Published: Wednesday, 5 Aug 2009 | 8:52 AM ET

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Procter & Gamble posted an 18 percent drop in fourth-quarter profit as sales fell more than expected, and the company's shares slipped 2 percent even though it stood by its 2010 profit forecast.

Jeff Chiu / AP Photo/Jeff Chiu)

The maker of Tide laundry detergent and Pampers diapers said sales could fall more this quarter and profit may not meet Wall Street's expectations.

Still, pressure from foreign currency fluctuations will not be as great this year as previously anticipated, which allowed P&G to maintain its profit forecast for the year.

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[PG  Loading...      ()   ], which in recent months has touted itself as recession-resistant but not recession-proof, has seen some loss of market share as consumers buy cheaper or private-label brands.

"For some time, we needed a quarter to kind of round out some weakness that they're seeing in the top line from foreign currency and from consumer trade-down, and it's just kind of all stacked up here," said Morningstar analyst Lauren DeSanto.

Sales fell in each one of the company's categories. The biggest percentage decline was a 17 percent drop in grooming, which includes Gillette razors.

The results contrasted an upbeat report from German rival Henkel, which said its business would not get any worse this quarter after a decline in raw material prices and cost-cutting helped it beat estimates.

In an interview with CNBC, Chief Financial Officer Jon Moeller said currency was an issue in the latest period. Another headwind was shrinking demand for more discretionary personal care categories such as fragrance and hair care.

Moeller also said P&G sales were hurt by competitive pricing by its competitors, and the company is currently taking steps to narrow its price gaps with its rivals.

Still, Moeller defended P&G's strategy and said that despite the weak economy nearly half of all consumers say they are still willing to pay a premium for products where it competes for better performance. 

"Almost half, about 45 percent, of shoppers indicated that they are currently placing a priority in our product categories on performance over value, so that set of consumers are still going to be paying a premium for better performance," Moeller said.

P&G earned $2.47 billion, or 80 cents per share, in its fiscal fourth quarter, down from $3.02 billion, or 92 cents per share, a year earlier. Analysts, on average, expected P&G to earn 78 cents per share, according to Reuters Estimates.

Sales fell 11 percent to $18.66 billion, falling short of analysts' average forecast of $19.27 billion.

P&G expected sales to fall in the quarter as consumers cut back and it felt the impact of the stronger U.S. dollar.

On an organic basis, which excludes the impact of currency fluctuations, acquisitions and divestitures, sales fell 1 percent and volume fell 4 percent. Sales fell less than volume as the company had raised prices. Volume was much weaker than some analysts' projections.

P&G said it expects to earn 95 cents to $1 per share from continuing operations in the first quarter, which ends in September. Analysts had called for a profit of 99 cents per share. It said organic sales should be flat to down 3 percent.

The company still forecast earnings of $3.65 to $3.80 per share from continuing operations this year, with organic sales growth of 1 percent to 3 percent. It now expects currency fluctuations to reduce net sales zero to 1 percent, versus its prior expectation of a 2 percent to 3 percent hit.

P&G said it would reinvest the benefit of improved currency rates into growing its business.

Shares of P&G have fallen 10.3 percent since the beginning of the year.

-CNBC contributed to this report.

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