P&G Posts First Loss in Eight Years; Adspend Dives by $500m

08 August 2001

The world’s largest consumer goods advertiser, Procter & Gamble, yesterday reported its first quarterly loss in eight years. The gloom was alleviated, however, by an unexpectedly robust performance from the healthcare division which lifted results beyond the predictions of most Wall Street entrail-rakers.

The loss reflects a massive $1.2 billion restructuring cost for P&G’s food, cosmetics and fabric care divisions. Allowing for this, the group’s fourth fiscal quarter posted a net loss of $320 million against a net profit of $516m in the same period the preceding year.

During the quarter, sales fell by one per cent to $9.6 billion, while full-year net profits after charges slumped by 18% per cent to $2.9 billion. Net sales sagged 3% to $39.2 billion.

But P&G president/ceo Alan Lafley was in defiant mode: “We’re encouraged by our results this quarter,” he insisted. “ We delivered improved top-line results and core earnings, ahead of what we said we would deliver. These results are the outcome of the plans we put in place this year: making tougher choices, focusing on our biggest brands and customers, and tighter cash and cost control.”

Separately, chief financial officer Clayton Daley revealed a 14% nosedive in adspend for the year ended June 30. In a conference call to analysts yesterday, Daley said spend had fallen by over $500m – the lowest absolute amount since 1995 and the company’s least as a percent of sales for more than a decade.

His boss, Lafley, played down the ad-slash, claiming that overall marketing spend was down only slightly – both in absolute terms and as a percent of sales for the year – although he declined to quantify the overall marketing spend. P&G had “improved spending efficiency,” he asserted, switching funds from TV and print advertising to unspecified “alternative marketing” channels.

Responding to a questioner as to the reasons underlying the draconian adspend cutback, Lafley offered the breathtaking reply: “We didn’t have as much to advertise,” citing a relatively light roster of new product launches.

News sources: The Times (London); Advertising Age - Daily Deadline