Procter & Gamble (PG, Financial) has reported sluggish sales growth for the second consecutive quarter, hindered by minimal price increases and declines in key segments such as skincare and baby care. In the first quarter of the fiscal year 2025, P&G's revenue reached $21.74 billion, marking a 0.6% year-over-year decline and falling short of market expectations. However, adjusted earnings per share were $1.93, surpassing the projected $1.90.
The organic sales growth for this quarter was 2%, slightly below analysts' forecasts of approximately 2.1%. The company maintained a 1% average price increase during this period, consistent with the prior quarter but significantly lower than the increase seen last year.
P&G's beauty product segment saw unexpected declines, mainly driven by a substantial drop in skincare sales and volume, with its premium brand SK-II underperforming in China. Conversely, the company's fabric and home care products, including the Tide brand, exceeded expectations with an increase in sales volume, partially offsetting the overall decline.
Despite challenges, P&G's performance has stabilized compared to the previous quarter, which showed growth well below Wall Street expectations. The company reaffirmed its revenue and earnings targets for the fiscal year, including an organic sales growth of up to 5%, suggesting an anticipated acceleration in growth in future quarters.
Chief Financial Officer Andre Schulten noted that revenue was relatively weak this quarter, with underperformance in China and the Middle East impacting results. Conflicts in the Middle East led to boycotts and reduced consumption. However, Schulten emphasized that the core business remains robust.
P&G is aiming to boost performance with high-end products, such as all-body deodorants and razors for specific body parts, which provide greater pricing flexibility with new features. Products like the Oral-B electric toothbrush are performing well, and the company is introducing a new lower-priced version to attract more customers.
Even with adverse commodity costs, the company's adjusted gross margin for the first quarter met expectations. Although the pace of price increases has significantly slowed, Schulten does not foresee prices starting to decline, stating that cost changes will not necessitate deflationary adjustments for P&G or the industry.
