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What Procter & Gamble Co. Has to Say About Its Growth Slowdown

By Demitri Kalogeropoulos - Oct 25, 2017 at 9:00AM

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Five key quotes from management's latest conference call with Wall Street analysts.

Procter & Gamble (PG 0.80%) investors are hoping that slow and steady wins the race. The consumer-products giant recently announced earnings results that included weaker sales growth. But management is optimistic that the business is headed in the right direction, especially when it comes to market share.

Here are a few of the key points that Chief Financial Officer Jon Moeller had for investors while discussing P&G's earnings in a conference call with analysts.

A magnifying glass sitting over a spreadsheet document.

Image source: Getty Images.

Putting the growth in context

Market growth continues to be sluggish. We estimate global category [growth] below 2.5% for the quarter, a modest deceleration versus the [prior quarter] period.

P&G's organic growth slowed down to a 1% pace from 2% in the prior quarter. That decline was due to weakness in the broader industry rather than strategic missteps. In fact, executives were happy with the slight volume growth they managed this quarter despite headwinds including a weak global sales environment and the sales disruption caused by hurricanes affecting Texas, Florida, and Puerto Rico.

P&G slide chart summarizing its sales and profit growth in the quarter.

P&G met its sales and profit projections this quarter. Image source: P&G investor presentation.

Market share trends

Market share trends continue to improve, with 13 of the top 20 countries and 14 of the top 20 brands, 65% of top 20 counties, 70% of top 20 brands growing or holding share.

Executives highlighted improving market share results, especially in the online sales channel, where nine of P&G's 10 categories held or expanded their positions. The company took a small step backward overall, though, with four of its five core product segments giving up share. The grooming division, home to the struggling Gillette shaving franchise, fared the worst, as organic sales fell by 6%.

The good news is, price cuts are starting to push volume higher in that franchise for the first time in years, but Moeller and his team cautioned that it's too early to tell whether the pricing moves will lead to a sustained rebound for the business.

China is a must-win

Accelerating growth in China is important to both the top and bottom lines of our company. 

China is P&G's second biggest market in terms of both sales and profits, and that geography is growing nicely today. Organic sales jumped 6% this quarter to mark a big improvement over the 1% uptick for fiscal 2017. Innovations in the Pampers, Olay, and SK-II franchises all contributed to that result, as did a generally booming e-commerce business.

Executives believe the China segment should grow at a faster pace than the overall business this year, and they say demand is so far meeting their targets through the start of the fiscal second quarter.

Expect big cash returns

We expect to pay nearly $7.5 billion in dividends and repurchase $4 billion to $7 billion of our shares in fiscal 2018.

P&G delivered $4.3 billion directly to shareholders through stock buybacks and dividend payments this quarter. The total cash returns for the year should range from around $12 billion to $15 billion, which would be a significant step down from last year's $22 billion allocation. Yet the figure still represents a huge cash return commitment, considering P&G's operating earnings were just $10 billion last year.

Staying on target

We are maintaining fiscal-year guidance across all elements top line, bottom line, and cash.

Management affirmed growth targets that call for organic sales gains of between 2% and 3%, compared with last year's 2% uptick. Earnings should rise by between 5% and 7%, too.

Yes, the broader market is slowing, but Moeller and his team said that the slight market-share improvements are offsetting that challenge and keeping the company right on track to meet its modest, but positive, fiscal 2018 objectives.

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