P&G sales growth shy of forecasts as slowing birthrate hurts diaper sales

By Richa Naidu and Nivedita Balu

(Reuters) – Procter & Gamble Co released quarterly sales on Thursday that missed analysts' expectations for the first time in five quarters, penalized by the weakness of baby and female skincare products such as Pampers and Tampax tampons .

P&G shares were stable at the start of the session.

A slowdown in the global birth rate has hit P&G and competitors like diaper maker Huggies Kimberly-Clark, particularly in China and the United States. To boost sales, the two companies have invested in more expensive premium products.

Sales of Pemium baby care products in China have increased by 20-30%, so there are still opportunities despite the slowness of brithrate, said director of operations Jon Moeller in a call after the results.

Sales growth in the U.S. for diapers and baby care was roughly flat compared to a year ago and innovation in the market remains competitive, said Moeller.

The company said net sales increased 4.6% to $ 18.24 billion, which missed the average analyst estimate of $ 18.37 billion, according to IBES data from Refinitiv. .

Jefferies analyst Kevin Grundy said Wall Street expectations have been based on business momentum over the past five quarters, but modest second quarter results should be disappointed .

"Good neighborhood, but high bar," he wrote in a note to customers.

In 2018, P&G launched Pampers Pure, herbal diapers made without chlorine bleaching, perfume or parabens. He recently partnered with Google to create a smartphone app that alerts parents when a diaper needs to be changed. Similarly, Kimberly Clark launched a premium Huggies brand, Special Delivery, in July, made from plant materials such as sugar cane.

P&G baby and female product sales increased only 1% to $ 4.58 billion, while sales of fabrics and home care products increased 4% to 5 , $ 79 billion, the two estimates missing.

The company said inventory levels in Japan had dropped following an accumulation before the country's sales tax hike in October.

Sales of the grooming company, which manufactures Gillette razors, rose 2% to $ 1.65 billion, which is also lower than estimated. Last year, the company took on an $ 8 billion unit-related charge, which faces competition from smaller rivals Harry's and Dollar Shave Club.

P&G has invested heavily to develop new products in all categories, improve packaging and marketing by trying to attract young consumers and to compete against Unilever, Reckitt-Benckiser and local upstarts.

The company has raised its forecast for fiscal year 2020 of basic earnings per share growth from 8% to 11% compared to a previous range of increase from 5% to 10%.

Net income attributable to P&G increased 16.4% to $ 3.72 billion in the quarter ended December 31. Excluding non-recurring items, earnings of $ 1.42 per share exceeded the average estimate of $ 1.37.

(Report by Nivedita Balu to Bengaluru; Edition by Saumyadeb Chakrabarty and David Gregorio)

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