P&G Q3 Results Disappoint

Bummer! The Procter & Gamble Company reported fiscal 2017 third quarter results and analysts were disappointed with the 1% decline in net sales to $15.6 billion. Yet, the company pointed out that organic sales increased 1% and organic sales increased in four of five business segments. Diluted net earnings per share were $0.93, a decrease of  4% versus the prior year while core earnings per share increased 12% to $0.96. Currency-neutral core EPS increased 15% versus the prior year.


“The third quarter macro environment was characterized by a slowdown in market growth, continued geopolitical disruptions and foreign exchange challenges,” said Chairman, President and Chief Executive Officer David Taylor. “Against this backdrop, we delivered modest organic sales growth and double-digit core EPS growth, and we increased the quarterly dividend for the 61^st consecutive year. Looking forward, we are maintaining our organic sales and core EPS guidance ranges for the year and increasing our outlook for adjusted free cash flow productivity.”

Sounds good, right? Some analysts agreed. According to Barclays Analyst Lauren Lieberman, while the results were “a clear disappointment” she noted that Trian Fund Management's $3.5 billion stake, an easing of Forex pressure and a determination to cut costs should all benefit P&G in the near future.


Still, the numbers weren't pretty. As reported, beauty sales fell 2%, grooming sales dropped 6%, fabric & home care decline 1% as did baby, feminine and family care. Health care was the lone bright spot as sales increased 4%. Yet, P&G, like so many other public firms, tried to put its best foot forward, aka, hyping “like-for-like” results, which went something like this:


• Beauty segment organic sales increased one percent versus year ago behind growth in skin & personal care. Organic sales increased low single digits in skin & personal care as the continued growth of the super-premium SK-II skin care brand offset lower volume in retail skin care. Organic sales in hair care were unchanged.


• Grooming segment organic sales decreased six percent due to lower volume and reduced pricing in shave care. Organic sales decreased high single digits globally in shave care due to competitive impacts in the US. Organic sales were up high single digits in Appliances driven by the continued success of innovation on Braun male shavers as well as styling tools.


• Health care segment organic sales increased six percent behind higher organic volume in both oral care and personal health care. Product innovation on power toothbrushes and continued marketing support drove a low single-digit increase in organic sales in oral care while personal health care was up double digits due to market growth in the US behind a strong cough & cold season along with increased pricing outside the US.


• Fabric and home care segment organic sales increased one percent versus year ago driven by higher organic volume in both fabric care and home care along with increased pricing in fabric care. Home care organic sales decreased low single digits as increased volume due to product innovation and increased customer support was more than offset by unfavorable geographic mix. Fabric care organic sales increased low single digits due to increased organic volume and favorable product mix from premium forms in developed markets and increased pricing in developing markets.


• Baby, feminine and family care segment organic sales increased one percent driven by volume growth in family care and favorable mix in feminine care. Baby care organic sales decreased low single digits due mainly to competitive activity. Feminine care organic sales increased mid-single digits from favorable product mix due to Always discrete premium innovation. Family care organic sales grew low single digits driven primarily by product innovation and increased marketing support.