Currency headwinds continue to batter the home and personal care industry. Today, Procter & Gamble said sales declined across all its major business segments in the third quarter as it took a hit from the strong dollar. In fact, P&G executives predict that the dollar will drive a 5 to 6% sales decline this fiscal year.
For the quarter, the maker of Tide, Crest and Pampers reported a profit of $2.15 billion, or 75 cents per share, down from $2.61 billion, or 90 cents per share, a year ago. Excluding items, earnings were 92 cents per share and in line with analyst estimates. It was the fifth straight quarter that P&G reported a sales decline. What's worse, sales in the company's beauty, hair and personal care products business fell for the ninth quarter in a row.
Fiscal Q3 sales dropped 8% to $18.14 billion, shy of analyst estimates of $18.49 billion.
P&G, which generates some two thirds of its revenue outside of the US, said currency headwinds ate into its top line by eight percentage points and drove declines across all business lines.
Its beauty, hair and personal care division led the charge with an 11% sales drop, driven in part by lower volume. Its fabric and home care division, which includes laundry detergent powerhouse brands Tide and Gain, declined 9%.
“Our third quarter earnings results were largely in-line with what we had expected,” said CEO A.G. Lafley in a statement. “As we have done before, we’ll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction.”
Taking a closer look at segment results, beauty, hair, and personal care segment organic sales decreased three percent as a positive impact from pricing was more than offset by lower volume. Innovation-driven organic sales growth in the deodorants, cosmetics and salon hair care categories were more than offset by sales declines mainly from the prestige sragrance and mass skin care categories. Hair care organic sales were down in developed markets due mainly to increased competitive promotional activity in the US and customer inventory reductions in China.
Grooming segment organic sales increased nine percent due to higher pricing across all regions on blades & razors, favorable volume and product mix from premium innovation on both the Gillette and Braun businesses.
Health care segment organic sales increased six percent behind favorable geographic mix and pricing in oral care and higher pricing in personal health care. Higher volume in personal health care driven by a stronger cough and cold season was offset by lower volume in oral care developing markets following price increases.
Fabric care and home care segment organic sales are unchanged versus year ago as the favorable impact of geographic and product mix, along with increased volume in P&G Professional from distribution gains, was offset by lower volume in fabric care. Fabric care organic sales growth in developing markets was more than offset by declines in North America due mainly to a base period which included the ship in of several new product innovations. North American fabric care consumption was up two points on the quarter, where both Tide and Gain gained market share. Home care organic sales were up for the quarter behind pricing-driven growth in developing markets.
Baby, feminine and family care segment organic sales increased two percent behind pricing and mix in baby care and feminine care, including the benefits from the Always Discreet entry into the adult incontinence category and continued strong growth of Pampers Swaddlers in North America.
And don't expect a recovery any time soon. In past years, P&G recovered between half and two-thirds of significant devaluation in developing currencies through pricing but the recovery will be less this year due to competitive pressures, Chief Financial Officer Jon Moeller said.
"This time it will be less than that because many of our internationally domiciled competitors..aren't seeing the full extent of the pressure that we are seeing," he said.