Procter & Gamble profit falls short in 4th qtr as marketing costs rise; sales increase

P&G 4Q profit falls short as marketing costs rise

CINCINNATI — Procter & Gamble Co.’s fourth-quarter net income fell 12 percent, as the consumer products maker unleashed a company-record advertising blitz to promote new versions of Gillette shavers, Pampers diapers, Crest toothpaste and Pantene shampoo.

P&G said sales rose 5 percent and it projected more sales growth for the year ahead. However, sales were lower and the profit slide larger than Wall Street expected, and shares fell nearly 4 percent in Tuesday morning trading, off $2.38 to $59.68.

Already the world’s biggest advertiser, P&G pumped up ad spending by more than $1 billion in the past year, to $8.6 billion, which company officials said was its highest total yet.

Much of that went into recent innovations of some of its biggest brands, such as the June debut of Gillette Fusion ProGlide. It went to market at a suggested price of $10.99 for a handle and shaving head, 10 percent more than the previous Fusion, and P&G officials said Tuesday it became the market leader within two weeks.

“Put simply, we would have been crazy to do anything else,” Jon Moeller, P&G’s chief financial officer, said of the ad spending in a conference call with investors. “If you look at the strength of the innovation program that was coming to market, we literally took every resource available to us and put it behind those innovations because we believed so strongly in them.”

The company has also boosted sales in a tough economy with price cuts, promotional discounts and rolling out cheaper versions of its big-name brands to combat tradedown by budget-strapped households.

“I think the economic recovery in the United States will be uneven,” Bob McDonald, president, CEO and chairman, told investors. “I think we are seeing that already. We don’t expect a double-dip recession, like you don’t, but we have got to keep innovating and keep growing at all areas of our vertical portfolio.”

Foreign exchange impacts also undercut profits in the quarter, P&G said Tuesday.

The Cincinnati-based consumer products giant says it earned $2.2 billion, or 71 cents per share, down from nearly $2.5 billion, or 80 cents a share, a year prior. Revenue increased 5 percent to $18.9 billion.

Analysts expected 73 cents a share on $19.1 billion in revenue.

Jack Russo, an analyst for Edward Jones, said while some investors wanted to see better profit numbers, he still considers P&G stock a “buy” because of their focus on building market share.

“You can argue that they’re being too aggressive,” he said. “I don’t have a problem with waht they’re doing. Again, you draw a line in the sand and say ‘We’re not going to lose market share.’ “

Organic sales, a key measure that excludes currency fluctuations, acquisitions and other such changes, grew 4 percent for the quarter and 3 percent for the year. P&G totaled $78.9 billion in sales for its fiscal year, up 3 percent.

Company officials told reporters in a conference call that they’re seeing broad-based sales growth across product lines and regions, particularly in emerging markets, and that P&G is also building or holding market share everywhere.

P&G expects more sales growth in the coming year, projecting organic sales up 4 to 6 percent with net sales up 2-4 percent. The company expects earnings in a range of $3.91 to $4.01 per share.

Analysts surveyed by Thomson Reuters expect $3.98 on average.

For the current quarter, P&G expects revenue to grow between 1 and 3 percent. Adjusted for discontinued businesses, acquisitions and foreign exchange effects, it expects sales to grow between 3 and 5 percent, with earnings of 97 cents to $1.01 per share. Analysts expect $1.04.

(This version CORRECTS the day of the week to Tuesday.)