Procter & Gamble It reported weaker-than-expected revenue on Friday as weak demand in China again hit its sales.
The company’s organic sales in Greater China, its second-largest market, fell 15% in the fiscal quarter. As home prices fall and the unemployment rate rises across the country, buyers have scaled back their spending, hurting P&G’s sales of shampoo, diapers and other consumer goods.
Although officials have maintained their confidence in China for a long time, a recovery in demand is not expected for at least several quarters.
“We believe the market continues to be weak and will remain weak for many quarters to come,” CFO Andre Schulten said in a press call.
P&G’s approach to China did not take the Chinese government into account Recently Announced Schemes To boost the country’s economy.
The company’s shares fell about 1% in morning trading.
Here’s how the company reported compared with Wall Street’s expectations, based on a survey of LSEG analysts:
- Earnings per share: $1.93 adjusted vs. $1.90 expected
- Revenue: $21.74 billion vs. $21.91 billion expected
P&G’s net sales Fell 1% to $21.71 billion. Organic revenue, which strips out foreign exchange, acquisitions and divestitures, rose 2%, helped by higher prices.
The company reported flat volumes for the quarter. The metric does not include pricing, making it a more accurate reflection of demand than sales. Like many consumer companies, P&G has seen demand for its products decline after several years of price increases. Its volume increased last quarter for the first time in more than two years.
In the U.S., volumes are up in eight of P&G’s 10 categories and the company is not seeing any business for private-label products, Schulten said.
But it’s a different story in Greater China, where it saw a decline in organic sales compared to the previous quarter. The company called for volume declines in both its hair care and oral care segments in China. Still, Greater China accounts for less than 10% of P&G’s revenue.
“The Asia and execution issues are much smaller than some of the other tough times the company has gone through in the past,” said Charles Rinehart, chief investment officer at Johnson Investment Counsel, a longtime shareholder in Procter & Gamble.
P&G’s beauty business, which includes brands like Pantene and Olay, saw volumes decline 2% in the quarter. In particular, its skin care segment struggled, with organic sales declining by more than 20%. P&G attributed the steep decline to lower volumes and a decline in sales of its expensive SK-II brand, which has been struggling since the pandemic-induced lockdown. Anti-Japanese sentiment in China has been the latest challenge for the brand; Last year, SK-II sales declined Chinese consumers boycotted The brand fears that Japan’s release of treated radioactive waste will contaminate the products.
P&G’s health care and infant, feminine and family care divisions both reported 1% declines in volume for the quarter. But its baby care division, which includes Pampers diapers, had an even worse quarter, with its organic sales falling to mid-single digits. As the global birth rate continues to decline, P&G has pushed consumers to purchase more expensive baby care items, such as its Pampers premium diapers, to boost sales. But that strategy can’t always compensate for declining volumes.
P&G’s grooming division, which includes Gillette and Venus, posted 4% volume growth. The company attributed its strong performance to innovation.
The company’s fabric and home care business saw volume growth of 1% in the quarter. This division includes Swiffer, Frieze and Tide products.
P&G reported first-quarter fiscal net income of $3.96 billion, or $1.61 a share, down from $4.52 billion, or $1.83 a share, a year earlier.
Excluding restructuring charges and other items, the company earned $1.93 per share.
P&G reiterated its fiscal 2025 forecast. It estimates basic net income per share in the range of $6.91 to $7.05 and revenue growth of 2% to 4%.