Not a good day for consumer product companies. Tough competition, inability to raise prices a problem for consumer giants. Colgate-Palmolive down 7 percent, one of its worst days in years, Kellogg down 5 percent to its lowest level since October of last year.
With good reason. For consumer companies, the key metrics are sales (particularly organic sales, i.e. sales ex-acquisitions), volumes and pricing.
Look what CL reported:
- Sales up 2 percent (light — most analyst were around 6%, with particularly weakness in Latin America, which is about 25 percent of total sales)
- Volumes up 3 percent (light--most analyst had 4%-6%)
- Pricing up 0.5% (light)
Ugh! On top of that, they continue to say they can do double-digit EPS growth for the full year. That projection is looking optimistic.
They will likely need to spend more on advertising to step up brand imaging.
Similar story with Kellogg...missed on the earnings, even including the $0.10 cost of a cereal recall. Like Colgate, organic sales growth was weak--down 4 percent. Volumes declined 4.5 percent, and pricing was flat at up 0.6 percent.
Ugh again! They also reduced full year guidance, mostly to reflect the effect of a cereal recall.
Bottom line: even cereal and consumer product makers are struggling with flat organic growth and inability to raise prices.
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