By Sharon Terlep
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 31, 2020).
Procter & Gamble Co., maker of household staples from Tide
detergent to Charmin toilet paper, posted its strongest annual
sales gain since 2006 as the pandemic kept the world's consumers at
home and vigilant about cleaning.
Demand in the U.S. for cleaning and paper products continued to
surge through the spring and early summer, while the reopening of
China, P&G's second-biggest market, drove sales there. P&G
executives said the company's efforts in recent years to overhaul
itself by shedding weaker brands and streamlining what they
described as an often suffocating bureaucracy are paying off at a
time of crisis.
The Cincinnati company's organic sales were up 6% for the fiscal
year ended June 30. For the latest quarter, organic sales also rose
6%.
P&G predicted more modest growth of 2% to 4% for the current
fiscal year, citing high uncertainty around the global economy,
especially in developing countries, and fallout from the new
coronavirus.
"On the whole, with health, hygiene and cleaning, consumers'
needs have changed forever," Chief Financial Officer Jon Moeller
said. "Maybe not to the degree that's happened recently. But it's
hard to imagine we'll snap back to the old world."
The strongest growth was in P&G's fabric and home-care unit,
which posted a 14% sales gain, its highest ever. The unit's brands
include Tide along with Mr. Clean, Dawn dish soap and Cascade
dishwasher detergent.
China sales recovered in recent months after sliding at the
start of the year, when the country shut down in an effort to
contain the virus. Closed factories, roads and stores stymied
production and kept Chinese consumers from buying. Organic sales in
China rose 14% in the quarter and 8% for the full year.
P&G has yet to show signs of being negatively affected by
the recession, as consumers remain willing to pay higher prices for
its products. A question facing the company, given that its
products are generally more expensive than rival brands, is whether
it would fare better in an economic downturn than it did during the
last recession, when sales growth plunged to anemic levels and took
a decade to recover.
The company has worked in recent years to improve offerings for
more budget-conscious consumers.
"We expect that if this gets longer and deeper, people will have
to make choices," P&G Chief Executive David Taylor said. "The
good news is that, unlike last time, we have a broader
portfolio."
Price increases continued to help drive sales gains in the most
recent quarter, with sales volumes also growing stronger in recent
months. Before the pandemic, consumers proved willing to buy
without discounts the more-expensive products it has developed.
Those price increases continued through the most recent quarter and
helped offset losses due to currency moves.
P&G and its consumer-staples rivals such as Kimberly-Clark
Corp. and Clorox Co. have cut back on deals and discounts as so
many of their products -- paper towels, disinfectants, sanitizing
wipes -- are in such high demand that consumers buy whatever they
can find.
P&G is wading more into cleaning products, both by chance
and because of the pandemic.
In February, it launched a household-cleaning line, Microban 24,
that the company says can be used against the new coronavirus. It
also offers 24-hour protection against bacteria, though not any
viruses. In recent weeks the company also quietly rolled out a hand
sanitizer to a limited number of U.S. retailers. P&G had been
making Safeguard hand sanitizer for use by its workforce and by the
government, health-care entities and relief organizations.
Mr. Taylor said the company is working to ramp up capacity of
both products.
P&G kept all its U.S. manufacturing operations running
through the pandemic, and employees have since returned to work at
product-development facilities and in offices, though at much
reduced levels.
Mr. Taylor said operating in the pandemic demonstrated that the
company had room to improve productivity even after a major
restructuring, noting that some factories were at times able to
operate at 90% capacity even with staffing levels cut in half.
"There's more there," he said.
P&G entered the fiscal year predicting organic sales growth
of 3% to 4%, slower than the 6% it delivered.
For the fiscal fourth quarter, it swung to a profit of $2.8
billion from a $5.2 billion loss a year earlier, when the company
reported an $8 billion write-down of its Gillette brand. Sales for
the quarter were $17.7 billion, higher than the $17 billion
forecast by analysts, according to S&P Global Market
Intelligence.
The company's adjusted quarterly profit of $1.16 a share was
above the average $1.01 projected by analysts.
For the fiscal year, P&G reported revenue of $71 billion and
profit of $13 billion. Adjusted annual profit was $5.12 a share,
higher than analysts' estimate of $4.97.
P&G shares, which are up 13% over the past year, reached
records this week. Shares were up 2.3% in afternoon trading
Thursday in an overall down market.
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
July 31, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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