A Popular Company's Earnings Exceed Expectations Despite Decreased Demand Affecting Sales
Recently, a well-known company that makes everyday household items reported mixed results for the recent quarter. This is due to a drop in the demand for their razors and baby diapers.
The company adjusted its prediction of net earnings per share growth for the fiscal year of 2026. Originally, they were expecting a growth between 3% and 9%. Now, they have lowered their estimate to a range of 1% to 6%. The reason behind this change is an increase in restructuring expenses. Despite this, the company maintains its sales growth outlook.
Details of the Quarterly Report
The company's CFO stated that they have finished what they believe will be the least robust quarter of the fiscal year. Following the news, the company's stock price fell by about 1%.
Here are some key figures from the company's report:
- Earnings per share: $1.88 adjusted compared to the expected $1.86
- Revenue: $22.21 billion compared to the expected $22.28 billion
The company's net income attributable for the second fiscal quarter came to $4.32 billion or $1.78 per share. This is down from last year's $4.63 billion or $1.88 per share. When excluding items such as restructuring costs, the company earned $1.88 per share.
Net sales increased by 1% to $22.21 billion. Organic sales, which do not include foreign currency, acquisitions, and divestments, remained the same for the quarter.
Understanding the Demand Drop
The company saw a 1% fall in volume as three out of its five product categories reported a decrease. This measurement doesn't include pricing, making it a more accurate representation of demand than sales. Like many consumer companies, this company has noticed a drop in demand for some of its products as consumers look for better deals to cope with inflation. This is particularly true in the U.S., which is their largest market.
"People have not stopped washing their hair, they still buy diapers, they do their laundry — albeit at a little bit slower pace, so the market growth has certainly slowed over the last 18 to 24 months," the CFO explained.
Product Categories Impacted
The company's baby, feminine, and family care division saw the largest decrease in demand, with a 5% drop in volume in the quarter. The company noted that family care products, which include paper towels, tissues, and toilet paper, saw the greatest drop. This is due to the tough comparisons with the previous year when retailers and consumers stocked up in anticipation of expected port disruptions.
The company's grooming business, which includes razors, reported a 2% drop in volume. The healthcare division, which includes products like toothbrushes, cold remedies, and upset stomach relief, saw a 1% drop in volume.
The fabric and home-care business, which includes products like air fresheners and laundry detergent, reported no change in volume from last year.
The only division to report growth in volume was the beauty segment. It saw a 3% increase, fueled by stronger demand for its hair-care products.
Looking Ahead
In the second half of the fiscal year, the company is expecting stronger sales, driven by upcoming product innovations. For the fiscal year of 2026, the company predicts sales growth between 1% and 5%.
