PG Procter and Gamble Co

By Sharon Terlep 

Procter & Gamble Co. is slashing costs and commanding higher prices for staples from shaving cream to paper towels. But one important goal continues to elude the consumer-products company: getting shoppers to buy more of its products.

The maker of Gillette razors and Pampers diapers on Tuesday reported higher profit for its fiscal third quarter ended in March and improvement in a core sales metric. Even so, sales volume declined across nearly all of its businesses.

P&G, which has struggled for years to accelerate sales growth, said economic woes in emerging markets coupled with the company's moves to sell off dozens of brands further slowed sales the past quarter. Finance chief Jon Moeller said it would be another six months to a year before greater volume, rather than higher prices and cost cuts, begin to drive profit increases.

"We're very happy about the progress that we're making but we clearly understand we have more to do," Mr. Moeller said in a call with financial analysts who pressed him to forecast when the company would stem sales declines in the U.S. and abroad.

In the quarter ended March 31, P&G said organic sales, a closely watched metric that strips out currency moves, acquisitions and divestments, rose 1%. Overall pricing improved 1%, but volume fell 2%. P&G logged the deepest volume decline in its grooming segment, and reported volume drops in four of its five segments.

The company attributed the volume declines to lower shipments in developing markets, some brand divestitures and a write-down of its Venezuelan operations even though it continues to do business there. The company has ramped up spending on advertising and is shedding brands so it can focus efforts on stronger-performing products in more promising segments, such as diapers.

Overall, P&G said its profit for the quarter rose 28% to $2.75 billion, thanks to earnings from discontinued operations without which its income would have fallen. Revenue dropped 6.9% to $15.76 billion.

The company has been working to slash costs, eliminating thousands of jobs and trimming its marketing budget. It has also sold off more than $20 billion of brands that it identified as being outside of its current focus, such as its Duracell battery business.

P&G continued to lose ground in China, its second-biggest market outside the U.S., though the company managed to slow the decline. Organic sales there fell 4% in the third quarter, compared with 8% declines in previous quarters, Mr. Moeller said.

The SK-II luxury skin-care brand was a bright spot, increasing sales by 20% in the country, he said. China's fast-growing market for baby-care products, however, remains a struggle. P&G has introduced a new line of Pampers diapers, complete with "Made in Japan" labels and gold labels to appeal to customers who are increasingly seeking premium products.

"Improvements in top-line growth won't happen overnight and they won't happen in a straight line," Mr. Moeller said of China.

P&G also tightened its outlook for core earnings for its full year. It expects core earnings to decline 3% to 6% from last year's core earnings of $3.76 a share. P&G said earnings are expected to be "significantly lower" than the prior year because of increased advertising investments, a higher tax rate, and foreign-exchange headwinds.

--Anne Steele contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

April 26, 2016 13:37 ET (17:37 GMT)

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