By Dow Jones Business News, October 25, 2013, 08:25:00 AM EDT
P&G Underlying Sales Growth Beats Unilever
Procter & Gamble Co. ( PG ) reported an 8% rise in profit for its first quarter under returned Chief Executive A.G.
Lafley and notched a rare win in sales growth over archrival Unilever PLC (UN, UNA.AE).
The Cincinnati, Ohio, maker of Tide detergent, Gillette razors and Pampers diapers said sales for the three months to
September rose 4% excluding the impact of currency movements, acquisitions and divestments. Including foreign-exchange
impacts, sales were up 2% to $21.2 billion, slightly above what Wall Street analysts were expecting.
P&G, struggling to catch up with faster-growing rivals like Unilever and Colgate, brought Mr. Lafley back to the top
job in May. The 66-year-old CEO has been tightening the company's focus on its biggest brands and most profitable
opportunities and is trying to speed up productivity improvements and cost savings to improve its bottom line.
Those efforts appear to be paying off. In the quarter, P&G said it maintained or increased its share in businesses
representing two thirds of its global sales, a bit better than the prior quarter.
Meanwhile Unilever, which sells a wide range of packaged food and household products, reported its worst quarterly
sales since the height of the financial crisis this week, and Chief Executive Paul Polman in part blamed heavy
competitive activity by a rival that employed what he called "irrational" promotions to win market share. He didn't name
the rival, but people familiar with the matter said it was P&G.
Jon Moeller, P&G's chief financial officer, denied the company spent heavily on discounts and promotional activities
during the quarter to win market share in areas like hair care and deodorants. Mr. Moeller said the percentage of P&G
products in the U.S. that were sold on promotion fell in the recent period from a year ago, "so promotion levels were
down." He said P&G would rather spend more on product innovations and is still working to get its lagging beauty
business back to consistent growth.
"We're not going to be the ones that will lead promotional escalation," he said, adding that the company is planning
to launch a slate of new beauty products in the coming months and there will be promotions around those.
Companies in the heavily competitive consumer products business, which often forces a tradeoff between market share
and profits, regularly complain about rivals' discounting at investor conferences and on earnings calls.
Mr. Lafley sat out Thursday's earnings call. P&G's shares were down 1% Friday at $79.82. Unilever's were down 1.2% at
In the recent quarter, P&G's hair care business, which includes Pantene shampoo, maintained its market share while the
overall beauty segment, which generates more a fifth of P&G's revenue, reported a 1% increase in organic sales growth.
But sales at the Olay skin care brand slipped again.
Unilever had pointed in particular to heightened U.S. competition in beauty products, where it sells TRESemme shampoo,
Dove body wash and Axe deodorant. Overall, the Anglo-Dutch company reported 3.2% underlying sales growth for the third
quarter, down from 5.9% a year ago. Unilever's growth in the last three years has largely exceeded P&G's, which has
ranged from 2% to 5% over this period.
For the quarter ended Sept. 30, P&G reported net profit of $3.03 billion, up from $2.81 billion a year earlier, on
sales of $21.21 billion. The company said it still expects 7% to 9% growth in earnings per share and 3% to 4% growth in
organic sales in the year that ends in June.
P&G's sales of Duracell batteries grew after the company inked exclusive distribution deals with large retailers
including the Sam's Club chain of warehouse stores. P&G also reported improved sales of laundry detergent and diapers,
but its pet food division was hurt by recent product recalls.
--Nathalie Tadena contributed to this article
Write to Serena Ng at Serena.Ng@wsj.com
(CORRECTION: This item was corrected to show that Unilever's growth in the last three years has largely exceeded
P&G's, which has ranged from 2% to 5% over this period. The original incorrectly stated 2% to 4%.)
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