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P&G posts strong sales but Gillette shaves quarterly profits
[NEW YORK] Procter & Gamble posted a big jump in sales despite a hefty negative hit to the shaving business that cut into quarterly results, pushing them into the red, the company reported on Tuesday.
The consumer products giant, with brands like Tide detergent and Bounty paper towels, said sales rose 3.6 per cent in the latest quarter to US$17.1 billion, with gains in four of five business segments.
But the company reported a US$5.2 billion quarterly loss following an US$8 billion accounting charge due to the lower value of the Gillette shaving business.
Despite that bad news, P&G's results benefitted from higher prices across its product slate, a reflection of strong consumer trends in the United States and in key overseas markets.
Executives hailed new product innovation such as smaller-sized Tide "Pods," fabric enhancers and products to address adult incontinence.
Expanding market size is a strategy "that tends to be much more sustainable and much more profitable than when we're simply taking share from competitors," said Jon Moeller, P&G's chief financial officer.
The company's share price jumped 4.1 per cent to US$120.79 in early-afternoon trading following the results, which topped expectations excluding the one-time items.
The Gillette write-down, primarily the result of currency depreciation since acquiring the shaving business in 2005, comes on heels of weakening sales in the grooming segment the last few years.
The greater social popularity of beards and facial hair has cut into the market for shaving products, but the company said the business also has been challenged by competitors in developed markets, such as online-focused Harry's and the Dollar Shave Club.
But Mr Moeller attributed the charge to accounting rules and stressed that grooming remains a viable long-term business that is among the company's most global products.
Gillette is focused on new among other offerings.
P&G chief David Taylor said the company is broadening the options, including products such as SkinGuard razors for men with sensitive skin.
"We recognise that we had a significant headwind on the broad societal trend on shaving, and we're ... making sure we have products that also allow you to trim and other ways to take care of facial hair," said in a conference call.