P&G, Colgate Warn of Sluggish U.S. Growth

NEW YORK ( TheStreet) -- Procter & Gamble ( PG) CEO Robert McDonald echoed word from Colgate-Palmolive ( CL), Kimberly-Clark ( KMB) and other consumer goods makers that growth in developed countries will be sluggish.


McDonald expressed concern over soft consumer demand in the U.S. to media in Singapore on Wednesday, pointing out that P&G's sales in North America, Western Europe and Japan were flat from October of last year through March of this year, according to a report in The Associated Press.

P&G's message was "consistent" with what other executives have been saying, RBC Capital Markets analyst Jason Grere told TheStreet. He said P&G stands to do well in terms of its emerging-market footprint, where about one-third of its sales growth is generated, a trend that is likely to increase over the years given the company's expansion plans. But still, "two-thirds of its growth is in developed markets and mainly in premium categories, which could play into its 2012 guidance."

P&G is due to report its 2011 fiscal fourth quarter earnings on Friday, and investors will look to the company for updated guidance on next year's profit outlook. Analysts expect the maker of Pampers diapers, Tide detergent and Crest toothpaste to earn $4.26 a share in fiscal 2012.

Gere said Wall Street expects P&G to report 2012 revenue at the low end of its long-term 4% to 6% organic sales target.

"Until developed market economies improve it will be difficult to anticipate better than that," he said.

"There's not a lot of acceleration in the back half of 2011," Gere said. "We hope that in 2012 we can see a bit of a lift between demand and pricing."

Clorox ( CLX), which beat quarterly profit and sales expectations early Wednesday morning, did not voice any concerns of anticipated soft demand in developed markets.

In the meantime, "economic scenarios will weigh down on a lot of these companies, just as in other industries," Gere added. Now it's a matter of who can execute the best in the second half of this year.

"That's the real question: Who will have the best execution, merchandising and innovation, and will take market share from others in a weak category market," Gere said.

-- Written by Miriam Marcus Reimer in New York.

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