In a recent report, Procter & Gamble (P&G) announced weaker-than-expected revenue, attributing the lower numbers to a decline in demand in China. The company’s organic sales in Greater China dropped by 15% in the fiscal quarter, reflecting a decrease in consumer spending due to economic challenges in the region.
While the executives at P&G remain optimistic about China’s long-term potential, they do not foresee a quick recovery in demand. CFO Andre Schulten acknowledged the weak market conditions in China and indicated that the situation may persist for several quarters.
Despite the challenging environment in China, P&G’s outlook did not consider the Chinese government’s recent economic stimulus plans. The company’s shares experienced a slight dip in morning trading following the revenue report.
Looking at the numbers, P&G’s earnings per share came in slightly higher than Wall Street expectations at $1.93 adjusted versus $1.90 anticipated. However, revenue fell short of estimates, totaling $21.74 billion compared to the expected $21.91 billion.
On a positive note, P&G’s organic revenue increased by 2%, driven by higher prices. Although overall net sales dropped by 1% to $21.71 billion, the company reported flat volume for the quarter. This metric, which excludes pricing, offers a more accurate reflection of demand trends.
In the U.S., P&G experienced volume growth in most categories, but the picture was different in Greater China where organic sales worsened. Specifically, the beauty segment struggled with a notable drop in skin care sales. The volatile performance of the SK-II brand in China highlighted the challenges of navigating different consumer preferences and sentiments in various markets.
Across different product divisions, P&G saw mixed results in volume performance. While the grooming division reported a significant 4% growth, the baby care segment faced mid-single-digit declines in organic sales. The company’s strategic focus on innovation and product differentiation will play a crucial role in navigating these market dynamics.
Looking ahead, P&G reiterated its fiscal 2025 forecast, expecting core net earnings per share in the range of $6.91 to $7.05 and revenue growth of 2% to 4%. The company remains committed to its long-term growth targets despite short-term challenges in key markets like China.
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