P&G CEO on profits, more cautious consumers and Trump’s tax cuts

CEO of P&G Jon Moeller is seeing a more demanding American consumer, but not one who is completely closing their wallets.

“Actually, no, I don’t doubt that some buyers will be more cautious — that would make sense,” Moeller told Yahoo Finance.

Moeller says the volume of private-label products sold compared with P&G brands is “flat,” a proxy he uses to gauge consumers trading down due to economic reasons. Unit volumes in the U.S. have also shown growth over the past five quarters, Moeller noted.

However, that more cautious consumer showed up in the company’s fiscal fourth quarter, released Tuesday.

Organic sales growth of 2% fell short of consensus forecasts, as did total sales.

Sales results in the beauty, personal care and baby businesses were slightly below analysts’ expectations.

P&G shares fell about 5% in premarket trading. The stock was at the top of Yahoo Finance’sTrend ticker‘ frame.

“Consumption is getting weaker in the US and there is less room for additional pricing. While China could be a key driver, beauty sales trends are still weak and there is little visibility on when it will return to growth,” Jefferies analyst Kaumil Gajrawala said ahead of the report.

Gajrawala downgraded his rating on P&G shares to hold.

Earnings Summary

• Liquid sales: $20.5 billion, unchanged from a year earlier, compared with the estimate of $20.74 billion

• Organic sales growth: 2% vs. estimate of 3.43%

  • Organic revenue growth in the beauty segment: $3.7 billion vs. $3.76 billion estimate

  • Organic revenue growth in the personal care segment: $1.6 billion vs. $1.72 billion estimate

  • Organic revenue growth in the healthcare segment: $2.7 billion vs. $2.67 billion estimate

  • Organic revenue growth in the fabrics and home care segment: $7.3 billion vs. $7.36 billion estimate

  • Organic revenue growth in the baby, women and family care segment: $5 billion vs. $5.12 billion estimate

• Gross margin: 49.8% vs. estimated 49.4%

• Adjusted EPS: $1.40, up 2.1% year-over-year, compared with an estimate of $1.37

• Organic sales growth for the full year: +3% to +5% (reaccelerating from Q4 results)

• Full-year EPS growth: $6.91 to $7.05 (consensus: $6.96)

• Comments from P&G Chairman and CEO Jon Moeller to Yahoo Finance on Trump’s tax cuts:

  • About its impact: The tax cuts were “incredibly impactful. And you know, that element of the conversation is going to increase as we get through the election and we start talking about 2025, when some of the tax provisions that were passed in 2017 expire. But if you just look at our investment in the U.S. before and after the 2017 Act, it increased significantly, our employment increased significantly, and most importantly, our taxes, the taxes that we’re paying to the U.S. government increased significantly. So it really led to significant economic activity in this country.”

  • On whether the tax cuts will not be extended: “It will certainly have an impact. Every decision we make is based on the present value of the discounted cash flow. And that’s on an after-tax basis. And then it starts to favor on a comparative basis, other places for investment. So yes, it will have an impact.”

The story continues

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