Procter & Gamble says it is being more efficient and effective with its marketing and in-housing its media buying, as the company slashed its earnings forecast and disappointed the street.
P&G reported a Q2 profit slump to $3.47 billion, down from $3.93 billion, a year earlier. The maker of Tide, Febreze, Oral-B and Always estimated it would record up to $2.5 billion in charges over two fiscal years due to its Gillette business write-down, which has slowed thanks to a hybrid post-pandemic work culture and restructuring in certain markets.
The CPG says it expects fiscal 2024 earnings to range from a fall of 1% to staying in line with fiscal 2023 earnings per share, compared with its previous forecast of a 6% to 9% growth. But the company’s quarterly net sales moved up to $21.44 billion from $20.77 billion a year earlier, as average prices across product categories rose 4%.
Organic sales were up 5% in North America, while volume also accelerated in the region.
Jon Moeller, P&G’s chairman of the board, president and CEO, reiterated the company’s integrated strategy of a focused product portfolio of daily use categories where performance drives brand choice and superiority across product performance, packaging, brand communication, retail execution, and consumer and customer value.
In today’s earnings call, Moeller says P&G is increasing its focus on brand building, and cited its “effective and efficient marketing programs,” in-store and online, to grow categories and brands. According to Moeller, P&G is in-housing more of its media buying.
“Now is not the time to pull back on marketing,” Moeller said. P&G is looking to increase rates of return, while increasing reach and is being “very disciplined” with no desire to spend money on what isn’t working for it. The majority of ad spend, Moeller says, is focused on driving market growth.
While acknowledging difficult economic conditions, Moeller emphasized that eight out of 10 product categories held or grew sales, and 21 out of 25 major brands did the same.
While Gillette experienced write-downs, grooming segment organic sales increased 9% versus one year ago, which was driven by higher pricing, premium product mix and volume growth. P&G, which bought Gillette for $57 billion in 2005, achieves 8% of its total sales from the grooming business.
Moeller reports that its exfoliating GilletteLabs razor is helping to drive global grooming growth. This fall, Gillette returned as the official shave and beard care partner of the Toronto Raptors.
P&G’s Beauty segment organic sales were tepid, moving just 1% higher, and Skin and Personal Care organic sales declined mid-single digits. However, Hair Care organic sales was up driven by increased pricing, premium product mix and volume growth, primarily in North America.
Health Care segment organic sales increased 2%, while P&G’s Fabric and Home Care segment organic sales increased 6% versus year ago.
Finally, Baby, Feminine and Family Care segment organic sales increased 3% versus one year ago.