Zhitong Finance APP noticed that Procter & Gamble (PG.US) reported weaker sales growth for the second consecutive quarter, weighed down by a lack of price increases and softness in key areas such as skin care and baby care. The company's first-quarter 2025 revenue was US$17.74bn, down 0.6% year-on-year, missing market expectations; adjusted EPS was US$1.93, topping market expectations of US$1.90.
Procter & Gamble's organic sales grew 2% in the first quarter ended September 30, below analysts' expectations of nearly 2.1%. The company's average price increased 1% during the period, the same as in the previous quarter, far below the year-ago increase.
The unexpected decline in the company's beauty products category was mainly driven by a weak performance of its high-end brand SK-II in China. The company's fabric and home care products, including Tide laundry detergent, performed better than expected, partly offsetting the decline.
The company's performance was stable compared with the previous quarter, when the growth was far below Wall Street's expectations. The company reiterated its revenue and profit targets for the current fiscal year, including achieving up to 5% organic sales growth, indicating that it expects growth to accelerate in the coming quarters.
Challenges to growth
"The revenue in the quarter was relatively weak," CFO Andre Schulten said in an interview, adding that weakness in China and the Middle East also weighed on the results. The war in the Middle East has triggered boycotts and weakened consumption. "These two factors are certainly a drag, but the business core is still strong," Schulten said.
Procter & Gamble has been trying to lift its performance through high-end products such as full-body deodorants and razors for different body parts, which offer more flexibility for higher prices with new products and features. Schulten said that more expensive products such as the Oral-B electric toothbrush performed well, and the company is launching a new low-priced version to attract more consumers.
Adjusted gross margin in the first quarter was in line with expectations despite unfavorable commodity costs.
Despite a significant slowdown in price increases, Schulten said he did not think prices would start to decline. "Cost changes will not necessitate a deflationary adjustment for us or the industry," he said.