The company had been expecting sales growth of 4 – 6 percent, but says that "reductions in retailer, distributor and consumers' in-home inventories in both developed and developing markets" is likely to reduce the original estimate.
Although the company is still expecting to register positive sales growth, despite the difficult economic environment world-wide, financial analysts believe that the fact the company is about to miss its targets is a reflection of just how difficult global market conditions currently are.
No big surprises
Reaction to the announcement was muted, with most analysts stating that the news was largely expected, but still relatively mild compared to some of the more dramatically downscaled outlooks given by big players in other industry segments lately.
The company says it is sticking by its estimates to deliver organic sales growth of 4 – 6 percent for the full financial year 2008, compared to last year’s sales figure of $76.47bn – a figure that represented a 12 percent increase in organic sales.
P&G CEO A.G. Lafley delivered the news at an Analyst’s Meeting, held in New York this morning, where he also took the opportunity to reassure investors over the fact that the company is sticking to its original estimates regarding net earnings.
The announcement did not have a significant effect on the company’s share price, which fell 0.44 percent to $59.38 per share in morning trading on the New York Stock Exchange today.
Outlook for personal care not so bleak
Reflecting the reaction of investors, Lafley pointed out in the meeting that the outlook for the fast-moving consumer goods segment was not nearly as bleak as for other segments such as automotive and apparel.
Lafley also stated that the company will cease to conduct research in the area of pharmaceuticals and will be considering the divestiture of some or all of the brands in its pharmaceutical portfolio, which currently includes key brands such as Actonel, Enablex and Asacol.
The focus away from pharmaceuticals is expected to leave the company further room to concentrate on its biggest and more profitable brands in the personal care and food categories.
Those brands include Olay, Gillette and Head & Shoulders in the personal care category, together with Bounty and Pringles in the food category.