updated 10/29/2009 11:01:28 AM ET 2009-10-29T15:01:28

The Procter & Gamble Co. sees budget-conscious consumers around the globe responding to price cuts and new products that promise to give them more for their money.

The world's largest consumer products company reported better-than-expected first-quarter results Thursday and forecast a better outlook after a year of households cutting spending and trading down to cheaper brands.

The maker of Tide and Pampers reported profits were off 1 percent at $3.35 billion, or 1.06 per share, compared to $3.31 billion, or $1.03 per share, a year ago. Sales fell 6 percent to 19.8 billion. Analysts expected earnings of 99 cents on $19.83 billion for Cincinnati-based P&G.

This was the first quarter under new CEO Bob McDonald, who has pledged to aggressively win back market share from lower-priced competitors and store brands. The company cut prices across 10 percent of its broad portfolio, stepped up advertising focused on offering value, and adding cheaper versions of Pampers diapers and feminine-care and toothpaste products, but also new premium items such as Tide anti-stain laundry additives and Bounce fabric softener dryer bars.

"What we're about is growth, and we're focused on growth," McDonald told investors on a conference call.

He said P&G was pleased to see sales improving ahead of earlier expectations, "but we also realize there's more work to do." P&G officials said their optimism is tempered by continued high unemployment in the recession.

Connie Maneaty, a BMO Capital Markets analyst, said P&G appears to be continuing to spend for the long term, but the improved outlook for organic sales growth is encouraging.

"We believe that PG is emerging from the economic and competitive pressure that characterized the last year," she said in a client note.

P&G shares rose $1.91, or 3.3 percent, to $59.14 in morning trading. In the past year, they have traded between $43.93 and $66.82.

Pantene and Head & Shoulders shampoos and Gillette Fusion shavers were among strong sellers, as was a new, lower-tier Pampers "Simply Dry" which is doing well in Europe.

Overall sales were undercut by declines in developing markets in the region that includes eastern Europe and Africa. Sales also fell for discretionary lines such as high-end fragrances and salon products. The company also reported weak figures for Duracell batteries, Braun electrical appliances and Pringles snacks, three brands that analysts say the company could try to shed.

P&G said organic sales — a key gauge that excludes acquisitions and other such effects on sales totals — were up 2 percent, after the company had earlier forecast them to be flat to down 3 percent. P&G now expects organic sales to grow 2 to 5 percent in the current quarter, up from an earlier forecast of 1 to 4 percent, with net sales growing 3 to 7 percent.

For its full fiscal year, the company expects 2-4 percent organic sales growth and 3-6 percent growth in net sales, which had fallen 3 percent last year.

P&G also said earnings per share for the October-December quarter should be $1.36 to $1.44, boosted by an expected 43-cent gain from its recently announced $3.1 billion sale of its prescription drug business. For the year, P&G raised the low end of earlier guidance by 3 cents to a range of $4.02-$4.12.

Analysts surveyed by Thomson Reuters are expecting $1.40 for the second quarter and $4.10 for the year.

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