updated 8/5/2009 4:36:39 PM ET 2009-08-05T20:36:39

The new man at the helm of Procter & Gamble Co. has his work cut out for him — steering the consumer products maker in a rough economy that’s sinking sales, profits and shares.

P&G reported Wednesday that fourth-quarter profit fell 18 percent and sales were off 11 percent, and the company forecast more declines in the current quarter, Bob McDonald’s first as CEO. The stock fell nearly 3 percent, $1.55, to close at $53.91, nearly $20 below the 52-week high last September.

The company expects things to start improving later in the year but will try to pump up sales volume by cutting some prices and adding lower-tier products to counter consumer tradedown to cheaper brands.

McDonald also said cost-cutting, efficiency improvements, offering P&G products in more drugstores and high-frequency shopping stores, and dramatically increasing sales in developing markets will help improve results.

“The opportunities are there, and I believe we have the right strategies, capabilities and plans to improve the lives of more consumers and create significant value for our shareholders,” McDonald told analysts on a conference call.

McDonald said the company had been willing to take some short-term losses as it rebuilt for the long term.

“This was not something we would accept on a sustained basis and isn’t something we will accept this year,” he said.

Sales dropped across P&G’s broad portfolio, but particularly in discretionary areas such as Braun electric shavers, Oral-B power toothbrushes, Duracell batteries, Pringles snacks, and its line of fine fragrances.

Battery shipments were down by double-digit percentages, and Braun shipments were down 20 percent in the quarter, P&G said.

The company had raised prices on popular brands over the last two years to try to offset higher commodity costs and foreign exchange losses, but acknowledged Wednesday that price gaps are hurting sales.

“We are addressing uncompetitive pricing spreads market by market, SKU (sales item) by SKU,” McDonald said.

P&G officials said they’re cutting prices on a small percentage of their products, while adding lower-tier products in such areas as disposable diapers and feminine care.

Consumers are also trading down within P&G brands, buying more of the lower-priced “Basic” versions of Bounty paper towels and Charmin toilet paper and its Gain laundry detergent. P&G is testing a basic version of its No. 1 laundry brand, Tide.

P&G reported earnings of nearly $2.5 billion, or 80 cents per share, in the three months ended June 30. That’s down from $3 billion, or 92 cents per share, a year ago. Analysts expected 79 cents.

Revenue fell 11 percent, to $18.7 billion; analysts expected $19.4 billion.

For the quarter that began July 1, P&G expects earnings in the range of 95 cents to $1, down from $1.03 a year ago. Analysts surveyed by Thomson Reuters expect $1 a share.

P&G forecasts net sales, which are being hurt by foreign exchange impacts of a stronger U.S. dollar, to be down 7 to 10 percent for the quarter.

A BMO Capital Markets analyst expects a better year ahead for P&G.

“We think PG’s outlook is conservative, especially considering increased investment, and over time we think volume and (earnings) growth will pick up,” Connie Maneaty wrote in a note to clients.

P&G stuck with earlier guidance of $3.65 to $3.80 per share with organic sales growth — or sales not related to acquisitions and other such changes — of 1 to 3 percent for the full year. Analysts expect $3.76 per share on revenues of $80.4 billion.

The quarter ended A.G. Lafley’s nine-year run as CEO. Lafley stays as chairman, telling analysts Wednesday the company “encountered one of the most difficult economic environments in decades that placed tremendous pressure on our business” in his last year.

For the year, P&G reported profit rose 11 percent, to $13.4 billion, with a boost from sale of its Folgers coffee business. Earnings per share were $4.26; sales fell 3 percent, to $79 billion.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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