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Procter and Gamble Hygiene and HealthCare Ltd.’s Q3 FY21 sales growth, while healthy at 15.8% YoY, was lower than our expectations, considering:
- the strong momentum in recent quarters; and
- a favorable base, with a 6.2% sales decline in Q3 FY20 (June year-ending company).
There was a steep increase of 73% YoY in advertising spends, translating to ad spends coming in at 17.1% of sales in Q3 FY21, much higher than the usual quarterly levels of 9-12% of sales.
With gross margin actually above expectations (up 20 basis point YoY versus our expectation of a 160bp YoY decline), high ad spends was the key reason for the miss on our Ebitda margin forecasts.
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