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P&G gets boost from push to get shoppers to buy pricier products

By Lauren Coleman-Lochner Bloomberg

Procter & Gamble Co.’s drive to sell more upscale skin-care, grooming and house-cleaning products is beginning to show up in its bottom line.

Sales of its premium brands helped lift earnings to $1.08 a share last quarter, excluding some items. Analysts estimated $1.06, on average.

The results reflect a crusade by Chief Executive Officer David Taylor to get consumers to pay a bit more for the items in their bathroom cabinets and kitchen pantries. P&G’s premium SK-II skin-care brand helped sales in the beauty division last quarter, and scent beads and Tide pods for high-efficiency washers boosted the home-care unit, giving the company a leg up on sellers of bargain health and cleaning products.

“Over half of their product lineup is premium-oriented, so with an improving domestic economy, those products are doing well,” said Jack Russo, an analyst at Edward Jones & Co.

P&G rose as much as 3.9 percent to $87.98 in New York, the most in almost three months. The stock gained 5.9 percent last year, trailing the 9.5 percent increase for the Standard & Poor’s 500 Index.

While total revenue slipped 0.3 percent to $16.9 billion, that topped analysts’ $16.8 billion average estimate. Organic sales – which exclude the effects of acquisitions, divestitures and currency exchange-rate fluctuations – rose 2 percent, Cincinnati-based P&G said in a statement.

Sales by that measure rose 3 percent in the beauty division. Organic sales gained 7 percent in health care, driven by innovation in oral-care products. Organic sales increased 1 percent in the grooming, fabric & home care and baby, feminine & family care units.

The company reiterated its forecast that earnings per share, excluding some items, will gain at a mid-single-digit percentage this year. Organic sales may increase as much as 3 percent, up from a previous projection of 2 percent.

Taylor, who took over as PG’s CEO in November 2015 after 35 years with the company, pledged to make the owner of Tide, Pampers and Olay a more nimble and innovative competitor. Once known for churning out hit products like Swiffer mops, P&G has struggled to invent new blockbusters in recent years.

P&G’s challenges aren’t unique. New brands, particularly those with natural or organic ingredients, have attracted younger shoppers, a trend that prompted Unilever’s acquisition of Seventh Generation Inc. last year. Large consumer companies also are coping with higher ingredient costs, sluggish demand and a stronger U.S. dollar, Goldman Sachs Group Inc. analyst Jason English said in a report downgrading the household products sector to cautious. English also lowered P&G to a sell rating this month.

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