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What Drove Procter & Gamble’s Segment Performance?

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Jan. 24 2017, Updated 7:37 a.m. ET

Segment performance

Procter & Gamble’s (PG) net sales remained almost flat in fiscal 2Q17, which ended on December 31, 2016. However, as we mentioned in Part 3 of this series, the company’s organic sales grew 2.0% with the rise in organic volume. Procter & Gamble experienced organic sales growth in fiscal 2Q17 in all of its five segments.

Procter & Gamble operates in five segments—Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.

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Performance by segments

In fiscal 2Q17, the Beauty segment’s net sales fell 0.7%. The positive impact of the product mix was offset by unfavorable pricing and lower volumes. The segment’s organic sales grew 3% due to the growth of the SK-II skin care brand and Pantene and Head & Shoulders brands.

The Grooming segment’s net sales fell 0.9% in fiscal 2Q17. The segment’s organic sales grew 1.0% due to a 4% rise in organic volume. The volume grew with the innovation in Shave Care and appliances.

In the Health Care segment, sales rose 4.8% in 2Q17. The 7% growth in the segment’s organic sales was driven by a 4% volume increase and an increase in prices and product mix in the oral care business.

The Fabric & Home Care segment’s net sales fell 1.4% due to the fall in pricing in 2Q17. The segment’s organic sales rose 1% due to the higher organic volume. The Fabric Care segment’s organic sales growth was driven by product innovation and marketing. It was partially offset by a fall in the distribution of some brands. The Home Care segment’s organic volume wasn’t impacted.

The Baby, Feminine & Family Care segment’s net sales fell 1.4%, which includes the negative impact of product mix and unfavorable pricing in 2Q17. However, organic sales grew 1% with an increase in volume due to product innovation and market growth in all three businesses—family care, baby care, and feminine care.

Rival Colgate-Palmolive (CL) operates through two segments—Oral, Personal & Home Care segment and Pet Nutrition. The Oral, Personal & Home Care segment is the key segment. It accounts for about 85% of the company’s overall sales.

Together, Colgate-Palmolive and Procter & Gamble account for 15.7% of the Consumer Staples Select Sector SPDR ETF (XLP).

Improved organic outlook

Procter & Gamble raised its organic sales growth guidance to 2%–3% in fiscal 2017—up from its previous guidance of 2% growth. However, the company’s fiscal 2017 reported sales aren’t expected to change compared to fiscal 2016 due to the impact of currency headwinds and minor brand divestitures.

In the next part, we’ll look at the company’s margins.

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