P&G core sales return to growth due to price hikes

Tue Jan 26, 2016 2:36pm EST
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By Yashaswini Swamynathan

(Reuters) - Procter & Gamble Co's (PG.N: Quote) new chief executive is off to a "nice start" as the company's core sales returned to growth in the second quarter, helped by price hikes and as it shed underperforming brands.

Organic sales - core sales that exclude the impact of currency, divestitures and acquisitions - rose 2 percent in the quarter.

These sales had dropped 1 percent in the previous quarter, marking its first decline since 2008.

P&G has been raising prices more rapidly to offset the stronger dollar's impact. The price hikes helped it boost organic sales in the latest quarter, but led to a drop in volumes across all businesses.

P&G also posted a better-than-expected profit by cutting costs, sending its shares up 2.5 percent to $78.79 on Tuesday, outperforming the broader consumer staples index .SPLRCS.

"Today's results, along with increased visibility of the new CEO David Taylor, could move the stock into the $80s in the coming months," SunTrust Robinson Humphrey analyst William Chappell wrote in a note titled, 'Two percent organic growth a "nice start" for new CEO'.

Taylor took the helm in November, in the middle of P&G's turnaround plan.

P&G is selling unprofitable brands and focusing on core brands such as Gillette, Pampers and Tide to revive sluggish growth, which analysts have blamed on the company's slow reaction to trends in top markets such as China.   Continued...

Tide detergent pods, from Procter & Gamble, are seen at the Safeway store in Wheaton, Maryland February 13, 2015.    REUTERS/Gary Cameron