The consumer staples market has been limping along at near zero growth for over a year, and that weakness has had a major impact on industry leader Procter & Gamble (PG +0.06%). At its last quarterly outing, the owner of blockbuster brands like Gillette razors and Pampers diapers announced soft pricing and sales trends that offset almost all of the benefits from management's aggressive cost-cutting initiatives.
Given P&G's conservative outlook, and the more recent earnings news from rival Kimberly Clark (KMB +0.59%), investors aren't expecting to see significant improvements in the company's operating trends when it posts fiscal fourth-quarter results on Tuesday, July 31.
Let's take a closer look at the key metrics for shareholders to follow.
Image source: Getty Images.
Market-share updates
P&G began its fiscal year targeting a solid growth acceleration. Management had recently finished a dramatic portfolio reboot that left the company with just its top global brand franchises. That's why, at the start of fiscal 2018, CEO David Taylor and his team forecast organic sales gains of 2.5%, or a bit more than the prior year's 2% uptick.
Industry conditions worsened throughout the year, though, and a few of P&G's growth initiatives didn't deliver the respected results, either. Following last quarter's 1% sales uptick, the company is now on pace for organic revenue to rise by just 2% for the full fiscal year, marking no progress in reaching its growth-acceleration target. P&G competitor Kimberly Clark recently announced flat sales in a period that management described as "challenging," and that's another reason to expect modest results from P&G on Tuesday.
Because it is closing its fiscal year this week, P&G will provide an update on its market-share position as well. The company has lost ground across important franchises, including Gillette, in recent years, and that broader negative trend probably continued in fiscal 2018, although the pace of declines could have improved.
Costs and prices
Investors are likely to hear plenty of discussion from the management team about P&G's strong finances. The company has made impressive strides at slashing costs and improving efficiencies in areas like marketing and its supply chain. These wins have allowed for faster investments into growth initiatives while also freeing cash up for increased direct cash returns to shareholders.
Yet that positive trend might be threatened by rising costs. Many raw materials, including pulp, plastic, and oil, have become more expensive over the past six months, and that spike led Kimberly Clark to lower its earnings outlook this week. P&G has been faced with the same challenge of having to absorb these increased costs rather than pass them along to consumers who might bolt to cheaper substitutes. That reality is evident its prices, which fell across each of its five core product divisions last quarter.
Management has been aiming for a rebound on this core metric that's powered by innovative product releases. But so far, investors haven't seen any evidence that this recovery is gaining steam.
Broader strategy
After shareholders voted for a shakeup of the management team, P&G executives said they got the message that the company needs to "move faster to deliver improved results." Wider industry struggles aside, the consumer products titan isn't likely to report much progress on that score for fiscal 2018.
That means investors can expect to hear about potentially shifting strategies for the upcoming year that might include more aggressive reorganization plans, dramatic portfolio changes, or even spinoffs, acquisitions, and mergers. Taylor told investors back in April that many of P&G's core markets are being disrupted, and the company will need to get ahead of those fundamental changes if it wants to get back to healthy market-share growth.
