PG Procter and Gamble Co

By Sharon Terlep 

Procter & Gamble Co.'s yearslong turnaround is starting to show some results.

The maker of Gillette razors and Pampers diapers on Friday offered a more upbeat outlook for sales growth this year as it posted better-than-expected organic sales for the latest quarter. The closely watched metric, which strips out currency moves, acquisitions and divestments, increased 2% from a year earlier.

"We are essentially on track with where we hoped we would be," finance chief Jon Moeller said in a call with analysts. The results, he said, were better than the company anticipated and "a pretty good number that's representative of the general strength of the business."

P&G shares rose 3.3% to $87.45 on Friday. The stock gained more than 7% last year, though it lost steam in recent months as Wall Street fretted over the pace of the company's turnaround.

P&G for years has been slashing costs and reworking how it develops, markets and sells consumer staples as the company has struggled to accelerate sales growth amid increased competition from new smaller and nimbler rivals.

Progress has been slow with the company's organic sales growth of 1%-3% in recent years stuck below prerecession levels. The company now expects organic sales growth of 2%-3% for the fiscal year ending in June, up from its previous 2% forecast.

P&G still faces long-term currency woes, stagnating growth in developing markets and price wars with rivals. But the Cincinnati giant made progress in key areas in the last three months.

More consumers were willing to pay for high-end consumer staples, from laundry detergent pods in the U.S. to premium skin-care products in China. A $200 electric toothbrush, for instance, helped deliver a surprising 7% jump in organic sales for the company's health-care unit, which includes oral-care products.

Sales rose in China, P&G's second-largest market and a key area of focus for Chief Executive David Taylor since he took over in late 2015.

Mr. Moeller said the strong U.S. dollar will be a bigger drag on P&G's earnings than the company initially anticipated, costing an estimated $500 million in the fiscal year ending in June. He said P&G is resisting the urge to trim losses through currency hedging and is instead implementing longer-term safeguards against currency volatility, such as cost-cutting and ensuring that more products are supplied and produced in the same markets in which they are sold.

The latest results were the first glimpse at operations since P&G shed the bulk of its beauty brands. P&G had long said those brands, including CoverGirl makeup and Clairol hair dye, were pulling resources while returning little in the way of profit or growth. The $11.4 billion deal closed last fall, shrinking P&G by more than 10,000 employees and 40 brands.

P&G on Friday reported fiscal second-quarter profit of $7.88 billion, or $2.88 a share, compared with year-earlier earnings of $3.21 billion, or $1.12 a share. On an adjusted basis, which excludes gains from the beauty sale, the company said it earned $1.08 a share, slightly above analysts' projections for $1.06 a share.

Sales fell 0.3% to $16.86 billion from $16.92 billion in the year-earlier quarter.

--Joshua Jamerson contributed to this article

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

(END) Dow Jones Newswires

January 21, 2017 02:47 ET (07:47 GMT)

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