Procter & Gamble On Friday, it reported weaker-than-expected revenue as falling demand in China again weighed on its sales.
The company's organic sales in Greater China, its second-largest market, fell 15% in the fiscal first quarter. As home prices fall and unemployment rates rise in the country, shoppers cut back on their spending, hurting Procter & Gamble's sales of shampoo, diapers and other consumer staples.
While executives maintained their confidence in China over the long term, demand is not expected to recover for at least several more quarters.
“The market is still weak and will be weak, we believe, for a number of quarters to come,” CFO Andre Scholten said in a call with the press.
P&G's forecasts for China did not take into account the Chinese government's recently announced plans to boost the country's economy.
The company's shares were down nearly 1% in morning trading.
Here's what the company reported compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:
Earnings per share: $1.93 adjusted vs. $1.90 expected Revenue: $21.74 billion vs. $21.91 billion expected
P&G's net sales fell 1% to $21.74 billion. Organic revenue, which excludes foreign exchange, acquisitions and divestitures, rose 2%, thanks to higher prices.
The company reported flat trading volume during the quarter. The metric excludes pricing, making it a more accurate reflection of demand than sales. Like many consumer companies, P&G has seen demand for its products decline after several years of high prices. The last quarter was the first time in more than two years that its volume increased.
In the United States, P&G's business has grown in eight of its 10 categories, and the company is seeing no trade down to private-label products, Scholten said.
But the story is different in Greater China, which saw its organic sales deteriorate compared to the previous quarter. The company called for lower volume in China for both its hair care and oral care segments. However, Greater China represents less than 10% of P&G's revenue.
“The issues with Asia and execution are minimal compared to some of the other rough spots the company has gone through in the past,” said Charles Rinehart, chief investment officer at Johnson Investment Counsel, a longtime P&G shareholder.
P&G's beauty business, which includes brands like Pantene and Olay, saw volume decline 2% during the quarter. In particular, the skincare sector suffered, with sales of organic products falling by more than 20%. Procter & Gamble blamed the sharp decline on falling volume and falling sales of its expensive SK-II brand, which has suffered since pandemic lockdowns. Anti-Japanese sentiment in China has been the latest challenge for the brand. Last year, SK-II sales took a hit when Chinese consumers boycotted the brand, fearing that Japan's release of treated radioactive waste would contaminate the products.
Procter & Gamble's Healthcare, Child, Women's and Family divisions reported a 1% decline in volume during the quarter. But the baby care segment, which includes Pampers diapers, had an even worse quarter, with its organic sales declining by mid-digits. As the global birth rate continues to decline, P&G has turned to getting consumers to buy more expensive baby care products, such as Pampers Premium diapers, to boost sales. But this strategy cannot always compensate for lower volume.
P&G's Care division, which includes Gillette and Venus, reported volume growth of 4%. The company has credited innovation for its strong performance.
The company's textile and home care business saw volume rise 1% during the quarter. The division includes Swiffer, Febreze and Tide products.
Procter & Gamble reported first-quarter net income attributable to the company of $3.96 billion, or $1.61 per share, down from $4.52 billion, or $1.83 per share, a year earlier.
Excluding restructuring charges and other items, the company had earnings of $1.93 per share.
P&G reiterated its outlook for fiscal 2025. It expects core net earnings per share to range between $6.91 and $7.05 and revenue growth of 2% to 4%.
