It’s good to see that Procter & Gamble, the world’s biggest advertiser, has been spending even more on marketing as it tries to rebuild its brands after the recession but that, plus higher commodity prices and a falling dollar, combined to reduce third quarter earnings by 6.8 per cent from $3.31bn to $3.08bn.
Overall sales increased by two per cent to $20.1bn with ‘organic’ sales (ie excluding acquisitions) up by a healthy eight per cent.
But P&G is clearly making less margin on this tidal wave of products, the falling dollar, which makes its sales overseas worth less, probably being the biggest factor.
It’s not the only company suffering in this way. Kimberly-Clark reported a 19 per cent drop in earnings earlier this week.
Agencies, other marcoms suppliers and media owners have benefited mightily in recent times from aggressive spending from the likes of P&G and Unilever (WPP is to announce its latest quarterly results on Friday and boss Sir Martin Sorrell says they’ll be good) but there’ll be a few twinges of nervousness over the earnings figures. A low dollar helps US companies export more but a weak domestic market and lower foreign earnings may place a curb or two on this ambitious spending, at least on the part of US-domiciled companies.
Newish P&G CEO Bob McDonald, who took over from AG (Alan George) Lafley in 2009, clearly has a few challenges on his plate.