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Gillette weakens P&G report after Peltz row
[BENGALURU] Procter & Gamble disappointed Wall Street with sales on Friday, hurt by continuing weakness in its Gillette business, a week after it claimed to have fought off hedge-fund manager Nelson Peltz's move to muscle onto the board.
P&G, which spent millions battling Mr Peltz's charges of bureaucratic and ineffective management, reported higher sales of beauty and home care products. But a third straight quarter of declines in the grooming business that sells Gillette razors and Braun epilators weakened overall growth.
Net sales in the firm's first quarter results rose just one per cent to US$16.65 billion, missing analysts' expectations of US$16.69 billion and driving shares 3.5 per cent lower in afternoon trading in New York.
The stock had been up 9 per cent so far this year.
"The quarter was a little bit more challenging. ..than we would have expected going in with the run up of commodity cost and the impact of the natural disasters," P&G chief financial officer Jon Moeller said on a call with analysts pointing to higher shipping costs in many geographies.
The world's biggest household products maker has been losing market share to upstarts like Unilever's Dollar Shave Club and has cut prices to try and shore up its men's personal care business.
"Grooming was especially weak," RBC Capital markets analyst Nik Modi said noting that was steeper than his own estimate of a two per cent decline.
Mr Moeller said price cuts that have averaged at about 12 per cent, caused the weakness in the value of sales in grooming.
Weakness in Brazil also had a big impact, as consumers spent less amid an ongoing recession.
Stagnant sales are one of the issues Mr Peltz had with P&G in his contentious and very public proxy fight for a seat on the company's 11-member board.
Preliminary voting results show he lost the fight - the biggest and most expensive in US corporate history - by a hair.
His New York-based Trian Fund Management have said they will contest the vote and would not concede until an independent arbiter had certified the count.
P&G said it was maintaining its full-year organic sales and adjusted profit forecast. But it also said it expects a US$300 million hit from commodity costs, in part due to the hurricanes that battered the southern US this year.
Net income attributable to the company rose 5 per cent to US$2.85 billion or US$1.06 per share in the first quarter ended Sept 30.
Excluding items, the company earned US$1.09 per share, beating analysts' average estimates by one US cent.