Procter & Gamble (P&G) is seeing encouraging signs in China, but a full recovery is still a ways off, executives said on Wednesday, January 22, as the consumer products giant reported solid earnings.
P&G, whose brands include Tide detergent and Charmin toilet paper, as well as Gilette, Head & Shoulder and Oral-B personal care brands, saw improvement in China in the just-finished quarter in sales of SK-II, a premium skin care product.
Chief Executive Jon Moeller also pointed to an uptick in the number of Chinese travelers to South Korea and Japan, as an indication of “more confidence and a willingness to spend” among some in the population.
But Moeller noted that SK-II is “very premium-priced product” and “the broad swath of society is still not confident and is still struggling,” he told analysts on a conference call.
The comments came as P&Greported profits of $4.6 billion in its fiscal second quarter, up 34 percent on revenues of $21.9 billion, up two percent.
P&G also confirmed its earnings forecast for fiscal 2025, a year in which it projects sales growth of two to four percent.
In the beauty segment, organic sales increased two percent versus year ago. Driven by volume growth in North America, Europe and Latin America and favorable geographic and premium product mix, hair care organic sales increased low single digits. Hair care growth was partially offset by volume declines primarily in Greater China. Personal care organic sales increased double digits driven by innovation-based volume growth. Skin care organic sales declined mid-single digits due to volume declines, partially offset by favorable product mix from higher sales of the super-premium SK-II brand.
Executives highlighted product launches including a whole-body deodorant spray and a new advanced power toothbrush as elements that would sustain sales growth.
P&G experienced a three percent drop in organic sales in its Greater China division.
Although still shrinking, Chief Financial Officer Andre Schulten described the performance as “a solid step forward” compared with the 15 percent decline in the prior quarter.
While “underlining market conditions remain soft,” Schulten said “we are trending back toward growth in Greater China.”
Sales of SK-II, which is manufactured in Japan, have been hampered in recent quarters in China due to anti-Japan sentiment in the country.
But Moeller, citing fewer negative social media mentions in China, described the climate as improving, saying “the whole dynamic of Japanese brand sentiment, I think, is easing.”
