NEW YORK -- Procter & Gamble's fiscal first quarter net income fell 7 percent on a stronger dollar and costs related to restructuring, but its results beat Wall Street expectations in a sign that a turnaround plan that it started in the spring is beginning to work.
The world's largest consumer products company, which has faced declining global market share, in May announced a plan to focus on its 40 top businesses, 20 biggest new products and 10 most profitable emerging markets as it undergoes a cost-cutting plan aimed at saving $10 billion by fiscal 2016.
The maker of well-known consumer goods such as Tide detergent and Pampers diapers said on Thursday that it's ahead of schedule with its planned job cuts, and that it might consider going beyond its $10 billion cost cutting plan. P&G also said it has created a new position called global productivity officer that will report to the CEO and monitor possibilities for cost cuts.
But perhaps most importantly, P&G said is beginning to grow market share. During the three months ending Sept. 30, the company said that it held or grew market share in businesses representing over 45 percent of its revenue during the quarter, up from 30 percent in the fourth quarter. That jumped to nearly 60 percent in the U.S., up from 15 percent in the fourth quarter. Its market share is still slightly down globally, but the company expects global market share gains by the second half of the year
The news comes as P&G has been facing increasing investor displeasure about its lack of global market share growth and pricing and product missteps. The pressure has grown since activist investor William Ackman disclosed that he has a 1 percent stake in the company. Ackman has agitated for change at other companies he has a stake in, such as J.C. Penney and Canadian Pacific Railway.
The results also are a much-need positive for CEO Bob McDonald, who has been criticized for not doing enough to turn around the company that makes well-known consumer goods such as Tide detergent and Pampers diapers. McDonald said the quarterly results show that the company is in the "early innings" of its restructuring plan and that it is showing progress.
"We're confident that this strategy will enable P&G to generate superior levels of shareholder return in both the short and long term," he said.
The results are a step in the right direction for P&G, which has admitted to missteps in balancing growth in emerging markets like China, which account for about 30 percent of its revenue, amid an uncertain global economy and lackluster market share growth overall. As growth in developed markets like the U.S. has slowed, consumer product makers have looked abroad for new customers.
But it's a tricky balancing act for all consumer product makers, particularly as the European economy remains under pressure and growth slows in China. Indeed, on Wednesday Kimberly Clark said it will exit its European diaper business. And on Thursday Colgate said it will cut 6 percent of its workforce by the end of 2016.
P&G also has admitted to making some mistakes in pricing in categories like laundry and oral care in the U.S., and has lowered some prices. And it has also suffered from supply chain problems, such as a delayed launch of its Tide Pods in February.
Citi Investment Research analyst Wendy Nicholson said the results show P&G's cost cuts and pricing steps are finally outweighing negative factors.
"First quarter results boost our confidence in the full-year outlook for Procter & Gamble, and we consider this a good `checking of the box' in the first stage of this turnaround story," she wrote in a note. She kept her "Buy" rating on the stock.
During the quarter, Procter & Gamble's net income fell to $2.81 billion, or 96 cents per share. That's down from $3.02 billion, or $1.03 per share, last year.
Excluding restructuring and European legal charges, its so-called core earnings were $1.06 per share. Analysts expected 96 cents per share, according to FactSet.
Revenue fell 4 percent to $20.74 billion. Analysts expected $20.79 billion. The stronger dollar, which cuts into the value of overseas sales, hurt revenue by six percentage points, the company said.
For the fiscal second quarter, Procter & Gamble predicts adjusted core earnings of $1.07 to $1.13 per share with revenue ranging from down 1 percent to up 1 percent, implying revenue $21.88 billion to $22.32 billion. Analysts expect net income of $1.09 on revenue of $21.76 billion.
For the full year P&G kept its guidance for adjusted core earnings of $3.80 to $4 on flat revenue growth to up 1 percent. That implies $83.68 billion to $84.52 billion. Analysts expect net income of $3.90 per share on revenue of $84.38 billion.
On the news, shares rose $1.99, or 2.9 percent, to close at $70.07 Thursday, after reaching a 52-week high of 70.83 earlier in the day. The stock had been up by about 2 percent so far this year.