Procter & Gamble (NYSE:PG) today announced financial results for its 2015 fiscal year. The good news is that management hit its goal of keeping core profits steady against the prior year. However, P&G's sales growth struggles accelerated -- the company booked lower organic volume for the full year.
Here's a look at how the consumer goods giant performed relative to Wall Street's fourth-quarter targets:
|Revenue||$18 billion||$17.8 billion|
|Profit||$0.93 per share||$1 per share|
Sales growth was weak as competition picked away at market share in many of P&G's major product lines. Volume slipped in four of its five divisions this year, with fabric and home care's 1% improvement swamped by drops of as much as 3% in other categories:
|Division||Change in Organic Volume|
|Beauty, hair, and personal care||-3%|
|Fabric and home care||1%|
|Baby, feminine, and family care||-1%|
Overall, P&G eked out a 1% gain in organic sales thanks to price hikes that made up for the volume declines. While it's nice to see evidence of pricing power, the organic growth result is far from what investors have come to expect from the company. In contrast to this year's results, P&G booked 3%-4% growth it the prior two fiscal years amid solid sales volume and pricing gains.
Today, management stressed the company's improving financial efficiency despite these market struggles. "P&G delivered strong, double-digit constant currency core EPS growth and very good free cash flow productivity of over 100% on modest organic sales growth," said outgoing CEO A.G. Lafley.
P&G doesn't see a return to substantial sales gains in the near term. In fact, at the low end of its target, management admitted organic growth may decelerate again and finish flat through fiscal 2016.
Meanwhile, incoming CEO David Taylor officially takes over Nov. 1, and he aims to build on the cost-cutting and brand-shedding progress that P&G has made over the past two years. The combination of a more focused portfolio and a lower cost burden clears the way for strong profit gains -- if and when sales growth returns. "P&G is transforming to be a faster-growing, more profitable company," Taylor said in a press release this week announcing his appointment as CEO.
Investors saw evidence of this transformation on profitability as core gross margin improved by a full percentage point to reach 49% of sales this year. However, there's no hint of a rebound yet for the critical sales growth piece of P&G's turnaround hopes.