Thursday, August 19, 2010

PG cuts prices

Anyone wonder why employers aren't hiring?

Article in the WSJ here.

This month, P&G reported results for the first full fiscal year under the new chief executive's command. While Mr. McDonald achieved his quest to win back market share—P&G increased or maintained its market share in all regions of the world for the first time in 11 quarters—it came at a hefty cost. Cheaper products and more advertising ate into P&G's profits, which fell 12% to $2.19 billion for the quarter ended June 30. Sales rose less than P&G had projected, reaching $18.9 billion during the period. So far this year, P&G's shares are up just 12 cents.

Among the premium brands P&G has been discounting in recent months are Tide detergent, Charmin toilet paper and Bounty paper towels. In the 12 weeks ended July 10, promotions by P&G and its retailers also knocked down the prices of hair conditioners by 7%, fabric softeners by 6% and liquid laundry detergents by 5%, according to Sanford Bernstein's analysis of U.S. data gathered by market research firm Nielsen Co.

Those are big bites for low-cost staples, and the figures don't include sales at Wal-Mart Stores Inc. or club stores, where discounts can be higher. Profit margins for these products range from 18% to 25%, according to Sanford Bernstein analyst Ali Dibadj, lower than the 26% to 30% margins that P&G's shaving or over-the-counter drug business garners.