P&G Profit Declines as Consumers Curb Spending

By Carol Wolf

Aug. 5 (Bloomberg) — Procter & Gamble Co., the world’s largest household-products maker, said fourth-quarter profit fell 18 percent as consumers curbed spending on higher-priced skin care and detergents in the recession.

Net income for the period ended June 30 dropped to $2.47 billion, or 80 cents a share, the Cincinnati-based company said today in a statement. Profit in the quarter ending in September will decline to 95 cents to $1 a share, P&G said. Analysts estimated earnings of $1, the average in a Bloomberg survey.

Consumers have slowed purchases of products such as Tide detergent and Olay face cream, switching to cheaper and generic ones to save money as unemployment increases. P&G will focus on innovation to lure shoppers into paying more for special product features, said Robert McDonald, who became chief executive officer July 1.

“We have a goal of building market-share profitability and will track it on a day-to-day basis,” McDonald, 56, said today on a conference call with analysts.

P&G declined $1.89, or 3.4 percent, to $53.58 at 10:57 a.m. in New York Stock Exchange trading. The shares had dropped 10 percent this year before today.

Sales fell 11 percent to $18.7 billion, missing the $19.3 billion average analysts’ estimate in a Bloomberg survey.

Currency Effects

The effect of currency translations clipped sales by 9 percent, said P&G, which makes about 60 percent of its revenue outside the U.S. The company said it raised prices in developing countries to counter the effects, which caused unit sales to fall.

Analysts projected fourth-quarter profit of 78 cents a share, the average estimate compiled by Bloomberg. Net income in the year-earlier quarter was $3.02 billion, or 92 cents.

In the year ended in June, increased competition in skin care products reduced Olay sales, P&G said in the statement. The company said it shipped fewer Tide and Ariel detergents and its Braun appliance business had a “sharp” decline. Sales of Iams pet food and Crest oral care products also fell, it said.

In the quarter ending in September, sales will fall 7 percent to 10 percent, the company said. Excluding the impact of currencies, they will decline as much as 3 percent, it said. P&G posted earnings of $1.03 a share in the year-ago period.

U.S. household income had its biggest drop since records began in 1960 in the 12 months through June, the Commerce Department said yesterday.

To contact the reporters on this story: Carol Wolf in Washington at cwolf@bloomberg.net;

Last Updated: August 5, 2009 11:35 ED

taken from bloomberg.com 8-5-09