Q1 Procter & Gamble reported a decline in organic sales of 1 percent for the first quarter of fiscal 2016. Quarterly revenue declined to $16.53 billion — from $18.77 billion — falling short of analysts’ consensus of $17 billion. The decline is being attributed to currency headwinds, which dramatically slowed sales and lowered the value of international sales, which accounts for nearly 60 percent of all business.
P&G earned $2.6 billion, or $.91 per share, compared to year-earlier earnings of $1.99 billion, or $.69 cents per share. They claimed that excluding one-time gains and costs, earnings were $.98 per share, or $.04 better than analyst projections.
Organic sales in beauty fell 2 percent, offset somewhat by a 1 percent gain from pricing and mix. There was a decrease in skin and personal care offset by the SK-II brand. Hair care declined as a result of price increases and competition. There was growth from Braun, as well as from higher pricing on blades and razors.
“Top-line results were soft, as expected, given significant foreign exchange impacts, our deliberate choices to exit unprofitable businesses and the early stage of the improvement plans we’re implementing in our largest categories and markets,” said interim CEO A.G. Lafley. P&G has been engaged for nearly a year in portfolio simplification and strengthening in order to restructure and streamline businesses to focus on its biggest brands. The plan is close to full realization as the company has eliminated almost 60 percent of the brands that were falling in sales and profits to focus on 65 core brands, while eliminating nearly 100 brands. P&G announced the sale of four product categories comprising 43 beauty brands to Coty Inc. in July this year. They have signed off to sell Duracell batteries to Berkshire Hathaway. The Coty and Duracell transactions are expected to close soon. In addition, the company has exited the bleach business, Vicks VapoStream, Camay and Zest bar soap brands, and several skin care and fragrance brands. While this plan should dramatically improve long-term results, it is hurting and will continue to hurt near-term sales.
P&G is expecting net revenue to decline in the high single-digits for fiscal 2016 instead of the previous guidance of low-to-mid single digits due to the restructuring of their brand portfolio.
A.G. said: “We continue to make strong progress on productivity savings, which will fuel smart investments in top-line growth. We expect second quarter organic sales growth to be positive and to further strengthen in the back half as we invest to build awareness and trial of our consumer-preferred products and brands.”