Shares of P&G Tumble After Lackluster Earnings

Wall Street was not happy with earnings from Procter & Gamble that revealed continued sluggishness in overall sales and a drop in grooming because of the anemic US demand for shaving products.

The earnings, the first since Proctor and Gamble claimed a slim victory over activist Nelson Peltz in a shareholder vote earlier in October, are “unlikely to silence dissenters,” stated Erin Lash, a Morningstar analyst.

Net income for the first fiscal quarter of 2018 came in at $2.9 billion, an increase of 5.1% from the period a year ago.

Sales edged up 0.8% to $16.7 billion.

Results were constrained by a series of hurricanes in the United States and Puerto Rico and an earthquake in Mexico, which sank sales in those regions and raised prices of some commodities that are used in P&G products.

Leading P&G brands include Bounty paper towels, Oil of Olay soap, and Crest toothpaste.

Strong categories included beauty, which was improved by strong growth in Chinese premium skin products, and health care, where the sale of electric toothbrushes was a bright spot again.

However, P&G saw no relief from the continued fall in shaving, where competition from newer US e-commerce brands has harmed the performance of the Gillette brand of Procter. Sales in grooming fell 5% from the period a year ago.

P&G has cut prices on Gillette products by an average of 12% in an effort to urge more sales. Jon Moeller, Chief financial officer, informed analysts that it was too soon to observe results from the investment but that shaving in the United States is “operating as we expected it would.”

The Gillette’s weakness was among the trouble spots that were highlighted in a campaign by Peltz, an activist shareholder of Trian Fund Management in which Procter and Gamble have claimed a narrow victory after a costly and hard-fought campaign.

Peltz still believes that the vote too close to call and he said that he would wait until final results are guaranteed by an independent inspector.

Goldman Sachs described the results as disappointing overall, referring to a weaker-than-expected gross profit margin and downcast commentary from David Taylor, its chief executive on “decelerating” market conditions.

“All-in, we expect results to be met with disappointment and would be surprised if the stock does not trade-off,” said Goldman.