Changes Ahead for P&G?

Procter & Gamble plans to sell about 100 “underperforming” brands to better concentrate on its core products, the company announced last month. During an earnings call, chief executive officer AG Lafley, announced plans to streamline its business to focus more on 70 to 80 of its biggest brands including the billion dollar brands like Tide, Pampers and Oral-B. Though the company did not specify the brands it plans to keep or divest, it stated that these 70 to 80 brands have accounted for 90% of company sales and over 95% of profits.

During the next two years, P&G will divest or discontinue 90 to 100 brands whose sales and profits have been declining during the past three years. Reportedly, the list could even include some larger brands if they do not strategically fit into the company’s core business. Lafley believes that a smaller and more focused company should be able to grow faster, create more value and be much easier to manage.

That announcement came as P&G reported a 1% increase in fiscal 2014 net sales to $83.1 billion. However, for the April-June 2014 quarter, net sales  fell 1% to $20.2 billion.

“P&G delivered top and bottom line commitments for the fiscal year,” said Lafley. “We met our objectives in a very difficult operating environment, delivered strong constant currency earnings growth, and built on our strong track record of cash returns to shareholders. Still, we have more work to do to deliver the profitable sales growth and strong cash productivity we are capable of delivering. We will discuss our going-forward strategy and plans to further strengthen our results during our earnings call this morning.”

For 2014, beauty segment organic sales were flat with gains from market growth and product and commercial innovation in hair care, deodorants and personal cleansing offset by declines in salon professional and skin care sales, due to competitive activity and market contraction.

Grooming segment organic sales increased 3% due to higher pricing and innovation on blades and razors and appliances, which was partially offset by negative geographic and product mix from disproportionate growth in developing markets and disposables.

Fabric care and home care segment organic sales increased 4% with growth across each business. Fabric care was up behind new innovation and developing market growth. Home care sales rose behind new innovation in developed and developing markets. Baby, feminine and family care segment organic sales increased 4%, according to the company.

P&G expects organic sales growth in the low-to-mid single digit range in fiscal year 2015.