P&G hikes ad spend amidst sales slump

Procter & Gamble is planning to give full financial support behind its brands, even amidst a quarter in which it is reporting a net sales and profit slump.

The manufacturer of Tide, Pampers, Olay and Crest is reporting net sales of $20.8 billion USD in Q2, a year-over-year decrease of 1%, and net income of $3.93 billion USD, which is down 7%. Average price across all categories was up 10%.

Despite volume declines and what was described as a “difficult cost and operating environment” by Jon Moeller, P&G’s chairman, president and CEO, the company is lifting its full-year organic sales forecast to a range of 4% to 5% growth, versus the prior fiscal year of 3% to 5%.

In this morning’s earnings call, P&G CFO Andre Schulten says volume shares are “holding globally,” and in the U.S. – a key market – it’s seeing an acceleration of volume share, which gives it confidence to raise topline guidance.

To ensure those shares hold, the company is also maintaining investment in its brands and hiking ad spend. Selling, general and administrative expense (SG&A) as a percentage of sales increased 10 basis points versus year ago. Quarter-over-quarter, ad spending was up $140 million USD compared to the prior quarter (though down compared to the same quarter last year); Schulten says it plans to continue “fully supporting its brands” in the year ahead.

According to Schulten, media spending is “sufficient,” defined in terms of reach and frequency, instead of dollars. The current business is “sufficiently funded” to grow brands, equity and awareness.

Innovations with the Downy and Dove brands are driving volume share growth, with Schulten adding that its portfolio of daily use products, packaging, product innovation and retail execution continue to be paying dividends. The organization’s on-shelf availability is also up to 95% from 93% as the supply chain stabilizes.

Organic sales in the Beauty segment increased 3% versus a year ago. Skin and Personal Care organic sales increases were in the low single digits. The grooming division, which includes brands like Gillette, reported unchanged organic sales compared with a year prior.

Health Care organic sales increased 8% versus a year ago, while Oral Care organic sales increased by low single digits due to increased pricing and favorable geographic mix.

Fabric and Home Care segment organic sales increased 8% versus a year ago, while Baby, Feminine and Family Care organic sales increased 4%.