By Sharon Terlep
Consumer-products giant Procter & Gamble Co. reported its biggest U.S. sales increase in decades as Americans stocked up on household mainstays like toilet paper, laundry detergent and cough medicine as the coronavirus pandemic spread across the country.
Increased demand in P&G's home market more than offset steep declines in China, its second-largest market, where closed factories, roads and stores stymied production and kept consumers from buying.
P&G is the first big maker of household staples to report financial results for 2020's first quarter, when the pandemic ravaged China and spread in earnest through the U.S.
P&G said organic sales, a measure that excludes currency moves and deals, rose 6% for the quarter. Sales rose 10% in the U.S. and fell 8% in China, a far less severe decline than the company said it expected.
Shoppers' rush to stock up drove much of the increase, the company said. But P&G executives say they believe increased consumption of products like laundry detergent, dishwashing soap and cold medicine will persist after the pandemic passes.
"Consumption of our products is not likely to dissipate," said Jon Moeller, P&G's chief financial officer. "We will serve what will likely become a forever altered health, hygiene and cleaning focus for consumers."
The results "are a direct reflection of the integral role our products play in meeting the daily health, hygiene and cleaning needs of consumers around the world," CEO David Taylor said.
The strongest growth was in P&G's health-care unit, which includes Vicks cold medicine, and its fabric and home care division. Sales rose 9% and 10%, respectively, in those units.
In Asia, P&G's high-end SK-II skin-care brand was stung both by shutdowns in the region and a sharp falloff in spending at airport shops, a major sales driver for the highly profitable brand. P&G's beauty unit, which has been among the company's fastest growing in recent quarters, posted a 1% increase. Only the grooming unit, which includes Gillette razors, fared worse, with a 1% decline.
P&G said net sales for the quarter were $17.2 billion, up 5% versus the prior year. Diluted net earnings per share were $1.12, an 8% percent increase from the prior year, which is what analysts polled by FactSet predicted. Core earnings per share increased 10% to $1.17.
The big question facing P&G is how the company will fare in an economic downturn. P&G's lineup is dominated by higher-end products, and premium offerings from all-natural diapers to high-tech razors have buoyed results in recent years.
Executives have said they believe the company has positioned itself to weather an economic downturn by investing in lower-price products in major categories such as detergent, diapers and razors.
The company maintained its guidance for organic sales and net earnings per share. It lowered estimates for revenue growth, to 3% to 4%, from 4% to 5%, because of a worse-than-expected impact of currency fluctuations.
Mr. Moeller cautioned that the state of the business and industry in the short term "is anyone's guess" as the pandemic plays out.
"A lot must go right in a very challenging environment, and not all of it will," he said. "There is a very wide range of possible near-term scenarios, and it's futile to spend too much time trying to assign probabilities to each."
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