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Procter & Gamble must have read the tea leaves wrong because they’re waking up to a nasty hangover after reporting revenue results that left Wall Street shaking its head in disbelief on Friday.
The world-renowned purveyor of everything from shampoo to toilet paper saw organic sales in Greater China nosedive 15% in the first fiscal quarter—yeah, that’s right, grab your tissues. Apparently, shoppers in the land of the Great Wall have decided that they’d rather save their yuan than splurge on P&G’s offerings. With home prices plummeting and the jobless rate pulling a high-wire act, who wouldn’t tighten their belts by skipping the shampoo in favor of a more austere lifestyle of greasy hair and questionable hygiene?
Despite this reality check, the brass at P&G clung to their belief that the sun will rise again in China—eventually. “The market continues to be weak and will be weak, we believe, for a number of quarters to come,” said CFO Andre Schulten on the company’s press jaunt—a phrase that could easily accompany a motivational poster of a sad panda.
And even though P&G is trying to sound optimistic, they apparently missed the memo about the Chinese government’s latest economic pep talk that could have potentially quelled some fears. Spoiler alert: shares still dipped 1% in the morning, which has to sting like a forgotten birthday.
Now let’s dive into the earnings party, where the numbers are as delightful as a surprise dental bill:
- Earnings per share: $1.93 adjusted vs. $1.90 expected— a glitter of hope in an otherwise gloomy report.
- Revenue: $21.74 billion vs. $21.91 billion expected—oops, someone forgot to pay the water bill.
Overall, net sales dropped 1% to $21.74 billion. Organic revenue was fancier—climbed 2%—as if prices went through the roof and carried the company on a cloud of inflation. But don’t let the fancy lingo fool you; volumes were about as flat as a pancake after ‘All You Can Eat’ night.
In a rare twist of fate, P&G’s volume actually grew in eight of its ten categories in the U.S.—no sign of consumers rushing to save a buck by opting for generic brands. But in Greater China, it’s a different beast altogether, with organic sales dropping like a bad habit from prior quarters, especially in hair and oral care. Note to self: Don’t bring the Olay to the party, it might not come back.
The beauty division, home to beloved brands like Pantene and Olay, is marching through a minefield. Organic sales plummeted more than 20% as their upscale SK-II brand takes a hit—not so surprising when consumers are spooked by fears of radioactive sunblock from neighboring Japan.
In healthy baby news, the baby care division, which includes Pampers, appears to be having a midlife crisis with mid-single digits declines as they grapple with the reality that not every baby can afford luxury diapers. Meanwhile, the grooming department—which still has hope—shimmied out a 4% volume growth, likely due to plenty of ‘new and improved’ razors, magazines, and some good old-fashioned marketing magic.
In the grand finale, P&G reported a net income of $3.96 billion, a little sob in comparison to last year’s $4.52 billion musical number. After all the restructuring charges and the smoke and mirrors, they’re still looking to predict easy street with core net earnings per share forecasted at $6.91 to $7.05 and revenue growth at 2% to 4%—hopes that could easily float down the rabbit hole if the winds of the market shift again.
So, as P&G rides the waves of uncertainty, we’re left to think: Does the financial world always have to be such a wild ride? Maybe they should just market their shampoo as an effective remedy for stress. Cheers to that!
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