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August 6, 2009

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P&G hit by drop in sales and now shares

PROCTER & Gamble Co has posted an 18-percent drop in profit for its fiscal fourth quarter as sales fell more than expected, and shares slipped almost 2 percent even though it stood by its 2010 profit forecast.

The maker of Tide laundry detergent and Pampers diapers said sales could fall more this quarter and profit may not meet Wall Street's expectations.

Still, pressure from foreign currency fluctuations will not be as great this year as previously anticipated, which allowed P&G to maintain its profit forecast for this year.

P&G, which in recent months has touted itself as recession-resistant but not recession-proof, has seen some loss of market share as consumers buy cheaper or private-label brands.

"For some time, we needed a quarter to kind of round out some weakness that they're seeing in the top line from foreign currency and from consumer trade-down, and it's just kind of all stacked up here," said Morningstar analyst Lauren DeSanto.

Sales fell in each one of the company's categories. The biggest percentage decline was a 17-percent drop in grooming, which includes Gillette razors.

P&G earned US$2.47 billion, or 80 US cents per share, in the quarter ended June 30, down from US$3.02 billion, or 92 US cents per share, a year earlier. Sales fell 11 percent to US$18.66 billion, falling short of analysts' average forecast of US$19.27 billion.

P&G expected sales to fall in the quarter as consumers cut back and it felt the impact of the stronger US dollar.

P&G said it would reinvest the benefit of improved currency rates into growing its business.

Shares of P&G, which have fallen 10.3 percent since the beginning of the year, fell 1.9 percent to US$54.40 in premarket New York trading.


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