Procter & Gamble and Colgate-Palmolive boosted sales of their brand name products in the last few months, convincing consumers to spend a little more with a bigger investment in advertising.
A tentative recovery in consumer spending helped both consumer goods leaders post better-than-expected results. Profit at P&G, the maker of Tide laundry detergent and Pampers diapers, fell less than anticipated. A higher profit at toothpaste and dish-soap maker Colgate was even stronger than analysts expected. But the companies stood by their 2010 profit forecasts as they digest new issues such as the impact from the devaluation of Venezuela’s bolivar currency.
“It’s encouraging, there’s no question,” JP Morgan analyst John Faucher said of the results from P&G and Colgate.
“However, as the raw material environment normalises after having easy comparisons, they’re not going to put up this kind of upside without some acceleration in top line growth going forward,” he said.
The companies must also prepare to respond to competitors across the sector increasing their spending on advertising, promotions and other plans.
P&G did say that sales should rise more than it previously anticipated this year. It also said moving to the lower exchange rate in Venezuela would trim reported sales by less than two per cent and have no impact on its organic sales growth rate.
P&G and Colgate have felt pressure since late 2007 as consumers bought less expensive products to save money. But Colgate’s portfolio has been more resistant to such trends since most of its products, such as toothpaste and soap, are less discretionary.
City A.M. Reporter