Procter & Gamble Income Falls on Sluggish Sales
Procter & Gamble Co. on Tuesday reported a 2.4% decline in operating earnings for its fiscal first quarter on sluggish sales and said profit in the next quarter might miss forecasts.
Shares in the company, the nation’s largest maker of household products, fell 7.1%, extending this year’s decline to more than a third.
Procter & Gamble has had a rough year grappling with the impact of rising commodity prices and the declining euro as well as marketing missteps. Several times, it has shocked investors with worse-than-expected results this year, leading to its naming of Alan Lafley to replace Durk Jager as chief executive in June.
In the latest quarter, Procter & Gamgle said profit fell to $1.24 billion, or 88 cents a share, from $1.27 billion, or 88 cents, a year ago. The company said the results, which matched analyst expectations, were also hurt by price increases for paper pulp and oil.
Sales edged up less than 1% to $9.97 billion from $9.92 billion, the smallest gain in four years. Procter & Gamble gets a quarter of its sales from Europe.
“The sales growth, including [foreign exchange] is a little weaker” than expectations, said Jim Dormer, an analyst at PaineWebber. “The fact that the outlook on the top line is a little weaker is also an issue.” Dormer said he had forecast second-quarter sales growth of 2%.
For the second quarter, the company expects earnings in the range of 91 cents to 93 cents a share, compared with 88 cents a year-ago. Analysts had forecast operating profit of 93 cents. The company expects sales to fall from a year ago.
CEO Lafley plans to boost advertising spending on top-selling brands such as Pringles chips and Bounty towels to reverse sales declines.
Procter & Gamble said its first-quarter results were also hurt by price increases for paper pulp and oil. To offset the rising costs, the company has raised prices on some products, which hurt sales.
Procter & Gamble has had three consecutive quarterly profit declines, breaking a streak of nine years of quarterly increases. Its shares have fallen by 35% this year.
Shares of Cincinnati-based P&G; fell $5.44 to close at $71.44 on the New York Stock Exchange.
*
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* EarthLink Inc. reported a wider loss for the third quarter and said growth in sales and subscribers will miss some analyst estimates for the fourth quarter. The Internet services provider said its loss in the latest quarter widened to $72.5 million, or 65 cents a share, from $49.1 million, or 45 cents, a year ago. Sales rose 44% to $249.3 million. For the fourth quarter, EarthLink expects sales of $290 million to $295 million, partly because of rebates its rivals are offering. That’s less than the $322.6 million expected by Jefferies & Co. analyst Fred Moran. EarthLink said it will end the year with 4.7 million to 4.8 million subscribers, less than the roughly 5 million customers forecast by Moran. It had 4.6 million customers as of Sept. 30.
* Humana Inc.’s third-quarter profit nearly tripled to $23 million, or 14 cents a share, from profit from operations of $8 million, or 5 cents, a year ago, as the operator of Medicare health-maintenance organizations raised premiums. Revenue rose 2.3% to $2.62 billion. The earnings were a penny better than analyst forecasts.
* Keebler Foods Co. posted a 27% rise in profit for the third quarter to $41 million, or 46 cents a share, beating expectations of 43 cents. Keebler, which has agreed to be acquired by Kellogg Co., said sales rose 4.3% to $642.2 million.
