P&G, Colgate results beat, consumers spend more

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Procter & Gamble Co and Colgate-Palmolive Co boosted sales of their brand name products in the last few months, after persuading consumers to spend a little more with a bigger investment in advertising.

The results of the household goods giants, along with reports from other personal care product makers on Thursday, point to a tentative recovery in US consumer spending. But the numbers also highlight how shoppers remain selective about when and what they buy.

Profit at P&G, the maker of Tide laundry detergent, fell less than anticipated. A profit increase at toothpaste and dish-soap maker Colgate was even bigger than analysts had expected.

"This idea that this economy is causing everyone to trade down is a little bit overly general and too broadly applied," P&G Chairman and Chief Executive Bob McDonald said during a conference call.

German rival Henkel , whose US products include Dial soap, also posted a strong finish to 2009.

Still, P&G and Colgate kept their 2010 profit forecasts as they digest new issues such as the impact from the devaluation of Venezuela's bolivar and prepare to launch new products.

"Obviously this recession was very, very severe but I think the lesson is it is not going to result in a permanent change in behavior of the consumer; rather (it would be) just a cyclical or transient change," said Hank Smith, chief investment officer of Haverford Investments, which holds over 2 million P&G shares.

"As the economy improves, consumers will be back to having a preference for branded, higher quality products," he said.

However, the rebound in products such as shampoo and soap has yet to take hold in the U.S. cosmetics category.

"I don't see yet this (U.S.) recovery and I'm cautious on how fast this will come," Estee Lauder Cos Inc CEO Fabrizio Freda told Reuters. "The U.S. is stable but the consumer is not yet back."

P&G said its sales this year should rise more than it had previously anticipated, while Colgate expects volume increases in all of its businesses and Henkel projected higher earnings.

On the New York Stock Exchange, P&G rose 2.17% to USD 62.13, Colgate climbed 0.55% to USD 80.83, and Estee slipped 1.19% to USD 53.00 at mid-afternoon. Henkel rose 2.6% to 37.20 euros in Frankfurt floor trade .

Promotional Cadence

P&G and Colgate have felt pressure since late 2007 as consumers bought cheaper products to save money. Colgate's portfolio has been more resistant to such trends since most of its products, except for pricey Hill's pet food, are less discretionary.

Across the consumer goods industry, companies must also respond in a growing marketing war, as rivals increase advertising, promotions and new products.

P&G's launches include updated Pampers diapers and Fekkai shampoo, while Colgate is bringing out new kids' toothpaste and toothbrushes, some based on the popular Bakugan action figures, cards and games.

Energizer Holdings Inc, Estee Lauder, Elizabeth Arden Inc are among the other personal care product makers beefing up such efforts.

Estee Lauder posted a sharp rise in quarterly profit, aided by sharp growth in Asia and at airport stores. Late Wednesday, Arden's higher profit also topped expectations.

By the numbers

P&G's sales rose 6.4% to USD 21.03 billion, falling short of analysts' forecast USD 21.07 billion, according to Thomson Reuters I/B/E/S. Organic sales, which exclude currency fluctuations, acquisitions and divestitures, rose 5%, as did the volume of goods sold.

P&G still expects to earn USD 4.02 to USD 4.12 per share in fiscal 2010 which ends in June. It now expects organic sales to rise 3 to 5% this year, one%age point more than before.

For the current fiscal third quarter, P&G estimated earnings of 77 cents to 82 cents per share, below analysts' target of 85 cents. P&G said organic sales should rise 4 to 6%.

Colgate's sales rose 11.4% to USD 4.08 billion, meeting expectations. The volume of goods sold rose 3%.

One area of concern at Colgate is Hill's, whose sales and volume fell. The company has lowered prices and resized packages to win back consumers in that premium segment.