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Why Procter & Gamble’s Sales Will Likely Fall in Fiscal 4Q17

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Analysts’ estimates

Analysts expect Procter & Gamble (PG) to post sales of $16 billion in fiscal 4Q17, a YoY (year-over-year) decline of 0.5%. A slowdown in category growth in the US (SPY), volatility in India due to the implementation of a goods and services tax, and increased competition are likely to hurt sales. Procter & Gamble has reported sales declines in the past 13 consecutive quarters.

Besides persisting challenges, the company’s strategic decision to restructure its portfolio by divesting non-core brands was one of the primary reasons for the decline in sales. In comparison, analysts project rival Kimberly-Clark (KMB) to report a YoY decline in sales for its upcoming 2Q17 results. Meanwhile, Colgate-Palmolive (CL), which reported its 2Q17 results on July 21, marked a 0.5% decrease in its top line.

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Outlook

Procter & Gamble’s management expects its organic sales to improve in the range of 2.0%–3.0% in fiscal 2017 driven by a marginal rise in volumes. However, total sales are projected to fall 1% as adverse currency movement is likely to remain a drag.

Procter & Gamble is witnessing decelerating growth in all of its product categories, reflecting weakness in the US and volatility in developing markets. The situation isn’t likely to abate in the near term. Retailers destocking in India before the GST rollout, the reduction of subsidies in Saudi Arabia, and macroeconomic challenges in Brazil, Egypt, and Nigeria are expected to dent the company’s category growth rate.

Also, the company’s Grooming segment is expected to take a hit from increased competition. The segment’s organic sales will likely fall on the back of lower pricing and reduced volumes. Procter & Gamble is witnessing stiff competition from Dollar Shave Club and Harry’s Razor in the shave care category, which could hurt the segment’s sales.

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