Rising Costs, Management Turnover Hurt P&G; Profit
Procter & Gamble Co., reeling from management turmoil and rising commodity costs, Tuesday said its fiscal fourth-quarter earnings fell 2.8% and it doesn’t expect first-quarter profit to increase.
The No. 1 U.S. maker of household products said profit from operations fell to $777 million, or 55 cents a share, from $799 million, or 55 cents, a year earlier. Sales in the quarter ended June 30 rose 2.2% to $9.66 billion from $9.45 billion.
Paper-pulp prices rose 37%, and oil jumped 47% the past year, boosting costs for the company’s Pampers diapers and Tide detergent. Procter & Gamble, which has cut profit forecasts three times since March, ousted Durk Jager as chairman and chief executive in June. He was replaced by Alan Lafley, who plans to cut spending on new, untested goods to promote top-selling brands.
“The new management is articulating a back-to-basics approach,” said analyst Daniel Popowics of Fifth Third Bank, which owns 11 million shares. “They’ve got a game plan. There’s reason to be optimistic.”
Procter & Gamble’s stock has lost more than half of its value from a high of $118.38 in January. It’s the biggest decliner in the Dow Jones industrial average this year.
The Cincinnati-based company’s shares rose $1.75 to close at $58.75 on the New York Stock Exchange. On Monday, they fell $2.19 to close at $57 on concern about the company’s earnings outlook.
The company’s fourth-quarter results met the average estimate of analysts surveyed by First Call/Thomson Financial.
Procter & Gamble, which has about 300 brands, said first-quarter earnings will be unchanged, and sales will be unchanged or slightly higher than a year ago.
At a Glance
Other earnings, excluding one-time gains or charges unless noted:
* Cigna Corp., the No. 3 U.S. health insurer, said second-quarter profit rose 11%, beating expectations, as it signed up more customers, held costs down and raised premiums. Profit from continuing operations rose to $279 million, or $1.71 a share, from $251 million, or $1.22, a year earlier. Revenue rose 6% to $4.97 billion. Cigna was expected to earn $1.56 a share, the average estimate of analysts polled by First Call/Thomson Financial.
* CVS Corp., the second-largest U.S. drugstore chain, said second-quarter profit rose 15%, led by increased pharmacy sales. Net income rose to $186.5 million, or 46 cents a share after the payment of preferred dividends, from $162.6 million, or 40 cents, a year earlier. Sales increased 13% to $4.94 billion from $4.36 billion. Sales were boosted by a 19% rise in sales at pharmacies open at least a year.
* Santa Ana-based computer wholesaler Ingram Micro Inc. reported second-quarter earnings that beat Wall Street expectations by 1 cent, on rising revenue after a series of disappointing quarters. Ingram Micro reported net income dropped to $33.2 million, or 22 cents a share, from $50.3 million, or 34 cents, in the year-ago period. The results compared with Wall Street consensus of 21 cents a share, according to First Call/Thomson Financial. Sales rose 7% to $7.3 billion.
* San Diego-based restaurant operator and franchiser Jack in the Box Inc. reported record fiscal third-quarter earnings of $20.8 million, or 53 cents per share, compared with $17.4 million, or 44 cents, a year ago. Revenue rose to $390.3 million from $342.5 million. Same-store sales increased 2.6%.
* Internet media company Salon.com said its fiscal first-quarter net loss shrank to $4.5 million, or 36 cents per share, compared with a loss of $16 million, or $10.10, a year ago which included $11.5 million for a preferred deemed dividend. Revenue rose to $1.8 million from $1 million.
* Manhattan Beach-based shoemaker Skechers USA Inc. reported second-quarter net income of $12 million, or 33 cents per share, compared with $6.2 million, or 20 cents, a year ago. Revenue increased 57% to $163.9 million.
* Wendy’s International Inc., the third-largest U.S. hamburger chain, said second-quarter profit rose 2.3%, helped by faster drive-through service at its namesake and Tim Hortons restaurants and promotions. The Dublin, Ohio-based company also raised its per-share earnings growth goal for the year to 14% to 17%, from 12% to 15%. Net income rose to $50.68 million, or 43 cents a share, including a 2-cent gain from asset sales. Year-earlier profit was $49.53 million, or 39 cents, including a 4-cent gain. Sales rose 7.8% to $569.9 million.
