Wednesday 11 December 2019

Premium brand strategy helps P&G up earnings

Tide detergent pods, from Procter & Gamble, are seen at the Safeway store in Wheaton, Maryland Photo: Reuters
Tide detergent pods, from Procter & Gamble, are seen at the Safeway store in Wheaton, Maryland Photo: Reuters

Lauren Coleman-Lochner

Procter & Gamble's (P&G) drive to sell more upscale skin-care, grooming and house-cleaning products is beginning to show up in its bottom line. Sales of its premium brands helped lift earnings to $1.08 a share last quarter, excluding some items. Analysts estimated $1.06, on average.

The results reflect a crusade by chief executive David Taylor to get consumers to pay a bit more for the items in their bathroom cabinets and kitchen pantries. P&G's premium SK-II skin-care brand helped sales in the beauty division last quarter, and scent beads and Tide pods for high-efficiency washers boosted the home-care unit, giving the company a leg up on sellers of bargain health and cleaning products.

"Over half of their product lineup is premium-oriented, so with an improving domestic economy, those products are doing well," said Jack Russo, an analyst at Edward Jones & Co.

P&G rose as much as 3.9pc to $87.98 (€82.2) in New York, the most in almost three months. The stock gained 5.9pc last year, trailing the 9.5pc increase for the Standard & Poor's 500 Index. While total revenue slipped 0.3pc to $16.9bn (€15.8bn), that topped analysts' $16.8bn average estimate. Organic sales - which exclude the effects of acquisitions, divestitures and currency fluctuations - rose 2pc, Cincinnati-based P&G said in a statement.

Sales by that measure rose 3pc in the beauty division. Organic sales gained 7pc in healthcare, driven by innovation in oral-care products. Organic sales increased 1pc in the grooming, fabric & home care and baby, feminine & family care units. The company reiterated its forecast that earnings per share, excluding some items, will gain at a mid-single-digit percentage this year. Organic sales may increase as much as 3pc, up from a previous projection of 2pc.

Taylor, who took over as PG's ceo in November 2015 after 35 years with the company, pledged to make the owner of Tide, Pampers and Olay a more nimble and innovative competitor.

P&G's challenges aren't unique. New brands, particularly those with natural or organic ingredients, have attracted younger shoppers, a trend that prompted Unilever's acquisition of Seventh Generation last year.

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