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Will Procter & Gamble’s Sales Improve in Fiscal 2017?

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Efforts to improve top line

After generating lower sales for 11 consecutive quarters, Procter & Gamble (PG) managed to report flat sales growth in fiscal 1Q17.[1. fiscal 1Q17 ended September 30, 2016] The company’s fiscal 1Q17 sales remained unchanged on a year-over-year basis at $16.5 billion, as higher volumes offset the negative impact of foreign exchange fluctuations. Procter & Gamble has operations in 70 countries, exposing it to significant currency fluctuations.

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The company’s organic sales, excluding the impact of acquisitions and divestitures and currency fluctuations, rose 3.0% in fiscal 1Q17 on higher organic volume. Procter & Gamble has been making efforts to streamline its product portfolio by exiting its non-core businesses. The company completed the divestiture of its beauty brands to Coty (COTY) in October 2016.

Portfolio transformation

In Procter & Gamble’s 2016 analyst meeting on November 18, 2016, the company’s chief financial officer, Jon Moeller, discussed its efforts to streamline its portfolio. Moeller spoke about how the company has sold, discontinued, or consolidated about 105 brands over the past two years.

Procter & Gamble has simplified its portfolio by exiting 12 product categories in the last ten years. These categories are bleach, water purification, kitchen appliances, pharmaceuticals, coffee, snacks, pet care, batteries, fine fragrance, cosmetics, retail hair color, and salon haircare. With its simplified portfolio, Procter & Gamble is now focusing on ~65 brands in ten product categories: baby, feminine, family, fabric, home, hair, skin and personal care, grooming, oral, and personal healthcare.

Aside from streamlining its product portfolio, the company is also attempting to boost its sales by focusing on innovation and marketing.

Sales expectations

Procter & Gamble expects organic sales growth of ~2% in fiscal 2017. Analysts expect the company’s net sales to rise 0.35% and 0.51%, respectively, in fiscal 2Q17 and fiscal 2017. These expectations include the impact of divestitures and currency headwinds. 

In their comparable quarters, Colgate-Palmolive (CL), The Clorox Company (CLX), and Kimberly-Clark (KMB) are expected to post revenue rises of 0.51% (in 4Q16), 4.4% (in fiscal 2Q17), and 0.22% (in 4Q16), respectively.

We’ll discuss Procter & Gamble’s earnings in the next part of this series.

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