PG Procter and Gamble Co

By Sharon Terlep and Micah Maidenberg 

Procter & Gamble Co. posted another quarter of rising sales and profit as the marketing giant persuaded consumers to upgrade to premium versions of Tide and Crest products, but the growth slowed from the previous quarter.

The Cincinnati company said organic sales, a measure that excludes currency moves and deals, increased 5% from a year earlier in the quarter ended Dec. 31. On that basis, sales rose 7% in the previous quarter.

P&G finance chief Jon Moeller said the company is pleased with the growth, and the results are evidence that P&G's turnaround plan is working. "We're looking, as we innovate, to be able to modestly [increase] price and still build value," he said. "These results required us to overcome several challenges," he said, citing global economic and political volatility and intensifying competition.

Shares in P&G were off 1% on Thursday afternoon. The stock has surged about 30% in the past year to trade near record highs, as the company has recorded a growth streak that has outpaced rivals such as Kimberly-Clark Corp. and Unilever PLC.

Kimberly-Clark, which makes Huggies diapers and Kleenex tissues, on Thursday reported a 3% gain in organic sales for the same quarter. The smaller company, which has also been raising prices, forecast growth for the current year that was below P&G's projections.

"It's still early days," Kimberly-Clark Chief Executive Michael Hsu said during a call with analysts. "We're making good progress, and I expect more going forward."

P&G executives have said they expect rivals to bolster efforts to woo competitors with new products, and Kimberly-Clark said Thursday that new offerings such as super premium Huggies diapers are soon headed to stores, which should help the company gain ground on its rival.

P&G's turnaround has been driven by higher prices, new products and a leaner portfolio of brands. The company has shed mass-market beauty brands and led the industry in a move to raise prices to offset commodity costs and fatten profit margins.

The most pressing question now facing P&G is whether the company can maintain growth as rivals step up competition and consumers and retailers potentially begin to push back on price increases.

In the December quarter, the company raised prices in its struggling Gillette razor business. Until recently, brand sales were falling despite aggressive price cuts in prior years. Gillette, "is strengthening quite nicely," Mr. Moeller said during a call with reporters. "There is still work to do but we are making significant progress."

P&G's beauty business, covering brands such as Olay and Pantene, delivered the strongest growth in the quarter, with organic sales rising 8%. The health unit, which includes products such as Vicks cough drops and Crest toothpaste, recorded a 7% gain.

The one weak spot was the company's baby-care business, which includes its Pampers diapers, where organic sales declined from a year earlier. Mr. Moeller said the division is fighting tough competition, as birthrates are falling in China and the U.S. Both P&G and Kimberly-Clark have sought to offset the impact of those declines with higher-end offerings and by focusing on other categories, such as adult diapers and feminine-care products.

P&G has benefited of late in part because consumers have proved willing to pay up for the more-expensive products it has developed, such as specialty toothpaste and Tide Pod detergent packets. Prices were up 1% across its portfolio in the quarter, P&G said.

China, where P&G was struggling a few years ago, proved to be a significant growth engine for the quarter. P&G said it gained market share and sales rose 14% from a year earlier.

P&G said Thursday it now expects organic sales to increase 4% to 5% for the fiscal year that ends in June, up from a prior forecast that anticipated a 3% to 5% gain on that measure.

Profit for the fiscal second quarter rose to $3.72 billion, from $3.19 billion a year earlier. Overall, P&G reported $18.24 billion in quarterly sales, short of the $18.42 billion consensus compiled by FactSet. The company's adjusted profit of $1.42 a share exceeded forecasts from analysts by 5 cents.

Kimberly-Clark, which has been cutting thousands of jobs and closing factories, reported profit of $547 million on flat sales of $4.58 billion. It forecast organic sales growth of 2% for 2020.

Write to Sharon Terlep at sharon.terlep@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

January 23, 2020 13:30 ET (18:30 GMT)

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