Procter & Gamble Profit Slips

By Anna Prior 

Procter & Gamble Co.'s fiscal second-quarter earnings fell 16% as the world's largest consumer-products company reported sales that were nearly flat with a year ago.

Core earnings, however, still beat Wall Street's expectations.

P&G Chief Executive A.G. Lafley came out of retirement for a second stint at the CEO role last year after the company took a series of stumbles under predecessor Bob McDonald. Since returning to P&G, Mr. Lafley has focused on improving P&G's core business and improving its lagging beauty business, which generates nearly $20 billion in sales.

In the latest period, the beauty segment's organic sales were flat, driven by growth in prestige, hair care, deodorants and personal cleansing categories. The segment's results, however, were hurt in part by a decrease in skin-care sales.

P&G has been cutting costs and eliminating jobs to catch up with its rivals' productivity levels and help fund new products, ranging from unit-dose Tide Pods laundry detergent to thicker Bounty paper towels.

"P&G's second quarter results came in as we expected," said Mr. Lafley on Friday, adding that the company is on track to deliver its objectives for the fiscal year.

"We expect strong earnings growth in the second half of the fiscal year driven by solid top-line growth, moderating headwinds from foreign exchange, and productivity savings that build throughout the year," he said.

For the latest quarter, P&G reported a profit of $3.43 billion, or $1.18 a share, down from $4.06 billion, or $1.39 a share, a year earlier. Excluding special items such as restructuring expenses, core earnings fell to $1.21 a share from $1.22 a year ago.

Sales edged up 0.5% to $22.28 billion. Organic sales, which strip out currency movements and the impact of acquisitions and divestitures, rose 3%. Unit volume rose 3%.

Analysts polled by Thomson Reuters projected per-share earnings of $1.20 and revenue of $22.33 billion.

Gross margin narrowed to 50% from 50.9%. Selling, general and administrative expenses edged down 3%.

The company reiterated its full-year guidance.

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