Procter & Gamble, the largest US consumer products company, said on Wednesday it did not believe its sales would be further affected by a continuing drive to reduce inventory by Wal-Mart, its largest single customer.

AG Lafley, chief executive, told analysts his company was now “essentially shipping to consumption“ for Wal-Mart.

“It would be difficult if not impossible to take inventory down any further, and keep the products on the shelves.”

Mr Lafley said that while both P&G and retailers would continue efforts to improve inventory management, he did not expect a further “big move like we saw in January and February”.

His comments came as P&G’s shares fell on lower than expected fiscal third quarter sales, in part due to inventory reductions during the quarter by Wal-Mart and other retailers.

P&G’s total sales for the first quarter, including its acquisition of Gillette, rose 21 per cent to $17.25bn, while its unit volume increased 20 per cent.

P&G’s first quarter profit jumped 37 per cent to $2.21bn, or 63 cents per share, as the US inventory cuts and higher energy and commodity prices were offset by higher prices, cost cuts and the benefits of its Gillette acquisition.

Mr Lafley said the company was raising its full year guidance by 3 cents to $2.61 due to “the combination of strong topline momentum, improving gross margins and good progress on Gillette integration”.

However, some analysts expressed concern that Gillette had contributed less than expected to sales growth, with total sales of its blades and razors increasing one per cent to $1.19bn, despite the launch of the new five-blade Fusion razor in the US. Sales of Gillette’s Braun and Duracell brands fell 1 per cent.

“These results make it look appear as if Gillette sold at exactly the right time,” wrote Justin Hott, analyst at Bear Stearns, in a research note.

P&G also forecast a second consecutive quarter of slower sales growth. Excluding the impact of Gillette, P&G said it expected organic sales growth of 4 to 6 per cent, down from 9 per cent in the second quarter last year. Organic sales in the third quarter increased by 6 per cent, above the company’s long-term target for organic growth of 3 to 5 per cent.

Mr Lafley also said the company may sell some small parts of its business during the current quarter, as it carries out a strategic assessment of its brand assets.

P&G also said its shipments to China during the quarter had been below its “initial high expectations”. Clayt Daley, chief financial officer, said P&G expected its base business growth in China to be slower than previous “exceptional” rates, as the company’s business there matured.

P&G’s shares were down 4.3 per cent at lunchtime in New York at $55.61.

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