated slowing sales in this quarter, which began July 1.
“I don’t think there’s any question that consumers, particularly in developed markets, are under pressure,” Bob McDonald, P&G’s chairman and CEO, told reporters Friday in a conference call.
“We’ve been to this movie before,” he said.
P&G shares rose $1.57, or 2.6 percent, to $61.15 in afternoon trading. They’ve traded from $59.17 to $67.72 in the past year.
The company said it is cutting costs by restructuring management and streamlining operations, but is outspending competitors in research and development of new products and in marketing. The world’s biggest advertiser said it spent $9.3 billion on marketing last year, the second straight year it has set a company record, while investing $2 billion in R&D.
P&G also raised prices on products including Pampers diapers, Charmin toilet paper and Cascade dish detergent to offset higher costs for oils, resin and other raw materials. McDonald said the company is putting more focus on offering pricing ranges, including at low price tiers to head off trading down to private label competitors. The aim is to help P&G compete “no matter the price point the consumer wants to spend.”
At a Kroger Co. supermarket near downtown Cincinnati, store shelves Friday offered P&G’s line of laundry detergents at a variety of sizes and prices: Cheer 2X concentrated at $13.99 for a 64-load container; Gain at $11.20 for 64-load container, while the top brand Tide was priced at $19.99 for a 96-load container. Private label brands were priced slightly lower, but without the marketing muscle and track record of P&G’s brands.
P&G dish cleaning liquids were 20 cents or more per bottle than most competing brands, but shoppers could save $2 by buying two bottles of Downy and also could get Downy enhanced with P&G Olay skin cream ingredients to protect hands while washing dishes.
“In this environment, you’ve got to raise prices because of commodity costs to protect margins,” said Jack Russo, an Edward Jones analyst. “You’ve got be careful you’re not alienating consumers. But these guys have great brands, and as they innovate, they emphasize value.”
P&G’s growth is coming from overseas, as it goes into new markets and expands its number of products for emerging consumers in places such as Indonesia and Nigeria. P&G says it’s now reaching some 4.4 billion consumers globally, well over half the world’s population.
P&G has scored a big hit in India with the Gillette Guard razors that sell for pennies. The company hopes getting men in emerging markets to try its big brand will lead to them trading up to higher-priced Gillette products.
Other strong growth came from SK2 cosmetics and Always feminine products in China, Olay skin care in the Philippines, Saudi Arabia and India, and Pantene and Head & Shoulders shampoos in Brazil.
P&G expects earnings for the year ahead to be in a range of $4.17 to $4.33 per share, with sales growing 5 to 9 percent. Analysts expect earnings of $4.29 per share on revenue of $87 billion, up 5 percent.
In the current quarter, P&G expects earnings per share in a $1 to $1.04 range; analysts were looking for $1.14. P&G also sees sales slowing down in places such as the U.S., Europe, and Japan. It projects organic sales growth of 2 to 4 percent overall, with net sales up 6 to 9 percent.