Blames 'Inventory Reductions' Despite Growth From Gillette

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CINCINNATI (AdAge.com) -- Procter & Gamble Co. late yesterday issued mid-quarter guidance for organic sales growth at the low end of previous forecasts.

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P&G said it expects organic sales growth, excluding impact of acquisitions, divestitures and foreign exchange, of 5% to 6% for the current quarter, below prior forecasts issued in January of 5% to 7% organic growth.

Max Factor
P&G blamed “tempered outlooks” for Asia and Eastern Europe as well as “recent customer inventory reductions” for the low-end forecast. While the company didn’t specify factors involved in the inventory reductions, Advertising Age yesterday reported Target and three of the four largest drug chains have discontinued Max Factor cosmetics.

The top-line softness comes despite the $57 billion acquisition of Gillette Co. in October, which P&G Chairman-CEO A.G. Lafley said last year would add a percentage point to P&G’s long-term top-line growth rate because of “revenue synergies,” including P&G’s ability to piggyback Gillette products on its larger Chinese distribution system.

Still, P&G said organic sales growth for its fiscal third quarter would remain at the upper end of its 3%-to 5% organic sales growth target and that it’s gaining market share in two-thirds of its business globally.

Strong showing for Fusion razor
Contributions to sales growth from Gillette are in line with prior expectations, P&G said, including strong early results from last month’s launch of the Fusion razor.

Analysts did not seem concerned. “Tempered top-line growth this quarter ... is clearly negative, but one quarter isn’t a trend and organic- and acquisition-driven volume and profit growth remains near the top of the peer group” for P&G, Deutsche Bank analyst William Schmitz said in a research note.

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