By Sharon Terlep and Austen Hufford 

Procter & Gamble Co. reported weak sales growth in its latest quarter as the company continues to face challenges in its Gillette shaving business and struggles to raise prices on its well-known brands.

The company's third-quarter report comes the same day it announced the purchase of Merck KGaA's consumer-health business in a $4.2 billion deal that combines vitamins and food supplements with P&G's group of over-the-counter medicines like Vick's and Pepto Bismol.

The deal could help P&G counter weak pricing on household staples, which is dragging down profits industrywide. Consumer health is among P&G's highest margin businesses, P&G finance chief Jon Moeller said Thursday.

"This is a branded goods business that carries higher-than-average company margin," he said of the Merck deal. "It's a very good strengthening move to the overall portfolio."

Organic sales, a closely watched metric that strips out currency moves, acquisitions and divestitures, rose 1% in P&G's latest quarter, below the company's target of 2% to 3% for the year. Prices fell 2% overall in the quarter and were lower across all five of P&G's main business units.

P&G said price cuts on Gillette and volatility in some international markets, including Saudi Arabia, Egypt and Nigeria, contributed to weakness. Retailers are slashing inventory as they work to improve cash flow, P&G said. It's a "very tough environment," Mr. Moeller said.

The company announced rare across-the-board price cuts on its Gillette razors last year, which it hoped would help it better compete with cheaper alternatives, like Dollar Shave Club, now owned by Unilever PLC. Organic sales fell 3% in the unit that houses the Gillette business during the third quarter.

Sales of the top household goods products rose 0.4% in the 12-week period ended March 24 compared with the same time a year ago, according to Nielsen data provided by Wells Fargo.

Activist investor Nelson Peltz assumed his seat on the P&G board March 1, after settling a monthslong proxy fight with P&G. Investors will look for signs of Mr. Peltz's influence on the company. While fighting for a seat on the board, Mr. Peltz argued that P&G's "suffocating bureaucracy" needed restructuring and that the company should overhaul research and development and look to startups to bolster its product portfolio.

"We will change at an even faster rate," Chief Executive David Taylor said Thursday.

In all for the quarter, the company reported a profit of $2.51 billion, or 95 cents a share, compared with $2.52 billion, or 93 cents a share, a year before.

Total sales rose 4.3% to $16.28 billion, compared with the $16.21 billion that was expected by analysts. Much of the increase was due to foreign-exchange fluctuations.

P&G shares fell 1.6% o $76.93 in premarket trading.

Write to Sharon Terlep at sharon.terlep@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

April 19, 2018 08:47 ET (12:47 GMT)