Procter & Gamble Faces Slow Growth from Stiff Competition

Procter & Gamble recently released a new report showing that quarterly earnings surpassed analyst’s expectations.  Of course, even with higher earnings, the slight revenue miss is probably not going to quell investors who are concerned over shrinking market share resulting out of an influx of private label and upstart competition.  At the end of the day, P & G reported a net sales of $16.5 billion, which is just shy of Wall Street’s anticipated $16.54 billion.

More specifically, P & G reports an organic sales growth of only 1 percent, far lower than the 2.3 percent they had expected. Organic sales growth, if you did not know, takes into account sales while disregarding the impact of currency and other related adjustments.  Looking more closely at the numbers, P & G showed adjusted earnings of 94 cents per share. This is slightly better than the 90 cents per share some had originally forecast.

Breaking down business activity, then, shaving business Gilette continues to struggle; the weak spot showing sales falling about 3 percent in its grooming products through this quarter.  This unit has, unfortunately, experienced new competition over the past few years from cheaper competitors and growing online models.

Of course, Procter & Gamble’s baby business, which includes bread-and-butter brands like Pampers diapers, also fell about 2 percent.  The company speculates, at least in part, that this drop comes out of market pullback for these products in Africa, the Middle East, and Latin America.  In addition, they consider this aspect of the business may have also been slowed by deep discounts on the retail end in combination with more aggressive private label pricing, which is a bit of a consistent point of overcoming for the consumer giant, at least through the last few quarters.

Still, P & G continues to face rising commodity costs and the company has intimated they are considering—and quite likely—raise the price of their Pampers products.  This will soon reflect as a 4 percent retail price hike in North America; it will also look to increase Bounty, Charmin, and Puffs brands by 5 percent, on average.

All things considered, Procter & Gamble posted a net income of $1.89 billion this quarter, which is down 14.9 percent from the same quarter last year.  This reflects a drop from 84 cents per share to 73 cents per share.