P&G sees sales starting to rise again in 2Q
CINCINNATI — The Procter & Gamble Co., maker of Tide laundry detergent and Gillette shavers, expects sales to begin rebounding this fall as it cuts prices and adds new versions of its consumer products that emphasize value.
P&G shares jumped $2.21, or 4.1 percent, to $55.97 Thursday morning.
Company officials told investors they expect the sale of P&G’s prescription drug businesses to increase earnings by 32-34 cents a share this fiscal year. They also said they project organic sales growth of 1 to 4 percent for the October-December quarter.
Organic sales — or sales not related to acquisitions — have fallen the past two quarters, and P&G says it expects them to be flat or drop as much as 3 percent in the current quarter.
The Cincinnati-based company, considered a household spending bellwether, has been hurt in the recession as households have cut spending and turned to store-brand and other cheaper products.
Company leaders say they are cutting prices across about 10 percent of their broad global portfolio and stepping up “value” pitches to consumers. P&G officials say they are cutting prices on Cheer brand laundry detergent; they have said they are also testing a low-cost “basic” version of their top-selling Tide.
Jon Moeller, the chief financial officer, said P&G isn’t predicting better market conditions, but expects investments in innovation, marketing and pricing to help sales.
“We firmly believe we’ve made the right choices in the past year to deal with the global economic crisis, but we also know that we can and must deliver better overall results,” Moeller said.
He said P&G also expects “solid” earnings growth for its second quarter ending in December, but didn’t give any figures. Analysts surveyed by Thomson Reuters expect an average 97 cents.
The company stuck to a first-quarter estimate of 95 cents to $1; analysts expect 97 cents.
P&G said the $3.1 billion pharmaceutical sale to Ireland’s Warner Chilcott PLC, announced last month, should help bring annual earnings of $3.99 to $4.12. Analysts expect $3.90.
Their earlier guidance before the sale was $3.65 to $3.80 a share for the year, and the new total also reflects gains from an earlier sale of Japanese rights to the Actonel osteoporosis treatment and the end of revenue from the business after the pharma sale is completed in November.
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