Procter & Gamble’s sales drop amid weakness in Chinese economy

Procter & Gamble reported a surprise drop in sales for the second consecutive quarter as a weak economy weighs on consumers in China.
The American consumer goods group’s sales totalled $21.7 billion in the three months to the end of September, a 1 per cent drop from a year earlier.
Declines in beauty and healthcare sales overshadowed growth in grooming, fabric and home care. Sales of skin-care products fell 20 per cent after weaker demand for its high-end SK-II brand, which the company linked to a deterioration of economic conditions in China.
In North America, sales grew 4 per cent in the first quarter, compared with a 7 per cent rise a year earlier.
Andre Schulten, chief financial officer, said: “China, as we had expected, continues to be softer from a consumption standpoint.” He said he expected the market to be weak “for a number of quarters to come”. However, P&G is planning new product launches and category expansions in the country, which has faced a prolonged property crisis and rising youth unemployment.
P&G reported a 1 per cent rise in average prices across its product categories, despite the strain on household budgets from inflation in recent years. Schulten said there was no plan to adjust pricing in the US.
The company maintained its annual sales growth forecast of between 2 per cent and 4 per cent. It also maintained its profit outlook for the year.
Profit of $4 billion in the three months to the end of September was 12.5 per cent lower than the comparable period last year.
The shares were flat by the close in New York at $171.28.
Don Nesbitt, senior portfolio manager at F/m Investments, which has a stake in P&G, said: “The consumers aren’t feeling good out there after the bout of inflation we’ve had over the recent years, so we need an improvement in sentiment I think for a company like this to do better.”
On Thursday Nestlé, the rival packaged food manufacturer, cut its annual sales forecast citing ongoing pressure on demand from weaker economies such as Latin America.
On Friday, CVS Health, the American drugstore chain, replaced its chief executive, Karen Lynch, after lowering its profit forecast below estimates.
The stock was down $3.33, or 5.2 per cent, to $60.34 at the close in New York.
In August, the company slashed its full-year profit guidance for the third consecutive quarter. CVS has been hit by higher medical costs at its insurance unit and a retail business impacted by online competition and reimbursement pressures for prescription drugs. Costs for insurers providing Medicare plans, which are available for people aged 65 years and above and those with disabilities, have soared in the past year due to sustained high demand from older adults for healthcare services.
Lynch stepped down from her position in agreement with CVS Health’s board, the company said. David Joyner, who is the president of the company’s pharmacy benefit manager CVS Caremark, takes over as president and chief executive from Friday. Roger Farah, CVS chairman, said: “The board believes this is the right time to make a change, and we are confident that David is the right person to lead our company.”