Investors weren't expecting much good news from Procter & Gamble (PG 0.64%) this week, given the brutal selling environment in the consumer products industry. Rival Kimberly-Clark (KMB 0.73%) had just announced lackluster results that were marked by sluggish sales growth and rising costs, and so P&G was likely to reveal similarly weak trends.

The company's actual fiscal fourth-quarter sales figures were worse than expected. However, P&G predicted a significant rebound for the coming fiscal year.

More on that outlook in a moment. First, here's how the latest results stacked up against the prior-year period:


Q4 2018

Q4 2017

Year-Over-Year Change


$16.5 billion

$16.1 billion


Net income

$1.9 billion

$2.2 million


Earnings per share




Data source: Procter & Gamble's financial filings.

What happened this quarter?

Sales rose 3%, but mainly thanks to foreign currency shifts. On an organic basis, revenue only inched higher to underperform management's targets. That sluggish growth came despite price cuts that sent profitability lower.

Woman looking at a home cleaning product in a store aisle.

Image source: Getty Images.

Highlights of the quarter include:

  • Organic sales rose 1% to mark no improvement over the prior quarter. That weak figure ensured that growth for the year was 1%, while management had predicted 2% gains as recently as late April. Peer Kimberly-Clark has been growing at a similar 1% rate for the past six months.
  • Selling prices declined by 2% overall to almost completely offset a slight uptick in sales volumes. P&G's beauty segment fared the best by achieving steady pricing. Each of its other four divisions logged significant declines, though, including a 3% slump in both the grooming and laundry care units.
  • Raw material and shipping costs rose. This combined with the negative pricing trend to push gross profit margin lower despite aggressive cost cuts in other areas of the business.
  • Other selling costs rose, too, and so operating margin dropped to 16.2% of sales from 18.3% a year ago.
  • Cash flow was strong, and helped support elevated cash returns to shareholders in the form of dividends and stock repurchase spending.

What management had to say

Executives highlighted progress that the business made in improving P&G's market-share trends and sales volumes. Yet management noted brutal conditions in the industry. "We are operating in a very dynamic environment," CEO David Taylor said in a press release, "affecting the cost of operations and consumer demand in our categories and against highly capable competitors."

"We delivered strong volume and consumption growth," Taylor continued, "market share trends improvement, core [earnings per share] and cash generation results above targets, albeit with organic sales slightly below target."

Looking forward

P&G issued an aggressive official forecast for the coming financial year that predicts sales growth will speed up to between 2% and 3%, compared to 1% in the year that just closed and 2% in fiscal 2017. A key component of that sales rebound will be higher selling prices, as the company is currently hiking prices by 4% in the Pampers franchise and by about 5% across its Bounty, Charmin, and Puffs brands. Core earnings should grow at a more robust 8% rate.

It's a risk to issue these price increases at a time when demand is so weak, since it might open the door for competitors to steal market share. But P&G appears ready to make bolder portfolio moves aimed at avoiding its third straight year of stubbornly weak sales growth.